Category: Technical

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The Ups and Downs of Using a Fiscal Agent to Apply for Grants

We sometimes write proposals, usually for foundation grants, when the applicant is not tax exempt under Section 501(c)(3) of the Internal Revenue Code (IRC). Most government grant programs and almost all foundations require that the applicant be a public benefit, tax exempt organization, but one can also use a fiscal agent/fiscal sponsor. A fiscal agent can enable an individual (e.g., artist, researcher, inventor, explorer looking for the The Lost City of Z,* etc.) or unincorporated associations (e.g., Citizens for a Better Owatonna, Residents United Against Everything, etc.) to be considered for grants. The ineligible individual or entity has to make a deal with the 501(c)(3) organization to, in effect, borrow their tax exempt status and be responsible for the grant funds received.

The upside of using a fiscal agent is that the project proponent can try to get their snout into the funding trough without going through the time consuming process of forming a corporation (e.g. finding folks willing on the board of directors, obtaining a nonprofit charter in their state, etc.) and applying for and getting a Letter of Determination of Tax Exempt Status from the IRS. While it is possible to form a new nonprofit and obtain a Letter of Determination by yourself (I first did it when I was about 21), most people use a attorney and/or accountant to do the paperwork and must pay application fees at significant expense while waiting from six to nine months for the paperwork to wind its way through the state and federal bureaucracies.

This makes using a fiscal agent attractive, particularly if the project proponent wants funding for something urgent, like, say, cleaning oil-soaked birds in the Gulf today, providing post-Hurricane Katrina disaster relief in 2005 or offering case management for those newly diagnosed HIV in 1985. It is also a good approach for artists and other individuals who want to concentrate their creative energies on outcomes, not process.

The advantages to the grant user are obvious, but what’s in it for the fiscal agent? Some established organizations genuinely are interested in expanding availability of services in their community and want to lend a hand to emerging nonprofits. Others, a cynic like myself might conclude, are looking to collect administrative fees and influence the direction of service delivery in their bailiwick. But, whatever the motivations on both sides, fiscal agency remains popular.

As a result, we occasionally accept selected grant writing assignments involving fiscal agents, but only after we explain the potential pitfalls and challenges, such as:

  • The plausibility of the fiscal agent/grant user relationship, which increases if the fiscal agent conducts activities at least vaguely similar to the grant user. It is hard, for example, to explain why a domestic violence prevention organization is serving as the fiscal agent for a documentary on the American Revolution. It is important to not give the impression to the funder that the 501(c)(3) fiscal agent is “renting” its tax exempt status.
  • It is not good if the 501(c)(3) fiscal agent appears to be a shell organization to serve only as a pass-through to the ineligible grant user. For example, for-profit medical groups sometimes set up a “captive” 501(c)(3) affiliate. While the captive may be an eligible applicant, if it has no track record and grant funds will be used to hire the medical group, or some of its docs, the relationship may be seen as a sham. There are many situations, however, in which this affiliated nonprofit relationship is perfectly innocent and accepted, such as when a school district establishes a 501(c)(3) “educational foundation” to raise money through donations or grants to supplement tax revenues. Since many foundations will not fund entities like school districts, which are taxing entities, the affiliated nonprofit structure has become quite common and accepted.
  • Even if the intentions of both parties in the fiscal agent relationship are believable, the real problem often emerges when the grant seeking effort is successful. It’s fine to contemplate the nuances of fiscal agent responsibilities in the proposal world, but the real world complicates things. To paraphrase Grandmaster Flash in one of the first rap anthems, White Lines, “The money gets divided / The fiscal agents get excited.” When grant funds start flowing, the fiscal agent will often suddenly develop a need and deep interest in what the grant user is doing. In extreme cases, the fiscal agent may simply deep-six their “partner” to run the program themselves and there will be little, if anything, the grant user can do about it.

If your idea is good enough to be grant-worthy, it is probably worth your time and money to establish a new nonprofit and obtain tax exempt status instead of using a fiscal agent. Unless there is urgency to the problem being addressed, it is best to form the new nonprofit at the start. Otherwise, you are telling the funder that you are hedging your bets by not investing in the new organization until the grants are approved, implying that you want the funder to take a risk while you are unwilling to do so.

* An explorer seeking grants for an expedition to find the Lost City of Z actually contacted us about 12 years ago. I explained that he needed a fiscal agent, but he never called back. Either he couldn’t find a fiscal agent or, like John Voight in one of my favorite “big animal” movies, Anaconda, was swallowed by a large snake on his way through the Amazon to Z.

