REQUESTFORPROPOSALS:

Social impactinvestments

Proposalsmustbe submittedon

by9:00amAESTon 12December 2016

Request for Proposals: Social impact investments

Contents

Contents

1.BACKGROUND

1.1Policycontext

1.2Purposeof thisdocument

1.3GovernanceoftheRFPprocess

2.CONDITIONS OF SUBMITTING A PROPOSAL

2.1Eligibilitytorespond

2.2Processtodevelopand implement atransaction

1.Requestforproposal(RFP)

2.Jointdevelopmentphase(JDP)

3.Implementation agreement

3.EVALUATION

3.1Delivers social impact

3.2Robustmeasurement

3.3Valueformoney

3.4Likelytoachieveoutcomes

3.5Sharingof financialriskandreturn

4.SUBMISSION REQUIREMENTS

4.1Basicconditions

4.2Formatof submissions

Proponents may submit a separate proposal, for each policy area.

a)Backgroundinformation

b)Summary of proposal

c)Statementagainsttheevaluationcriteria

d)Otherinformation

4.3Lodgementof proposals

Electronicproposals

Extensionofclosingdateandclosingtime

Ownershipofproposals

Confidentiality

Variationstoproposals

Non-complyingproposals

Acceptanceorrejectionofproposals

Communication/Clarification

Ethical conduct

Probity

Exchangeofinformationbetween NSW Governmentagencies

Disclosureinformation

5.APPENDICES

A.Increasing permanency for children in out of home care, particularly through open adoption

1.Intended outcomes

2.Potential cohort

3.Data

4.Principles for effective interventions

5.References

B.Improving outcomes through early childhood education

1.Market overview

2.Intended outcomes

3.Potential cohort

4.Data

5.Principles for effective interventions

6.Additional data: preschool program by suburb, service type and enrolments

7.References

C.Addressing youth unemployment

1.Intended outcomes

2.Potential cohort

3.Potential locations

4.Cohort data

5.Location data

6.Avoiding duplication with other programs and initiatives

7.Opportunities for social impact investments

8.References

9.Other potentially useful references

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Request for Proposals: Social impact investments

  1. BACKGROUND

TheNSWGovernmentbelievessocial impactinvestmenthasthecapacitytodeliverbetterservicesandresults,better partnershipsbetweenthegovernmentandnon-governmentsectors,andbetter valuefortaxpayers.The NSW Governmentseekssuitablyskilledandexperienced partnerstoachievebetter socialandfinancialoutcomesfor individualsandcommunitiesinNSWthroughsocial impactinvestment.

1.1Policycontext

As part of the Social Impact Investment Policy, the NSW Government aims to deliver two investments to market each year

On4February2015,theNSWGovernmentlauncheditsSocial Impact Investment Policy(‘thepolicy’).Thepolicybuildsonthesuccessofthe NSW Government’ssocialbenefitbondsandsetsouttheGovernment’sintenttosupportabroader socialimpactinvestmentmarketinNSW.Akeyactioninthepolicyistoaimtodeliver twosocialimpactinvestmentstothemarketeachyear.

The NSW Government has implemented three social impact investments and negotiations for three more are in progress

Since 2013, the NSW Government has implemented three social impact investments:

  • theNewpin social benefit bond to help expand an intensive, therapeutic support program delivered by Uniting to safely restore children in care to their biological families
  • The Benevolent Society social benefit bond to deliver the Resilient Families Service, which aims to prevent at-risk children from entering care
  • the On TRACC social impact investment to deliver an intensive support program to help parolees successfully reintegrate into the community following their release from prison.

Following two requests for social impact investment proposals (RFPs) in 2015, the NSW Government is also negotiating other investments to improve outcomes for vulnerable young people, and people with chronic and mental health conditions.

Three focus areas for this RFP have been drawn from the 2016 Statement of Opportunities and the NSW 2016-17 Budget

As part of the policy, the NSW Government is committed to periodically identifying policy areas in which it believes there are opportunities to achieve better outcomes through social impact investment. This year, policy areas were identified in both the 2016 Statement of Opportunities and NSW 2016-17 Budget.

The Office of Social Impact Investment (‘the OSII’) hosted three market sounding sessions in July 2016, which were well attended by service providers, intermediaries, financiers and others. Based on feedback from these sessions, this RFP invites proposals in three focus policy areas:

  • increasing permanency for children in out of home care, particularly through open adoption
  • improving outcomes through early childhood education
  • addressing youth unemployment.

WhiletheStatementandmaterialsfrom themarketsoundingsessionsoutlinedpotentialoutcomesandtargetcohortsinthefocusareas,proposalsthatsuggestvariationsonthesearealsoinvited. Proposals inareasotherthanthoseidentifiedinthisRFPwillalsobeconsidered,thoughthese willneedtomeettheevaluationcriteria(referSection3)toaveryhighstandard. Such proposals must be evidence-based and align with current NSW Government priorities.

