When the money is restricted, your supplier selection has to be defensible.

Why procurement rules reach charities at all

Charities encounter procurement obligations through three routes, and they behave differently. The first is grant conditions: a funder requires competitive purchasing above stated values and evidence that the charity obtained value for money. The second is contract terms: where a charity delivers a public service under contract, the commissioner often flows down obligations covering subcontracting, transparency and sometimes the funder's own procurement standards. The third, less common, is where a charity is itself a contracting authority.

That third route surprises people. A charity can fall within the definition of a body governed by public law if it is largely publicly financed or publicly supervised in the relevant sense, in which case the Procurement Act 2023, in force since 24 February 2025, applies to its own regulated procurements above threshold. Most charities are not in this position, but organisations with heavy statutory funding, or those established by or closely controlled by public bodies, should get a documented view rather than assuming.

Whichever route applies, the practical requirement is similar: buy competitively where value justifies it, treat suppliers fairly, avoid conflicts, and be able to show why the decision was reasonable. Trustees have a duty to act in the charity's best interests and to apply funds properly, and that duty exists whether or not a funder is asking.

• Grant conditions requiring competition and value for money evidence
• Contract terms flowing down commissioner requirements
• Rare cases where the charity is itself a contracting authority
• Trustee duties, which apply regardless of funder requirements

What funders actually mean by value for money

Funders rarely mean lowest price, though many charities read it that way and then find themselves managing a cheap supplier who cannot deliver. Value for money in this context means the charity considered what it needed, tested the market to a degree appropriate to the value and risk, understood what it was paying for, and chose on a basis it can explain. A well reasoned decision to pay more for a supplier who can actually deliver is value for money and should be recorded as such.

The most common funder finding is not that a charity paid too much. It is that the charity cannot show how it chose. A single quote accepted because a trustee knew the supplier, no record of what was asked for, and an invoice that does not match the funded budget line is the pattern that triggers questions. The purchase may have been entirely sensible, but the evidence does not exist to demonstrate it.

Funders also care about eligible cost. Buying something reasonable that falls outside the agreed budget lines can lead to disallowed expenditure and, at worst, recovery. Checking that a purchase is both competitively obtained and within the funded scope before committing takes minutes and prevents the most damaging category of finding.

Proportionate process by value

The workable model is a small number of value bands, each with a defined process, set out in the charity's own procurement policy and approved by trustees. For low value purchases, one quote and a written note of why. For mid value, three quotes or a short specification issued to several suppliers. For higher value, a written specification, published or directly issued invitation, evaluation against stated criteria and a formal approval. Where a funder specifies its own thresholds, those override the internal ones.

The bands should reflect the size of the charity, not be copied from a large public body. Thresholds that make sense for an organisation with a substantial annual turnover will create absurd overhead for one with a small team. The test is whether the process is proportionate to the value and risk of what is being bought, and whether it can be completed by the people who actually have to do it.

It helps to decide in advance how to handle the cases that always come up: a single supplier is genuinely the only credible option, an urgent replacement is needed after a failure, or a specialist has done the work before and continuity has real value. Each of these can be legitimate. Each needs a written justification approved at the right level, rather than a decision taken quietly and explained later.

• Written policy with value bands, approved by trustees
• Defined process and approval level for each band
• Funder thresholds override internal ones where stricter
• A documented exceptions route for single source and urgency
• Review the bands as the charity's income changes

Running a small competitive exercise well

Even a three quote exercise benefits from structure. Write down what you need in a page: the outcome, key requirements, timescales, and any constraints such as safeguarding, insurance or accessibility. Send exactly the same document to each supplier, with the same deadline, and state how you will decide. Suppliers respond better to clarity, and comparable responses take far less time to assess than three differently shaped proposals.

Decide the criteria before you see the responses, and keep them few: usually understanding of the requirement, relevant experience, approach or method, and price. Score simply, write a sentence of reasoning per criterion, and keep the note. That single sheet is what satisfies a funder, an auditor and a trustee asking a reasonable question at a board meeting eighteen months later.

Tell unsuccessful suppliers the outcome, briefly and promptly. Charities depend on local goodwill and repeat relationships, and suppliers who never hear back stop responding to future requests. A short note explaining the basis of the decision costs nothing and preserves the market you will need next time.

Conflicts of interest and related party transactions

Conflicts are more likely in charities than in most organisations, because trustees and staff are often embedded in the same community or sector as the suppliers. That is not a problem in itself. Failing to identify, declare and manage the connection is. Charity reporting requirements around related party transactions mean these arrangements will surface eventually, and it is much better that they surface as properly managed decisions.

