Goal as the starting point – municipalities contracting outcomes

What does outcomes contracting mean? What tools do municipalities have for outcomes contracting? Generating an overview of municipalities’ methods and an understanding of outcomes contracting is anything but simple.

Outcomes contracting is a surprisingly hot topic in municipalities. We interviewed 27 representatives of municipalities, two thirds of whom have talked about outcomes contracting to a greater or lesser degree. However, there is a variation in what outcomes contracting means. Where one defines outcomes contracting as a new operating model that aims to save costs by allocating resources more effectively, another underlines outcomes contracting as a solution for unwanted problems, and a third sees it as a means for smoother service paths and a higher customer value, while yet another considers it a way to extend the timespan of operational evaluations.  

Currently, outcomes contracting is primarily based on the Social Impact Bond (SIB) model. In addition, municipalities have innately considered individual opportunities of outcomes contracting. Outcomes contracting using the SIB model, for example, is a multifaceted process, and such a process cannot be mastered overnight. Municipalities that carry out outcomes contracting using the SIB model have gained a profound learning experience regarding the requirements and different stages of outcomes contracting. Then again, there are municipalities for which outcomes contracting is a novel concept. All in all, municipalities have a broad range of capabilities and preconditions for outcomes contracting.

No model or implementation can be separate from the operating environment of municipalities. This is why it is important to consider how ready municipalities are for new ways and methods of contracting. As a rule, municipalities are very interested in new ways and opportunities to develop their services. However, different municipalities have different resources, which is especially emphasised when comparing smaller and larger municipalities. In smaller municipalities, nearly all hands are tied up in practical work, whereas larger municipalities have seen the rise of a highly networked and competent community of developers. In addition to resources, the question is of the type of competence and knowledge municipalities have and of the decision-making atmosphere. Some municipalities want to lead the way by experimenting with new opportunities, while others would rather wait to hear others’ experiences and act on the basis of the resulting knowledge.

What should happen and be done to spread outcomes contracting? Information and the operating culture are key. As municipalities have highly different starting points, we need targeted means for the use of outcomes contracting. In addition, we need a shared conceptual view of what outcomes contracting means, and then implement this information in municipalities. Municipalities must shake their way of thinking, adhered to performance and service transactions, and make room for proactive and preventive long-term activities, in which the teachings of different professions are brought together. Above all, outcomes contracting deals with human well-being, which has a significant value in today’s world. The challenging situation also materialises in pressures in municipal economies, and also in this respect, municipalities should identify the potential of outcomes contracting. The key question is: how can we use our shared resources as effectively as possible? When the goal of operations is set as the starting point in outcomes contracting, plans can be prepared from a whole new perspective. Outcomes contracting is about a change which is larger than its size. A new way of operating and thinking gives municipalities access to tools, with which they can shake and reinvent their service logic.

Anni Kyösti, Researcher, Tampere University 
Jenni Airaksinen, Lecturer, Tampere University