We were also hired by a fellow seeking grants through a fiscal agent to set up a reserve for Komodo Dragons. We lost contact with our client after he left for Komodo Island in Indonesia, where he may have been eaten by a dragon. His fate is unknown, but I will leave the rest of this tale for another post.

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Supplementing versus supplanting grant funds

In “What to do while waiting for the Stimulus Bill to pass,” Isaac included a footnote that says “This is a big grant no-no called ‘supplantation.’ In a future post I will explain how you can explain away supplantation in your grant writing anyway.”

This is that post, except I’m writing it instead of him, so one might say I am supplanting him. Or am I supplementing him? Read on to find out.

Supplanting Versus Supplementing: A Key Distinction

A grant applicant always, always, always should assure the funding source that funding of any kind will supplement, not supplant, existing programs. Some RFPs make this explicit; for example, the HUD NOFA for the Capital Fund Recovery Competition Grants says on page 26:

No Supplanting of Funds. The applicant must certify that: (1) the CFRC funds, if awarded, will not supplant expenditures from other Federal, State, or local sources or funds independently generated by the grantee; and (2) the CFRC funds, if awarded, will not supplant any leverage related to this grant, if any (that is, the grantee must have pursued and secured leverage to the fullest extent possible in order to ensure that expenditures from other Federal, State, or local sources or funds independently generated by the grantee are not supplanted).

Last year we had a client who decided that he wanted to fund his existing staff positions with a new HUD Rural Housing and Economic Development Program grant. That’s a big no-no: it’s supplantation, and, if he tells HUD that he wants to use their money to replace the money he’s already got, at best they’ll deduct it from his budget. At worst, they’ll reject the proposal outright. It’s also possible that they won’t notice until after the grant is awarded and implemented, and if our client is unlucky enough to get a program audit, the auditors or funder could demand repayment of the grant amount that “supplanted” existing funding. This is the same as a college student asking his mom to supplant her $100 to cover his cell phone bill so that he can use the original $100 on beer. Moms know not to fall for this and so do most funders.

Still, there are ways of getting around this proposal-world problem. For example, an organization could announce that people already employed by the agency will spend 10 – 20% of their time managing the proposed program, so that money should come from the grant. If an organization has enough major grants, the grants might cover 100% of management team salaries. Some agencies claim more than 100% of the time of certain staff, which is another no-no, albeit one that many agencies do anyway, and an issue that we’ll cover in a future post. Another method is to give multiple job titles: previously, an existing staff person was a Housing Counselor, and now she is a Program Specialist for Client Assistance. Suddenly, she’s being paid because she’s in a new position related to the new grant.

Why Supplantation Happens Anyway

Although the rules usually forbid it, supplantation happens all the time anyway, mostly because money is fungible—meaning that many organizations just have a big money pot at the center of their financial systems, so money goes in one side and out the other, making it almost impossible to determine whose dollar was spent on what.*

So if you have a grant and you need, say, new computers, you might put them in the budget for the grant—and those computers no longer need to come from your equipment replacement fund. And does the Executive Director spend “15%” of their time on the grant? That’s another small but real amount of money that doesn’t have to come from the central pile. Do you have a Program Director? Put her in charge of the new program, and hire someone else in her place. Technically none of that is supplantation, because it’s part of what you need to run the program.

I explained all this to my girlfriend, who asked why the rules about supplantation exist. The answers:

  • They work sometimes and aim to prevent egregious abuses;
  • The rules weed out unsophisticated applicants who announce they’re going to stop using local funds and donations and start using Federal dollars;
  • Such rules pass the New York Times test, which means that the funding agency or the funded agency aren’t as likely to see themselves on the front page of the Times, if a nonprofit proposes to do Bad Things (the theme song from my guilty pleasure, True Blood) with their money.

* There is an approach called Fund Accounting, which is supposed to overcome fungibility but often doesn’t. Think of the Social Security “Lockbox” debate of a few years ago. How exactly do the feds account for your FICA contributions? That’s fungibility writ large.

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Tools, Grant Writing, and Small Businesses: How to Buy a Phone System

When Seliger + Associates moved its intergalactic headquarters to Tucson, we also decided to buy a new phone system under the assumption that prices were relatively low and hiring someone to set up our old system again would prove sufficiently difficult and expensive to justify buying a new one.

