Everyone in our society takes part in consumption. It doesn’t matter if it’s the regular Joe who buys a slice of pizza at lunchtime or the CEO of a multinational who buys a rival business to leverage his economic position. Everyone purchases. But deciding on where to buy that slice of pizza or which company to take over involves a distillation of thought, planning and sometimes agonizing research before a conclusion is reached. Nonprofits and charities are not exempt from this process. In fact, nonprofit organizations may even have a harder time making purchases and getting supplies because they exist to serve their communities. They must be more mindful of the ethics of retaining suppliers or materiel while drawing on fewer resources.

Know the value of a supply

Jane Garthson is a leadership and ethics consultant with Mills Garthson & Associates in Toronto. With more than 14 years experience consulting with nonprofits, she is a strong advocate for ethical and environmental purchasing and does not hesitate to counsel her clients on where and how to source their suppliers. “Procurement should be based on two things: a way that reflects the values of the organization and a way that recognizes stewardship of a lifetime cause,” she says. “The point is to buy things that will help them achieve their mission, but the lowest price is not always what will help.” Research and a long-term vision toward purchasing are key ingredients, as is a proper valuation of the real benefits of a purchase.

Learning from mistakes

For Garthson there are two common mistakes that charities and nonprofits make. The first is based on the thought process that if a supply or service is cheap or free, then it is better for the organization to use it. Not so. “A ‘free’ person who [is retained] because they once had some small experience at a job 20 years ago wastes the time of the board and senior staff,” she states. “Board members may have given up a weekend to attend a strategic planning retreat [only] to come up with a poor plan and end up not delivering to their community because they thought ‘free’ meant ‘okay’.” Another thing to consider when purchasing is the environment.

Keeping a green eye on costs

An organization that is acutely aware of this is Habitat For Humanity Canada (HFH). Terry Petkau is director of special projects with HFH and knows that his organization’s mandate must take ethical purchasing into account wherever possible. “HFH attempts to be ethical in its purchasing by considering the human and environmental cost of manufacturing of every product used in a HFH house,” he says. “If HFH becomes aware of a validated unethical issue related to a product under use, HFH would make every effort to reduce or eliminate the use of these products.” That said, like many other organizations in the voluntary sector, purchasing decisions are not always cut and dried.

Know when to spend for value

“Every attempt is made to solicit donations or deep discounts for all products going into a house as every dollar saved in the initial construction enables a HFH affiliate the opportunity to start its next project sooner,” says Petkau. But it can be a slippery slope when sourcing suppliers. “Within HFH there is a debate as far as when to draw the line on donation procurement and just purchase certain products. That said, HFH follows [internal criteria] which at all times seeks to find the balance between highest quality and minimum cost.” This is a struggle for every organization.

Garthson points out that it can be tempting for nonprofit decision-makers to cut corners in the procurement process by sourcing internal members of their own organizations in an attempt to budget. She counsels against it. “The first people to know about [purchasing] opportunities are the insiders,” she says. “[Nonprofits] need to do due diligence and check the true market value before hiring insiders. That means making sure that the person who wants to bid isn’t part of the decision-making. To me that’s a clear conflict of interest.” Garthson points out that there are some fine resources out there for nonprofits to use in finding the right suppliers for their missions. And sometimes it behooves nonprofits to look outside the voluntary sector for these suppliers.

Strategic alliances with for-profits

ASSOCIUM is a for-profit company that has aligned itself to serve the interests of the voluntary sector by providing human resource expertise at affordable cost. Doug Slanker is director of development for the Group Acquisitions Initiative Network (GAIN) at ASSOCIUM. “GAIN, was launched by ASSOCIUM in 1996 in response to a change in both the financial and political climate in Canada,” he says. “With an emphasis on facilitating opportunities to reduce overhead costs, maximize resources and increasing the organizational capacity of not-for-profit organizations, GAIN was able to help offset some of the newfound pressures facing the sector.” And it continues to do so to this day.

According to Slanker, GAIN membership now numbers in the hundreds across the country and has more than $800 million in purchasing power to help its members. “GAIN manages the vendor relationships, and responds to increased purchasing power by renegotiating on our members’ behalf for higher discounts,” states Slanker. “[It] saves members time and money by sourcing new vendors, negotiating contracts, resolving issues, and presenting a broad range of products and services designed to address the operational needs of not-for-profit organizations.” Slanker also notes that ethical purchasing is high on his priority list.

“When qualifying a company as a new partner providing products or services to our membership, [we] look closely at how they conduct their business. We expect that they will not only treat our members well but also their employees, and when applicable, that the products they supply are manufactured in an ethical manner,” he says.

Take it from an expert

Slanker also offers some sound advice for nonprofit managers. “In order to ensure that [nonprofits] always get the best value for their funding dollars it is necessary to continually monitor the various markets from which they purchase,” he says. “Lengthy contracts are also an area to be avoided as they prevent an organization from taking advantage of downward market trends when they occur.”

Garthson recommends nonprofits take a hard look at companies like ASSOCIUM, because using a market expert can often save you money. “In general, I suggest that nonprofits look at any umbrella organization that they could reasonably belong to [to assess purchasing or supply needs],” she advises. But there are many resources out there for nonprofits to use to learn about purchasing.

Alternate sources of information

As you may already know, this very site (CharityVillage.com) is a prime resource to find suppliers and information, but there are some other sites that can aid nonprofits in achieving purchasing goals and save money on operating costs. Here are a few to get started:

And while these organizations are just the tip of the iceberg, they are nevertheless a great place to start learning about and bettering purchasing methods.

Every decision has its costs

Garthson offers a last word of caution to nonprofits looking for a freebie. “[Non-profits] need to look at the years of service or maintenance costs of a purchase; if a machine dies after two years and you need it for five, you didn’t get a better price.” Words of wisdom.

Andy Levy-Ajzenkopf is president of WordLaunch professional writing services in Toronto. He can be reached at andy@wordlaunch.com.