A rift has opened within a group of southeastern states that are jointly developing an electronic benefits transfer system, and Citibank could end up a big loser.
The Citicorp unit had won the U.S. Treasury Department's endorsement to process electronically delivered government payments such as welfare and food stamps.
But Florida officials want to pull out of the consortium, known as the Southern Alliance. They say they plan to issue their own request for proposals, or RFP, for a system that would rely on automated teller machines and point of sale terminals instead of government checks.
Florida's breakaway could be only the first eruption of dissent among such multistate groupings. Several New York legislators have recommended ditching their state's participation with six others in the Northeast Coalition electronic benefits project.
Observers of the electronic benefits transfer, or EBT, field had suggested that Florida would generate about half of the $400 million in fee income Citibank expected to garner from the Southern Alliance project.
Florida legislators have expressed concern that they were not adequately informed about the program's costs. They also questioned the fairness of a bidding process that they saw as steeped in secrecy.
In a letter to James A. Scott, president of the Florida Senate, Edward A. Feaver, secretary of the state Department of Health and Rehabilitative Services, wrote: "It is in the best interest of the state ... that Florida suspend its participation in the IEI procurement process and proceed to issue its own RFP, with the possible voluntary participation of other states in the alliance."
IEI, or invitation for expressions of interest, refers to a streamlined bidding process designed by the U.S. Treasury.
The Southern Alliance of States - comprising Alabama, Arkansas, Florida, Georgia, Kentucky, Missouri, North Carolina, and Tennessee - was the first to follow the IEI procedure, which requires a bank to be the primary contractor.
The alliance's procurement process had been challenged and delayed by a lawsuit filed by Transactive Corp., an Austin, Tex.-based transaction processing company that operates an EBT system in Texas.
Although Transactive was unable to block the IEI process, its suit helped bring its objections to the attention of Florida legislators.
A Citibank spokeswoman expressed hope that the state would sign a contract with the New York-based bank rather than starting a new procurement process.
"Citibank was chosen by both the federal government and the Southern Alliance of States as the best qualified and lowest-cost provider of EBT," she read from a prepared statement. "We understand the Florida Legislature's concern for clarity ... and are hoping that the state will move forward with EBT and take advantage of the economies of scale available through the Southern Alliance of States."
An attorney working for Citibank hinted that, if Florida abandoned the project, costs per recipient would go up in the remaining alliance states.
The spokeswoman said Citibank is in the process of signing contracts with the other seven states, which she said have reaffirmed their intention to remain in the alliance.
While delivery of state benefits is in question, the Citibank spokeswoman said federal benefits in Florida would be delivered through the bank's EBT unit.
