A unit of Citigroup, already the dominant processor of electronic benefits transactions, has beaten out Deluxe Corp. for a contract awarded by Maryland.
The contract was particularly prized because Maryland was the first to go statewide with an electronic benefits transfer, or EBT, program in 1989. Deluxe has been the processor since 1991.
Citicorp Services Inc. of Chicago is now the main EBT contractor in 29 states. That far surpasses either of its rivals with any volumes to speak of: Deluxe of Shore View, Minn., and Transactive Corp., a Gtech Corp. subsidiary.
"This is a very important award for us," said Mark MacKenzie, president of Citicorp Services. It will begin serving Maryland's 126,000 food stamp and 108,000 cash-benefit recipients in September.
The decision, announced last Thursday, calls for a seven-month setup phase and a three-year contract with two two-year renewal options. Financial terms were not disclosed.
Deluxe bid on the contract, said Rosemary Thomas, EBT project coordinator for Maryland's Department of Human Resources, but the state chose Citicorp because of its pricing and technical expertise.
EBT services have become much more of a commodity than they were in the 1980s, when Maryland first chose a vendor, Ms. Thomas said.
Maryland is among several EBT states that are nearing the expiration of a contract. Many of the early EBT contracts are being rebid just as states lacking service are hiring their first processors.
Citicorp Services, which has been asserting the advantages of economies of scale, last year won the bidding as primary contractor for New Mexico, taking over from First Security Corp. of Salt Lake City.
Observers said Citicorp Services' ability to win state contracts will continue to pay off. California, which has the largest caseload of benefits recipients, has revised its original plan for county-by-county bidding and is expected to issue an official request for statewide EBT proposals by the end of February.
In Maryland and in New Mexico, "Citi had to come into the bid as an outsider, factor that into their cost proposal, and still walk away with the business," said Robert A. Bucceri, president of Chaddsford Planning Associates, West Chester, Pa.
The industry is "moving into a slightly different period," said Brian Claire, vice president of Citicorp Services. "There are procurements for first-time systems-a California or a Wisconsin-but also, for the first time, re-procurements."
Citicorp Services also may grab Texas eventually. Transactive, now the primary contractor, has suffered financially and from service difficulties. That makes it an unlikely renewer when its agreement expires in 2001.
Citicorp Services reached an agreement last year to buy Transactive's EBT business, but the Justice Department blocked the deal for antitrust reasons. Transactive announced the termination of the deal last Friday, with parent Gtech expecting a charge between $13 million to $15 million in its fiscal fourth quarter, which ends Feb. 27.
Citicorp Services' market leadership should be unaffected, said Arthur W. Burger, president of Burger, Carroll & Associates Inc., Santa Fe, N.M.
"Now, instead of putting up with grief and paying lawyers' fees, Citi can just bid (for Texas) on its own terms," Mr. Burger said.