Local Initiatives Support Corporation Pay for Success Competition Application Guide for Transaction Structuring Activities I. OVERVIEW In May 2016, Local Initiatives Support Corporation (LISC) was awarded a grant from the Corporation for National & Community Service s (CNCS) Social Innovation Fund (SIF) to advance the field of Pay for Success (PFS) financing. Through this award, LISC will use its expertise in transaction structuring and financing, as well as its deep programmatic experience, to bring high-quality PFS projects that have been deemed viable through a feasibility assessment process from development to implementation. See Section V for more information on how projects will be assessed. Selected applicants may be provided with: Transaction structuring services including assistance with various aspects of project management, capacity building, evaluation design, raising investment capital and support for ramp-up activities; Access to a network of PFS practitioners and investors with a wide range of expertise, including subject areas and evaluation; Tailored, project specific evaluation plans approved by CNCS to ensure projects are on track to launch while complying with PFS project design, maintaining a sufficient level of rigor and increasing the program model s level of evidence base; Tools and resources to help move projects towards implementation, including assistance with developing a work plan and financial model, negotiating contracts, service provider capacity building, outcomes monitoring and data collection systems; and Participation in collaborative field-building activities including convenings, presentations, webinars and listservs by PFS SIF Partners and Networks Competitions, awards and estimated number of Service Recipients: Through Round 1 of this open competition, LISC will select between 3-4 Service Recipients. LISC will provide transaction structuring services to selected Service Recipients, the value of which will range from approximately $300,000 to $635,000 per project and will be delivered over a 12-18 month period with an anticipated start date of February 1 st, 2017.
All selected applicants will be required to enter into a memorandum of understanding (MOU) with LISC agreeing to certain terms and conditions of service. The terms and conditions will be made available to finalists prior to selection. If selected, applicants should, to the extent legally permissible, be willing to make key final documents from the PFS transaction structuring process publically available. Completed applications are due by November 10 th, 2016 at 5:00 PM PST / 8:00 PM EST. Applicants are encouraged to submit a Letter of Intent to apply by October 21 st, 2016 (instructions below). II. APPLICATION TIMELINE The following timeline for the Round 1 open competition is subject to change. Updates will be posted on LISC s website at: http://www.lisc.org/our-model/financing/lending/paysuccess/ September 15 th, 2016 October 4 th, 2016 September 15 th November 10 th, 2016 October 21 st, 2016 November 10 th, 2016 December 5 th December 16 th, 2016 January 20 th, 2017** January 27 th, 2017 Application Form and Guide released Webinar for Potential Applicants* Registration Link: Click Here Open Information Period for Applicants Letters of Intent (LOI) accepted (recommended) Applications Due Due Diligence Interviews for Selected Applicants Awards Announced Finalize Agreements with Service Recipients *A second webinar may be held based on demand **Within 90 business days of announcing awards, LISC will publicly release a list of all compliant applications submitted; an executive summary of all compliant applications; and a list of names of application reviewers outside of LISC. Subject to funding availability, applications submitted after the Round 1 deadline will be accepted and reviewed on a rolling basis up until February 28 th, 2017 and be considered part of a Round 2 cohort of Service Recipients. Open Information Period LISC will offer potential applicants the opportunity to engage with LISC staff to answer specific questions related to the application criteria. Applicants will be limited to a maximum two hours of engagement time. To schedule, please email payforsuccess@lisc.org. Answers to commonly asked questions will be posted here. Webinar Potential Applicants are encouraged to attend an informational webinar to learn more about this opportunity and to ask questions. The webinar will be held on October 4 th, 2016 at 11:00 AM PST / 2:00 PM EST. Please click here to register. 2
A recording of the webinar will be posted here. Letter of Intent Applicants are encouraged to submit letters of intent (LOIs) indicating their intent to apply for services. LOIs should be sent to payforsuccess@lisc.org by 5:00 PM PST / 8:00 PM EST on October 21 st, 2016 and should include the following information: Name of applicant organization Applicant point of contact details: - Name - Title - Mailing address - Phone number - E-mail address A brief description of the proposed Issue Area(s), target population and intervention of PFS Program Proposed target geographic location of PFS program To the extent identified, name(s) of partner organizations and their anticipated roles in deal (e.g., service provider, back-end payor, evaluator, independent assessor, investor). Please indicate if a partner organization plans on serving as the Service Recipient in lieu of applicant. Please be sure that the primary contact is authorized to correspond on behalf of the organization. III. APPLICATION INSTRUCTIONS Applications must be submitted electronically to payforsuccess@lisc.org using the subject SIF Application