Itisalsoimportanttonotethatproposalsarenotlimitedtosocialbenefitbonds.The NSW Governmentisopentoandencouragesproposalsforother investmentmodelsthatinvolverisksharingamongparticipantsandoneormoreofthefollowing:

  • paymentby resultscontracts
  • incentivepayments
  • layeredinvestments
  • pooledinvestments(refer to thepolicyfor moredetail).

Referto AppendixA to Cforfurther informationonthefocuspolicyareas.

1.2Purposeof thisdocument

Thepurposeofthisdocumentisto:

  • outlinethebackgroundtotheRFP
  • defineterms,conditionsandprocessesforsubmitting aproposal
  • explaintheanticipatedprocessandtimeframeforevaluatingproposalsand selectingthepreferredproponent(s)
  • guideproponentsoninformationtheyshouldincludeintheir proposals
  • provideinformationonthefocuspolicyareasto helpprepareproposals.
  • GovernanceoftheRFPprocess

TheRFPprocesswill beoverseenbyasteeringcommitteeofseniorofficersfromtheDepartmentofPremier andCabinet,TheTreasuryandotherNSWGovernmentagenciesresponsibleforhumanservices(‘lineagencies’).

Thesteeringcommitteewillappointanevaluationpanel (‘the panel’)to assessallproposalsreceivedthroughtheRFP process.The panelwill assessproposalsagainsttheevaluation criteriasetoutinthisdocument(referSection 3).Duringtheassessmentprocess,the panel may askproponentstoclarifyaspectsoftheirproposalor providemoreinformation.The panel mayalsocontactothergovernmentagenciesto verify a proponent’s capability(i.e.reference checks).

The panel will then submit an evaluation report to the steering committee, which may recommend one or more proposals received through this RFP that should proceed to the joint development phase (JDP). The steering committee may then endorse that recommendation to the NSW Government to enter into a JDP agreement with one or more proponents.

OCTOBER 2016 Page 1 of 64

Request for Proposals: Social impact investments

  1. CONDITIONS OF SUBMITTING A PROPOSAL
  2. Eligibilitytorespond

Proposalsmustbesubmittedbyalegalentity(orentitiesinthecase ofajointproposal) withthecapacitytocontract.Wherethereisajointproposal,referencestoaproponentor preferredproponentincludesall partiestotheproposal.

TheNSWGovernmentwill onlyenter intoan agreementwith anentitythathasan AustralianBusinessNumber (ABN)andisregisteredforGST.Proponentsmuststate their ABNandGSTstatusintheir proposals.

Aproponentmaysubmitmorethanoneproposal.Eachproposal will beconsideredindependentlyofother proposalssubmittedby theoneproponent.Similarly,intermediariesandother consultantsarepermittedtobepartytomorethan oneproposal,providedthereareadequateprocessesinplacetomanageconflictsofinterest.

2.2Processtodevelopand implement atransaction

Theprocessfor developingandimplementingasocial impactinvestmentwiththeNSWGovernmentincludes:

1.Requestforproposal(RFP)

ThisRFPseeksinnovativeproposalsfor social impactinvestmentstodeliver betterservicesand/or infrastructure,and improved social andfinancialoutcomes for individualsandcommunitiesinNSW.All proposalswillbe assessedagainstevaluationcriteria(referSection 3)by anevaluationpanel.The panel willidentify the strongest and most compelling proposal, or proposals, which meettheevaluationcriteriatoastandardthatindicatesan investmentthatrepresentsgoodvalue islikely following joint development. The panel mayrecommendoneor moresuchproposalstothesteeringcommittee. ThesteeringcommitteemaythenendorsethatrecommendationtotheNSWGovernmentto enterintoaJDPagreementwith oneormoreproponents.Proponentswill be notifiedinwriting oftheoutcome oftheirproposalsbyMay2017.

2.Jointdevelopmentphase(JDP)

Thepreferredproponentwillbeinvitedto enter intoaJDPwiththeNSWGovernment.Asthecontractingentity,therelevantlineagencyislikelytoleadtheJDP,withsupportfromtheOSII.

ThepurposeoftheJDPistodevelopproposalsto alevel suitablefor contracting.Thisstagefeaturesahighdegree ofcollaborationandnegotiationtodevelopan investmentstructurethatsatisfiesallparties.Mattersexpectedtobe negotiatedduringthisJDParesetoutbelow (seebelow,Implementation Agreement).

AJDPagreementbetweenthepreferredproponentandtheNSWGovernmentwill be finalisedandenteredintoprior tothestart of theJDP. The JDPagreementwill governtheterms of therelationshipbetween the preferredproponentandthe NSW Government,and will addressmattersincluding:

  • ownership ofanyintellectualpropertygeneratedduringtheJDP
  • theprocessfornegotiatingandreachingagreementontheImplementationAgreement(seebelow,Implementation Agreement)
  • thedisputeresolutionprocess
  • terminationandthesharingofinformationbetweenthepreferredproponentandNSWGovernment.

