Chesapeake Pay for Success is a Success: How state water quality program design can drive cost-effectiveness
Harry Huntley, Agriculture Policy Lead and Grace Edinger, Procurement and Contracting Policy Strategy Lead
The Chesapeake Bay states are leading the nation in applying Pay for Success contracts (PFS) to their water quality problems, specifically nitrogen loads. The Bay’s Total Maximum Daily Load and Watershed Implementation Plans require states to meet strict nutrient pollution reduction targets. Widely accepted models are available to translate from practices to outcomes.
These new PFS programs represent a significant shift: states pay for verified pounds of nitrogen reduced from the watershed instead of paying for practices. This outcomes-based approach delivers the outcomes (lbs of nitrogen reduced) at lower costs compared to traditional methods.
PFS programs must be designed intentionally to achieve these benefits and optimize the contract structure. This analysis reviews the five existing programs across Maryland, Pennsylvania, and Virginia–as well as the Susquehanna River Basin, which also includes a piece of New York. We examined cost data, program timelines, statutory and solicitation language, template contracts, and conducted a suite of interviews with agency staff, bidders (successful and not), contractors, and researchers.
These findings have wide applicability to other states looking to build new, or refine existing Pay for Success programs based on evolving best practices.
