According to OMB’s 2013 Memo on the Next Steps in the Evidence and Innovation Agenda …evidence includes evaluation results, performance measures, and other relevant data analytics and research studies, with a preference for high-quality experimental and quasi-experimental studies. Since 2010, OMB has used its annual budget guidance to broadly encourage federal agencies to use evidence to consider the effectiveness of their programs and to institutionalize the use of evidence to foster innovation rooted in research and rigorous evaluation. In a 2013 memo, OMB identified areas in which agencies could improve their use of evidence, including: (1) strengthening evaluation capacity and proposing new evaluations; (2) developing high-quality, low-cost evaluations and rapid, iterative experimentation; (3) using innovative outcome-focused design; and (4) increasing agency capacity to use evidence. In 2015, OMB required agencies to include an evidence template with their fiscal year 2017 budget submissions. The template should provide an overview of evidence-building strategies and identify related priorities. The six federal agencies in our study that typically fund social programs said they used evidence to inform a range of program proposals or decisions. See appendix 2 for illustrative examples of these agencies’ evidence-based programs. As part of its agenda to base management and policy decisions on evidence, the White House and OMB have encouraged agencies to explore PFS, where appropriate, as one tool to incorporate evidence into grant making. As of July 2015, four federal agencies have awarded PFS grants or are developing PFS grant proposals (see table 1). PFS is a program funding mechanism that some U.S. state and local and foreign governments are using to contract for prevention services to address entrenched social problems. The first PFS project began in the United Kingdom in 2010. In a PFS contract, private investors provide upfront capital that a service provider uses to implement an evidence- based prevention program. An intermediary organization can solicit funding from the investors, facilitates the flow of capital from the investors to the service provider, and oversees the provider’s work throughout the project. If the program is successful, the government entity makes payments to the intermediary, which in turn may repay the investors their capital along with interest. These payments are, in theory, based on the savings that result from decreased use of government services. PFS is intended to allow government to transfer the risk of paying for a program that does not achieve desired outcomes from the government to other participating organizations. If the program is successful, the government obtains improved outcomes for vulnerable populations. In addition, PFS can potentially capture cost savings by reducing the need to provide costly remediation services to the individuals in vulnerable populations. However, stakeholders said that PFS can also be used to contract for outcomes that a government deems worthwhile, even if the outcomes do not generate savings. Because the government makes payments based on the service provider meeting outcome targets, all parties to the contract have a vested interest in the success of the service provider. An individual PFS project comprises a series of contracts and other vehicles, such as loan and grant agreements, that defines entities’ roles in the project and identifies the risks they each agree to assume and the benefits they each stand to receive by virtue of their participation. Although individual PFS projects may vary in terms of roles and responsibilities for the parties to the contract, there are five main types of organizations that commonly participate in a PFS project: government, intermediaries, investors, service providers, and evaluators (see figure 1). Government originates a contract for defined outcomes and pays on the basis of those outcomes being achieved. In the United States, state and local governments have initiated PFS projects to date, while in the UK both national and local-level governments have initiated them. Examples of government entities that have been involved in PFS projects include state or local programmatic agencies and central management offices, which often work together collaboratively on a project. As mentioned above, DOL and CNCS have awarded grants to support state and local PFS projects. Investors provide capital to finance a program. They provide capital on the condition that the government will repay the investment if outcomes are achieved, usually with a rate of return. In U.S. projects to date, capital has been provided by a mix of investor types, such as banks, foundations, and high net worth individuals, whereas in UK projects, capital has been provided solely by social impact investors. Intermediaries enter into a government contract in a PFS project and usually receive a fee for the services they provide. Intermediaries can take on a variety of roles in a PFS project, such as providing technical support to governments on the feasibility of a project, identifying the service provider, raising operating funds from investors, negotiating the terms of contracts or agreements with governments, service providers, and investors; disbursing payments to service providers; and overseeing day-to-day performance management of the project. Examples of intermediaries that have been involved in PFS projects include nationally focused nonprofit organizations with public policy and financial expertise and a locally focused nonprofit organization with experience implementing programs within local communities. Service providers enter into contracts with an intermediary or a government to administer