Phase 1 - Define

1.5 Calculate costs

I. Estimate how many participants you expect to achieve which outcomes and when                                               

You’ll need to estimate the number of participants recruited, the programme duration, the drop-out rate, the % achieving each outcome, and when this will happen. Realistic goals should reflect:

  • The target population’s capabilities and needs. Ideally, you’ll be deeply familiar with these already

  • Your organisation’s capacity to meet these needs and deliver the programme outcomes. Which resources, most notably in time and money, are necessary and available to achieve your intended results?

While much of the workload in the SIB development phase may fall on the organisation’s management, it is very important to involve the delivery team when setting goals involving participants. 

Avoid a common mistake by keeping your estimates conservative. For example, there may be delays in participant recruitment, the drop-out rate may be higher than expected, and outcome achievement may be slower than expected. Once it seems that a commissioner may be interested in your outcomes, it is sensible to do some scenario modelling. This should happen before agreeing to any outcomes rates.

Case study : ThinkForward

At ThinkForward, our experience with our Department for Work and Pensions (DWP) SIB offers a cautionary tale of being overly optimistic about how much it is possible to achieve.

When we first designed the SIB, the programme was new, and we did not have extensive experience working with the beneficiary population., which was young people aged 13-18 at risk of becoming NEET in 10 London schools. We allocated each of our progression coaches a caseload of 95 young people.

Throughout the first year, it became clear that coaches were overburdened and that this was compromising the outcomes. In response, investor Impetus-PEF led a theory of change process to assess how the programme model could be adapted, resulting in the decision to flex the model and halve coach caseloads. This adaptation required flexibility on the part of the investors.

The target resetting process involved striking a balance: we were aware of the danger of over-compensating. If we had reset the outcome targets at too low a level, such that it was ‘too easy’ to achieve the targets, this could have resulted in failing to serve the young people who could most benefit from this intervention, i.e. those who would likely not have achieved the outcomes without the programme’s support.


II) Calculate the cost of delivering the programme for the target number of participants  

Remember to include core costs as well as direct delivery costs and estimate as precisely as possible any SIB-specific costs such monitoring, reporting and evaluation. Think about any timing lags for outcomes to be verified and outcomes payments to be received.  Also include the cost of borrowing the working capital. From the above, you should be able to work out the minimum level of total outcome payments that would cover the costs of delivering the programme and therefore make the SIB financial model viable.

III) Postpone any resource-heavy scenario modelling until conversations with commissioners progress

We have heard that many delivery organisations have spent significant time and funding on preparing and developing SIBs for which they have not been able to find commissioners.

Tempting though it may be to test assumptions as fully as possible before commissioners are engaged, a SIB that is co-designed seems to stand the greatest chance of success.

Next: 1.6 Progress conversations with outcomes payers