Doing so is harder than it looks—just like buying a copy machine, which I explained at the link. Most of us, if we’ve worked in institutions or large business, are used to having a phone magically appear on our desks. But if we’re suddenly in a group of, say, five or ten, someone has to buy the phone system. This time around, that person was me.

There are a few basic strategies that small organizations can use for phones these days: (1) they can use their existing cell/mobile/home phones, (2) they can use Internet lines through outfits like Vonage, Skype, and Google Voice, (3) they can buy a Voice over Internet Protocol (“VoIP”) “box” through companies like Digium, or (4) they can buy a box that works with copper lines through Nortel, Avaya, and the like.

One of the biggest problems is simply understanding the difference among these approaches. Another is understanding the differences between a) the manufacturers of these systems and b) the vendors who actually sell / install them.

We ultimately went with option 4 and purchased an Avaya system that runs through plain old telephone system (POTS) lines. We did so largely because it’s probably the most reliable. In addition, we previously owned an ancient Avaya system and already had the mandatory, very expensive proprietary handsets. Here are the issues with the first three alternatives:

1) It’s tempting for small businesses and nonprofits to use personal phones as their primary business lines as well. Don’t do that if you can avoid it; if you don’t believe me, go read Personal Phone Numbers For Business, Yeah That Was A Mistake… on BigStartups.com. A quote:

[T]hrough the magic of the Internet and networked computer systems, contact information tends to get syndicated to dozens of places when it is first entered. Often it does not get updated when the original source does.

Once you start using personal numbers for business, it’ll be hard to stop. That’s one reason to get an 800 number if you’re facing customers: it will be portable wherever you might move. Our 800 number—800-540-8906, for those of you wondering—has followed Seliger + Associates from northern California to Seattle to Tucson. If you use personal numbers, people will also be able to figure out that you’re primarily using cell phones, and you’ll look unprofessional or amateurish. Also, do you really want to field fevered phone calls from crazed clients at 3:00 A.M.?

2) Consumer VoIP outfits like Vonage, Skype, and Google Voice have problems of their own. Vonage customer service is notoriously terrible. Skype is okay, especially for international calls, but doesn’t transfer calls from receptionist areas to back areas easily, doesn’t have professional voicemail (as far as I know), and has no real customer service when something breaks. Google Voice requires existing phone lines. All of these problems can be overcome, but if the overriding goal is never to have to think about phones, this isn’t the way to go.

3) Outfits like Digium are okay, and its vendors sell boxes that sit somewhere in your office. You plug existing landlines in or set them up boxes with Internet access. These systems are slightly less expensive than the solution we went with, but it was harder to find vendors for this, and we didn’t want to have the same points of failure for Internet access and phones. In other words, even if there is a power outage that takes down Internet service, we still have an option, since phone systems using POTS lines like Avaya will still produce a dial tone at the point where the POTS lines go into the Avaya box.

That left us with copper providers.

Phone systems have a zillion features; look at some of them here, although beware that the link goes to a vendor website. As I said earlier, perhaps the hardest part of dealing with phones involves finding out who sells them: the big manufacturers are Avaya, Nortel, Panasonic, Toshiba, and Mitel. The best way to start getting prices is by searching for “Avaya Vendor,” “Nortel Vendor,” and so on in Google. Then call the manufacturer to find a local vendor. These pages are probably going to be hard to navigate and understand. Once you have a list of resellers, you’ll have to call each one for a quote. Some manufacturers have multiple vendors in your area. You’ll need to know things like:

* How many lines you want.
* How many handsets you need.
* How far you might need your system to expand—will you need four lines, or forty?
* How many voicemail boxes do you need?
* The number of technicians and/or service people the vendor has, along with their location.
* The cost of a 36 month lease, a 60 month lease, and whether it’s a regular lease or a “fair market value” lease.
* The bottom line cost of outright purchasing a system.
* Installation fees.
* The warranty.
* Timing—when can it be installed?

Once you start asking these questions, you’ll be inundated with information and quotes that are hard to compare. You should build a spreadsheet in Excel or another spreadsheet program. Mine has about 30 rows and 12 columns. In addition, almost all of this has to be done by phone: that’s why it will probably take at least a full day of work just to get bids, understand the systems you’re dealing with, and figure out who the vendors in your area are.

If you’ve read this, however, you at least have a place to start and know a few of the questions you’ll want to ask. Perhaps the best thing you can do is ask a lot of questions of your local vendors and preface those questions with, “I’ve never done this before, so explain the choices in terms a novice can understand.” (You can also ask questions in the comments section of this post.) Like car dealers, some vendors will try to upsell you, or tell you that you need more of a system than you think you do. By the same token, as with car dealers, patience and fortitude might be the difference of thousands of dollars. Like a car, you will live with your small business phone system for years, so take the time to get it right.

