Do charities and non-profit organisations get the most from their procurement?
These organisations often have less complex procurement requirements than, say, manufacturing, but at the same time need to ensure that donors and supporters feel like their money is being used effectively.
Anyone have any experience on procurement in this sector?
It's good to hear Joseph's experiences from the US. I suspect in the UK, many charities are not quite so adept, though. It's certainly true they're good at seeking donations in kind, especially in services - our local hospice receives excellent marketing support pro bono from the agency Bray Leino, for example. However, when charities do pay for services, they're not always as hot as corporates in driving down rates. I've found with one of the charities we support that they were paying over the odds for some legal services.
It's certainly an area worthy of more attention. The Charities Aid Foundation provides various services on a pooled basis for smaller charities (investment management, for example). Perhaps procurement support could be another.
I work for the Royal National Lifeboat Institute one of the largest Charities in the UK. It is a complex organisation as we do Manufacturing as well as supporting stations with spares, Contracting buildings to be built and that's just naming a few of our larger spends. We are trying to get a handle on our spend but it's not always easy as the organisation has a lot of tradition and what I refer to as maverick spenders who know what they want and struggle to see the point of procurement. Although, we do try and educate our colleagues on why we are here and why it's so important we get involved with their projects. We are slowly making progress but it's a long and slow process.
We work with a number of charities and it brings a special feeling seeing them reduce their costs so dramatically by using our tools. We offer a 50% discount on our software licence costs in recognition of their not-for-profit status. If you need specifics we have a couple of case studies here:
I've been doing purchasing/procurement/negotiation on all supplies that the Philadelphia Historical Society uses for a bit over a year now. I also help them negotiate with antiquities dealers on the rare occasions that happens. Given that charities rarely pay their Procurement folks (unless they're massive) I can assure you they're getting a fantastic deal. Charities also negotiate from a position of strength because they can say, quite honestly, "We're poor, this is all we can afford." and also you look like a real scumbag if you try work over a charity as a vendor. Antiquities dealers are an obvious exception.
Donors are strongly encouraged to just donate THINGS and buy them themselves. While this takes away from the charity's flexibility, it makes the donor happier and also costs the charity less money and time to use (which they have very little of already). Donors can also earmark donations, which I see a lot.
None of this applies to non-profit companies, which are basically just corporations that don't have investors. I honestly don't even know if there's a European equivalent because it's an odd concept that many foreigners find absolutely baffling. "Oh, so this incredibly profitable nursing home company isn't owned by anyone. So does the money go to a charity?" Nope! They sort of just hang onto it and plow it all back in.
This is quite an interesting question I asked myself many times, but I did not find any academic or business article covering procurement in non-profit organisation. It would be interesting to know the level of maturity achieved nowdays.