(a) (1) An agency may enter into a pay for success contract if the agency head determines with reasonable certainty that the contract will produce a quantifiable public benefit or financial savings to the State by doing any of the following: a. Reducing or avoiding costs. b. Increasing economic productivity. c. Improving client outcomes. d. Creating high wage jobs. (2) A pay for success contract may be used for a service, program, or economic development initiative that produces a public benefit or financial savings under paragraph (a)(1) of this section and includes any of the following: a. Economic development. b. Public education, including early childhood education. c. Workforce preparedness and employment, including school to work programs. d. Public safety, including programs that reduce recidivism and address juvenile justice. e. Health and human services, including programs for drug and alcohol addiction, mental health, chronic homelessness, supportive housing, and child welfare services. (3) A pay for success contract for education must comply with the specific procedures for pay for success contracts for public education. The procedures for pay for success contracts for public education must be consistent with the recommendations from a working group. (b) A pay for success contract may be made between either of the following: (1) An agency and a program intermediary. (2) An agency and an investor. (c) The agency head shall design a pay for success contract in collaboration with other relevant agencies and the program intermediary or investor. (d) The Director must approve the terms and conditions of a pay for success contract before an agency head may enter into a contract under subsection (a) of this section. (e) An agency must comply with the requirements of this chapter when selecting a program intermediary, investor, or any necessary consulting assistance. (f) Each pay for success contract must include all of the following: (1) A full and thorough description of the objectives to be addressed by the pay for success contract and an analysis of how the defined performance measures will demonstrate progress in addressing the objectives, and how achieving the objectives should provide a significant public benefit, lead to a long-term reduction in state expenditures, or enhance job growth. (2) A requirement that the agency will hold the funds for the pay for success contract in a reserve account that is specifically for the pay for success contract. (3) A requirement that a substantial portion of the outcome payment is conditioned on achieving specific outcomes based on the defined performance measures that lead to fiscal, economic, or social value for the State. (4) A requirement that the program intermediary or investor provide evidence that the program intermediary or investor has secured all of the necessary financing before service delivery begins. (5) A description of the data each agency involved in developing the pay for success contract will provide to the program intermediary or investor. The data will be provided by the agency only to the extent permissible by law. (6) The objective process that an independent evaluator, chosen by the agency head, will use to monitor program progress and determine if a performance measure is achieved. (7) The reporting requirements the program intermediary or investor must provide to the agency regarding the program intermediary's or investor's progress in meeting the objectives. (8) The method that will be used to calculate the amount and timing of outcome payments to the program intermediary or investor during each year of the pay for success contract if the independent evaluator determines that the program intermediary or investor achieves a performance measure. (9) The terms under which a pay for success contract may be terminated.
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