Submission by November 10 th, 2016 at 5:00 PM PST / 8:00 PM EST. Subject to funding availability, applications submitted after the Round 1 deadline will be accepted and reviewed on a rolling basis up until February 28 th, 2017 and be considered part of a Round 2 cohort of Service Recipients. The full application for funding must include the following: Executive Summary (Executive Summary template can be found here) Proposal Narrative: Application narrative is limited to 25 pages (double-spaced, Arial 12 point font, one-inch margins, numbered pages). The page limit does not include the Executive Summary, Table of Contents, Excel Workbook, Appendix or Supplementary attachments. The Executive Summary and Proposal Narrative must be submitted as a single, searchable PDF file. Excel Workbook - Draft implementation work plan - Draft project budget 3
If applicable, evidence of nonprofit status: Documentation that the Service Recipient meets the requirements of section 501(c)(3) of the Internal Revenue Code. A preliminary financial model and/or other information that demonstrates the feasibility of the project and net financial and social benefits to the back-end payor. Most recent audited financials, including A-133 audit if applicable. Letter from back-end payor: Letter of support, commitment letter, or memorandum of understanding from entity willing to provide outcomes payments for the proposed PFS Project. (Does not count towards 25 page narrative limit) Optional Materials to be submitted: The following additional materials may be submitted along with the application materials listed above: Copies of any feasibility studies that relate to the proposed PFS program. IV. MINIMUM ELIGIBILITY CRITIRIA Eligible proposals must meet the following minimum eligibility criteria: 1) Complete application with all requested attachments and documents as listed above. 2) Applicants eligible to serve as a Service Recipient are nonprofit organizations, public or nonprofit universities, state and local governments (and other political subdivisions), tribes, as well as faith-based organizations that are 1 : Nonprofit organizations described in section 501 (c)(3) of the Internal Revenue Code and are exempt from taxation under section 501 (a); or Any organization described in sections 170(c)(1) or (2) of the Internal Revenue Code Partnerships of the above organizations are eligible to apply. An eligible Partnership is a formal relationship between two existing eligible applicants as defined above, where the partner organizations will share responsibilities under the award and should include a legal agreement, such as a Memorandum of Understanding, outlining the roles and responsibilities of each partner. In a cooperative agreement with a Partnership, LISC would expect to be dealing with each partner entity with some degree of independence concerning its collective responsibilities, and all Service Recipient entities are subject to LISC monitoring. 3) Applicants must target one or more of the SIF Priority Focus Areas below: 1 Ineligible organizations are those that engage in lobbying as described in Section 501(c)(4) of the Internal Revenue Code of 1986, 26 U.S.C. 501(c)(4), pursuant to the Lobbying Disclosure Act of 1995, and organizations that have been convicted of a federal crime. 4
Youth Development: Preparing America s youth for success in school, active citizenship, productive work, and healthy and safe lives, including crime reduction initiatives focused on juvenile delinquency and victimization prevention and response. Economic Opportunity: Increasing economic opportunities for economically disadvantaged individuals. Healthy Futures: Promoting healthy lifestyles and reducing the risk factors that can lead to illness. 4) Applicants must demonstrate a well-defined program and the presence of a lowincome, sizable target population. 5) Applicants must demonstrate an intervention with at least a preliminary level of evidence. Preliminary level of evidence is defined as evidence based on a reasonable hypothesis and supported by credible research findings that prove that an intervention(s) improved an intended outcome(s). Examples of research that meet these standards include outcome studies that track participants through an intervention and measure participants responses at the end of the intervention and third-party pre- and post-test research studies. 6) Applications must include a preliminary financial model and/or other information that demonstrates the feasibility of the project and the net financial and social benefits to the back-end payor. 7) Applications must include a high-performing service provider(s) with experience implementing the proposed interventions through a viable service delivery model and demonstrated infrastructure, leadership and data collection capacity. 8) The project must have engaged a government or other back-end payor as evidenced through a letter of support. Projects with soft or hard commitment letters will be prioritized. 5