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PSST! Listen, Do You Want to Know a Secret? Do you Promise Not to Tell?* Here’s How to Write Foundation Proposals

Hey you!! That’s right, you! The nonprofit Executive Director lurking in the back. Confused about how to write foundation proposals? I shouldn’t really do this, but, just between me and you, and if you promise not to tell anyone, I’ll let you in on some of the secrets of writing foundation proposals.

Many nonprofit folks, and particularly the “True Believers” I wrote about in True Believers and Grant Writing: Two Cautionary Tales, are hopelessly confused about getting foundation funds and writing foundation proposals. There are basically two ways to get access to foundation funds: the fairy tale way and the hard work way. In the fairy tale world, the nonprofit person (e.g., Executive Director, President, Founder, what have you) cozies up to the foundation representative (ideally, Bill Gates) and breathlessly describes how their new organization will bring instant water to thirsty parts of the world (just add liquid!) or a similar idea. Mr. Gates will be so impressed that he will reach into his Tom Bihn Manpurse**, pull out a checkbook, wad of cash or debit card (depending on the age of the dreamer), and the funding is accomplished.

We call this kind of approach to getting foundation grants “relationship funding” because it depends on the nonprofit developing a relationship with the funder. While this can work, it takes a lot of time and luck. Also, very few folks actually know foundation reps. Any of you nonprofit folks out there play Bunco with Oprah? I didn’t think so. Being serious, most foundations either hide behind an accountant/lawyer/flak catcher type, who you can’t develop a relationship with because there is no one to develop it with, or have a staff, whose job is partially to make potential applicants feel like they’re special (similar to the role of the field deputy in your congressperson’s district office) without actually making any commitments.

People ask us all the time if we have “special relationships” with funders, which always makes me laugh. Let’s say I regularly play bridge with Bill Gates and Warren Buffet. Why would I use my influence on your project, as opposed to the dozens of other projects we work on in a given year or for a project dear to my stone-like heart? In other words, even if we had influence, which we don’t, why would we rent it? So, if any would-be grant writer tells you they have special influence, walk away quickly, as they are likely an amateur. Putting it in Entourage terms, if you want to get into the hottest club in LA, it helps to know Vince, not Drama. When callers ask about developing relationships with funders, I always suggest that they criss-cross the US flying first class in hopes of sitting next to Bill or Oprah. They probably actually probably fly in private jets, but you get the idea.

If developing relationships with foundations is pretty much a fairy tale exercise, how do nonprofits get foundation grants? Here’s the really bad news: through hard work. The task starts with deciding what you’re trying to fund. In the foundation world, there are essentially the following four funding types:

  • Start-Up Grant: This one is for new organizations. The challenge is that you have to convince the foundation that your organization can actually do something, because presumably nothing has yet been done so far other than to identify a problem. But all organizations have to start somewhere, so if you need start-up funds, go for it.
  • Capital Grant: Favored by Boys & Girls Clubs, religious organizations, etc., this means you want to build a building, buy a van fleet or the like. Lots of foundations love capital grants because they can put their name on the project, and they’re easy to evaluate. Either the building is built or it isn’t. In the case of the largest foundation in the world, the Bill & Melinda Gates Foundation, they decided to give themselves an enormous capital grant to build a 12-acre “campus”—or maybe Taj Mahal is more appropriate—in downtown Seattle. Personally, I think it would be better if they simply bought a couple of the hundreds of vacant and abandoned office buildings in Detroit or Flint, but where’s the fun in that?
  • Operating Funds: This means you’re seeking funds for everything done by the nonprofit—the organization is already doing lots of great things but needs more money to do them. From the foundation’s perspective, this is a bit like feeding a stray cat, as they know you will be back for more. But many foundations like operations projects because they recognize that established organizations have to have enough money to keep the lights on.
  • Special Project/Program Development: Let’s say your organization provides supportive services to Cyclopes. A special project could be to conduct outreach to work with left-handed Cyclopes. Foundations often like funding the development of special projects, particularly if you can link the project to some emerging crisis. If you were going to fund Project NUTRIA, as we described it in an earlier post, you would pitch it as a special project.

