Sunday, December 06, 2015

Does promise of a donation sully a vendor's bid?

When does a promise of a donation in exchange for getting a business contract cross ethical lines? That’s what S.S., a reader from Northern California would like to know.

A colleague of S.S.’s owns a business that provides services to nonprofits. Recently her colleague participated in competitive bidding for a project. The colleague reports that one of his competitors included in its proposal an offer of a large donation to the nonprofit soliciting bids if the competitor’s firm was awarded the job.

S.S. reports that if the donation was made, the competitor’s proposal would result "in a lower net cost for the agency than what my friend’s firm’s fees would have been."

But S.S. goes on to write that her professional colleagues, including the friend who lost out on the bidding, were divided about whether the inclusion of the promise of a donation in the proposal "was a donation or a kickback."

"Some of us thought it was unethical," S.S. writes. "Some of us admired the benefit to the nonprofit — lower costs would equal more funding for mission-critical activities."

S.S. believes that the "I’ll give you a donation if you give me your business approach" doesn’t seem unethical if there is already a relationship or a commitment to the cause. But she believes it does cross a line when the donation is conditional on getting the contract and is part of the negotiation.

"What do you think?" she asks.

Let me preface my response by disclosing that I am neither a lawyer nor an expert in contracts. But it does seem an important factor that whatever a bidder is promising in the way of services should be spelled out clearly in its proposal. Any off-the-record promise of a donation in exchange for your business seems inappropriate. In the case of S.S.’s colleague’s experience, the promise of the donation seems to have been out in the open for all who wanted to see.

It’s not quite clear to me why the bidder would offer a "donation" if the contract was won rather than simply lower the cost of the bid being made. Perhaps the bidder has found that taking that donation as a tax write-off is preferable to offering a lower bid. If that’s the case, it’s still not clear why the bidder doesn’t simply lower his bid accordingly so that his own net expenses would be the same whether the donation was being offered. Ideally, making such bids that simply offered the best price for the best service seems the clearest way to go.

But if the end result of accepting the contract with the donation attached would be for the nonprofit to get the best quality services at the best price, it seems a reasonable and responsible choice for the nonprofit to make. If two comparable bids were made with such a promise of a donation and only one of these came from a bidder that had supported the nonprofit in the past, then it also seems reasonable for the nonprofit to choose the bidder that had shown ongoing support in the past.

The right thing would be for the nonprofit to choose to give its business to the vendor that provided the best services at the best net cost for the project.

Follow him on Twitter: @jseglin 

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1 comment:

Azalea Lover said...

Change this scenario a bit:

The business owner makes a bid on a government contract and makes a campaign donation promise contingent on getting the contract. Unethical? Yes. Illegal? Yes.

The nonprofit's decision should be to refuse a bid with a promise of a donation attached.

Good rule of thumb: If you have to put a lot of thought into whether or not a bid or an action or an offer or a promise is unethical, it usually is.