Achieving Better Outcomes in Local Government Stormwater Programs through Pay for Performance

Abstract

Local governments are challenged with addressing stormwater pollution to meet water quality standards set forth by Total Maximum Daily Loads (TMDLs). Procurement and financial instruments used in traditional stormwater programs typically pay contractors based on delivery of a set of actions or volume of services (Pay for Success Learning Hub, no date). This oftentimes requires significant public staff time to design and administer projects, and places liability for performance risk and cost overruns on the local government. Additionally, green infrastructure has emerged as an attractive alternative to gray infrastructure solutions, however, its effectiveness is largely unproven. This combination of factors has piqued the interest of local governments around the country in cost-effective solutions that streamline agency staff time, and shift performance risk from the local government to the private sector. Four programs in the Chesapeake Bay region were analyzed in order to identify how alternative delivery models that incorporate pay for performance are being utilized in local government stormwater programs, and whether those approaches are likely to deliver better outcomes than traditional approaches. The analysis was carried out via a literature review and series of interviews with staff from each program and professionals with relevant expertise in this field of work. The structure, roles between the public and private sector partners, and degree to which pay for performance is applied varies across each program. The lessons learned from this analysis provide a strong foundation to build upon and inform adoption of pay for performance in local government stormwater programs. However, each program analyzed is in its early phases of implementation and this analysis does not address the cost-efficiency, in terms of environmental benefit per dollar spent, of each approach in satisfying TMDL requirements. Nonetheless, this analysis highlights a broad range of program examples, outlines the key components and benefits of each program and pay for performance, and highlights a set of enabling conditions necessary to establish an environment conducive to pay for performance.