Bridges – supporting public contracts NPC October 2016 Innovative investments that make a difference

Introduction to Bridges Bridges’ structure options SIB business cases

Bridges takes a Multi-Fund Approach… Bridges Sustainable Growth Funds Bridges Property Funds Bridges Social Sector Funds Bridges Impact+ Bridges Charitable Trust

What does Bridges Ventures do? We invest money on behalf of investors, to generate social impact and financial returns Example investors Part-ownership Mission-lock Types of investments Example beneficiaries Improved life prospects for young people Cost savings for Local Authorities Funds of Funds Outcomes Contracts Bridges Ventures’ Investment Funds Charitable Foundations Improved care quality for domestic care users Better job conditions for domestic carers Social Enterprises Improved economy and jobs in deprived areas Better education services High impact commercial businesses Local Authority Pension Funds Increased supply of high quality care homes Reduced environmental impact of buildings High impact commercial property Financial returns Impact reporting

Create significant direct impact on beneficiaries’ lives What were our original targets? (as stated when the Fund was raised) Play a catalytic role in evolution of PbR market, generating both direct and systemic impact Inputs SIB Fund Activity Outputs Outcomes Impact Provide working capital to social sector organisations to meet the cashflow requirements of PbR contracts Bring expertise to deals to reduce risk and cost of contract delivery Deliver services to most disadvantaged members of society more efficiently and effectively by SSOs than existing private or public sector organisations Improved outcomes for disadvantaged individuals, families and communities in a range of areas, including: Education, training & employment Housing & essential needs Personal & social wellbeing Direct Impact Create significant direct impact on beneficiaries’ lives Mobilise capital from impact investors to establish specialist Results Fund Systemic Impact Share learnings and best practice with all engaged with development of PbR market Assist in development of exemplar deal structures attractive to commissioners, providers and investors Demonstrate ability of SSOs to deliver improved outcomes against a range of indicators Create innovative delivery models that can be scaled and replicated Commissioners increasingly use SSOs to deliver PbR contracts New investors & capital attracted into market Shape the market and catalyse further development of PbR contracts for SSOs

Improved lives vs status quo What were our original targets? (as stated when the Fund was raised) Play a catalytic role in evolution of PbR market, generating both direct and systemic impact Inputs Activity Outputs Outcomes Impact Investment £15-20m Support 2.5 FTE Better services delivered 15 projects 10,000 beneficiaries Improved outcomes £50m outcomes 7 policy areas Outcomes worth £100m Direct Impact Improved lives vs status quo Raise the SIB Fund (£15-20m) Share learnings 1 report 16 workshops Develop structures [tbd] Capacity built in SSOs [tbd] Structures replicated More SIB providers 20-30 SSOs More SIB contracts 9 new commissioners More SIB investors £20m co-invest Systemic Impact Grow the SIB market

13 outcomes projects addressing four main social policy areas 19 impact-driven organisations delivering programmes for 24 local and national commissioners Independence & Employment Children’s Services Homelessness Health – Long Term Conditions

Won a second SIB in 2015 for a further 1,500 yp Independence and Employment – 5 outcomes projects 3 launched in 2012, with follow-on contracts for the two most successful providers in 2015 Achieved Now Target, end 2019 # young people School engagement outcomes Education outcomes Employment outcomes 7,000 11,000 6,930 12,067 5,676 10,374 424 699 Career Connect video can be viewed here Teens and Toddlers video can be viewed here 2012 2012 2012 Achieved Now Target, end 2019 Total outcome payments made by DWP Total value of outcomes to DWP £9m £14m 683 young people 4,383 young people 1,317 young people £16m £20m 3.5 years 3.5 years 3.5 years Greater Manchester East London Merseyside Won a second SIB in 2015, co-commissioned by local authorities, for a further 4,000 yp Won a second SIB in 2015 for a further 1,500 yp