Keep in mind that not every foundation will fund all of these four project types—a foundation that funds capital grants may love your charitable purpose but not be interested in supporting operations. While we think it is best to settle on a project type before doing research to find funders, it can be done the other way around by finding the funders first and bending your concept to meet the type of projects they will fund.

Once you’ve crystallized your concept, it’s time to do the research into what foundations might fund you. More or less, foundations use the following filters—the details of which are usually specified somewhere in their guidelines—to funnel applications:

  • Geography: While some foundations fund nationally, most foundations fund in a specific place or region (e.g., Owatonna, MN, Southern California, etc.), or my personal favorite, “areas of company operations.” Let’s see, where does Wal-Mart not operate? Chicago, Boston, and one or two other places. Keep in mind that a foundation that funds in Poughkeepsie is unlikely to fund a project in Ashtabula, no matter how much they care about your cause.
  • Charitable Purpose: Some foundations want to help at-risk youth, some are interested in health issues and a very few just want to do something good, whatever that means. It is critical that you find funders who care about what you care about. True Believers often stumble on this filter because they cannot believe that anybody fails to share their passion. Also, try to avoid embarrassing mistakes: if your organization approaches at-risk youth services from an evangelical Christian perspective, a foundation that talks about Jewish philanthropic giving on their website is not likely to fund you, so save the postage.
  • How The Grant Will be Used: See the project concept discussion above. If you’ve managed to find a foundation that wants to fund Cyclops services in Owatonna and you want to build transitional housing for homeless Cyclops, make sure the foundation will fund a capital campaign before you send in the proposal.

Now, it’s time for letting you in on the really big foundation grant writing secret, or as is said in the TV biz The Reveal: How to organize an initial foundation proposal. Unless directed otherwise by the guidelines, we format them as five-page, single spaced letters. Why five pages? Because foundations almost never want a longer proposal and often want a one to three page letter of inquiry. We call the initial submission narratives “foundation letter proposals” and here’s how to organize them:

  • Date, address block and salutation.
  • Introduction paragraph, that includes the ever popular “five w’s and the h.”
  • Goal and objectives. See this post for help in writing these: The Goal of Writing Objectives is to Achieve Positive Outcomes (Say What?).
  • Background on the problem or a needs assessment. Don’t use too many citations, since, unlike government proposals, in foundation proposals you’re aiming for the heart, not the head.
  • Program description. Make this count, because this is where you tell the funder what you plan to do and how the money will be spent.
  • Timeline. We usually do these as a simple double column table.
  • Evaluation plan (a paragraph will do).
  • Staffing plan and budget request. A few sentences, along with a simple attached line item budget/budget justification in Excel will get the job done.
  • Background on the organization. Who are you, and why are you qualified?
  • Acknowledgment. A short paragraph on how you will acknowledge the grant: press releases, name on the building, larger than life statues of Bill and Melinda astride white chargers in front of the building, etc.
  • Summary paragraph.

I know this is pretty much the same as learning how to write a five-paragraph theme, as Miss Cruikshank taught me in eighth grade English at Sandburg Junior High, now Middle School when dinosaurs walked the earth, but writing foundation proposals is really not that complicated—like golf, all you have to do is hit that little ball 400 yards into the tin cup 18 times in less than five strokes a hole. No problem. Of course, it helps to be Tiger Woods, and in writing foundation proposals, it’s a lot easier to simply hire Seliger + Associates. But now you know the secrets, so get busy and write.

* This is a steal from the lyrics of charming, but somewhat forgotten Beatles tune, Do You Want To Know a Secret that I liked about the time I was in Miss Cruikshank’s class.

** This reference is designed to poke fun at Jake, who carries his Tom Bihn Messenger Bag everywhere, stuffed with a laptop, books, tupperware containers with fried tofu remains and assorted other items he can’t be without. While I am way too old for a manpurse, Jake did get me to buy this Tom Bihn Laptop Bag in a particularly annoying shade of avocado green.

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Tools, Grant Writing, and Small Businesses: How to Buy a Digital (Networked) Copy-Printer-Fax-Scan Machine

Buying a copy machine is harder than I thought.

It became a necessary task when Seliger + Associates decamped from Seattle to Tucson and decided to replace most of its aging office equipment. I got tagged with the assignment. This is the first of several posts on my experience.

You’ll end up spending a lot of time researching equipment, especially if you have the specific requirements we do: Mac OS X support, hydra-headed capabilities (print/copy/scan/fax), fast speed, low supply cost, and great tech support/service. This post is designed to share some of what I learned in hopes that your process won’t be as arduous as mine.

