RESOURCE AND EXPERTISE REQUIRED TO DEVELOP DIBS

At this early stage, the development of high quality DIBs is likely to require considerable thought and collaboration between key stakeholders. This section discusses potential

activities and outputs at each stage (see Figure 9, p. 92 for a summary), alongside the range of skills and expertise required.

1. DIB IDEA GENERATION

A DIB idea usually comes in the form of a problem where, for example, present funding models may not be producing ideal results, where implementation is perceived to carry significant risk, or where the model needs significant last mile adaptation over time or by creation.

Ideas for DIBs may come from a number of sources. The models put forward in this report were initiated by two development agencies, two intermediaries, a development finance institution and a service provider. Over time, the outcome nature of DIBs should allow ideas to be brought forward from the field and tested by development agencies or other outcomes funders on an experimental basis. In order to progress to a scoping or feasibility assessment, which is likely to require significant time and effort, we recommend that one or more potential outcomes funders have been engaged and have expressed an interest at the idea generation stage.

2. SCOPING WORK

At the scoping stage, the social issue that the DIB is looking to address needs to be further analysed and understood. Outcomes funders may choose to commission a third party to undertake data analysis in order to understand population trends, identify the geographical focus and determine clear criteria against which the target population can be identified.

Potential outcome metrics and ways of measuring success are developed through consultation with all DIB actors (e.g. partner government, outcomes funders, investors, potential service providers and beneficiaries). These will form the basis on which outcome payments are made. In addition to identifying outcome metrics, research will need to be carried out to identify interventions that address the needs of the target population and have potential to achieve the desired outcomes.

Development agencies or outcomes funders may be tempted to attempt much of this work in isolation. The learning from developing early SIBs is that they should resist this temptation.

Extensive stakeholder engagement and coordination are required to develop a thorough understanding of the social issue and strategic objectives of outcomes funders and other parties. In early DIBs we expect that an intermediary, preferably with experience in designing outcomes-based contracts, is likely to be helpful in building the case for DIB feasibility and to coordinate input into the DIB project from multiple stakeholders (see Section D for further details on the role of intermediaries).

Figure 9: Developing a DIB: Key stages

Idea Generation

• Potential DIBs put forward by developing country governments, donor agencies, DFIs, intermediaries, service providers and others

• One or more potential outcomes funders interested in progressing

Define the

Developing Operating Model & Outcome Valuation

• Develop the operating model, due diligence on potential providers and intervention costs

• Finalisation of outcomes measurement and payment framework

• Develop the governance structure Define the outcome metric(s)

• Research on desired outcome metrics

• Define how success will be assessed

Financial Modelling

• Build the financial model to provide detailed costings and to assess potential financial, economic and social benefits as a result of the interventions

Contract Development & Procurement

• Design procurement process for outcomes-based contract where applicable

• Develop the legal structure

• Develop and finalise Outcomes Contract

• Develop and finalise Service Agreement with service providers

Capital Raising

• Identify potential investors

• Market investment proposition to investors

• Develop and finalise investor documentation (e.g. Investor Agreement)

• Secure commitments for investment

2. Initial DIB scoping work

3. Detailed Feasibility: Building the Business Case

4. Pre-implementation: Contracting, Procurement & Capital Raising Outputs:

• Initial identification of interested parties and development partners

• Agreement to explore development issue

• Develop the Business Case for approval by outcomes funders – informed by detailed feasibility study

• Develop term sheet to form basis of Outcomes Contract and investor proposition

Outputs:

• Develop the Outcomes Contract

• Develop the Service Agreement

• Develop the Investor Agreement

Service Delivery, Contract and Performance Management

• Mobilisation of service delivery providers

• Contract management

• Data collection and analysis

• Develop and finalise Verification Contract between outcomes funder and verification agent

• Independent verification of reported results

• Reporting to outcomes funders / partner government / investors

Stakeholder Engagement

• Stakeholder engagement throughout each stage of DIB development process

5. Service Delivery, Contract & Performance Management

Stakeholder Engagement Throughout

Outputs:

• Delivery of services

• Ongoing management / outcomes reports to outcomes funders /

For a DIB to be feasible, there must be an outcomes funder (or funders) willing to commit to pay for outcomes if DIB-funded interventions are successful. Intermediaries can provide support to outcomes funders in undertaking detailed feasibility work and in developing a DIB business case, which can assist outcomes funders in finalising their decision to fund outcomes through a DIB.

The business case outlines a detailed operating model and outcomes measurement and payment framework. The operating model sets out indicative programme delivery costs and describes how the proposed interventions will fit with existing infrastructure and services.

The outcomes measurement and payment framework forms the basis of the DIB outcomes contract, providing detail on the conditions under which outcomes funders will make payments to DIB investors.

Intermediaries can assist outcomes funders in performing financial analysis to test different ways of structuring outcome payments and to assess the financial and social benefits resulting from DIB-funded interventions under different success scenarios. A term sheet can then be developed, outlining the key terms and conditions of the outcomes contract. Intermediaries can also bring an understanding of potential investor needs to the project and can undertake an initial marketing exercise of the investment proposition to potential investors at this stage. This helps to ensure that the outline terms proposed will be successful in attracting investment from potential investors.

DIBs can add value where