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Should small 501(c)(3) bid the work for new scholarship endowment?

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Should small 501(c)(3) bid the work for new scholarship endowment?

We are a small educational 501(c)(3) and would like to start a scholarship endowment. As the executive director, I have spoken with two organizations regarding the endowment and they both have given me their costs. One of our board members would like to do a Request For Proposals. Others believe that the cost from one of the individuals is very reasonable. Do we have to do an RFP or invite a group of organizations to bid? Can we just use the two offers?  

A 501(c)(3) nonprofit is not normally required to go through a bidding process for its vendors.  It certainly makes sense to get bids for major projects like new construction, where capacity and prices can vary significantly, but unless you have some unusual provision in your governing documents, it is very unlikely that you would be required to get more bids here.  A board may want to know how you chose the two vendors you spoke with, and whether you went to recognized money managers or friends with start-up ventures.  They may want to ask another organization or two that they know have had particularly good investment results or are particularly responsive to their clients.   I wouldn’t recommend a broad RPF for such a small job.  It would be a lot more work for everyone with very little extra benefit for anyone.

As a small group just starting an endowment, even different fee structures are not likely to result in significantly different absolute costs for your charity.  If you sign an easily terminable contract, you don’t have much risk.  I don’t see why you would need more choices, but if I were the E.D., I would want to be sure that my board had enough choices of qualified vendors to be comfortable making the selection.

Tuesday, May 18, 2021

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