5 years of delivery, 8 years including tracking period Family Therapy – 1 outcomes project 1 launched in 2012 Achieved Now Target, end 2020 # families treated % families still together # care days avoided 200 380 80% 65% 23,000 105,000 Action for Children MST video can be viewed here 2012 Achieved Now Target, end 2019 Total outcome payments made by Essex Total costs avoided by Essex Future cost avoidance unlocked £5m £8m £4m £20m 380 families 5 years of delivery, 8 years including tracking period £10m £20m Essex

Therapeutic Foster Care – 2 outcomes projects 2 launched in 2014 Achieved Now Target, end 2023 # young people placed # Weeks of therapeutic foster care provided 31 160 689 5,616 Birmingham Team Parenting video can be viewed here 2012 2012 Achieved Now Target, end 2023 Total outcome payments made by local authorities Total cost savings achieved by Local Authorities £1m £26m 62 young people 98 young people £2m £46m 8 years 6 years Manchester Birmingham, Cardiff

Supported adoption – 1 outcomes project 1 launched in 2013, with 6 delivery providers, serving 10 local authorities Achieved Now Target, end 2018 # children registered # children successfully placed 26 26 14 21 Family Futures “Toby” family finding video can be viewed here 2013 Achieved Now Target, end 2018 Total outcome payments made by Local Authorities and Cabinet Office Total cost savings achieved by Local Authorities to date Total future savings unlocked £1m £1.3m £1m £2m 26 young people on scheme £10m £13m 3 years of family finding, 2 year monitoring period Currently on hold, pending national Adoption regionalisation

Greater Manchester, Greenwich Tackling Youth Homelessness – 3 outcomes projects 3 launched in 2015 Achieved Now Target, end 2017 # young people # in stable accommodation Entry into education Entry into employment 914 914 620 680 314 431 129 240 2015 2015 2015 Achieved Now Target, end 2019 Total outcome payments made by DCLG Total value of outcomes to DCLG £3m £6m 348 yp 215 yp 352yp £3m £7m 3.5 years 3.5 years 3.5 years West Yorkshire Greater Manchester, Greenwich West Midlands

Health and Social Care – 1 outcomes project 1 launched in 2015 Achieved Now Target, end 2021 # patients registered Average wellbeing star improvement % of patients managing their condition better Level of saving from secondary care 933 10,047 3.95 1.1 62% n/a n/a 15% Ways to Wellness video can be viewed here 2015 Achieved Now Target, end 2021 Total outcome payments made by CCG + Cabinet Office + Big Lottery Fund Total cost savings achieved by CCG - £8m 10,047 patients 7 years n/a £5m* * CCG paying out their expected short-term cashable savings, and programme payments are topped up by the Cabinet Office and Lottery to recognise longer term savings to Newcastle CCG, and wider social impact for other departments (e.g. DWP, NHS England, etc)

Improved lives vs status quo What were our original targets? (as stated when the Fund was raised) Play a catalytic role in evolution of PbR market, generating both direct and systemic impact Inputs Activity Outputs Outcomes Impact Investment £15-20m Support 2.5 FTE Better services delivered 15 projects 10,000 beneficiaries Improved outcomes £50m outcomes 7 policy areas Outcomes worth £100m Direct Impact Improved lives vs status quo Raise the SIB Fund (£15-20m) Share learnings 1 report 16 workshops Develop structures [tbd] Capacity built in SSOs [tbd] Structures replicated More SIB providers 20-30 SSOs More SIB contracts 9 new commissioners More SIB investors £20m co-invest Systemic Impact Grow the SIB market

Our main impact targets are on track to be delivered We track and publish impact across all of our 13 SIBs

We are working with 19 impact-driven organisations All of which have learnt how to deliver PBR contracts Fund target 20-30 19 15 11 4 3

We are working with 24 local and national government bodies We are trying to share learning and good practice across government 24 14 Fund target 9 7 2 1

