Financing that pays
for what works.

The United States has built one of the most elaborate federal spending architectures in the world. And yet the question of whether that spending actually produces results remains, for the most part, unanswered. The GAO has flagged program fragmentation repeatedly. OMB's own evaluations show fewer than half of major federal programs can demonstrate evidence of effectiveness.

The Legislative Foundation Is Already There

The Foundations for Evidence-Based Policymaking Act of 2018 required all federal agencies to designate an Evaluation Officer, build learning agendas, and produce annual evidence plans. The legislation created the infrastructure for results-oriented government. What it did not create was the financial mechanism to link payments to those results. OBF is that mechanism.

Where Federal OBF Makes the Most Sense

• Workforce development (DOL, WIOA): Pay for verified job placement and 6-month retention rather than training completions.
• Health outcomes (HHS, Medicaid): Results-based payment tied to reduction in emergency utilization or chronic disease management.
• Housing (HUD): Outcomes funds that pay service providers only when individuals are verifiably housed for 12+ months.
• Criminal justice (DOJ): Social Impact Bonds for recidivism reduction, modeled on the UK Peterborough SIB.
• Education (ED): Performance-based funding for community college graduation rates and employment outcomes.

Seven years after Congress passed the Foundations for Evidence-Based Policymaking Act, the United States has the legal architecture for a results-oriented federal government — but not yet the financial mechanisms to deliver one. The Evidence Act created Evaluation Officers, learning agendas, and evidence plans. It did not create outcomes-linked budgets. OBF is the missing financial layer.

What the Evidence Act Actually Did

• Required every major agency to designate a Chief Evaluation Officer responsible for agency-wide evaluation capacity.
• Mandated annual Learning Agendas — multi-year plans outlining priority questions to answer through evaluation.
• Required Annual Evaluation Plans detailing specific studies for the coming fiscal year.
• Created the Federal Data Strategy to improve access to and use of federal data for evaluation.

The Gap: From Evidence to Payment

The Act's central limitation is that it creates evidence infrastructure without creating financial consequences for evidence. An agency may learn, through rigorous evaluation, that a program is ineffective — and continue funding it at the same level. OBF closes this loop: payment is disbursed only when verified outcomes are achieved.

"A growing body of research shows that well-designed OBF initiatives can lead to positive outcomes and enhance value for money across sectors including education, health, employment and climate action."

OECD, 2025

While attention focuses on federal-level adoption, the most dynamic and immediately actionable OBF opportunities in the United States are at the state and municipal level. States have greater flexibility in contracting design, shorter procurement cycles, and more acute pressure to demonstrate the effectiveness of social spending.

Leading States

Massachusetts

Launched the first U.S. Pay for Success contract in 2012, targeting chronic homelessness in Boston. Has since expanded to workforce development and early childhood education.

Connecticut

Created a dedicated Office of Early Childhood that uses outcomes-based contracting as a core procurement mechanism — integrating OBF into standard procurement rules rather than treating it as an exception.

Colorado

Launched an outcomes-based contract for reentry services in 2016, paying based on verified recidivism reductions. The program has since expanded to four counties producing 12–18% recidivism reductions versus controls.

The United States launched its first Social Impact Bond in August 2012 at Rikers Island — targeting recidivism among adolescent males. Backed by Goldman Sachs and guaranteed by Bloomberg Philanthropies, it represented a genuine institutional innovation: private capital placed at risk against a social outcome. It failed to meet its targets. Goldman did not recover its investment. And this outcome produced some of the most valuable lessons in the history of U.S. impact finance.

What Rikers Taught Us

The Rikers SIB's failure was not a failure of the outcome payment mechanism. It was a failure of intervention design. The SIB did not make a weak intervention strong — it made the financial consequences of that weakness visible. This is the mechanism working as designed.

Design Principles That Work

• Start with a proven intervention, not an experimental one.
• Invest in the verification design upfront — it shapes the entire instrument architecture.
• Build adaptive management clauses allowing implementation adjustment without renegotiation.
• Use tiered payments proportional to outcome achievement — binary structures create perverse incentives.
• Ensure the outcome funder is genuinely motivated by the outcome, not merely by the innovation narrative.

One of the most technically demanding aspects of OBF transaction design is setting the outcome payment level — the price the outcomes funder agrees to pay per unit of verified result. Set too low, and the incentive is insufficient. Set too high, and the instrument becomes a subsidy in disguise. Predictive econometric modeling offers a rigorous methodology for pricing outcomes before they occur.

The Arboria Approach: Propensity-Adjusted Outcome Pricing

• Step 1 — Baseline modeling: Estimate the probability of achieving the target outcome without intervention for each participant subgroup (P₀).
• Step 2 — Intervention effect estimation: Use experimental or quasi-experimental evidence to estimate the average treatment effect (δ) of the proposed intervention.
• Step 3 — Target setting: Set the outcome target at T = N × (P₀ + δ), with appropriate confidence intervals.
• Step 4 — Price calibration: Set the outcome payment at the level covering delivery cost per achieved outcome, plus a margin sufficient to incentivize risk-taking by the implementing partner.

Colombia is the most advanced OBF ecosystem in Latin America and one of the most instructive globally. From a single pilot employment SIB in 2017, Colombia built a national outcomes fund, engaged 50+ local actors, placed 33,000+ individuals in verified employment, and embedded results-based financing in two consecutive national development plans.

The Colombia Trajectory

2017: The First Employment SIB

Backed by IDB Lab and Switzerland, structured by Instiglio with DNP support. A randomized controlled trial found the pay-for-performance mechanism produced a positive "OBF effect" — providers changed their behavior, not just their activities.

2022: LOGRA — The National Outcomes Fund

Colombia created LOGRA under the Department of Social Prosperity, becoming the first country in Latin America to institutionalize OBF at the national level. LOGRA can commission multiple projects simultaneously, engage private investors, and provide standardized verification protocols.

Five Lessons for the United States

• Start small, learn fast: Colombia's first SIB was modest in scale — designed to generate learning, not just results.
• Invest in the ecosystem, not just the transaction: Colombia's success was built on a community of OBF practitioners who developed shared knowledge across successive transactions.
• Government must be the anchor: Private funders can catalyze OBF, but they cannot institutionalize it. Colombia's breakthrough came when DNP declared OBF a strategic priority.
• Use outcomes funds to reduce transaction costs: LOGRA dramatically reduced per-transaction costs by standardizing verification, contracting, and stakeholder coordination.
• Design for equity from the start: Colombia's employment SIBs explicitly incentivized providers to serve women, youth, migrants, and vulnerable groups.

The U.S. federal government spent approximately $6.1 trillion in fiscal year 2024. Of this, roughly $700 billion was directed toward discretionary domestic programs where the question of what results that spending is producing is, in most cases, genuinely unanswerable. This is not a failure of intent — it is a failure of mechanism.

The Value-for-Money Argument

The OECD's 2025 review found that well-designed OBF programs consistently produce better value for money than traditional grant funding through three mechanisms: selection pressure toward effective interventions, investment in performance management infrastructure, and elimination of funding for ineffective programs.

The Path Forward

A federal outcomes-based contracting initiative would not require replacing all existing procurement. The most credible path is incremental: identify 5–10 high-volume, outcome-measurable programs with existing evaluation infrastructure; run outcomes-based pilots in parallel with traditional contracts; compare cost-per-outcome and use the evidence to expand. This is precisely how Colombia built its ecosystem.