I would love for this post to be shorter, but, alas, it’s just not very easy to explain the “how” and “why” with sufficient depth and detail in a small space. But for people who really face the networked copy machine problem, as I did, the guide should be incredibly useful. It’s broken up into sections to facilitate using whatever pieces you find most relevant.

1. Why go Through This Process?

The cost of copy machines that met our criteria was in the neighborhood of $3,000 to $10,000, depending on whether we went color or black and white. That made it very much worth our time to shop with care for reasons that, if they’re not obvious, mean that you probably won’t care about the rest of this post.

In addition, copy machines have a million little features that make comparison shopping difficult. Envelope feeders, for example, can make an enormous difference in the utility of a machine. If you have to get up and manually insert an envelope once a day, or even once a week, you might have your work flow disrupted for 15 minutes, leaving aside the couple of minutes it will take you to walk to the machine and back. If your time is worth virtually anything at all, the more efficient, right machine is worth finding and buying.

2. How Big Networked Copiers Are Sold

If you buy, say, a computer, you go to Apple’s online store, or Dell’s, or whoever’s, pick your model and accessories, give them your credit card number, and wait for your iMac to show up. Network copy systems don’t work that way: you want buy a particular company’s product, but there is usually more than one “channel” through which the devices are sold. The channel you buy from affects who provides the service and the price you pay. Sometimes the companies provide direct purchase options, but you’re more likely to have to deal with local vendors. Either way, you’ll probably need to get on the phone and make some calls. In this respect, buying a new copy machine is more like buying a new car than buying a computer. You’ll also find that you can lower prices through negotiations, taking me back to the car shopping analogy. Try asking Apple for a discount because a Dell notebook is cheaper.

Service contracts are essential, as is how the service is provided. Large copy machines are incredibly complex and tend to shake themselves apart over time. So you’re not just buying a machine—you’re buying the company and service arrangement that go with it. It’s sort of like getting married: you get the mother-in-law and crazy Uncle Joe in the basement along with the bride.

3. Where to Find Manufacturers

Manufacturers of digital print/copy/fax/scanning machines include Xerox, Lexmark, Kyocera, Ikon/Ricoh (now the same company), HP, Toshiba, Konica/Minolta, and Panasonic. If you go to the website of each company and begin drilling down, you’ll find a “contact us” page that’ll deliver you to their local vendors (or deliver their local vendors to you). You’re often better off calling the local dealers rather than waiting; some of the on-line forms I filled out didn’t elicit responses for weeks. So much for working at the speed of light or “Internet time.”

If the companies offer a national contact line, call and then ask for local vendors. That will sometimes yield unexpected and useful results for your geographic area.

4. Narrowing the List

We ruled out a few of the companies based on reputation: many of the vendors we talked to who displayed grudging respect for their competitors thought Kyocera weak, and the Kyocera vendor in Tucson didn’t seem particularly on the ball. We also eliminated Toshiba relatively quickly using those metrics. The obvious contenders were Xerox, Lexmark, Konica/Minolta, Ricoh, and Canon. Unfortunately, there is no equivalent of Consumer Reports for small- to medium-sized businesses, so you’re stuck basically evaluating machines on reputation, advertised features, and price.

If you’re in a relatively big market like Seattle, or a really big market, like New York, you’ll be able to find a couple of sufficiently large vendors for each product. If you’re in Tucson or similar city, you’ll probably find only one or two. In Tucson, I found a variety of vendors, including Arizona Office Technology, IKON Office Solutions, Inc., Digital Business Systems, Copygraphix, Inc., Action Imaging, and a few others.

5. Our Criteria, Including OS X Support

We wanted a networked, standalone machine that would print in black and white, scan in color, copy, and fax. It should be fast enough to produce proposals, but speed wasn’t our main criteria.

We do little color printing, and although vendors promised color printing for “only” $500 – $1,000 more, that capability wasn’t worth the cost for us. We’d rather get a standalone color printer like a Xerox Phaser 6280N, which we ended up buying, or its equivalent. These will cost about $400 – $500. Even a standalone photo printer would probably do this trick, but vendors will try to upsell you to copy machines that print in color. If you don’t do a fair amount of color printing, I don’t think it worth upgrading, particularly because supplies for color machines are much more expensive than black and white.

In addition, all of our office computers are Macs, so OS X support was vital—which I’ll elaborate on in tremendous detail below. This counts. When I walk into a copy vendor, what would really be nice is for them to install whatever software and drivers they need on my MacBook and use it for the demonstration. That would impress me. Almost none of them could or would do it.

