The Nonprofit Experience with Government
Contracting: Challenges & Recommendations
March 2022
Executive Summary
In December 2021, Washington Nonprofits launched a survey to assess the nonprofit
experience with government contracting. Survey respondents were asked to identify
challenges they’ve experienced, prioritize the challenges they want addressed,
describe any positive experiences they have had with government contracting, and
identify policy solutions they would like to see.
The six most prevalent challenges that nonprofits experience fall into two main
categories:
Complex Contracting Processes
1. Difficult application procedures or timelines
2. Burdensome reporting requirements
3. Overly complicated or restrictive budget or invoicing requirements
Financial Constraints
4. Contract rates do not rise with cost increases over time
5. Reimbursement basis – receiving payment after delivering services
6. Contract rates do not cover administrative costs
All of these challenges impact the majority of nonprofits who contract with
government. The impact is significantly greater for Black, Indigenous, People of Color-
led (BIPOC-led) nonprofits, and these groups experience the biggest disproportionate
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impact from contracts that do not cover administrative costs, late payments,
reimbursement-based contracting, and burdensome insurance requirements.
Nonprofits are grateful for government partnership to meet common goals. The
partnership can be improved in the following ways:
1. Nonprofits should be compensated appropriately for their work. Government
funders should cover the full cost of service delivery, pay for necessary
administrative costs, and increase contract rates to cover rising costs.
2. Government funders can and should remove or mitigate barriers to contracting
that disproportionately impact nonprofits serving BIPOC, rural and other
marginalized communities. These include reimbursement-based contracting,
delayed payments, matching funds requirements, and onerous insurance
requirements.
3. Processes can be simplified and coordinated across departments and
government entities, reducing work for both funders and contractors.
Opportunities include common application formats or elements, coordinated
rather than multiple audits, less prescriptive rules about how money can be
spent, and not asking for unnecessary information.
4. Government can best reach its goals when partners are strong and capable.
Government funders should invest in capacity building and technical assistance
to nonprofits, particularly those serving underserved areas or populations.
General capacity building to strengthen nonprofits’ infrastructure and systems,
proposal writing assistance, and use of intermediaries are effective strategies.
The challenges associated with government contracting affect funders and contractors,
and win-win solutions are possible. Most importantly, if unnecessary barriers and
complexity can be eliminated, more funding, time, and energy can go toward
maximizing quality services to Washington residents.
The next step is intentional dialogue between nonprofits and government funders to
discuss these challenges and identify feasible solutions. Washington Nonprofits
proposes the creation of a bipartisan legislative workgroup to facilitate dialogue and
development of win-win solutions to improve contracting processes and results. We
can build on the relationships forged through adversity during the pandemic to
continue to improve outcomes for communities across Washington State.
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Introduction
In Washington State and across the country, nonprofit organizations have been
increasingly called upon to implement and carry out what are traditionally government
services. They’ve been asked to do this work on limited budgets and to continuously
prove their expertise and effectiveness through burdensome and duplicative
application and reporting processes for government contracts. Nonprofits are now
leading pandemic recovery efforts amid a labor shortage and surging demand for
services. The nonprofit sector is strained, and government contracting practices are
directly contributing to this crisis. For nonprofits to continue serving our communities
and providing vital services, contracting reform is needed.
This report summarizes the experience and recommendations of 109 nonprofits of
different sizes and fields of service in communities across Washington State (see
methodology section for more detail), including 23 BIPOC-led organizations and 30
rural organizations.
Findings
Challenges with Government Contracting
Respondents were asked to indicate which common challenges had impacted their
organization. Percentages include non-responses from eight survey respondents,
including five that indicated they do not contract with government.
Challenges
% Impacted
Difficult application procedures or timelines
66%
Burdensome reporting requirements
60%
Overly complicated or restrictive budgeting or invoicing requirements
59%
Contract rates do not rise with cost increases over time
54%
Reimbursement basis (receiving payment after delivering services)
52%
Contract rates do not cover administrative costs
51%
Short-term contracts make planning and staffing difficult
44%
Difficult or duplicative auditing requirements
31%
Requirement for matching funds
30%
Invoices not paid in a timely manner
28%
Burdensome insurance requirements
21%
Failure to disclose the use of federal funds in RFP
10%
Failure to follow OMB guidance on the use of federal funds
6%
table 1
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The six most prevalent challenges fall into two main categories:
Complex Contracting Processes
1. Difficult application procedures or timelines (66%)
2. Burdensome reporting requirements (60%)
3. Overly complicated or restrictive budget or invoicing requirements (59%)
Financial Constraints
4. Contract rates do not rise with cost increases over time (54%)
5. Reimbursement basis – receiving payment after delivering services (52%)
6. Contract rates do not cover administrative costs (51%)
Additional related issues were raised by respondents,
including duplicative requirements across government
entities, lack of a common application or reporting format
among funders, overly directive or controlling guidelines that
get in the way of providing the highest quality services, and
refusal to fund some required costs. It was also pointed out
frequently that all these challenges lead to inequity and
impact quality of services.
