U.S. Invites Bids on EBT in 7 Southern States

The Department of the Treasury has invited financial institutions to bid on a large project to change the way government benefits are delivered in seven states.

The Southern Alliance of States - comprising Alabama, Arkansas, Florida, Georgia, Missouri, North Carolina, and Tennessee - has decided to implement electronic benefits transfer. Ultimately, the transactions generated from the alliance could account for 20% of all EBT, once it is done nationally.

Electronic benefits transfer enables recipients of government benefits to receive their payments through automated teller machines or point of sale terminals using an ATM-like card.

To this end, the Treasury Department last week invited expressions of interest in becoming a single provider for EBT services to the Southern Alliance.

The department expects to have sent more than 600 copies of the invitation, based on the interest expressed thus far.

"We expect to select the winning respondent in October, after which we will immediately begin developing an implementation plan," said Kenneth E. Carfine, director of payments modernization for the Treasury's Financial Management Service.

Mr. Carfine said he could not disclose names of any of the organizations that have expressed interest in this EBT project.

Industry consultants, however, said it would not be surprising to see bids from Citibank EBT Services, NationsBank, Mellon Bank, Mercantile, or First Union.

The Treasury is expected to issue a more general invitation later this year, from which it hopes to build a list of vendors that other states can use for EBT projects.

Acting on work begun by Vice President Gore, who made benefits delivery a cornerstone of his "Reinventing Government" plan, state and federal officials have been exploring EBT, which is hailed by many as a way to cut administrative costs and reduce fraud.

EBT "would substantially alter the current $50 billion welfare system as it exists today," said Howard Mandelbaum, an electronic banking consultant and former chairman of the Electronic Funds Transfer Association.

The interagency Federal Electronic Benefits Task Force, established by the vice president, set March 1999 as the deadline to have EBT fully implemented on both the federal and state level.

The task force recommended that just one ATM-like card be issued to recipients of all government benefits, including welfare checks, food stamps, Aid to Families with Dependent Children, social security payments, unemployment checks, veteran's benefits, and more.

The task force estimated that once nationwide EBT is implemented, the transaction volume would be about 250 million a month. The Southern Alliance makes up about 20% of that total.

The task force asked the Treasury to play a central role in future EBT projects by handling the bidding process for federal undertakings and by helping states to procure EBT-related services.

"The successful respondent is to provide all card-issuing services for state-administered and federal benefits, as well as establishing and maintaining accounts, providing settlement services, and any other services needed to successfully implement EBT in the seven-state region," said Mr. Carfine.

The IEI process is routinely used by the Treasury instead of requests for proposals because IEIs reduce the amount of time it takes to review bids and award contracts, since the invitations are not subject to the legal challenges that can hold up a project.

Mr. Carfine said that once the winning respondent is selected, pilot programs would immediately be initiated in each of the seven states.

"By February or March" of 1996, he said, "we will start to roll out programs statewide in all seven states."

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