Outcomes-Based Grantmaking & Contracting
After defining a grant program’s desired outcomes, SEAs can improve performance on those outcomes by engaging in outcomes-based grantmaking or by encouraging grantees to engage in outcomes-based contracting for grant activities.
Outcomes-based grantmaking and outcomes-based contracting are similar in that both:
Tie funding to high-priority outcomes.
Require SEAs and grantees to shift their thinking from “How much does a service cost?” to “How much is an outcome worth?”
Increase accountability for improving outcomes.
Foster innovation and a cycle of continuous improvement.
SEAs that decide to use outcomes-based grantmaking need to determine what portion of the available funding to distribute to grantees regardless of performance on outcomes (“base funding”) and what portion of the funding to link to achievement of the desired outcomes (“performance-based funding”).
Balancing base funding and performance-based funding depends on the SEA’s goals and the financial situation of the grantees. Too little base funding will inhibit grant implementation. Too little performance-based funding - less than 5% - might not create a sufficient incentive for providers. Performance level thresholds can vary by outcome and should be both challenging and achievable.
SEAs may use a combination of the state’s administrative data, data reported by grantees, or data reported by third parties to verify whether grantees achieve the intended outcomes.
A data verification process will allow the SEA to allocate funds to individual grantees and assess the performance of individuals grantees and the grant program as a whole.
SEAs should be transparent with grantees about what they are learning from the data, and communicate how the SEA and the grantees both can use the data to evaluate and strengthen the grant program.
SEAs can design grant programs to incentivize or encourage grantees to engage in outcomes-based contracting in cases where grantees are likely to enter into contracts to carry out grant activities.
There are several strategies SEAs can use to encourage outcomes-based contracting:
Require grantees to engage in outcomes-based contracting.
Award preference points for grantees who commit to outcomes-based contracting.
Provide or subsidize technical assistance for grantees engaging in outcomes-based contracting.
Like outcomes-based grantmaking, outcomes-based contracting requires grantees to identify “base payments” and “performance-based payments.” Additionally, grantees using outcomes-based contracting will need a system for collecting data on whether their vendors are meeting the intended outcomes.
The Southern Education Foundation provides resources and training on outcomes-based contracting for K-12 districts, including RFP templates, contract templates, rate calculators and other resources through their Outcomes Based Contracting Toolkit.