Complexity in the Contracting Process
Complexity issues in the contracting process made up the top three challenges
experienced by survey respondents. Applying for and administering government
contracts requires significant resources and can be a complex and confusing
experience. The information that is required to apply for government contracts can
require multiple staff members to collect and organize, and it often isn’t clear how that
information will be used or why it is necessary. Applications require a burdensome
budgeting process to document how funds will be spent, and invoicing governments
for services performed can be equally complicated. Reporting requirements continue
this burden and for some contractors, the level and type of data required can violate
the privacy and safety of individuals who access services. For smaller organizations, the
burden of this process is not worth the funding received and it creates inequitable
access barriers to small and BIPOC-led organizations.
Funding is awarded on a per project basis to assist with acquisition, pre-development or down
payment assistance in most cases. Additional contracted grants cover reimbursement for critical
home repairs. Complicated and cumbersome application process for WA Housing Trust Fund is a
key issue for us. It was a 3-month grant process consuming hundreds of staff hours to complete,
“In our sector, affordable
housing, each of these
challenges represents a barrier
to providing more homes.
When [contracting
requirements] cost the providers
more time and money, less time
and money go to the work that
needs to be done.”
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that was ultimately not awarded. The additional cost per project just to meet the basic
requirements, adds approximately $15,000 to a project that may not receive funding.
At one point, for $5,500 we were required to report 4 times a year AND send a survey out to all
senior participants (postage, envelopes, paper, staff time to process) and report the results of the
survey. So, 5 reports for $5,500!!
Lack of coordination across government entities leads to duplication of efforts.
Inconsistencies on the government side of this process compound the frustration that
nonprofits experience. Application, budgeting, invoicing, and reporting requirements
differ across levels of government, and often differ across government agencies within
the same jurisdiction. This can compound the sense that certain requirements are
arbitrary or unnecessary but more importantly, it means that nonprofits who layer
multiple sources of government funding must create multiple systems and “translate”
data into different formats to deliver the same information to various agencies. Not
only is this incredibly inefficient, but it is also resource intensive. The result is that more
of the organization’s resources are spent on contract management and less on critical
services. This can push small, less-resourced organizations out of government
contracting opportunities altogether.
Short government timelines compound the burden
associated with contracting requirements. Application
periods for contracts can often be as short as two weeks,
requiring organizations to scramble to get all the
necessary information together. Once awarded a
contract, the allotted time to complete programming is
often insufficient, and contract end dates remain rigid,
even when governmental delays prevent programming
from beginning on time. These government delays show
up throughout the process, including invoice payments,
which further impacts which organizations can compete
for awards.
Dept of Commerce published an RFA for diaper banks with less than two weeks to submit the
proposal. For small nonprofits overwhelmed [by] providing primary services, this is a huge barrier
and sets small nonprofits at a disadvantage for applying [for] and receiving funds. Small
nonprofits also lack the army of paid Development people and grantwriters to devote many
hours to writing an RFA, not to mention robust $$$$ reporting systems. The reporting process
would be helpful if customized per each organization's budget and scale.
“A recent and disturbing trend
is the failure of government
agencies to make their own
deadlines, especially when it
comes to award
announcements and
contracting. There is no give for
nonprofits when it comes to
submission. We are held to a
higher standard than the
government. All of us face the
same labor shortages and
COVID chaos.”
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Especially since the pandemic, funding becomes available but the turnaround time from
announcement to due date, or from when monetary awards are announced to [when they have
to be spent], can be so short that it makes it difficult to effectively plan and spend. The [amount
of] time a few of our subcontractors (food pantries) have had to wait for their SAM [System for
Award Management] number has caused them to miss out on grant opportunities.
