Niti Aayog tries out outcome-based payment in public procurement

Over the years, public procurement systems have undergone significant transformations. Today, the public sector is adopting more efficient buying and spending patterns. Mandatory e-procurement and the emergence of Government e-Marketplace (GeM) are some steps in that direction.  However, the budgets and disbursals of funds continue to be based mainly on input factors like population, past utilisation patterns and infrastructure creation and rarely get directly linked to delivering real-life results that the budgets hoped to achieve. For instance, in the education sector, there has been a trend of procurement of resources which may have bettered the infrastructure, enrolment numbers and literacy rate. Yet real-life results — i.e. students’ learning levels — have remained abysmally low. Data from several surveys on school learning levels point to the challenge of lower learning levels that our systems are grappling with.

Even before the pandemic-induced learning losses, the National Achievement Survey (2017) had reported average learning levels of 59 per cent in grade 3, 42 per cent in grade 8 and 36 per cent in grade 10, indicating a progressive decline. The Annual Status of Education Report, 2018, showed that nearly three out of ten grade 8 students could not read a grade 2 textbook. Post-pandemic, the situation worsened further.

The government has inducted technology in public schools to improve learning levels. There is already a mandate within the central government to implement EdTech solutions under Samagra Shiksha and the National Education Policy (NEP) 2020. Additionally, many states such as Rajasthan, Andhra Pradesh, Madhya Pradesh and Haryana have implemented individual EdTech programmes to support teaching and learning. However, there is minimal evidence to justify the use of public funds towards EdTech, as the usage of ICT infrastructure continues to remain abysmally low in government schools, with the complete absence of any study that measures the direct impact of such massive spending on student’s learning levels in public schools. While public investment creates ICT labs in schools, no defined channel exists to measure the return on EdTech investments in improving children's learning.

Interestingly, at the same time, agencies in the development sector have begun using results-based financing or outcome-based financing as a technique to improve the effectiveness of their spending. Broadly, results-based financing refers to any program or intervention that rewards individuals or institutions only after agreed-upon results are achieved and verified. Linking payments to outcomes incentivises enterprises to perform better and spurs innovation. Bearing this in mind, NITI Aayog has pioneered this approach in government procurement, starting with the Edtech space in Uttar Pradesh. This outcome-based financing approach is being implemented in four of UP’s Aspirational Districts: Balrampur, Fatehpur, Sonbhadra and Chandauli, making it India's first government-led, outcome-based financing initiative.

This first-of-its-kind pilot program links part of the EdTech service provider’s payment with improvement in students’ learning levels. This shifts the focus from paying for the set-up of computer labs to improving the child's learning. In this approach, if the pre-defined target of improvement in a child's learning level is not met, the service provider is not paid the due amount. This method increases the service provider’s accountability towards improving the child’s learning levels. The EdTech intervention comprises 50 tablets per school, loaded with a Personalised Adaptive Learning solution, supported by field management staff to assist teachers. The program covers students from grades 3 to 8, in 280 schools for two years. Unlike existing ICT procurements, this pilot program tends to create enough incentive for service providers to emphasise actual usage of these devices, capacity building of teachers and robust monitoring, ultimately leading to improvement in learning levels.  

At the ecosystem level, NITI Aayog seeks to shift how EdTech procurement occurs within governments fundamentally. It aims to increase the accountability of Edtech service providers towards improvement in the learning levels of students and also boost return on public spending on Edtech in schools. This shift from an input-focused to an outcomes-focused financing approach is a revolutionary step, and it’s the first time that a government body in India is playing the role of an outcome funder. The project envisions building strong evidence to establish a successful ‘Pay for Outcomes’ government procurement model by linking payments to actual outcomes.

With the successful onboarding of service providers on the principle of ‘outcome-based payment’, the procurement of EdTech services is now complete in all four pilot districts. We hope the insights generated from this program will facilitate better decision-making on future EdTech programs in the country. We also hope that the overall impact of the ‘Outcome-based payment model’ brings greater efficiency and that this model may get replicated in other domains, like health and public service delivery, in the future. 

 

Lt Col Updesh Kumar Sharma serves as a Joint Advisor at NITI Aayog; Mohit Bahri is a co-founder at GDi Partners – a governance consulting firm implementing the outcomes-based Edtech project. They can be reached at updeshsharma.668w@gov.in and mohit@gdipartners.in, respectively. The views expressed by the authors in the article published are their own. They do not necessarily reflect the views of the government or the organisations they work for.