Applying PFS Lessons to PfR in Development

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Recently USAID published a guide for “Setting, Pricing, and Administering Performance Metrics in Pay-for-Results Programming.” The guide is intended to help those within USAID understand the basics of Pay-for-Results (PfR) contracts, their connection to current contracting practices and authorities, and how to think through the design of a new project. Third Sector contributed by sharing our experiences and how the lessons we learned in our work in domestic human services are equally applicable in the international development context.

Our experience shows that there are six critical aspects when developing an outcome-based approach to your project. USAID chose to parallel Third Sector’s framework for specific sections of their new guide. (This framework is taught in greater depth in our Impact Management Skills Training, which is held throughout the year). The six elements and a brief overview of their intent follow in the figure below:

The USAID guide walks through each of these steps illustrated above and shows how an organization can use these principles to more actively understand their practices through their data, connect incentives to outcomes, and apply a governance process to improve outcomes over time. The guide illustrates how the framework would look in practice, for instance using a water-access project to highlight how this framework can apply to development projects as well as to human services. 

While Third Sector’s experience provided the approach to Pay for Results, the USAID team made our framework relevant by including their specific policies and procurement rules. For example, in the section about creating incentives for meeting outcome targets, they show how the Federal Acquisition Regulations (FAR) allow for performance-based acquisition in FAR Subpart 37.6 and financial incentives in FAR Subpart 16.4. 

We look forward to continuing to partner with USAID and others in development to expand the impact of outcome-based contracting. We’re already exploring training options to work with individual offices and guide them through our framework to see how outcomes, metrics, and incentives can create lasting improvement in the countries they work with.

If you think that your office or agency could also benefit from the Impact Management Skills training or would like us to facilitate a workshop to apply the impact management framework to your mission area, please send us a note.