Complexity issues arose as the top challenges faced by nonprofits because they
consume resources that nonprofits don’t have or could be better spent providing
services and running programs. As the financial constraint issues will demonstrate, the
expenses associated with these complexities are administrative expenses, an area on
which government contracts either prohibit or severely restrict spending.
Financial Constraints
The majority of survey respondents reported financial challenges with government
contracting that constrain their ability to implement programs or even compete for
funding altogether. As with the complexity challenges nonprofits face, these financial
constraints require nonprofits to have sufficient capital and additional funding sources
to be able to take on government contracts. Financial challenges are where we see the
greatest disproportional impact for BIPOC-led organizations, reflecting the systemic
underfunding of BIPOC communities and BIPOC-led organizations.
Insufficient compensation and failure to raise rates squeezes nonprofit budgets. Every
year, the cost of providing services and running programs increases. Wages, rents, and
overall price levels increase. Over the past decade, the minimum wage in Washington
State has increased 60% from $9.04 to $14.49. As prices rise, however, most
nonprofits continue to receive government contracts that fund programs at the same
rate each year, leaving them to figure out how they’ll cover the remaining cost of
services. Fifty-four percent of respondents reported stagnant contract rates as an
issue for them, and comments stressed that contracts do not cover the full cost of
services. Because of this, some end their relationships with government altogether.
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Low contracts rates also prevent nonprofits from paying
competitive wages. Nonprofits provide vital services that
can require advanced degrees and professional expertise,
yet the rates nonprofits receive don’t reflect that reality. For
many, this frustration is compounded by the fact that if the
government were carrying out these programs itself, wages
and benefits would be much higher. While nonprofits have
always faced this issue, it has become especially acute
during the pandemic, contributing to the current labor
shortage of essential nonprofit staff.
Administrative costs are necessary to run strong programs, but they are not covered
by government contracts. Not only do contracts not rise over time or cover the full cost
of service, including wages, but they also don’t cover administrative costs.
Administrative costs include expenses critical to running a program – rent, a database,
or organizational finance managers – in addition to all the costs associated with
applications, budgeting, invoicing, and reporting. Through the complicated and
burdensome contract procedures addressed in the previous section, government is
requiring nonprofits to take on costs for which it will not pay. This creates an
environment where nonprofit employees are simultaneously underpaid and
overworked.
Nonprofits have a lot of volunteers and low paid workers. We need both to keep overhead down.
But overhead increases with government funding and finding inexpensive super-devoted labor is
not easy. It is like the government wants to put out a fire and supply the water, but not the hose.
My top priority is managing contracts that have zero allotment for our staff time, and the
significant time required to manage them including reporting, etc.
Reimbursement-based contracting creates barriers for less-resourced nonprofits.
Alongside insufficient contract rates, nonprofits in Washington State are subject to
“reimbursement basis” contracts, meaning they must first provide services, invoice the
government for reimbursement of services, and then wait for the government to
process and pay the invoice. This process requires organizations to have enough cash
on hand to front the costs of services for months, which can again be prohibitive to
small and BIPOC-led organizations. Thirty percent of respondents reported that they
had been impacted by payments not being paid on time, further extending the timeline
for cost reimbursement and increasing the working capital needed to float the
contract.
“Over time, it is hard to
provide services at the pay
rate the contracts include. It
makes it hard to be a
competitive employer if you
cannot pay staff enough.
Plus, they do deserve an
increase in wages year-to-
year and often, this is a
fight to get approved.”
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For large grants, the need to front funds and wait for reimbursement is a challenge. Staff
turnover, particularly at the City of Seattle, has been disruptive at times.
Small [organizations] need cash flow for basic operating [expenses] and not being able to invoice
until after services [are] rendered can be a challenge.
Disproportionate Challenges for BIPOC-led Organizations
Financial constraint issues were experienced by a smaller proportion of all
respondents than contract process complexity issues, but disaggregated data shows
that financial constraints are experienced at higher rates for BIPOC-led organizations.
In table 2 below, the highlighted rows show the areas of greatest disproportionate
impact (>10% difference). Close behind these challenges are gaps in impact related to
reporting and auditing requirements.