The mechanics are straightforward: a maintained register of interests covering trustees, senior staff and anyone involved in purchasing decisions, a declaration at the start of any selection exercise, and recorded mitigation where a connection exists. Mitigation means the conflicted person takes no part in specification, selection or approval, and that this is minuted, not simply agreed verbally.

Where a charity does buy from a connected party because it is genuinely the best option, the answer is more evidence rather than less: a documented comparison with alternatives, a clear rationale, approval by unconflicted decision makers, and disclosure in the accounts. Handled that way it is defensible. Handled informally it becomes the finding that dominates an otherwise clean audit.

The audit trail a small team can actually maintain

The evidence a funder or auditor wants is more modest than most charities fear. For each purchase of any significance: what was needed and why, who was approached, what they offered, how the decision was made and by whom, the agreement or order, the invoices, and evidence the thing was delivered. Seven items, most of which already exist somewhere.

The problem is almost never the existence of the evidence, it is its location. Quotes in one person's email, the decision in a WhatsApp message, the order verbal, the invoice in the accounts system and the delivery evidence in a project folder. When that person leaves, or when a claim is queried, reconstructing the story consumes days that a small team does not have.

The fix is a single place per purchase, populated as you go. Whether that is a structured workflow or a disciplined folder convention matters less than consistency and the habit of filing at the time. Charities that adopt a simple standard find that funder queries change from a week of archaeology into a ten minute retrieval, and that trustees stop asking the same assurance questions repeatedly.

• What was needed, and the approval to spend
• Who was approached and what they offered
• The decision, the reasons and who made it
• Any conflict declared and how it was managed
• Agreement or order, invoices, and evidence of delivery

Subcontracting and delivering public service contracts

Charities delivering public services under contract often subcontract parts of delivery, and the commissioner's terms usually govern how. Common obligations include naming subcontractors, obtaining consent to change them, flowing down key terms such as safeguarding, data protection and payment timescales, and reporting on subcontracted spend. Breaching these is easy to do accidentally when delivery pressure is high.

Prompt payment obligations deserve particular attention. Public contracts increasingly require payment terms to be passed down the chain, and a charity that holds payment to a small partner while waiting for its own commissioner payment can be in breach as well as damaging a relationship it depends on. Cash flow planning for this at bid stage is more effective than negotiating it after the fact.

Consortium delivery, where several charities bid together, adds a layer. Who contracts with the commissioner, how funds flow, who carries the risk if a partner fails, and how performance data is collected across partners should all be settled in a written agreement before the bid is submitted, not after award when the negotiating position has changed.

Winning public sector work as well as buying

Many charities sit on both sides: buying with funder money and bidding for public contracts. The two reinforce each other. Running a tidy internal procurement process produces exactly the evidence commissioners ask for about governance and financial control, and understanding how buyers evaluate makes for better bids.

Under the Procurement Act 2023, transparency is greater and opportunities are more visible, including through Dynamic Markets, which replaced Dynamic Purchasing Systems. Dynamic Markets are permanently open, membership cannot be capped, applications must be assessed within a reasonable time, and pending applications must be considered before a competition concludes. For a charity that missed a framework three years ago, that is a meaningful change: you can join when you are ready rather than waiting for a refresh.

For finding and responding to opportunities, sister platforms are freely available or purpose built. WinAContract offers free UK tender search at winacontract.co.uk, and BidWriter provides AI assisted bid writing at bid.winacontract.co.uk. Charities with limited bid capacity often get more from improving how they track and qualify opportunities than from writing more bids.

How eSourcing Data supports charities and funded organisations

eSourcing Data covers source to contract, and the parts that matter most to a funded organisation are the ones that create evidence without extra work: below threshold workflows for the everyday purchases that make up most charity spend, supplier records with insurance and policy documents tracked to expiry, evaluation and moderation records for larger exercises, contract management so renewals and expiries do not arrive unannounced, and governance and audit throughout.

For organisations reporting to multiple funders, analytics and reporting matter as much as process. Being able to show spend by funded programme, with the decision record attached to each purchase, turns a monitoring visit into a routine exercise. Where a charity also manages onward grants, the same structure handles application rounds, scoring and claims.

The software is available to public buyers through RM1557.15 G-Cloud 15, with 28 software services listed on the Digital Marketplace plus cloud support services, and framework purchases are made as call off contracts. Data is held in the UK and the platform is GDPR compliant. The Procurement Library sets out the official Procurement Act guidance, Procurement Policy Notes and commercial playbooks, which is a practical reference for charities working to a commissioner's rules.