A sample JDP agreement is available on the Office of Social Impact Investment website. Please review this document carefully before you submit your proposal as you will be expected to sign the JDP agreement as written should you be selected as the preferred proponent. Please identify in your proposal any concerns you may have with the standard terms of the agreement.

TheJDPisintendedtobeginoncethepreferredproponentisapproved,advisedinwriting,andreturnsasignedJDPagreementtothe NSWGovernment.The NSW GovernmentestimatestheJDP will takeaboutsixmonths.

Attheend oftheJDP,theNSW Governmentnegotiatingteam (likelytocompriseof therelevantlineagencyandtheOSII)willreviewandreassessthefinal proposal againsttheevaluationcriteriaofthis RFP andrecommendtothesteeringcommittee whether to proceed with implementation.ThecommitteewillthendecidewhethertoendorsetherecommendationtotheNSWGovernmentforapprovaltoenter into anImplementationAgreementwiththepreferredproponent.

Ifaproposal issubsequentlyshowntobeunviablethroughtheJDP,anotherproposalfrom theRFPprocessmaybebroughtforwardandafurther JDPagreementnegotiatedwiththerelevantproponent.However,theNSW Governmentmayinstead decidetoopenthenextRFP.Inthiscase,proposalsfrompreviousRFProundsmayberesubmitted.

Any costs,losses or expensesincurredby proponentsduringtheRFPandJDPprocessesmustbemetbytheproponentthemselves.Suchcostsinclude,butarenotlimitedto,expensesincurredbytheproponentinpreparingandsubmittingitsproposal(s),attendingmeetingsandprovidingfurther information,or engaging advisors.

Referto theOffice of Social Impact Investment websiteforasample JDP agreement andImplementationAgreement.

Note:Selection asa preferred proponentthroughtheRFPprocessand entering intoa JDPagreement withtheNSWGovernment isnota guarantee ofproceeding to anImplementation Agreement.
Thelikelysocial impactand relativevalueformoneyof proposed investmentswill be crucial in determining whetherto proceed withimplementation.Proposalsmustrepresentan effectiveuseofpublicfunds,relative toothernon-social impact investment funding optionsavailabletotheNSWGovernment forthe sameimprovementinoutcomes.

3.Implementation agreement

AnImplementationAgreementwill be negotiatedwiththe preferredproponentaspartoftheJDP.TheImplementationAgreementisexpectedtoinclude:

  • detailsofthetargetcohort,includinglocationandreferralarrangements
  • contractdurationandanyextensionprovisions
  • ownership ofintellectualpropertyfrom the transaction
  • detailsoftargets,comparisongroupsandothermeasurementarrangements
  • paymenttriggers
  • apaymentschedulecoveringall performancescenarios(expected,below expected,goodperformanceandover-performance)
  • allocation ofriskbetweenpartiestotheinvestment
  • disputeresolution provisionsincludingamechanismto resolveclientissues
  • breakclausesforall parties
  • anyoptionsfor re-contractingattheconclusion ofthecontract term
  • detailsofanyevaluation.

TherelevantNSW Governmentagencywillenter intoanImplementationAgreementwiththepreferredproponentfollowingapprovalby theNSWGovernment.AsampleJDP Agreement and ImplementationAgreement, along with other sample legal documents that may be needed for socialimpact investments with the NSWGovernment,areavailable ontheOffice of Social Impact Investment website.Thesedocumentshavebeendevelopedbased ontheNSWGovernment’sexperiencewithsocialbenefit bonds. The NSW Government envisages that any negotiation in relation to the terms of these documents will be limited and will only arise where the nature of the particular arrangement necessarily requires it.

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Request for Proposals: Social impact investments

  1. EVALUATION

Proposalswillbeassessedagainsttheevaluationcriterialistedbelow.Proposalswill needtoaddressall criteriatoahighstandardtobeconsideredsuitablefor asocialimpactinvestment.Thefirstcriterion isparticularlyimportant.

For more information and advice on responding to the criteria, please refer to:

  • Principles for social impact investment proposals to the NSW Government, which discusses the evaluation criteria.

Technical guide for outcomes measurement, which will support proponents to develop a rigorous measurement framework and financial basis for their proposal.