Challenges
BIPOC-led
Orgs
Difficult application procedures or timelines
74%
Burdensome reporting requirements
70%
Overly complicated or restrictive budgeting or invoicing
requirements
61%
Contract rates do not rise with cost increases over time
57%
Reimbursement basis (receiving payment after delivering
services)
65%
Contract rates do not cover administrative costs
70%
Short-term contracts make planning and staffing difficult
48%
Difficult or duplicative auditing requirements
39%
Requirement for matching funds
26%
Invoices not paid in a timely manner
43%
Burdensome insurance requirements
39%
Failure to disclose the use of federal funds in RFP
17%
Failure to follow OMB guidance on the use of federal funds
9%
table 2
Respondents also reported that current contracting practices undermine the ability of
BIPOC-led organizations to apply for and utilize government grants and contracts.
[There are] burdensome requirements when working with community consultants or community
orgs that might be classified as "Sub-contractors". The requirements can be overly burdensome
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and costly for BIPOC consultants who have relatively small practices but are critical because of
their relationship to community.
Some of these [challenges] are overcome-able for us because of our size, but a total obstacle for
the agencies we fund, particularly historically under-funded BIPOC organizations.
The disproportionate impact of contracting challenges on BIPOC-led organizations
reflects what we already know: BIPOC communities and BIPOC-led organizations face
structural barriers to financial resources, often leading to smaller, less well-funded
nonprofit organizations. The government contracting process is one of those barriers.
Results for Rural Nonprofits
Interestingly, rural nonprofits reported lower rates of experience with many of the
challenges presented. The biggest difference is a gap in experiencing difficult or
duplicative auditing requirements, but they also report less experience with certain
challenges related to financial constraint (see table 3). Like BIPOC-led organizations,
rural organizations can often be under-resourced, so this finding is unexpected. The
survey data does not present any explanations, but Washington Nonprofits shared this
finding at a virtual rural nonprofit gathering after the close of the survey to discuss with
our rural partners. Participants hypothesized that rural nonprofits may be less likely to
have the capacity to navigate complicated application procedures and therefore may
not experience the additional challenges beyond that step. While the validity of this
hypothesis requires further research, eight of the 15 survey respondents that do not
currently contract with government were rural-based organizations, amounting to 26
percent of rural respondents. By comparison, only 9% of survey respondents that did
not identify as rural reported that they were not contracting with governmental bodies.
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Challenges
All
Orgs
Rural
Orgs
Difficult application procedures or timelines
66%
67%
Burdensome reporting requirements
60%
57%
Overly complicated or restrictive budgeting or invoicing
requirements
59%
53%
Contract rates do not rise with cost increases over time
54%
47%
Reimbursement basis (receiving payment after delivering services)
52%
47%
Contract rates do not cover administrative costs
51%
40%
Short-term contracts make planning and staffing difficult
44%
43%
Difficult or duplicative auditing requirements
31%
20%
Requirement for matching funds
30%
20%
Invoices not paid in a timely manner
28%
30%
Burdensome insurance requirements
21%
20%
Failure to disclose the use of federal funds in RFP
10%
3%
Failure to follow OMB guidance on the use of federal funds
6%
7%
table 3
Priorities for Change
Respondents were asked to prioritize among the government contracting issues listed,
indicating which of these issues is a top priority to address. They rated issues on a
scale from 1 (most important) to 5 (not important)
1
. While all issues were somewhat
important, nonprofits most want to change the fact that contract rates do not rise with
the cost of inflation and that they do not cover necessary administrative costs. In
addition, improvements to the contracting process and requirements are important. It
is important to note that although the top three issues most experienced by nonprofits
related to complexity challenges, the two biggest priorities for change concern contract
rates.
1
Weighted averages are based on 96 responses to this question. Due to the structure of the question, weighted averages cannot
incorporate non-responses.
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Priorities for Change: All Respondents
Prioritization
Contract rates do not rise with cost increases over time
1.80
Contract rates do not cover administrative costs
1.80
Burdensome reporting requirements
2.17
Overly complicated or restrictive budgeting or invoicing requirements
2.18
Difficult application procedures or timelines
2.24
Reimbursement basis (receiving payment after delivering services)
2.28
Short-term contracts make planning and staffing difficult
2.57
Requirement for matching funds
2.60
Difficult or duplicative auditing requirements
2.67
Invoices not paid in a timely manner
2.69
Burdensome insurance requirements
3.05
Failure to follow OMB guidance on the use of federal funds
3.29
Failure to disclose the use of federal funds
3.40
table 4
For rural organizations, priorities aligned almost exactly with the priorities of the overall
respondent pool, but for BIPOC-led organizations, challenges related to financial
constraints constituted the top four priorities
2
. Like the overall respondent pool, the
two challenges associated with contract rates were the top priorities for BIPOC-led
organizations, however the two subsequent priorities were the reimbursement basis of
payments and late payments.
