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Why Nonprofits Should Pursue Federal Contracts And Not Government Grants

8 Aug 2017 10:28 AM | Linda Chatmon (Administrator)

Most nonprofit founders are a little surprised when I suggest they compete for federal contracts instead of looking for government grants. In this article, I will tell you why it may be better for your organization to turn to federal contracting opportunities as part of your funding strategy.

One of the huge advantages young nonprofit organizations have over young for-profits companies is the opportunity to select and assemble a board of directors.

The average struggling startup doesn’t have or need a board. This is one case where the stereotype may be true, in that the typical startup is owned by a tech person and sales guy, and hopefully it really is a sales guy, and not just a “visionary”.

Either way, startup founders often work double-duty as the company’s strategists, sales team, copywriters, and admin staff.

Nonprofits, on the other hand, often have boards made up of a diverse selection of talented people, many of whom are leaders in their own space.

This small difference can give nonprofits a distinct advantage when they enter the federal contracting space and have to compete against for-profit companies.

In fact, this distinction is one of the primary reasons I encourage nonprofit organizations to go after government contracts instead of just competing for government grants.

Federal Contracts Vs. Government Grants

Most founders are a little surprised when I suggest they compete for federal contracts instead of looking for government grants. The truth is federal contracting often provides a better opportunity for nonprofits to have the type of long-term income that can support consistent growth.

Let’s face it: If your nonprofit doesn’t have a large endowment sitting in an account somewhere drawing interest, your organization will have to raise funds to generate enough revenue just to cover the organization’s expenses.

The problem with fundraising is it’s unpredictable.

You don’t know from year to year how close you will get to raising your target amounts. To me, it makes sense for mission-focused nonprofits to offer a menu of products and services they can monetize to support their mission.

How To Determine If Your Nonprofit Is Eligible For Government Contracts

The easiest way to figure out if you’re eligible for a government contract is to do what for-profit companies do – find a federal Request for Proposal (RFP) for which your organization would be a good fit.

Many people have the misconception that the government only buys products. But the government buys services as well. So, you don’t have to make and sell widgets to compete for government contracts.

Your company can develop training programs for certain segments of the population. You may even be able to find RFPs that will keep your contracting activities within the scope of your organization’s mission.

Some government agencies get grants then use the proceeds to to contract with nonprofit organizations. The Department of Labor does it, as do Housing and Urban Development, the Environmental Protection Agency, and the National Institute of Health.

All four of these agencies contract with nonprofits. But these are not government grants. This money is set aside for nonprofit organizations who are willing to pursue federal contracting opportunities.

In addition to competing for federal contracts yourself, make it a point to also reach out to larger nonprofit entities like the Salvation Army and Catholic charities as they often have “subgrant” opportunities for nonprofits who are looking to partner with them and perform certain programs.

Larger organization secure government grants then look for smaller nonprofits to provide the services needed to fulfill grant requirements.

Don’t overlook federal contracting and sub-grant opportunities as part of your program income funding strategy.

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