V. APPLICATION REVIEW INFORMATION Selection Factors and Scoring Applications will be scored on a scale of 100 points using the criteria below. Category Description of Scoring Points Executive Summary --- Program Design, Impact and Feasibility LISC will prioritize high-quality PFS projects with a low-income Program target population that aligns with SIF Priority Focus Areas. LISC Design and will evaluate project readiness, including whether the project has 20 Delivery a clearly-defined problem and corresponding intervention, a Components program delivery plan and well-articulated outcomes. PFS Intervention Feasibility Proposed Work Plan and Budget Service Recipient Capacity Capacity and Commitment of Service Provider LISC will evaluate the strength of the proposed intervention for PFS based on the description of the feasibility assessment work that has been completed to date including the available evidence base, initial cost-benefit analysis and preliminary evaluation plan of target outcomes. LISC will evaluate the likelihood that the services rendered will result in PFS project implementation within the proposed timeline based on the applicant s initial work plan, budget and analysis of key risks and mitigating factors. LISC will evaluate the capacity and commitment of the Service Recipient including their experience, capabilities and priorities to serve the target population as well as organizational capabilities to deliver a high-quality PFS transaction. LISC will also assess the applicant s ability to contribute to knowledge sharing in the PFS field. Partner Capacity and Commitment Capacity and Commitment of Selected Partners OR Partner Selection Plan LISC will evaluate the capacity and commitment of selected partners to work towards PFS deal structuring, with consideration for the experiences, capabilities and priorities of the back-end payor(s), funder(s) and evaluator(s), as well as the applicant s partnership capabilities. Where a particular partner has yet to be identified, LISC will evaluate the applicant s partner selection plan, including existing work being done to vet potential partners. 25 10 25 20 6
Description of Selection Factors and Scoring Executive Summary Please fill out the corresponding Executive Summary Sheet. Please note that applications will not be reviewed without a completed Executive Summary. Program Design, Impact and Feasibility (55 points) Program Design and Delivery Components (20 points) LISC aims to support activities that will result in the structuring of high-quality PFS transactions for low-income populations that align with the SIF Priority Focus Areas while advancing the field of PFS financing. To that end, LISC s selection process will focus on evaluating whether a project has the components to result in the launch of a successful PFS transaction during the project timeline. Please include a detailed description of the proposed intervention and delivery plan to give insight into its quality and readiness for PFS transaction structuring activities, including: Intervention: An identified intervention that addresses a clearly-defined problem and the components needed to implement the intervention including the level of engagement and duration and expected outcomes, highlighting any innovative and/or transformative elements of the intervention. Target Population: A defined target population for the intervention along with their alignment to the SIF Priority Focus Areas. Applicants will score more favorably if their program includes research and data demonstrating the need for the intervention within the target geography, a target population of adequate size and suitability for a PFS program, and how the target population will be identified and/or recruited. Program Delivery Plan: A Program Delivery Plan that includes program location, a participant engagement model and participant interfaces. Applicants will score more favorable if the program delivery model is realistic, scalable and leverages community relationships, tools and an existing evidence-base. PFS Intervention Feasibility (25 points) In addition to the Program Design and Delivery Components, LISC will heavily weigh the work that has been done to determine the feasibility of the proposed intervention for PFS financing as evidenced by a feasibility study. Please provide information on the feasibility assessment and its links to a PFS transaction, including: Evidence-Base: A minimum preliminary level of evidence is defined as evidence based on a reasonable hypothesis and supported by credible research findings that prove that an intervention(s) improved an intended outcome(s). Examples of research that meet these standards include, outcome studies that track participants through an intervention and measure participants responses at the end of the intervention and third-party pre- and post-test research studies. 7
Applications will score more favorably if the intervention can demonstrate moderate evidence defined as evidence from previous studies on the intervention, the designs of which can support causal but have limited generalizability or vice versa or strong evidence defined as evidence from previous studies on the intervention, the designs of which can support causal conclusions, and that, in total, include enough of a range of participants and settings to support scaling up. Applicants should include details on how the evidence referenced relates to the proposed intervention and the service provider. Cost-Benefit Analysis: A preliminary cost-benefit analysis that can be used to create an economic model demonstrating the dollar costs of the intervention and expected dollars to be paid by the back-end payor as a result of successful delivery of the intervention. A clear link should be drawn between the preliminary cost savings/outcome payments and the evidence base. Evaluation Plan: A preliminary plan for evaluating success of the PFS intervention, including any proposed or preliminary quantifiable measures that could be used as outcomes to determine the intervention s success. Successful applicants should provide reasonable evidence that the data to measure the success indicators can be easily obtained and note the status of any datasharing agreements required. Proposed Work Plan and Budget (10 points) LISC will prioritize