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First-in-the-Nation “Pay for Success” Contracts Announced

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The Commonwealth of Massachusetts announced today that it has selected

Third Sector Capital Partners to develop its two groundbreaking Social Innovation Financing pilots, more commonly known as “Pay for Success” contracts. Massachusetts is the first state in the nation to issue a competitive process to obtain services using social innovation financing.

Third Sector will serve as lead intermediary, in partnership with New Profit Inc., for a youth recidivism initiative and as partner to the Massachusetts Housing and Shelter Alliance (MHSA), lead intermediary for a chronic homelessness project. Roca, United Way of Massachusetts Bay and Merrimack Valley, and Youth Options Unlimited will also participate in the youth recidivism project. The Corporation for Supportive Housing

and United Way will partner with MHSA and Third Sector for the homelessness initiative.

“We are thrilled to reach this important next step in the process, and we look forward to productive negotiations,” said Secretary of Administration and Finance Jay Gonzalez. “Through this innovative public-private partnership and financing arrangement, the Commonwealth will pay only if better social outcomes are achieved at lower cost- a true ‘win-win’ for taxpayers.”

Third Sector Capital Partners provides advisory and project structuring services for government, service providers, investors and project intermediaries pursuing social innovation financing strategies, including Pay for Success initiatives. Founded in 2010, Third Sector’s mission is to deliver capital market solutions that will accelerate America’s transition to an evidence-based social sector.

“Third Sector is excited to build collective leadership around this new concept to generate better outcomes for Massachusetts’ most vulnerable populations. Our communities deserve to receive the most effective social services available, and innovative financing techniques can help make that happen,” said Third Sector CEO George Overholser.

The Massachusetts initiatives are a unique opportunity to scale impact-driven programs through a financing partnership between government, philanthropic and private investors. “This is really an opportunity to adapt existing financial market techniques to help communities thrive,” commented Rick Edwards, Partner.

Massachusetts Governor Deval Patrick agrees. “We need to invest in innovative ideas and strategies to tackle challenging, long-term social issues. The results-oriented nature of Social Innovation Financing contracts will help us improve services and build a better Commonwealth for the next generation.”

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