Pursuit of impact challenges parties arranging tendering

Impact investing is a new means of funding socially significant projects. It offers a new approach to public spending: only achieved results guarantee funding. Hansel’s tendering expertise was required in a project which sought for means to get the long-term unemployed back to work by means of a Social Impact Bond (SIB).

The Ministry of Economic Affairs and Employment had a clear goal: producing more effective services leading to employment while saving public funds. In the Employment-SIB, this goal was pursued with the help of a model where a project manager selected based on a negotiated procedure would be responsible for the achievement of the final goal.

“This is a highly demanding implementation method. The project was successful, because we were supported by Finland’s best SIB advisors from the Finnish Innovation Fund Sitra and Hansel’s tendering experts,” sums up Kimmo Ruth, a labour market counsellor at the Ministry of Economic Affairs and Employment.

Preparation of the unorthodox project was led by Timo Lindholm, Chief Specialist. To support project planning, Sitra performed social benefit modelling and prepared a calculation on the impact of the employment of different people on general government finances. A bonus scheme based on employment results was also created.

The different perspectives will be adjusted to create a functional system.

During several rounds of negotiations, a model that complies with the purchaser’s requirements and is also sensible for the selected project manager and the investors and service providers selected by the project manager was sought. In a SIB project, the purchaser does not determine the means to achieve the goals; instead, the project manager is free to select the most efficient means to reach the desired final result.

During the negotiations, the system was edited in a manner which enables achievement of the goals specified in the invitation to tender. Pekka Alahuhta, Hansel’s Senior Consultant, who was involved in the project, was praised for his prompt and competent way of managing the negotiations.

“Pekka planned the agenda of all the nine meetings and promptly ensured that everything went in accordance with the tendering rules,” Kimmo Ruth explains.

A model to increase wellbeing

A similar implementation method had previously been tested in the integration and employment of immigrants. The lessons learned from that project were now used in a broader scale, as there were 60,000–80,000 potential customers or people who were long-term unemployed or in danger of becoming long-term unemployed.

“We paid special attention to ensuring that the selected customers are as motivated as possible. After an orientation period, the customers will be interviewed and the most suitable persons will be included in the scope of the services. This will assist the project manager and the supporting team to succeed,” Kimmo Ruth says.

The Employment-SIB will offer customised services for up to 3,000 unemployed people in different parts of Finland over the course of five years. The goal is to create as long employment relationships as possible. The selected project manager is Epiqus Oy (now FIM Private Equity Funds Ltd), which is part of the S-Group. It will bring together investors and service providers for the project, and keep in close contact with the TE Services and the Ministry of Economic Affairs and Employment during the agreement period.