projects with the greatest likelihood of resulting in a closed PFS transaction in a 12-18 month timeframe. In this section, please provide information on current operating budget for the program, estimated ramp-up costs and budget for year 1 of the scaled intervention and the milestones to be achieved during ramp-up to get to a fully scaled intervention. LISC will support Service Recipients finalize the project work plan and budget based on initial projections. Budget and Budget Narrative: Use the attached Excel template to illustrate your intervention(s) current annual operating budget, the estimated budget and costs associated with ramping up your intervention(s), and the estimated Year 1 budget of a fully operational, scaled intervention. Include a budget narrative explaining the costs associated with your intervention and bringing it to scale. Additional instructions on the budget can be found in the corresponding Excel. Work plan: Use the attached Excel template to outline key activities and milestones the applicant anticipates as necessary to scale their intervention during a project ramp-up phase, along with corresponding responsible parties. Provide a brief narrative summary of proposed milestones. Key Risks and Mitigating Factors: Identify any possible risks and mitigating factors to the successful launch within the proposed project timeline. Risks could include political, legal, financial or technical. 8
Service Provider Capacity (25 points) LISC aims to provide services to projects that draw upon the existing programmatic expertise of the applicant/service Provider. Please use this section to describe the capacity, strength and commitment of the Service Provider to ensure the proposed intervention will yield the desired outcomes through an executed PFS project, including: Qualifications of Service Provider to deliver proposed intervention with fidelity in order to achieve desired intervention outcomes; History and track record of the Service Provider in the target geography and with the target population; Experience with data collection, analysis, performance management, external program evaluation and performance-based government contracts/private funding; Current scale at which the Service Provider is operating and an assessment of how well-positioned the Service Provider is to scale programs based on human capital, facilities and organizational systems and procedures. - Commitment to dedicate staff and/or team members to lead and/or support the successful launch of a PFS project. Please provide the following information for key leadership including any relevant qualifications, years of experience with target population, distinctive capabilities from other fields and years of experience within the field. - Evidence of leadership team support, including buy-in from ED/CEO, CFO and Board of Directors, with the necessary skills and appetite to implement the PFS project. - Evidence of clear plan for scaling operations, including acquiring necessary financial and human capital resources prior to PFS launch. - Evidence of effective processes to develop and manage financial plans and budgeting, including the technical systems and skills to manage finances, as well as internal fundraising capacity. - Capabilities to comply with relevant regulations and requirements of government financing. - Capacity of buildings, office space, IT and other supporting infrastructure to meet scaling needs. Knowledge Sharing: LISC will prioritize applicants with demonstrable commitment to engage in knowledge sharing with the PFS learning community composed of other SIF grantees, subgrantees, subrecipients, technical assistance providers and other parties through the duration of the project timeline as a condition of SIF LISC funding. Please describe any relevant activities or skill sets that the applicant and partners can provide. Knowledge sharing activities may include: - Quarterly Service Recipient cohort calls; - Participation in blog posts / white papers; - Possible attendance to the SIF Annual Conference; and 9
- Participation in SIF Pay for Success Competition evaluation through surveys and interviews. Partner Capacity and Commitment (20 points) LISC seeks to catalyze partnerships across sectors in order to grow the field of PFS financing. Towards this objective, LISC seeks to support projects that will diversify the nonprofit, government, research and private sector participants in the PFS sector while working towards the shared goal of structuring high-quality PFS transactions within the project timeframe. Applicants will score more favorably if project partners have been identified prior to applying for LISC support but in cases where a partner has not yet been selected, LISC asks applicants to describe the plan for engaging and selecting partners. Please describe the capacity of selected partners listed below: Back-End Payor(s): Priority will be given to projects that have strong commitment and involvement from a back-end payor documented through a letter of support, a memorandum of understanding or other documentation that articulates the commitment or engagement of the back-end payor. In addition to supporting documentation, please describe: - Which payor(s) have been engaged, how payor(s) were identified and their anticipated role and level of engagement during the transaction structuring process. - How the proposed intervention aligns with the goals and priorities of the payor(s). - Actions taken by payor to ensure that sufficient funds are available for future outcomes payments, including any approved or pending legislation to address appropriations risk. - Any political risks