6. Further Narrowing the List

Once I had an approximate list of vendors, as opposed to companies, I began getting price quotes. Most salespersons will first want to jawbone you, which can be somewhat useful but isn’t nearly as interesting as the bottom line. In short, you’ll spend between 20 minutes and half an hour on the phone or in person with each vendor, during which time you’ll describe what you want and which, if any, other machines you’ve looked at. Expect to spend close to a full day on this if you want genuinely competitive bids.

7. Warning: Vendors Will Try to Waste Your Time

Much like buying a car, if you walk into what is in effect a dealership for copy machines, they will want to give you their whole sales spiel. Don’t be afraid to say, “No,” “I don’t care,” or “I don’t want to hear it.” For us, copy speed above about 30 or so pages per minute is fairly unimportant, but that didn’t stop vendors from telling us over and over that their machine goes to 50. That’s wonderful, pumpkin, but not of great interest to us.

They’ll also want to sit down and discuss their quotes in detail and give you more marketing materials. This is useless unless you have competitors’ quotes and specs right there. Try to avoid this to the extent possible.

That being said, going in can tell you some useful things. In the case of the attractive-on-paper Lexmark unit, it told us that their envelope feeder wasn’t adequate. We want automatic envelope printing capability, and once we figured out the Lexmark didn’t really have a solution, the machine was an unlikely buy.

8. Attention Companies: Show Me OS X Support

When I type in “Xerox OS X” into Google right now, the first result is “Mac OS X 10.4: Some Xerox printers may require newer PPDs.” “Canon OS X” gets me “Mac OS X 10.5: Canon inkjet printer cannot scan.” Ricoh is slightly better—”Ricoh OS X” gets me Products&Solutions | Compatibility of Mac OS X | Ricoh Global, which is a slight improvement, but it’s still just a product page. “IKON OS X” brings me a bunch of stuff about telescopes, and so on. If you’re a big vendor, you might want to create a dedicated OS X page that promises you’re going to have compatibility and support.

Contrast that with Microsoft’s approach: if you type in “Office OS X,” the first page up is a friendly one directed at the great team for Microsoft Office 2008 for Mac. “Google OS X” brings me Google Software Downloads for the Mac.”

If I’m praising Microsoft for doing something right, you can be assume that your tech company is doing something terribly wrong. I should be able to type “http://www.xerox.com/mac” and find all sorts of whiz-bang stuff about Xerox’s awesome Mac support, which they have, but apparently are too dense to advertise. That would give me vastly more confidence than vendors who say, “Oh, yeah, we have PostScript Drivers.” In this class of machine, everyone does. Tell me more.

Only one company is smart enough to have figured this out: Lexmark. Google “Lexmark OS X” and you get Mac OS X — Lexmark United States. Nice. That’s exactly what I want. If only they met the envelope tray requirement.

9. Why Does OS X Confidence Count?

We can usually solve low-level problems that yield their secrets through Google searches of error messages and the like. At our still-low level of technical sophistication, problems are more likely to occur will be in the class of those Frederick Brooks describes in The Mythical Man Month: “The most pernicious and subtle bugs are system bugs arising from mismatched assumptions made by the authors of various components.” In the case of complex machines like the ones we’re looking at, those can and have been fiendishly difficult.

This has been a problem in the past. The worst thing that can happen to end users of these kinds of systems is a blame-game problem: Apple tells you to talk to Ricoh, and Ricoh tells you to talk to Apple, and no one wants to solve your problem. If you, a copier vendor, say that you will make sure your machine works with the latest version of OS X, damnit, come hell or high water, I’m going to buy your machine over a rival’s. If you promise to solve all my problems, regardless of who is at fault, I’ll be more likely to buy your machine.

10. Service Contracts Count Too

If you lease machines, service will often come with the lease. If you buy a machine, you’ll usually get a service contract that covers virtually everything: parts, diagnostics, etc. In some cases, the service may be “hidden” in a cost/copy charge. This means you have to factor service into the price and also decide if you want a stand alone service contract or a cost/copy charge. If this isn’t confusing enough, most of these machine, such as those sold by Xerox, actually come with a one-year warranty. But that won’t stop some vendors from trying to charge for service from day one. In addition, if the vendor is going to provide the service, rather than the manufacturer, you’ll probably want to go with a slightly larger outfit than a slightly smaller one: if the vendor you buy from has two people servicing machines, and one has a baby while the other gets appendicitis, you’ll have trouble getting your machine serviced.

