Public Private Partnerships have been used to fund some very large infrastructure projects, but it's much harder to make them work on smaller projects, as GovTech points out:
"When a public official raises questions about whether a medium-sized project can be done down the block, it is simply deemed not bankable -- not big enough, complex enough, revenue-generating enough."
Another vehicle to finance community development is the New Market Tax Credit, but to make financial sense, programs also need to stretch into 8 figures at least and be highly focused.
Social Impact Bonds are also being tested, with a focus on social programs instead of physical infrastructure, with private capital taking the risk, and philanthropic or public funds making investors whole if social programs are successful.
One often-overlooked reason why financing programs like this is expensive, is the cost of legal services to pull the deal together. The multiple counter-parties make deals complicated, with SIBs requiring an intermediary (honest broker) and an evaluation partner as well as the capital provider and program delivery agency. It is reasonable to expect legal effort to reduce over time as learning is incorporated and contracts become more standardized.
The expense of measuring and analyzing outcomes is another reason why social impact bonds are expensive today. Data collection is costly, and where savings are reliant on longer term outcomes, it is necessary to continue to collect data over time, requiring on-going contact with clients. However, when clients are successful, there is a tendency to leave behind the environment and connections from their struggling days. One way to reduce the cost of data collection and analysis is to use operational data and to develop standard reporting tools on top of the data. Acivilate's case management platform is designed to collect de-identified granular data on a near real-time basis, as citizens help manage their own cases. The platform provides value to clients by helping them manage their own affairs, creating the "stickiness" that enables longitudinal data collection.
A third big challenge is the difficulty in capturing benefits that span government departments. When recidivism falls, savings across to corrections departments, but they may also be shared by housing, workforce, social services and health departments. As McKinsey notes "A first step may involve ensuring that government data systems are capable of tracking cost and service utilization at the client level."
Since most government reporting systems are heavily influenced by the federal agency agency funding the programs, those data systems are unlikely to change.
Acivilate attacks this problem by offering a cloud-based system that can be shared by different agencies, to get all participants' client-level data in one place.
If the costs of data collection and analysis are reduced, and the organizational and IT challenges of aggregating data in one place are over come, Social Impact Bonds and similar Pay for Success models may come within the reach of more municipalities, changing lives in the process.