Introduction to Bridges Bridges’ structure options SIB business cases

Structure Options Bridges offers a variety of solutions for providers and commissioners Working with Service Providers Working with Commissioners Who are we working with? Bridges Ventures engagement Work with commissioners to procure providers Work with providers to bid into open procurement Core capital Project Finance Social Impact Bond Co-commissioning Advisory service Bridges directly finances service provider to grow through a variety of contracts Bridges provides at-risk financing to a service provider to deliver a specific contract Bridges creates new SPV, which holds main PbR contract, and sub-contracts to service provider Bridges and commissioner create new Prime Contractor, which procures service providers competitively No new entities. Bridges advisory team contracted by commissioner to provide support Typical entity structure Typical financing Investor loan to service provider, with interest rate tied to success Bridges pays revenue to service provider and receives share of PbR payments directly from commissioner SPV pays revenue to service provider and receives all PbR payments directly from commissioner Prime contractor pays revenue to service providers and receives PbR payments directly from commissioner Bridges not involved in financing. Provider raises working capital from other investors if needed Bridges takes seat on board of service provider Governance group (Bridges + provider) formed to manage specific project Board of SPV directs service provider, and external performance manager Bridges and commissioner sit on Board of prime contractor, which recruits small team Bridges offers contract design and management support to launch and deliver the project Governance Example

No performance manager used CASA: Bridges provided core capital to a provider to bid for multiple domiciliary care contracts Lead investor Loan agreement, with interest rate tied to success Example commissioners Service Provider Performance Manager No performance manager used Provider bids for contract(s) directly Advisor No advisor used Full market procurement 20 20

No performance manager used Manchester foster care: Bridges provided project finance to deliver a specific contract Share of PbR payments paid to Investor Lead investor Commissioner Bridges pays up-front revenue to service provider for initial contract period Main tri-partite PbR contract Service Provider Performance Manager No performance manager used Attachment payments + share of PbR payments paid to Provider Advisor No advisor used Full market procurement 21 21

Unlocking Potential Ltd Career Connect SIB: Investors and service provider set up a new vehicle to jointly bid into a competition Lead investor Co-investors Commissioners SPV Unlocking Potential Ltd Advisory contract Joint bid (SPV + investor + delivery provider) into the central competition Delivery contract Advisor Service Provider Performance Manager No advisor used Full market procurement 22 22

Ways to Wellness: Bridges worked with the commissioner to design a payment mechanism and procure providers Top Up Funding (30% of contract) Innovation partnership Commissioner Social Prime Contractor Lead investor Full market procurement Advisors No advisor used Service Providers 23 23

Advisory services: Bridges’ Impact+ team can provide contact design and management support Investor? Provider raises working capital as required to deliver the contract Example commissioners Service Provider Performance Manager? Provider appointed via open procurement Provider or investor may procure delivery support as required Advisory support provided, with fees tied to contract success Provider bids for contract(s) directly Advisor Full market procurement 24 24

Introduction to Bridges Bridges’ structure options SIB business cases

Potential business cases for an Outcomes Contract New services Generates measurable cost savings to the commissioner, within a reasonable timeframe The cost savings are cashable (may require re-configuration or outsourcing of related services) Project is sufficiently difficult to require an outcomes payment mechanism to make it happen Project is sufficiently important to justify the time and effort needed 2. Existing services Understand the current cost of an existing service Understand the outcomes currently being delivered by this service Design a “Base Case Zero” contract

Step 1 – identify current cost per successful outcome

Step 2 – invite bids, using the current cost per outcome as a maximum price

Step 3 – choose a bid which fits the authority’s goals and budget Optional contract cap

This process can drive better outcomes, and drive efficiency Better alignment of incentives for providers: “The supported housing was rubbish really, they didn’t seem like they wanted to help me, it was more like they were there to do the job because that’s what they were getting paid for, they didn’t feel as if they were trying to move me out of there, as I was there for over a year and they told me they couldn’t move me out because I wasn’t ready, but a month later I am in my own flat from [Fair Chance Fund] and everything has been done well”. Better competition to deliver outcomes: 30 30

Contact us Bridges Ventures 38 Seymour Street London, W1H 7BP E: info@bridgesventures.com www.bridgesventures.com Printed on 100% recycled paper Bridges Ventures Ltd is authorised and regulated by the Financial Conduct Authority