Evaluationcriteria
1.Demonstratessocialimpact(PASS/FAIL)
  • Measurableindividualor communitysocialbenefitswill bedelivered

2.Robustmeasurement
  • Clear andreliableoutcomemeasures
  • Well defined client group
  • Addressesanunmetneed
  • Robustmethodsfordeterminingperformance

3.Value formoney
  • Composition ofbenefits
  • Whoreceivesthebenefit
  • Proportionofbenefitsachievedduringthecontract
  • Wheretheprogramfallsontheservicespectrum (i.e.prevention,earlyintervention,acute)
  • Benefit-costratio

4.Likelyto achieveoutcomes
  • Evidence ofprogrameffectiveness
  • Program logic
  • Evidence ofproponentachievingstatedoutcomes
  • Degreeofchangerequired/timetoreach full servicedelivery, including a high level implementation plan
  • Demonstratescapacityto deliver,includingIT systems,financial management,capability,geographicspread
  • Demonstratesinnovationcomparedtobusinessasusual

5.Sharing offinancialriskandreturn
  • Appropriatecomposition offinancial risksharinginvariousperformancescenarios

3.1Delivers social impact

Proposalswillbesubjecttoapass orfailassessment ofwhether theydemonstratesocial impactthatisachievableandcanbemeasuredin termsofindividualor communitysocial andfinancialbenefits.Proposalsshouldclearlydescribetheservicetobe delivered,and explain the issue or unmetdemandtheproposal intends to addressandhow theservicedeliverymodel will operate.The proposalmustalsoclearlyidentifythesocialandfinancial benefitsitaimstodeliver.[1]

For example,aproposal toimproverecordsmanagementandreduceadministrativeburdenmaydeliver cashsavingsandefficienciestoaNSW Governmentagency,butwill notresultinsocialbenefits to individuals.Suchaproposal will fail thesocial impactassessmentandwill notproceedfurther.

Alternatively,aproposal toimproveroadqualityandsafety,leadingtoreducedaccidentsanduseofpublichealthservices,willdeliverfinancialbenefitstotheNSW Governmentandsocialbenefitstoindividualsandcommunities.Thistype ofproposal islikelytopass thesocial impactassessmentandthenbe assessedagainstremainingcriteria.

3.2Robustmeasurement

Social impactinvestmentproposalsshouldincludeameasurementframeworkthatsatisfiesinvestors,theNSW Governmentandtheproponentthatoutcomesandassociatedpaymentscanbeaccuratelyquantifiedand,ifappropriate,independentlyverified.The capacitytomeasureoutcomeswill be animportantindicatoroftheproposedinvestmentmodel’sviability.

Themeasurementframeworkshouldoutline:

  • Clearandreliableoutcomemeasures.Outcomemeasuresarethebasisfor makingpaymentstoserviceprovidersand/or investors.Proponentsshouldincludemeasuresthatarecloselylinked tothesocialandfinancialbenefitstheproposal aimstodeliver.Ifclientoutcomeshavenotbeencapturedforasatisfactoryhistorical period,proponentscanconsider reliableproxymeasures.Proponentsshoulddemonstratehow thechosenproxymeasuresarelinked totheexpectedsocialandfinancial benefitsoftheproposal.Binarymeasuresmaymaximizereliabilityandreducetheriskofdispute,butgraduatedmeasuresarealsopossibleandwill beconsidered.Proponentsshouldconsider theavailabilityofreliabledataintheproposedarea,thecostsandpractical stepsofcollectingthatdata,andwhetherdatacan beaccessedbyorsharedwithexistingNSW GovernmentIT systems.
  • Awell-defined client group.Proposalsshouldoutlineclear andobjectiveeligibilitycriteria for theproposedclientgroup(‘interventiongroup’). Be specificaboutthecharacteristics oftheproposedinterventiongroup,includingage,location,anddemographics(e.g.juvenileoffenders,peoplewithadisability,Aboriginal people).Proposalsshouldsuggestanefficientandobjectivereferralprocess,andoutlinehowoutcomeswill bemeasuredforall clientswhoarereferred,includingthose whorefuse toparticipate.Theinterventiongroupshouldbe abletobeidentifiedthroughexistingNSW GovernmentITsystems or withlimitedchangestoexistingITsystems.Proponentsshouldalsospecifyiftheir proposaladdressesanunmet needortargetsthosenotcurrentlyaccessingservices.Proposalsthatreplaceanexistingservice(s) will beconsideredas longastheydonotdisadvantageclientsofcurrentservices(e.g.byapplyingmorestringenteligibilitycriteriaandreducingthenumberofclientsthatcanaccessthe service),improveontheefficiencyandeffectivenessofcurrentservices,andcanbesufficiently scaled.
  • Robust methodsfordetermining performance.Proposalsshouldbuildintothemethodologyamatchedor randomisedcomparisongroup(who donotreceivetheservice),whichissubjecttothe sameeligibilitycriteriaastheinterventiongroup.Thisissooutcomescanbe attributedtotheproposalandminimise the influence ofotherenvironmentalfactors.Optionsfor assessingperformance,inorderofrobustness(andpreference),include:

(i)random selection ofthecomparisonandinterventiongroupfrom thesamepopulation

(ii)a‘realtime’ orlivecomparisongroupwithsimilarcharacteristics

(iii)acomparisongroupcreatedusingaoneto onematchingprocessatthetime ofreferral

(iv)arollingaverageperformancebaseline

(v)anhistoric or staticperformancebaseline.

