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In 2020, Partner4Work, the workforce development agency for the Pittsburgh area, issued this RFP to identify training programs that would provide a specific pathway for job seekers to gain industry-recognized credentials and employment. To incentivize credential attainment, the RFP specified that “payment will be made 50% on enrollment into a training program and 50% when documentation of a credential earned is provided.” Evidence-driven organizations, including Per Scholas, were awarded contracts through this RFP allowing them to serve more participants.
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The Memphis Workforce Investment Network used WIOA funds in 2018 to award an outcomes-based contract for transitional jobs services to the Center for Employment Opportunities (CEO), which offers an evidence-based model for reentry employment. The contract paid for three specific thresholds: (1) 40% for participants enrolled, entered into the system, and confirmed to be eligible; (2) 40% for participants completing transitional employment; and (3) 20% for participants successfully placed in unsubsidized employment. The contractor was required to invoice on a monthly basis for participants meeting the thresholds. Memphis and CEO tracked outcomes for these participants for at least four quarters using WIOA data to better understand the link between the outcomes payments and longer-term impacts.
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The City and County of San Francisco Office of Economic and Workforce Development restructured its contracts for American Job Centers to offer a 10% performance-based payment for the placement of individuals with barriers to employment into jobs paying above the minimum wage. The RFP explains that the agency “will provide a base cost-reimbursement amount for start-up, operating expenses, training and supportive services. 90% of the grant budget will be offered as the base reimbursement amount. The remaining 10% of the grant amount will be set aside for performance-based grant achievements.”
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In 2020, the Workforce Development Board of Central Ohio (WDBCO) released performance-based RFPs for their One-Stop Center operator and their main career services provider that combine cost-reimbursement with performance payments for priority outcomes. The contract specifies performance metrics beyond WIOA Common Measures and each metric was assigned a baseline measure as the minimum level of performance required to begin receiving bonus payments, and each metric accounts for 9% of the total direct operational costs.
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Use these templates and sample language to help develop your agency's performance-based grants and contracts.
WIOA Pay-for-Performance
One type of performance-based contracting is WIOA’s Pay-for-Performance (PFP) provision. DOL provides guidance on how to implement a PFP approach through their Training and Employment Guidance Letter and additional resources.
Like performance-based contracting, PFP is intended to improve the effectiveness of WIOA programs by focusing on evidence-based approaches that move beyond simply tracking inputs and outputs toward rewarding service providers for achieving specific outcomes. However, workforce agencies interested in implementing PFP should be aware of both its pros and cons. While RFA highly encourages workforce agencies to use performance-based contracting, RFA cautions against the use of PFP specifically. State and local workforce areas interested in PFP should carefully consider the potential burden of PFP’s implementation requirements and the limited number of successful PFP examples that exist.
Pros and Cons
Pros
The ability to leverage 10% of WIOA funding as “no-year” funding, meaning workforce agencies can spend it beyond the normal two-year limit, and to accumulate each year’s 10% set-aside until there are sufficient funds to launch a PFP initiative.
The ability to use those dollars until expended means workforce agencies can pay for longer-term outcomes, such as employment after five years.
If outcomes are not met, and funds are not paid out, local workforce areas can keep those dollars if they put them toward another PFP contract.
Cons
Increased compliance requirements, including a feasibility study (which can be done in-house), an independent data validator, technical assistance, and an evaluation plan, among others.
Limitations of the 10% set-aside, which may only be used to make outcomes payments. This limitation on paying for necessary, related activities could eliminate local agencies’ ability to use the PFP authority.
Lack of clarity regarding what performance indicators may be linked to payment and on what timetable, making it difficult to identify allowable focus populations, metrics, or when to measure a specific performance indicator for payment.
Limited number of existing PFP contracts and less familiarity among potential service providers, partners, and monitors of its requirements, requiring more upfront time to ensure alignment and buy-in.
Examples
- To date, the DOL has approved a very small number of PFP projects, meaning there are few examples of successful implementation for other jurisdictions to review or replicate.
- The SkillSource Group, Inc. is the non-profit arm of Virginia Career Works - Northern Region and the local workforce development agency. In 2017, data showed that young adults in foster care and juvenile justice programs were not accessing One-Stop Job Centers or available services to help them onto career pathways. Skillsource implemented PFP to link funding directly to positive outcomes for these young people, awarding vendors up to $150,000. Unfortunately, these contracts were suspended by the DOL after award due to additional clarity required through an updated guidance letter. Contracts were eventually restarted, and while this work demonstrates the innovation possible through PFP, it also highlights its challenges.
The ability to leverage 10% of WIOA funding as “no-year” funding, meaning workforce agencies can spend it beyond the normal two-year limit, and to accumulate each year’s 10% set-aside until there are sufficient funds to launch a PFP initiative.
The ability to use those dollars until expended means workforce agencies can pay for longer-term outcomes, such as employment after five years.
If outcomes are not met, and funds are not paid out, local workforce areas can keep those dollars if they put them toward another PFP contract.
Increased compliance requirements, including a feasibility study (which can be done in-house), an independent data validator, technical assistance, and an evaluation plan, among others.
Limitations of the 10% set-aside, which may only be used to make outcomes payments. This limitation on paying for necessary, related activities could eliminate local agencies’ ability to use the PFP authority.
Lack of clarity regarding what performance indicators may be linked to payment and on what timetable, making it difficult to identify allowable focus populations, metrics, or when to measure a specific performance indicator for payment.
Limited number of existing PFP contracts and less familiarity among potential service providers, partners, and monitors of its requirements, requiring more upfront time to ensure alignment and buy-in.
- To date, the DOL has approved a very small number of PFP projects, meaning there are few examples of successful implementation for other jurisdictions to review or replicate.
- The SkillSource Group, Inc. is the non-profit arm of Virginia Career Works - Northern Region and the local workforce development agency. In 2017, data showed that young adults in foster care and juvenile justice programs were not accessing One-Stop Job Centers or available services to help them onto career pathways. Skillsource implemented PFP to link funding directly to positive outcomes for these young people, awarding vendors up to $150,000. Unfortunately, these contracts were suspended by the DOL after award due to additional clarity required through an updated guidance letter. Contracts were eventually restarted, and while this work demonstrates the innovation possible through PFP, it also highlights its challenges.
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