Setting up for Success: Best Practices for Procurement and Contracting of RBF Programs

Updated: 4 days ago

Executive Summary

  • By ensuring a focus on outcomes to deliver tangible, real-life improvements in the lives of beneficiaries, Results-Based Financing (RBF) offers a world of exciting opportunities for governments and donors.

  • While legal and procurement considerations are seldom the focus of conversations about outcomes funding, a failure to anticipate these challenges is often the 'silent killer' of these programs—the unanticipated factor that can lead to them taking years longer to launch than intended, and calling into question the merits of embarking on them in the first place.

  • A new paper, ‘Setting up for Success: Best Practices for the Procurement and Contracting of Results-Based Financing Programs,’ identifies the lack of well-suited templates and of familiarity with RBF mechanisms on the part of procurement and legal teams as a root cause of the above mentioned challenges. Co-authored by Principal at the Education Outcomes Fund (EOF) Milena Castellnou alongside Freshfields Bruckhaus Deringer LLP Associate, Daniella Jammes, and Hilary Sienrukos, Senior Director in the Program Acquisition and Assistance group at the Millennium Challenge Corporation, the paper makes a compelling case for putting greater emphasis on the legal and procurement aspects of RBF from start to finish.

  • These conclusions reinforce the rationale behind the institutional set-up of the Education Outcomes Fund (EOF). EOF has invested significant time and effort working closely with UNICEF’s legal and procurement teams to create specific templates to select service providers and investors for EOF’s programs and sign outcomes-based contracts. These templates are now ready to be used and replicated in a diversity of contexts, allowing EOF to launch high-quality RBF programs much faster, at a lower cost and to unlock the full benefits of the mechanism at greater scale.

  • You can read and download the paper here.


Setting up for Success: Best Practices for the Procurement and Contracting of Results-Based Financing Programs


Results-based financing (RBF) is shifting the way we think of funding—and for good reason. Rather than paying for inputs and activities, RBF funders pay only for results achieved. Not only do RBF instruments offer alternative ways of funding social programs that improve the effectiveness of spending and enable innovation, they promote results-oriented partnerships across the public, non-profit, and private sectors.


Why, then, is the adoption of RBF not yet more widespread? RBF skeptics often mention the high transaction costs and lengthy pathway to launch when explaining their reluctance to adopt these financing mechanisms. They generally point to the complex technical design process required to select outcome metrics, define the evaluation methodology, set targets, or determine the price per outcome. While legal and procurement considerations are seldom the focus of conversations about outcomes funding, a failure to anticipate these challenges is often the 'silent killer' of these programs—the unanticipated factor that can lead to taking years longer to launch than intended, and calling into question the merits of embarking on them in the first place. For instance, developing an impact bond in Massachusetts required writing 27 drafts of contracts, and more than 1,100 legal hours were billed! Going against the grain of existing and well-established procurement systems can also add delays and raise transaction costs. For instance, in the process of launching EOF's program in Ghana, multiple revisions were required to transform World Bank templates, which were designed for service contracts, into ones that were adequate for an outcomes fund. Getting the legal and procurement considerations right early on can make a huge difference when it comes to delivering impactful programs and facilitating the adoption of RBF mechanisms at greater scale.


A new paper, ‘Setting up for Success: Best Practices for the Procurement and Contracting of Results-Based Financing Programs,’ identifies the lack of well-suited templates and of familiarity with RBF mechanisms on the part of procurement and legal teams as a root cause of the above mentioned challenges. Co-authored by Principal at the Education Outcomes Fund (EOF) Milena Castellnou alongside Freshfields Bruckhaus Deringer LLP Associate, Daniella Jammes, and Hilary Sienrukos, Senior Director in the Program Acquisition and Assistance group at the Millennium Challenge Corporation, the paper makes a compelling case for putting greater emphasis on the legal and procurement aspects of RBF from start to finish.


To overcome the challenge of setting RBF programs up for success, EOF has worked closely with UNICEF’s legal and procurement teams. Together, they have made great strides towards realizing EOF’s mission to launch and implement RBF programs with speed and scale through the creation of specific templates to select service providers and investors for EOF’s programs and sign outcomes-based contracts. What is particularly exciting about these new templates is that they have been specifically built to take best practices into account. The UK, home of the world’s most developed ecosystem for social impact bonds, has developed template contracts and EOF, with the pro bono support of Freshfields Bruckhaus Deringer LLP, has looked to these, as well as to best practice examples from across a range of other contexts to inform their own templates, ensuring that they are suitably fit for purpose. These templates are now ready to be used and replicated in a diversity of contexts—giving RBF programs the potential to reach some of the world’s most in-need populations.


But what makes these new templates so much better than existing ones? Simply put, whether they were initially intended for grant or service contracts, pre-existing templates that are available to governments and donors just aren’t well-suited to the functionalities of RBF programs and risk resulting in suboptimal outcomes. In fact, the different logic that procurement and contracting for RBF programs should follow requires a departure from traditional contracting as we know it. Outcomes are at the core of RBF programs, which therefore dictates that flexibility on inputs and implementation delivery is an essential condition of their success. It is critical that this flexibility is recognized in the contract to enable adaptation and course-correction during implementation. This focus on outcomes and the transfer of the performance risk to implementers and investors requires a radical shift in the basis of accountability and the development of a new contract structure that holds space for change and adaptation over time. And the impetus for funders is clear, as by failing to do this they risk not selecting the most appropriate implementers—or being contractually bound by rigidities—which could lead to disappointing results and financial difficulties for both implementers and investors.


Along with their aim of achieving high-quality results, efficiency is a clear benefit of these new, fit for purpose templates. The example of the United Kingdom is a source of inspiration as the use of template outcomes contracts has greatly increased efficiency and supported the acceleration of the domestic impact bond ecosystem. Adopting a similar approach to standardization and replicability at the global level was one of EOF’s objectives: by putting in the work and effort required to create brand new templates, teams no longer need to adapt and re-adapt inadequate ones each time a new program is launched.


To help other organizations circumvent contracting and procurement issues from the outset, ‘Setting up for Success: Best Practices for the Procurement and Contracting of Results-Based Financing Programs’ provides recommendations for teams engaging with RBF for the first time. The paper not only illustrates why working closely with the procurement and legal teams and creating new templates that are fit for purpose will ultimately save time and result in better outcomes, it also offers practical recommendations for practitioners, lawyers, and procurement officials.


Along with its recommendations for RBF practitioners, the conclusions of 'Setting up for Success' reinforce the rationale behind EOF’s institutional set-up, which allows it to bring together governments, donors, implementing partners, and investors who want to scale outcomes funding approaches while avoiding expending their own time and resources unnecessarily. The time and effort EOF has invested in developing the fiduciary structure to pool outcomes funding and creating its own procurement and legal templates for RBF programs will facilitate and accelerate the launch of RBF programs and lower their transaction costs, ultimately expanding the impact of the funds that go towards improving learning and employment outcomes for children and young people around the world.


By ensuring a focus on outcomes to deliver tangible, real-life improvements in the lives of beneficiaries, RBF offers a world of exciting opportunities for governments and donors. To ensure that enthusiasm for innovation and ambition to achieve impact do not die of a slow death due to procurement and legal challenges, standardized templates and processes are our only vaccines. Thankfully this type of immunization will allow us to launch high-quality RBF programs much faster and unlock the full benefits of the mechanism at greater scale!


You can read or download the full paper here.