How do I do ethical procurement for my charity? I recently became Executive Director and have little experience with major purchasing.

That’s a big topic! Purchasing has become professionalized for those who specialize. I suggest you read the Purchasing Management Institute of Canada’s Code of Ethics at www.pmac.ca/about/ethics.asp.

Some issues to consider at a charity:

1. You are seeking the best value for your organization, in relation to serving your mission. When comparing products or services, a low initial price is not sufficient indication of value. Consider lifetime costs, including non-monetary ones, such as implementation/set-up, training, upgrades, support, and time until replacement. Free is not always best value, as there may be insufficient support, major maintenance costs, or an inadequate fit with your needs. Don’t be afraid to turn down well-meaning offers of ‘free’ equipment that would quickly end up in your crowded supply room, or ‘free’ services that would waste the time of staff and volunteers.
2. Remember that lifetime costs include environmental stewardship. Excess packaging fills up landfill sites. Pesticides and many cleaning products contaminate water and could harm children, pets, and wildlife. If you have a choice, buy green.
3. If a relative or friend of an employee might become a supplier, make sure that employee declares a conflict and stays completely outside of the decision process.
4. One of your volunteers may operate a related business. If so, let them bid but make sure they are providing best value and that you document the selection process with extra care. For close bids, I would reward the volunteer with the purchase order.
5. One of your leadership volunteers may in the business of providing what you need, and that is much trickier. Directors of Ontario charities cannot receive any direct or indirect remuneration from the charity where they serve as directors, and therefore cannot be a contractor or professional service provider even if they are paid below fair market value. Elsewhere, trust law may imply a similar restriction for charity directors.
6. In other nonprofits, directors may be able to declare a conflict of interest and remove themselves from all involvement in the decision. However, other suppliers are likely to suspect unfair treatment, insider information, and other inappropriate purchasing. Be VERY careful to document how their written bid compares to written bids from other qualified suppliers. Even with such care, it will simply stink to have a director providing an ongoing service. Directors can remove themselves from a quick decision on a new communications system. It is much, much harder to remove themselves from evaluating major ongoing services such as association management. It may be easier in a large organization than a very small one, but how many Executive Directors could feel comfortable telling a board member that their paid services are unsatisfactory?
7. Speaking of fairness to suppliers, your charity status does not give you the right to pick the brains of consultants for free on the pretext of a subsequent contract. And just because $2,000 worth of services looks large in your budget does not justify a request for proposal process that costs consultants $5,000 in lost time to participate in. Be reasonable – a quote for a short contract can be done in a short e-mail and/or a telephone interview.
8. Similarly, you should not waste the time of suppliers getting quotes for your files if you have already decided where to buy. Be open to better deals, or don’t call.
9. Do not allow suppliers to make buying from them a condition of a donation. A donation must be made without expectation of return, otherwise their tax receipt could be invalid. If the company is using the marketing budget and is a sponsor rather than a donor, they still have to meet the test of providing the best value for the organization on this purchase. Consider the total value of the sponsorship if bids are close.
10. If a cause-related marketing offer includes some kind of monetary return to your charity, make sure it is a legal one and not something that could be perceived as a kickback.
11. Minimize socializing with suppliers, especially if a decision is pending. Have a gift policy that indicates what you can accept. Nominal items like a coffee may be fine but tickets for a flight or major league baseball game are not. Consider how it will look to a competing supplier! Have a hospitality policy about when you can host, and buy your own meal at the restaurant unless there is an exchange of hospitality.
12. Buy in your community when you can. Local businesses can be wonderful supporters, particularly for your events, and I would not bypass them to save a few dollars buying books or supplies from major chains. You will get back that investment the next time you need an event publicized, advertisers for your program book, or timely service calls.
13. Choose suppliers who invest in their community and whose values match those of your organization. If you value inclusiveness, are they committed to employment equity? If there is a corporate board, what percentage are women? Do they make gifts to charities at which their employees volunteer and provide flexible work arrangement to support volunteering? Are they IMAGINE members (in Canada)? Ask questions and do research before major purchases.
14. Look for opportunities to do group purchasing with other nonprofits. It could save money, and give the supplier more incentive to be attuned to nonprofit needs.

In summary, apply your organization’s ethical values to purchasing. If you value treating clients, members and staff with respect, honesty and fairness, find suppliers who share your values and treat them the same way. Make prudent use of your organization’s valuable resources, and think broadly and long-term when comparing costs.

Since 1992, Jane Garthson has dedicated her consulting and training business to creating better futures for our communities and organizations through values-based leadership. She is a respected international voice on governance, strategic thinking and ethics. Jane can be reached at jane@garthsonleadership.ca.

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