Proposalsshouldincludeinterventionandcomparisongroupsthatarelargeenoughtobestatisticallyreliableand correctly detect an effect. They should alsospecifytheperiodduringwhichoutcomeswill bemeasured.

Themeasurementframeworkisopentofurtherdiscussion,clarificationandnegotiationduringtheJDP.Proposalsneednotinclude‘goldstandard’frameworksbutmustshowevidence ofconsideringtheaboveelements.

For more guidance on robust methods for determining performance, see the Technical guide for outcomes measurement.

3.3Valueformoney

Justasfor infrastructureandcommercialinvestments,social impactinvestmentproposalsshouldonlyproceedwhenexpectedbenefitsoutweighcosts.All measurable benefits–financial,economicandsocial–canbeusedtosupportabusinesscaseforaproposal.Proposalsshouldoutline:

  • Thecomposition of financial benefits.Proposalsmustidentifytheintendedfinancial benefits,andhowandwhentheywillbeachieved.Wherepossible,benefitsshouldbe quantifiedindollar termsasthiswill helpcalculatethebenefit cost ratio(see below),andshowhowfinancial returnsandother paymentswillbefunded.Forexample,immediatecashsavingstothe NSW Governmentareamongthemoststraightforwardwaysoffundingthesecosts.Ideally,cashsavingsshould be sufficienttocover theset-up anddeliverycostsoftheservice,transactioncosts,andreturnstothe NSW Governmentandinvestors(ifrelevant).ProposalsshouldalsoidentifyindirectbenefitsandhowtheycontributetovalueformoneyrelativetodirectNSW Governmentserviceprovision.
  • Who receivesthefinancial benefits.Proposalsshouldidentifywhoreceivestheeconomicandsocialbenefits,includinggovernmentagencies(local,stateandCommonwealth),communitiesandindividuals.Where possible, proposals should indicate to which agencies or levels of government specific benefits will accrue as a result of the intervention. However,onlyfinancial benefitsthataccruetoNSWGovernmentagenciescan be usedtooffsetpaymentstoinvestors or serviceproviders.
  • Proportion of financial benefitsachieved during thecontract period.Proposalsshouldclearlystatethetotalsocial and financial benefitsthatareexpectedtoresultfrom theservice andinvestmentbothduringandafterthecontractperiod.Benefitsachievedbypreventative and earlyinterventionproposalsmaynotbevisibleforsometime.Inthiscase,proposalsmust show whatisexpectedto beachievedduringtheproposedcontractperiod.Wherepossible,proposalsshoulddemonstratethatbenefitsdeliver apositivenetpresentvalue(NPV)duringthetermofthecontract. Over time, maximum benefits will come from scaling transactions to cover the billions in base social service expenditure rather than just incremental new pilots. Proposals should demonstrate the ability to achieve scale through the proposed service or over time should the proposed investment prove successful.
  • Wherethe intervention fallson theservicespectrum.Proposalsshouldidentifythetype ofserviceor interventionthatwill bedelivered(i.e.prevention,earlyintervention,secondarypreventionor acute).Proposalslikelytodeliver thegreatestsocialbenefitsandsavingstotheNSWGovernmentareanticipatedto bethosethatpreventor reducetheneedforacute,highcostservicesinthefuture.
  • Benefit-cost ratio.TheNSWGovernmentpreferssocial impactinvestmentproposals thatdemonstrate the financialbenefitsof the investment arelikely to be greater thanthetotal costs.WhilethefinancialoutcomesofthetransactionwillnotbeagreeduntiltheJDP,proposalsthatincludesufficientfinancialmodellingtodemonstratealikelybenefit-cost ratiogreaterthan1:1willbe well regarded. Please note that proposals should provide the inputs and assumptions required for calculating a benefit-cost ratio in addition to an estimated ratio.
  • Likelytoachieveoutcomes

Proposalsshouldclearlydescribetheservicetobedelivered,includinganexplanationoftheunmetdemandorservicedeliverygaptheproposalintendstoaddressandhowtheservicedeliverymodelwilloperate.Proposalsshouldalsodemonstratetheeffectivenessofboththeserviceandtheproponentindeliveringthestatedoutcomes.Thisshouldinclude:

