Seven northeastern states have banded together to invite bids for an electronic benefits transfer system.
Banks and transaction processors are expected to enter the bidding in hopes of racking up the processing fees and using the experience as an entree to other government work.
The winning contractor would be responsible for delivering food stamps and cash benefits to as many as three million people.
Electronic benefits transfer, or EBT, relies on networks of electronic terminals or automated tellers to distribute government payments. Recipients are given plastic cards for access to funds that were traditionally delivered by check.
The request for proposals was released June 26, bids are due Sept. 14, and a winner should be designated by the end of November, said Daniel C. Berry, EBT project manager for New York and designated contact for the Northeast Coalition of States.
"The intent is to have a single EBT processor for all of the states in the Northeast," he said, but each state has the right to opt out and enter into its own arrangement.
Mr. Berry said the coalition considered working with the U.S. Treasury and its streamlined bidding procedure known as an invitation for expressions of interest, or IEI, but a legal tangle intervened.
In March, seven southern states released an IEI, which requires the primary EBT contractors to be banks.
Transactive Corp., which administers the EBT program in Texas, filed a lawsuit to invalidate the IEI process. Transactive, a Dallas-based unit of Gtech Corp. in Providence, R.I., obtained an injunction against the IEI that has since been lifted, but the case has not been settled.
"We had a time frame in which we wanted to get things done, so we thought with the injunction, the IEI process would be too risky," said Mr. Berry.
He said the Northeast Coalition does rely on the federal EBT task force for guidance and advice "and we share a lot of the same goals for rollout of EBT."