2
Weighted averages are based on 22 responses to this question. Due to the structure of the question, weighted averages cannot
incorporate non-responses.
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Priorities for Change: BIPOC-led Organizations
Prioritization
Contract rates do not cover administrative costs
1.57
Contract rates do not rise with cost increases over time
1.85
Reimbursement basis (receiving payment after delivering services)
2.00
Invoices not paid in a timely manner
2.00
Difficult application procedures or timelines
2.10
Short-term contracts make planning and staffing difficult
2.21
Burdensome reporting requirements
2.32
Overly complicated or restrictive budgeting or invoicing requirements
2.36
Burdensome insurance requirements
2.50
Difficult or duplicative auditing requirements
2.58
Requirement for matching funds
2.58
Failure to follow OMB guidance on the use of federal funds
3.00
Failure to disclose the use of federal funds
3.05
table 5
Positive Experiences with Government Contracting
To identify potential bright spots to replicate, survey respondents were asked to
describe positive experiences they’ve had with government contracting. The majority of
comments spoke to positive experiences with contract administrators that have
occurred despite numerous difficulties with the contracting system. However, a small
number of respondents did note a lack of complexity in the contracting process and
positive experiences with governments making changes based on feedback from
nonprofits. These comments underscore that improvement in government contracting
is possible.
Respondents overwhelmingly reported experiences with caring government staff.
Twenty-one comments, representing 33 percent of responses to this question, noted
positive experiences working with individuals in government who valued the work
being done and did their best to support organizations through complex processes.
Comments acknowledged that these individuals often do not have institutional power
to make meaningful changes, but that they do their best under difficult circumstances.
In some cases, this line of thought led to negative comments about government
bureaucracies and individuals within government who do hold the power to improve
the process.
The people we work with from most government agencies are thoughtful and caring.
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Usually the humans (staff) are very competent, understanding and apologetic for their systems,
and helpful in navigating or trying to change requirements or provide waivers.
Despite frustrations with the contracting process, nonprofits are appreciative of their
funding. The second-most cited positive experience was an appreciation to just be
funded and able to “do the work.” Nonprofit employees are dedicated to their work
and care about the wellbeing of the individuals, families, and communities they serve.
The amount awarded through government contracts/grants can be transformational.
[We were] consistently able to find some kind of government funding for our work, especially
through the COVID-19 pandemic.
Positive changes to the contracting process occurred during the pandemic. A number
of respondents commented that relations and funding processes had improved during
COVID-19. The crisis forced government and nonprofit leaders to work together quickly
to ensure that the community was served. Reporting requirements were relaxed in
some cases, and generally there was more flexibility and trust. Nonprofits are hopeful
that some of these shifts can become permanent.
Comments identifying less-complex processes or government agencies making small
changes based on nonprofit feedback were generally vague, but they nonetheless
demonstrate that government does have the ability to improve the way it contracts
with nonprofit organizations. Two comments described individual instances of
obtaining requirement waivers or negotiating contracts, but overall comments
described improvements made to entire contracting processes from one round of
funding to another.
Kudos were given for agencies that have made improvements. Specific agencies noted
for easier or streamlined processes were the Washington State Department of
Transportation, the Washington State Office of the Superintendent of Public
Instruction, King County’s Revive and Thrive application process for arts & cultural
programs, and the City of Seattle’s Office of Arts and Culture. The Washington State
Department of Commerce and Department of Children, Youth, and Families were
noted for improvements made across rounds of COVID-19 relief funding.
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Policy Solutions that Nonprofits Want to See
Nonprofits are grateful for government partnership to meet common goals. The
partnership can be improved in the following ways:
1. Nonprofits should be compensated appropriately for their work. Government
funders should cover the full cost of service delivery, pay for necessary
administrative costs, and increase contract rates to cover rising costs.
2. Government funders can and should remove or mitigate barriers to contracting
that disproportionately impact nonprofits serving BIPOC, rural and other
marginalized communities. These include reimbursement-based contracting,
delayed payments, matching funds requirements and onerous insurance
requirements.
3. Processes can be simplified and coordinated across departments and
government entities, reducing work for both funders and contractors.
Opportunities include common application formats or elements, coordinated
rather than multiple audits, less prescriptive rules about how money can be
spent, and not asking for unnecessary information.