  • Evidenceof programeffectivenessandprogramlogic.Proposalsshouldinclude a review of evidence ofthe program or service’s effectiveness in achievingoutcomes. Ideally, this will include the results ofmultiple,independentevaluationsoftheserviceor program (or its components).Asoundprogram logicshouldalso beprovided.In all cases,proposalsshoulddemonstratehow theserviceorprogram incorporatesnationally or internationallyacceptedprinciplesforsuccessful interventionsinthepolicyarea(refer toAppendicesforexamplesofinterventionprinciplesinthefocus policyareas).Robustevidenceofthelikelihood ofachievingoutcomeswill reduceriskand maketheproposal more attractivetothe NSWGovernmentandinvestors(ifrelevant).
  • Evidenceof proponent achieving stated outcomes.Proposalsshoulddemonstratetheproponent’sabilitytosuccessfullyimplementtheprogramatascalerequiredtoachievetheintendedoutcomes.Thiscouldincludeprovidingsupportingevidence ofdeliveringsimilarprogramsandachievingagreedoutcomes,andeffectivelymanagingpartnershipswithgovernment,investorsorotherpartners.
  • Degreeof changerequired / timeto reachfullservicedelivery.Proposalsshoulddemonstratethatfull implementationisachievableinan appropriatetimeframeandwithminimal changetoexistingsystemsandprocessesfor theNSW Governmentandproponent.
  • Demonstratescapacityto deliver.Proposalsshouldclearlydemonstratecapacityandcapabilityto administerall aspectsoftheproposedinvestment, includingservicedelivery,managingpartnerships,anddatacollection.Proponentsshouldconsider IT systems,financialmanagement,staffcapability,andgeographicspread.Thisisparticularlyimportantwheretheserviceor program isnewanduntestedand/or wheretheproposal involvesarecentlynegotiatedpartnership.
  • Demonstratesinnovation compared to business as usual.Whileproviding anevidencebaseisimportanttodemonstratethelikelihood ofachievingstatedoutcomes,innovationisalsoadesirableelementofproposals.In thisinstance,innovationcanbeuntestedandcatalyticorincremental.Proponentsshouldalsodemonstratetheirabilitytocontinuallyassessandadaptservicesto achievethebestresults.Iftheprogram isuntested,or theproponent’sabilitytodeliver isunproven,therisk-returnprofilefor participantswill needtobecarefullyconsidered(seebelow).

3.5Sharingof financialriskandreturn

Overall,theproposalshoulddemonstratethatthesharingofriskandreturnisappropriatelybalancedbetweeninvestors(whereappropriate),theproponentandtheNSW Government.Proposalsshouldoutline:

  • Appropriatecomposition of financialrisksharing in variousperformancescenarios.Proposalsmustoutlinetheintendedrisk/returnprofileforeachparticipantintheinvestment,consideringtheriskappetite ofallpartiesandpotential returns.The NSW Governmentprefersthatthemajorityofriskistakenbyinvestorsand/or proponents,withlimitedfinancial riskbornebytheNSW Government.Whereprivateinvestorsareinvolved,proposalsshouldoutlinehow theinvestmentintendstodeliver returnsfortargetinvestorsintheexpectedperformancescenario.Scenariosinwhichperformanceisaboveorbelowthatexpectedshouldalsobe outlined(seebelowformoreinformation).
  • Proposed payment mechanisms and return structure.Proposalsshoulddemonstrateastructurewherethe NSW Governmentpaymentsaremade dependingontheoutcomesachieved.Proposalsshouldalsosuggestclear mechanismstoindependentlyassessthepaymentsdue.Whereinvestorsareinvolved,returnswill ideallyreflectthelength oftimefor whichinvestmentcapital iscommitted,andtheregularityandsizeofpayments.The size oftheprincipal ininvestmentsinvolvinginvestorsshouldalsobeconsideredandspecified.Giventhecostsofraisingcapital,atransactionwith aprincipaloflessthan$5millionmaynotbeattractiveforprivateinvestors.Proposalsmustoutlinethesuggestedpaymentscheduleandamountsfor allpossibleperformancescenarios:

(i)belowexpected performance

(ii)expected performance

(iii)goodperformance

(iv)over-performance.

Thesefeatureswill befurthernegotiatedduringtheJDP,butthefinancial riskinthecase ofbelow expectedperformanceshouldresidemostlywithinvestorsand/orproponents.

  • Abilityto financethe transaction.Proposalsmustidentifyafundingsourcetosupportthecostsoftheinvestment(includingfinancial returnstoinvestors,whererelevant).Thismightincludeoneoracombination ofthefollowing:

(i)savingstoNSW Governmentfrom successfulpreventionservices

(ii)revenuefromothergovernmentor philanthropicpayments

(iii)salesofgoodsor services

(iv)other returnsfromassets(e.g.rental income).

Whererelevant,proposalsshoulddemonstratesufficientinvestor interestandamarket-basedrisk/returnprofile,withthecapacitytomarkettheproducteffectivelytothetargetinvestors.

Ideally,financial modellingshouldshow thattheNSW Governmentandtheproponentatleastbreakevenatexpectedperformancelevels.Indirectfinancial benefits,suchasproductivitygains, are generallyunableto directlyfundinvestmentcosts.However,theyarestill importantand while morecomplexthanotherbenefits,maybeusedtosupportproposalswithsignificantsocialbenefits.

Proponentscouldconsider workingwithanintermediarytostructuretheinvestment.Aswiththemeasurementframework,thebreakdown ofriskandreturnwill be further discussedandnegotiatedduringtheJDP.

