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29 Cornell J. L. & Pub. Pol'y 1 (2019-2020)

handle is hein.journals/cjlpp29 and id is 1 raw text is: CONTRACTING (INCOMPLETELY) FOR SUCCESS:
DESIGNING PAY FOR SUCCESS CONTRACTS
FOR SOCIAL IMPACT BONDS (SIBS)
Deborah Burand*
More than two dozen social impact bonds have been launched in the
United States since the first was contracted by New York City in 2012.
Dozens more of these transactions are in progress across the United
States, and more are likely to come prompted, at least in part, by the
Social Impact Partnerships to Pay for Results Act (SIPPRA) of 2018.
As the number of social impact bonds has grown, the architecture of
the pay for success contracts that undergird social impact bonds is start-
ing to take recognizable form in the United States. What explains the
design of these pay for success contracts and where are they heading
next?
Nobel Laureate Oliver Hart's work in developing a theory of incom-
plete contracting is relevant to understanding the design of the pay for
success contracts that were developed for the first social impact bonds
launched in the United States from 2012 through 2017. Not only does
this theory explain why many of these early transactions include contrac-
tual governance and oversight structures, but it also points to how future
pay for success contracts used for social impact bonds might develop
and standardize as private and public actors gain more experience with
contracting for successful social or environmental outcomes.
* Associate Professor of Clinical Law at NYU School of Law. Director of the Interna-
tional Transactions Clinic (ITC)and a faculty co-director of the Grunin Center for Law and
Social Entrepreneurship. I would like to thank the organizers and attendees of two conferences
where early versions of this Article were first presented: 9th Annual International Social Inno-
vation Research Conference (ISIRC) 2017: Beyond Boundaries? Organisations, Systems and
Social Innovation held at Swinburne University of Technology (Melbourne, Australia) and
Comparative perspectives on Social Impact Bonds and outcomes-based approaches to public
service commissioning: learning across geographical, thematic and disciplinary boundaries
held at Blavatnik School of Government, Oxford University (Oxford, United Kingdom). I
would also like to thank Navjeet Bal, Amy Cobb Curran, John Grossman, Louise Savell, and
Carl Valenstein for their suggestions and insights drawn from their experiences in negotiating
and documenting SIB transactions. Thank you to the two law student teams enrolled in the ITC
during the 2018-2019 academic year who worked on various impact bond projects for ITC
clients. Their keen questions provoked me to take a second and often third look at the pay for
success contracts that provided the basis for many of the findings in this Article. Finally, I am
grateful to Kevin Davis and Helen Scott for their helpful comments on earlier versions of this
Article. All errors are my own.

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