Citicorp and Lockheed Information Management Services Co. said they have agreed to compete jointly for electronic benefits transfer business.
The New York-based banking company and the Lockheed unit based in Teaneck, N.J., already operate an EBT system in South Carolina and recently lost a bid to run a statewide project in Texas.
They said they have entered into a "teaming agreement" that signals a long-term, joint commitment that will help them bid more effectively against other potential processors for contracts with state and federal benefits agencies.
"Citicorp and Lockheed recognize in each other a mutual commitment to developing EBT," said Robert E. Terkhorn, division executive for Citibank global cash management services in Chicago.
"With nearly two centuries of Citibank financial service experience and more than 60 years of Lockheed government contracting," he added, "the team is ideally positioned for the long-term."
Under the agreement, Citicorp and Lockheed will divide EBT project revenues equally.
They also agreed not to enter into partnerships with anyone else on EBT projects in which both companies wish to participate.
If one of the companies is not interested in bidding on a particular project, the other is free to seek another partner.
The reason for the two organizations' interest in EBT is clear. Streamlining benefits programs, such as welfare and food stamps, with plastic cards, automated teller machines, and point of sale terminals has become a front-burner concern for government agencies.
Cost and Fraud Reduction
The federal and state agencies want to reduce the operational costs and fraud losses associated with paper-based systems.
They are further motivated by a national implementation schedule announced in May by the Federal EBT Task Force at the behest of Vice President Albert Gore.
According to that schedule, many states will be operating prototype EBT programs by March 1996.
By March 1999, standard EBT services should be available in all states.
The goal is to allow recipients to gain access to their benefits and related information through a single card.
The card would work both for federally administered benefits, such as Social Security, and state-administered benefits, such as welfare.
One-Fifth on EBT
Each year, federal and state agencies deliver more than $500 billion in cash and food assistance.
At least $111 billion of these annual payments is expected to be handled on EBT systems.
Since the funds will be disbursed through the existing electronic banking infrastructure, a wealth of opportunities are opening up for companies, such as Citicorp and Lockheed, that want to manage the account-processing and transaction authorization and settlement for the government.
In the coming months, Citicorp and Lockheed are likely to bid on contracts in North and South Dakota, Pennsylvania, and Oklahoma. Their competitors are likely to include Deluxe Data Systems of Glendale, Wis., and Electronic Data Systems Corp., PIano, Tex.