Governmentstanding charges
Withmanyinternationalbondmodels,allriskistransferred toinvestors.ThishasnotbeenthecasewithsocialbenefitbondsinNSW. Recognisingtheearlystagesofthesocialimpact investment market,theNSWGovernmentprovided a ‘standingcharge’orpayment toimprovethe riskprofileforinvestorsintheNewpinandThe BenevolentSociety bonds.Thestandingcharge inthebondsisapproximately50percentoftheservicedeliverycosts.Asthemarketdevelopsandinvestorinterestgrows,a lowerlevelof financialsupport fromtheNSW Governmentwill likelybeprovidedinfuture.
Thestandingchargeisnotagovernmentguarantee toinvestorsbutanearlypayment thatisdeductedfromtheamountduefromtheNSW Governmentwhenoutcomesareknown.Itmaybestructuredasa one-offpaymentorasa regularpayment throughoutthelife ofthecontract.Itenablesanappropriaterisk/returnprofilefortheinvestorssoughtintheparticularproposal.It isimportantthat standingchargearrangementsgivetheNSWGovernmentanappropriateriskprofilein thecontextoftheriskallocated toinvestorsandtheproponent.

OCTOBER 2016 Page 1 of 64

Request for Proposals: Social impact investments

  1. SUBMISSION REQUIREMENTS

This RFP identifies three focus policy areas:

  • increasing permanency for children in out of home care, particularly through open adoption
  • improving outcomes through early childhood education
  • addressing youth unemployment.

However, proposalsarenotlimitedtothesepolicyareasor others in the2016StatementofOpportunities.Proposals inother areasmustdemonstratehow theymeetevaluationcriteriatoahighstandard(referSection3).

For more guidanceon what is required in proposals, please refer to the Lessons from the 2015 requests for social impact investment proposals, which sets out observations and lessons from previous RFPs.

4.1Basicconditions

Inadditiontomeetingthesocial impactcriterion,proposalsmustalsomeetthebasicconditionssetoutbelow to beeligiblefor assessment:

  • Proponentsmustprovidecontactdetailsforatleasttwoindependentrefereessothepanel canverifytheinformationinproposals.Ifpossible,refereesshouldhaveexperience ofpreviousworkdonebytheorganisation(s) involvedintheproposal.The panel maycontactrefereesatitsdiscretion.If deemed necessary and justified, the panel may also seek additional referees.
  • Proponentsarerequiredto discloseanyexistingcontracts(withtheNSWGovernmentorotherentities) inareasthatmayberelevanttotheproposal.
  • IfselectedasapreferredproponentthroughthisRFPprocess,proponentsmustbewilling toparticipateintheJDPaccordingtothetermsoftheJDPagreement.

Thepanel may,atitsabsolutediscretion,excludeproposalsthatfail tomeetthesebasicconditionsfrom thisRFPprocesswithoutfurther consideration.

4.2Formatof submissions

Proponents may submit a separate proposal, for each policy area.

Each proposalshould be nolonger than 30pages in length,includingappendicesor additionaldocumentation(e.g.financial modelling).Whereproposalsexceed 30pages,thepanel maynotconsider theinformationcontainedintheadditional pages.Fontsizeistobe aminimumof11pointandallpagesmustbeA4.All referencestomoney,pricesand/or paymentsmustbeinAustraliandollars.

Asuggestedstructureforproposalsissetoutbelow.Thisisonlyaguide–thestructureandlengthofsectionsshouldbetailoredtothecontent.

a)Background information

  • Details of proponents, including contact person
  • Statement against basic conditions (section 4.1)

b)Summary of proposal

  • Contextualise your proposal (i.e. what problem are you trying to solve?)
  • Clearly describe your proposed intervention andtarget cohort at a high level
  • Summarisethe preferred structure and likely benefits of the proposal

c)Statement against the evaluation criteria

  • Provide a detailed response to all evaluation criteria in as much technical detail as possible, even if you have touched on these elements in the summary of the proposal

d)Other information

  • Details of independent referees
  • Appendices

a)Backgroundinformation

Thefollowingrequestedinformationismandatory.Proposalsmustoutlinetheorganisation(ororganisations) involvedintheproposal,as wellaskeypersonnel whowill beinvolvedintheJDPiftheproposal issuccessfulthroughthisRFP.Contactdetailsmustalsoinclude:

  • TradingnameandABNforeachorganisation involvedintheproposal.
  • Type oflegal entityforeachorganisationinvolvedintheproposal.
  • GST statusfor eachorganisationinvolvedintheproposal.
  • Businessaddressforeachorganisationinvolvedintheproposal.
  • Detailsofnominatedcontactpersonfor theproposal.Thisshouldbe onepersonforeachproposal who isauthorisedonbehalfofallparticipatingorganisationsto bethecontactpersonfor theproposal.
  • Thecontactdetailsforanyadvisorstotheproposal andtheir role/responsibilitiesindevelopingtheproposal.