the evidence-based prevention program. Examples of service providers that have been involved in PFS projects include nonprofit or charitable organizations with established track records of implementing programs in specific policy areas, such as job training or homelessness prevention. Evaluators measure a program’s outcomes or evaluate a program’s effect on the target population. The evaluator’s work assures the other participating organizations that defined outcomes were achieved and are likely due to the program, rather than to other factors, including chance. Outcome payments are based on these findings. In some cases, a validator, independent of the evaluator, is responsible for certifying the evaluator’s findings. Examples of evaluators that have been involved in existing PFS projects include a research office within a government department and an organization with experience evaluating programs within a specific public policy area, such as early childhood education. The PFS projects we reviewed generally had three phases: a feasibility assessment, project design, and program implementation (see figure 2). As described previously, a PFS project is a complex set of contracts through which multiple organizations work together to deliver social service programs. PFS projects are similar to complex acquisitions. Complex acquisitions are defined, in part, by the difficulty in defining precise terms of exchange for all the characteristics of the product or service at the time of the contract negotiation. We have previously identified key factors that government entities should incorporate into complex acquisitions to achieve improved service acquisition outcomes. Key literature on complex acquisitions we reviewed reinforces these factors. Taken together, this understanding can inform the design and management of PFS contracts. To address the inherent ambiguity in complex acquisitions, parties can include processes in the contract to manage decision making and to make ongoing adjustments during implementation. Specifically, providing clear standards in the following areas can facilitate PFS contracts: Valid and well-defined requirements. We have previously reported that establishing a valid need for a service, and then translating that need into a service acquisition requirement, is essential for obtaining the right outcome. Literature on complex contracting underscores the need for well-defined requirements, but states that it can be challenging to define all requirements upfront in a complex acquisition. Undefined requirements leave room for interpretation that, if not carefully managed, can lead to outcomes that are inconsistent with expectations. Properly structured business arrangements. We have previously reported that once requirements have been defined, it becomes necessary to develop a business arrangement to meet the requirements and protect the government’s interests. At a basic level, properly structuring business arrangements includes defining a clear scope of expected contractor performance and developing an objective means of assessing the contractor’s performance. There should be clearly established relationships among the tasks the contractor is expected to perform, the contract terms and conditions, and performance evaluation factors and incentives. Literature on complex contracting underscores the importance of properly structured business arrangements, including governance rules, which should define how the government and contractor will interact to make decisions during the contract’s implementation. Proactively managed outcomes. We have previously reported that managing and assessing post-award performance entails various activities performed by government officials to ensure that the delivery of services meets the terms of the contract, including adequate oversight resources, proper incentives, and a capable workforce for overseeing contractor activities. Each of these activities requires metrics and tools to encourage contractors to provide superior performance and to manage and document acceptable contractor performance. Literature on complex contracting also underscores the importance of rewarding successful outcomes, particularly in cases where it is difficult to define requirements, such as efforts to acquire services. In our selected case illustrations, governments used PFS to address entrenched social problems. The individuals who face these problems have complex, multi-faceted needs and are often poorly served by existing interventions or programs. The organizations participating in the PFS projects in our study said that these individuals can be better served through prevention programs focused on defined outcomes. Stakeholders told us that PFS is just one tool among many for addressing social problems and that PFS is not a panacea. Stakeholders said PFS is most appropriate in policy areas in which populations face complex, entrenched problems. One stakeholder also noted that PFS may work best on projects that supplement, not supplant, existing services, such as prevention programs for which existing services have been insufficient in achieving desired outcomes. Projects in our study used PFS to implement programs intended to reduce recidivism among an adolescent jail population, gaps in academic achievement among preschoolers, homelessness for difficult-to-serve individuals, wait times for adoption, and to provide preventive health care to address poor birth outcomes and asthma. Massachusetts Juvenile Justice PFS Initiative The “Roca Model,” which the project is funding, includes 4 basic elements: outreach to young men; intensive case management; life skills, educational, prevocational, and employment programming; and a connection to work opportunities.