In addition, if you buy a machine, remember to add the cost of your service contract to the bottom line when you compare buying versus leasing.

11. The Contenders

We picked the following machines for final consideration: the Xerox WorkCentre Pro 5225, Xerox WorkCentre Pro 5632, Xerox WorkCentre 4250, Ricoh Aficio MP 2050, Ricoh Aficio MP 2550, Canon imageRUNNER 3225, Konica/Minolta Bizhub 282, and Lexmark X654de. They all hit the major feature requirements. Some of them had better local vendors than others. I did the best I could getting apples-to-apples bids from each of them and learned a lot about copy machines in the process. Some important questions to ask that I didn’t know to ask at the beginning:

* How many local technicians do you have?
* What is the interest rate on the lease? Please include that in your bid.
* What is the probable fair market value of the machine at the end of your lease?
* What does the service contract include?
* Which phone number do we call (national or local vendor) when something breaks? Can we call both?
* Do you use old parts in new machines?

Those questions all came from conversations. I could never have learned that I needed to ask them from looking at websites.

12. Our Decision and Rationale (With Photos!)

We went with the Xerox 4250X, upgraded to four paper trays, because we previously had a Xerox digital machine for over ten years with excellent Mac support that worked reasonably well:

xerox_front

Also, this machine has the ability to print up to 50 envelopes from a standard paper tray, eliminating the need for a dedicated envelope tray. But if we’d gone through this process two months prior, we might’ve picked the Lexmark; our original Xerox quote came to $7,625 for one of the bigger machines. By asking a lot of questions, we ended up paying several thousand dollars less for a machine that actually better meets our needs. Xerox and its vendors have evidently figured out that premium pricing in a weak economy isn’t a brilliant move and were willing to negotiate on price.

The Lexmark was also a strong contender, but it looked a bit like an alien device had been mounted on a paper tray, and it couldn’t take a dedicated envelope tray and couldn’t print envelopes from the standard trays. The physicality of the Xerox was probably the best of the machines we saw. It cost less than the larger machines; although it can’t do color, it has the other features we need. The display is bright and easy-to-use, it prints at 45 PPM, and duplexes. Incidentally, the machine it replaced, our trusty DocuCentre 432 cost about $25,000 in 1998, while the new 4250X, fully configured was less than $4,200. That’s what I call good deflation. And the user interface is far easier to use:

xerox_top

Once we decided on the 4250X, the next decision was where to buy it. Xerox has three distribution channels: buying directly from Xerox, from an authorized reseller, or from a so called “agent.” In Tucson, the reseller is Arizona Office Technology (AOT), a wholly owned Xerox subsidiary and a fairly large company, while the agent is Tucson Copy & Xerographics, a mom & pop operation.

Both Xerox Direct and Tucson Copy had the same price, with service through Xerox central. AOT was considerably higher in price and does their own service. Based on our years of experience with Xerox, we like the idea of getting service and tech support directly from Xerox. This is particularly important for Mac users, as one can actually get to a knowledgeable engineer that specializes in Macs by calling the Xerox “800” support number. There are lot of guys & gals with toolboxes who can fix copiers, but, when it is a software or driver problem, you want someone who can find the right person at Apple or Microsoft to resolve it. We also like paying less for equipment and were charmed by the small business aspect of Tucson Copy, so they got our business.

Conclusions

Nonprofits and small businesses of up to about 50 employees probably face the exact same problems we do is selecting equipment. Larger offices and institutions tend to have purchasing managers who are dedicated to handling jobs like these. Now I understand why. We only needed to buy one networked copier—I can only imagine what buying and deploying 10 or 100 would entail.

But many if not most of our readers who are with nonprofits or small public agencies are probably going to face the same frustrating problems I had in trying to balance efficiency, productivity, cost and the like. The last time we faced these issues, I was too young to work for Seliger + Associates and the word “blog” hadn’t even been coined—so Isaac had to go through the process of searching and sorting office equipment systems on his own. My big hope is that this series of posts saves readers some of the pain I’ve gone through.

And picking office machines like this is a pain, but it’s a worthwhile one. The top bids we received were close to $8,000. The machine we eventually picked costs closer to $4,000, as noted above. Some of the vendors were willing to drop their prices to match competitors, provided we could show those vendors real bids. So, buying a digital copier is pretty much like buying a Honda, without edmunds.com to give you information on pricing and reviews. I wish someone else had written this article before I started the process so that I could’ve read it.