4. Government can best reach its goals when partners are strong and capable.
Government funders should invest in capacity building and technical assistance
to nonprofits, particularly those serving underserved areas or populations.
General capacity building to strengthen nonprofits’ infrastructure and systems,
proposal writing assistance, and use of intermediaries are effective strategies.
Provide Appropriate Compensation
The top solution that nonprofits want to see is improved compensation. Nonprofits
want to see contracts that cover the full cost of services, including administrative costs
and competitive wages.
Cover the full cost of service delivery, with annual increases to cover rising costs.
Respondents noted that contract rates often make it impossible to pay skilled staff
reasonable wages. This leads to recruitment and retention issues which in turn affect
program quality. They noted that government wages for equivalent work are often
significantly higher, and that community groups should be paid better for their skills
and lived experience. Rates could be adjusted annually based on the Consumer Price
Index, once the rates are reset at an appropriate baseline level.
Rate adjustments should be made annually to contracts to keep up with increases to minimum
wage, benefits, and other costs to provide quality services.
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Pay true administrative costs. Many government contracts
prohibit or severely limit spending on administrative costs, yet
many required activities associated with government grants
such as proposal writing, fiscal management, and evaluation
are administrative. Failure to pay true administrative costs
prevents organizations from investing in infrastructure such as
strong fiscal and data management systems—the systems
necessary to accountably manage government contracts. This
effectively excludes smaller organizations from government
contracting, as only larger, wealthier nonprofits have other
funding sources to build these systems.
Every nonprofit goes through a process to determine our federally-approved indirect rate. "Honor
our indirect" is our rallying cry with all of our funders. We cannot be responsive to ever-changing
and ever-increasing community need without a strong central administrative team.
Remove Barriers for Under-Capitalized Nonprofits
There are a number of barriers to smaller and community-based nonprofits accessing
government grants and contracts. Here are some actions that are recommended by
respondents to reduce barriers.
Eliminate matching requirements. Matching requirements, while often intended to
demonstrate community buy-in, in fact privilege comparatively wealthier communities
with more fundraising options, including urban areas.
Address challenges with reimbursement-based payments. Delivering on a
reimbursement-based contract requires a nonprofit to have substantial working capital
to cover the upfront cost of a reimbursement-based contract. Provide planning funds
or structure payments to provide upfront funding for the initial contract period.
Upfront and timely payment of invoices would be more equitable to enable smaller organizations
with less cash flow to participate in government contracting.
Direct pass-through agencies to allow prepayment on contracts (subject to recovery) whenever
funds are paid in advance to the pass-through.
“If we want to provide
services, we need staff to
do that. We also need
our staff to have support
services from payroll,
HR, communications etc.
Keeping admin rates
down to low levels is not
a healthy organizational
practice and it creates
turnover and burnout.”
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Make on-time payments. The challenge of floating expenses required to complete
reimbursable contract work is exacerbated when government does not pay on time. As
noted earlier in this report, 30% of nonprofits report being impacted by late payments.
Government agencies [should] pay on a timely basis. We have to get our invoices in on strict
schedules, but they often don't pay them for several months.
Reevaluate the necessity of insurance requirements. Standard government insurance
requirements can be burdensome and expensive for nonprofits. Requirements should
be reasonable and be adjusted to requirements that truly relate to the services
provided in a specific contract.
Provisions on indemnity, insurance requirements, and IP [Intellectual Property] are often the
provisions that are most burdensome or problematic when it comes to working with "sub-
contractors" who are BIPOC consultants or smaller community organizations. Especially when
the contract is not very big, or when the sub-contract is small, these requirements are overly
burdensome for a smaller vendor to take on. Yet, those folks are the very community members
that the agency often really wants us to work with because they are embedded in the
communities we are trying to serve.
Work Together and Simplify Processes
Nonprofits overwhelmingly want to see simplified contract processes, coordination
across government agencies and departments, and collaboration with nonprofits to
understand community needs and how to meet them.
Simplify application and reporting requirements. More effective than teaching
nonprofits how to jump through the many hoops associated with government
contracting is the removal of hoops. Applications and reporting should be streamlined
and reduced to only what is truly necessary.
Make contracts more accessible and simple for people to follow so the common community
organization doesn't fail the competition due to restrictive processes only the big organizations
can do.