Theevaluation panel’snominatedcontactofficer (or that officer’s nominee) maycontactproponentsduringtheassessmentprocesstoclarifyelementsofproposalsand/or seekfurther information.Theproponent'snominatedpersonwill becontactedinthefirstinstance for all suchcommunication.

This section should also fulfil the basic conditions set out in section 4.1.

b)Summary of proposal

While the technical detail of proposals should be left to the statements against the evaluation criteria, proponents may wish to consider including a succinct summary that:

  • provides context for the proposal, including the rationale for the proposed intervention
  • clearly describes key features of the proposed intervention, including any capital asset requirements, and identifies a target cohort
  • outlines expected outcomes for clients and the total financial benefits to the NSW Government
  • indicates the preferred size, structure and term of the investment.

c)Statementagainsttheevaluationcriteria

ProposalswillbeassessedagainstevaluationcriteriaoutlinedinSection3.Proponentsareadvisedtorespondto all evaluationcriterialistedinthisRFP.Proposalsthatdo notincludeafullandcompleteresponsetopermitaproperassessmentagainstthesecriteriaandtherequirementsofthisRFPmaybeexcludedfrom theevaluationprocesswithoutfurther considerationatthepanel’sdiscretion.

This section differs substantially from the Summary of proposal, which is intended to be a clear, succinct outline of the proposal (much like an executive summary). Detailed and technical information on all aspects of the proposal should be provided in the response to the evaluation criteria.

d)Otherinformation

Proposalsmustincludethedetailsofatleasttwoindependentreferees,asspecifiedinSection4.1.

Appendicescanbeincludedasseparateattachmentsandshouldbeas succinctaspossibleastheyareincludedinthe30pagelimit.Largeattachmentscontainingkeyproposal informationmaybedisregardedatthepanel’sabsolutediscretion.

4.3Lodgementof proposals

Proposals(includingall supportinginformation,ifany)mustbefullyreceivedby9:00am AESTon12 December 2016.

Lateproposalswill notbeconsideredexceptwherethepanel issatisfiedthattheintegrityandcompetivenessofthisRFPprocesshasnotbeencompromised.Thepanel will notpenaliseanyproponentswhoseproposal isreceivedlateifthedelayisduesolelytomishandlingbytheNSWGovernment.

4.Electronicproposals

All proposalsmustbesubmittedelectronicallyon betreatedinaccordancewiththeElectronicTransactionsAct2000(NSW).

Aproponent,byelectronicallylodgingtheir proposal,istakento haveacceptedtheconditionsshownintheconditionsandrulesontheDepartmentofFinance,ServicesandInnovation(DFSI)tenderswebsiteat haveacceptedtheconditionssetoutinthisRFPdocument.

Signaturesarenotrequiredbuttheproponentmustensurethataproposal isauthorisedby thepersonor personswhomaydosoon behalfoftheproponent,appropriatelyidentifiestheperson,andindicatestheperson'sapproval oftheinformationcommunicated.

Electronicallysubmittedproposalsmaybemadecorruptor incomplete,for example,bycomputerviruses.The NSWGovernmentmaydeclinetoconsiderforacceptanceaproposalthatcannotbeeffectivelyevaluatedbecauseitisincompleteor corrupt.Proponentsmustnotethat:

  • Toreducethelikelihood ofviruses,proposalsshouldnotincludeanymacros,applets,orexecutablecodeorfiles.
  • Electronicallysubmitted filesshouldbe freefrom virusesandshouldbecheckedusing anup todatevirus-checkingprogrambeforesubmission.

TheNSWGovernmentwill notberesponsibleinanywayforanyloss,damageor corruption ofelectronicallysubmittedproposals.

IfaproponentexperiencesanypersistentdifficultywiththeDFSItenderswebsiteinsubmittingaproposalorotherwise,.

Proponentsmaybreakdownthelodgementoflargeproposalsintosmaller packagesifclearlyidentified(e.g.Package1 of3) andmustprovideclear directionsas towhether thelodgementis:

  • supportinginformation
  • afurther partoftheproposal thathaspreviouslybeenlodged.

5.Extensionofclosingdateandclosingtime

TheNSWGovernmentmay,initsabsolutediscretion,extendtheclosingdateandclosingtimeofthisRFP.

Ifthereisan extendeddefectorfailure oftheDFSItenderswebsiteore-Tenderingsystem andtheNSWGovernmentisadvisedasindicatedabove,theclosingdate andclosingtimemaybeextendediftheNSWGovernmentissatisfiedthattheRFPprocesswill notbecompromisedbysuchanextension.

6.Ownershipofproposals

All proposalsbecomethepropertyoftheNSWGovernmentonsubmission.TheNSWGovernmentmaymakecopiesoftheproposalsfor anypurposerelatedtothisRFP.