Federal Reserve Bank of San Francisco

Community Development

Making Performance-Based Contracting Work for Kids and Families

Author(s): Patrick Lawler and Jessica Foster, Youth Villages

April 2013

Community Development Investment Review

Done right, performance-based contracting (PBC) offers a win-win-win to government, providers, and, most importantly, the people being served. Government spends funds more effectively, higher-quality providers thrive, and recipients get better services. Take Tennessee’s experience introducing PBC to its child welfare system. Significantly more children are exiting care to stable homes, providers deliver better outcomes and receive incentive payments to reinvest in strengthening their work, and the Department of Children’s Services (DCS) has kept its budget steady and is getting more bang for its buck. The idea of paying for performance is not new. In child welfare—the field in which our organization, Youth Villages, works—a 2009 study identified fourteen states with performance-based contracts for at least one service. But PBC is far from ubiquitous, and its implementation is inconsistent.

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