Nearly all our applications require extensive local demographic studies and narratives and hours
of research to plead our case for affordable housing needs in the community when it has been a
high priority for everyone for years. We know the need exists, let's just focus on building homes
rather than duplicating demographic research, needs analyses, etc. We are a rural area and we
have to provide information about proximity to banking, groceries, transit centers, etc. like we
were an urban center.
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Coordinate among government agencies and across departments. There is a great
deal of extra work created due to each level of government, and in some cases
different departments within a single city or county, creating their own distinctive forms
and requirements without coordination. In many cases, the same information is
requested, but in novel formats. Responding to these requirements is labor-intensive
for applicants. If there were a common application form, or even common elements
such as a standard cover page, this would save hundreds or perhaps even thousands
of hours for nonprofits in Washington each year—effort that could be reallocated to
service provision. Similar savings of time and effort could be realized for both
contractors and contract management staff by coordinating reporting formats,
invoicing forms, and audit requirements to reduce duplication.
Each opportunity we apply for requires starting over and compiling all the same basic
information like 501(c)(3) validation, board roster, 990s, etc. All applications seem to require their
own format, so it is difficult to create a re-useable document for all applications.
Streamlined auditing/monitoring - if you are qualified to provide services in multiple counties AND
require a national accreditation - there is no need for multiple annual monitoring events.
Do not prescribe in detail how to do the work or spend the
money. Nonprofit partners have expertise in service delivery
and need flexibility in how they spend resources to achieve
desired results. Many respondents indicated that they
preferred performance-based contracts and that specific
requirements on how funds can be expended impede
nonprofits from doing their best work. This type of
micromanaging is commonly seen in contracting with
nonprofits and rarely imposed on for-profit vendors.
We have some state government contracts that are deliverables-based rather than
reimbursement-based (we are paid the same monthly sum for meeting deliverables) which has
been so much easier and enabled us to save some money and not waste funds that were
budgeted for but we did not end up needing. It is ridiculous to feel like you have to spend money
to align with a projected budget just because, rather than saving resources when possible.
Cover the full cost of delivering service and stay out of trying to tell us how to deliver those
services. Instead, ask for a competitive proposal that describes how we will serve clients, why this
will deliver the best results for the investment, and what it will cost to do the work.
“Let's also talk about
evaluation/outcomes -
the outcomes that
BIPOC communities
seek aren't always the
outcomes that
governments are
promoting/requiring we
track.”
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Support Organizational Development and Capacity Building
Small organizations tend to have limited infrastructure and technical knowledge that
precludes them from obtaining government contracts, despite being embedded in
community and well-positioned to carry out services. To support these organizations in
competing for and winning contracts, government partners need to invest in nonprofit
capacity and organizational development.
Invest in nonprofit capacity building for potential contractors. If government agencies
want strong nonprofit partners, investing in capacity building is wise. Organizational
strength and solid infrastructure are necessary in order for nonprofits to ramp up
service delivery in the event of a crisis (or to assist with pandemic recovery).
Provide guidance and technical assistance. Capacity building and technical assistance
are also helpful to build the strength of BIPOC-led organizations, rural organizations,
and other groups serving marginalized communities. These organizations have been
chronically under-resourced, but also have the community knowledge and lived
experience to effectively serve their own communities. This assistance should include,
but not be limited to, proposal writing.
New organizations may not apply for opportunities due to the process seeming too daunting but
if they knew they had support during the process, it may encourage them to apply for
opportunities they may have not considered.
It would be beneficial to provide assistance on best practices for applying for government
contracts as well as training on how to adhere to proper reporting and invoicing procedures and
how to handle potential contract disputes. I would say that the biggest issue was applicants
would be considered non-responsive because they failed to follow the instructions on the RFP.
Applicants need better guidance and possible review of application prior to submittal to make
sure they cover all necessary requirements for their bidding proposals.
Several departments have scheduled Zoom meetings post award notification and pre contract
negotiation. That’s helpful!
Utilize intermediaries. One way of working effectively with nonprofits, especially those
facing barriers, is to work with partners with proven expertise in accessible
grantmaking and existing relationships with target communities. In some cases, the
intermediaries may have more well-developed reporting systems and be able to take
on some of the burden of satisfying government compliance requirements on behalf of
grantees.
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We are an intermediary subgranting funding to a number of agencies of multiple sizes. We tend
to try to absorb as much of the administrative burden as we can so the agencies can focus on the
direct service. We've had good relationships with the City and County as we've been major
recipient of local, federal, and levy funds over the years from those entities. We're pleased to be a
go-to for the public sector and to support getting public funds in a non-burdensome way to
BIPOC-led organizations serving their communities.