to be addressed to ensure successful transaction launch (i.e., transition in leadership, budget concerns, legislative support). - Any data sharing agreements that would need to be executed to capture and measure outcome metrics for the project. Other Partners: Describe the role of any other partners who will play a role in transaction structuring and/or program implementation (e.g. financial or legal intermediary, project manager, technical advisor, contractors for services, marketing the program, etc.). LISC will assess the ability and staff capacity of parties selected by the applicant including their track record of work specific to the proposed intervention, geography and target population. Please describe the alignment of the proposed intervention with the goals and priorities of key stakeholders. Partnership Capacity: Please describe the ability of the stakeholders to effectively manage partnerships and challenges with other organizations, including government entities. 10
Supplemental Considerations There are four additional factors that LISC will use to make its final selection decisions. These factors will be evaluated to help ensure that the final set of Service Recipients are best positioned to expand and deepen the pool of PFS experience nationally while maximizing learning to advance the PFS field. Supplemental Factor 1: Diversifying PFS Participation LISC will seek to ensure, to the maximum extent possible, that the final set of Service Recipients includes jurisdictions that have not previously participated in PFS. Additionally, consideration will be given to including new issue areas, geographies, interventions or target populations that have not yet participated in PFS. Special consideration will also be given to applicants with proposals that have high potential for replication, involve work across different agencies or levels of government, and/or would lead to multiple PFS projects over time. Supplemental Factor 2: Targeting Underserved and Underrepresented Geographies LISC will seek, to the maximum extent possible, that the selected Service Recipients serve low-income communities and/or underserved/underrepresented populations/geographies including rural and economically distressed communities, tribal communities, disabled populations and veterans that have previously not been served by PFS transactions. Supplemental Factor 3: Match Funding LISC will look favorably at projects that are able to contribute to LISC s match requirements either through cash or in-kind donations. If an applicant would like to contribute to LISC s match through in-kind donations, LISC will request further due diligence items to ensure applicant s ability to comply with SIF and federal policies including experience with managing federal grants and contracts and staff capacity and infrastructure for complying with federal requirements. Supplemental Factor 4: Project Sustainability LISC will seek to provide services to applicants with a high likelihood of continuing programs after the PFS project term. LISC will take into consideration if the applicant describes additional/new funding streams that will be made available for continued implementation/scaling or government payor support to institutionalize the program within the government. 11
VI. COMPLIANCE AND REPORTING All Service Recipients selected through this competition will be required to comply with Social Innovation Fund (SIF) and federal policies, including all relevant terms and conditions outlined in the Corporation for National and Community Service Social Innovation Fund Cooperative Agreement Terms and Conditions (CFDA No. 94:019) Version 6 (effective May 1, 2016), which will be provided to Service Recipients prior to an award being made. All applicants will be required to use performance measures to assess progress towards achieving applicant, LISC and SIF goals. LISC will work with applicants to use the preliminary work plans developed as part of the application to create milestones and benchmarks to assess progress. LISC will review each project s progress by charting progress against annual work plans in order to identify and address any performance issues in a timely manner. VII. LISC FUNDERS LISC s work on this project is made possible through a generous award from the Corporation for National Community Service s Social Innovation Fund. The Social Innovation Fund is a program of the Corporation for National and Community Service, a federal agency that engages millions of Americans in service through its AmeriCorps, Senior Corps, Social Innovation Fund (SIF), and Volunteer Generation Fund programs, and leads the President's national call to service initiative, United We Serve. For more information, visit NationalService.gov. In 2009, President Obama authorized the creation of the Social Innovation Fund as part of the Corporation for National & Community Service to find solutions that work, and make them work for more people by proving, improving and scaling effective models. SIF and its non-federal partners have invested nearly $1 billion in effective community solutions since the program s inception. Launched in 2014, the SIF Pay for Success (PFS) program is designed to help cities, states, and nonprofits develop Pay for Success projects where governments pay service providers only when there are demonstrable results. Note: Pay for Success (PFS) is a general term for performance-based contracting between government and social service providers, where government only pays providers if target outcomes are achieved, e.g. reduced recidivism or improved health outcomes, as opposed to providing cost reimbursement payments. 12