New Issue Brief: Rethinking NGO Procurement Through Performance-Based Models

NEW YORK, NY – While New York City spends billions of taxpayer dollars each year on nonprofit human-services contracts, residents rarely see measurable results from these investments.

In a new Manhattan Institute issue brief, policy analyst Josh Appel examines New York City's nonprofit procurement process and finds that the current reimbursement-based model provides little incentive for cost control or performance. Under this system, nonprofits are paid for expenses incurred, rather than for achieving results. Consequently, programs can exhaust full budgets regardless of impact. The result, Appel argues, is increased administrative oversight, frequent payment delays, and little accountability for New Yorkers' taxpayer dollars. It's no wonder that the city's nonprofit human-services spending – totaling $8 billion in 2024 – was more than the city's entire NYPD budget.

To address these problems, Appel recommends transitioning New York City to a hybrid performance-based contracting model that provides modest upfront funding, while tying most payments to clearly defined outcomes. This transition, Appel argues, would align New York City's nonprofit funding with the successful funding model of the city's charter school system.

Click here to read the new issue brief.