For non-profits, partnering with other organizations may be necessary to obtain the contract.
Acting as a "bridge-builder" capable of connecting organizations would be beneficial.
We were impressed with Dept. of Commerce partnering with Philanthropy NW during the
pandemic to get funds to "by & for organizations." Working through intermediaries might be a
great solution to explore further.
Conclusion and Recommendations
As currently practiced, the government contracting process creates and perpetuates
structural inequities affecting access to financial resources. Whether related to the
complexity and burden of the contracting process or the financial constraints it
creates, the challenges most experienced by nonprofits and the challenges that they
prioritize to address all share a common thread: they require nonprofits who
participate in government contracting to be well-resourced.
Nonprofits must have the resources to supplement contracts that do not cover the full
cost of services and must have general operating funds available to complete the
administrative work associated with government contracts that government refuses to
fund. They must have the resources to front costs associated with contracts starting
with the application period and continuing with the provision of services prior to
invoicing and receiving payment from their government partners. These challenges all
favor larger and well-resourced nonprofits. Smaller, BIPOC-led nonprofits, which have
been historically and systemically underfunded, continue to face barriers to accessing
financial resources. The current system is inequitable and results in communities not
getting the local, culturally responsive services they need. It is also out of alignment
with stated goals of government funders to reach BIPOC, rural, and other marginalized
communities.
The scope of challenges laid out in this report may seem daunting, but we know that
improvement is possible. Starting points for change include increasing contract rates
to cover the full cost of services and reducing the burden of contract applications and
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reporting requirements. These types of improvements can eliminate unnecessary
barriers, create a more equitable distribution of funding, and allow more funding, time,
and energy to go towards maximizing quality services to Washington residents.
The next step is intentional dialogue between nonprofits and government funders to
discuss these challenges and identify feasible solutions. Washington Nonprofits
proposes the creation of a bipartisan legislative workgroup to facilitate dialogue and
development of win-win solutions to improve contracting processes and results. We
can build on the relationships forged through adversity during the pandemic to
continue to improve outcomes for communities across Washington State.
Please contact Washington Nonprofits to join the list of interested parties and receive
updates on our efforts to foster dialogue and change.
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Appendix A: Methodology
To better map the issues with government contracting in Washington State and
identify policy solutions, Washington Nonprofits launched an online survey to hear
directly from our sector. The survey was open from December 16, 2021, through
February 7, 2022, and was primarily distributed via social media and Washington
Nonprofits’ email list, with additional assistance solicited from community partners to
reach their networks.
figure 1. Map of survey respondent locations
The survey received responses from individuals representing 109 Washington-based
nonprofits and three additional responses that were omitted from the report. Two
omitted responses were from out-of-state nonprofits, and one was from a local
government entity in Washington. Respondents hailed from across the state (see figure
1), with 46 percent located in the Greater Seattle/Puget Sound Region (King, Pierce,
and Snohomish Counties). Respondents represented a wide swath of the Nonprofit
sector, with Human Services being the largest category of respondents at 41 percent
(see figure 2). Half the respondents held 1-5 government contracts, 38 percent had six
or more government contracts, and 13 percent did not contract with government at all
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(see figure 3)
3
. State-level contracts were most common, held by 68 percent of
respondents, and were closely followed by county-level contracts, which were held by
64 percent of respondents. Half held city-level contracts and federal-level contracts
were less common at 38 percent (see figure 4). Twenty-one percent identified as
BIPOC-led organizations and 28 percent identified as rural organizations.
figure 2. Distribution of respondent organization sub-sector
3
Percentages do not total 100 due to rounding.
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figure 3. Distribution of number of contracts held by respondents
figure 3. Percent of respondent organizations that contract at various levels of government
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Acknowledgements
This report was authored by Washington Nonprofits Policy Fellow, Anna Kelsey, and
Executive Director, Laura Pierce.
We are grateful to each nonprofit leader who took the time to respond to this survey.
We also appreciate the support of our partners in the nonprofit sector, including the
BIPOC ED Coalition of Washington State, Philanthropy Northwest, and members of
Washington Nonprofits’ Public Policy Committee and Nonprofit Advocacy Workgroup,
for distribution of our survey call. Their help brought in a significant response to our
survey, which allows us to show with data what our sector has long understood about
government contracting.