Procurement is a set of processes and practices established to ensure an organization is gaining best value from its spending. Nonprofit organizations can often lag in utilizing these practices either because of the perceived cost or unfamiliarity with the return on investment. This article defines several reasons why nonprofits need to understand and embrace procurement as a value driver and program enabler.
One of the tenants of sound procurement practices is that the lowest price is not always the right solution and is typically not a sustainable way to purchase. Best value is the standard that these efforts aim towards. In order to meet requirements and rely on the quality of the purchase, you may need to pay more than the lowest available price. In other words, you get what you pay for.
Consider this from the perspective of program performance. If you buy only the cheapest products to support your programs, then you are more likely to run into defects or other issues that will degrade your ability to deliver your program.
Sometimes, cheapest is all you need. Procurement allows you to consciously make decisions on managing expenditures to stick to your budget. Preliminary procurement activities can help in the development of your program or organizational budget. A few quick steps and you can ensure that your budget assumptions for expected purchases are sound.
Good procurement practices save money. Even basic practices, such as, getting multiple quotes, consolidating spending and negotiating can provide significant savings.
One of the first steps in the procurement process is identifying requirements. Defining exactly what you need is a great way to avoid costs associated with additional features or functions. Maybe you need a base product that does not have extra capabilities that you may not use.
Procurement policies and practices are required by most federal and state-level funders. If you are looking to diversify your revenue streams by adding government grants, you will have to establish these processes in your organization.
For more on government requirements, check out this article from The Nonprofit Times
Maintaining strong procurement practices is something that can distinguish your organization when making proposals or campaigns for funding. Foundations and donors want to see that your proposal is effective and efficient. Being able to demonstrate that you are spending your funds in a way that provides best value will show potential funders that your programs are ones they should strongly consider supporting.
Nonprofits often struggle to find operational funds and good procurement practices can help by providing value far exceeding their cost (and can be done at a relatively low cost). Procurement focuses on meeting requirements efficiently which can lead to lower costs, higher reliability and ultimately better program outcomes. In addition, these practices can open new funding sources and can distinguish your organization from others in the eyes of funders.
Look for an upcoming continuation of this post; “Powerful Procurement Practices for Nonprofits,” coming soon.
For more NFP topics, check out the Not for Profit Leadership Blog: Not for Profit Beyond the Numbers
If you have questions or would like a consultation on a NFP issue, contact me at: firstname.lastname@example.org
For more about the author, follow this link: Michael F. Cade