An electronic benefits transfer program slated for two midwestern states has received bids from three contractors.

Deluxe Data Corp., Transactive Corp., and IBM Corp. are vying to deliver services to Minnesota and Wisconsin, states that jointly issued a request for proposal as the Midwestern Alliance. The deadline for requests was last week.

Minnesota is leading the coalition, with Wisconsin "piggybacking," said Dick Mellinger, director of electronic benefits transfer services for Wisconsin.

A bistate evaluation committee will determine the winner by 1997. The program, which allows for the delivery of state and federal benefits electronically, through automated teller machines and point of sale terminals, should be implemented in 1998.

Initially, the program is to include food stamps and Aid to Families with Dependent Children. Magnetic-stripe cards will be issued to approximately 250,000 recipients across the two states.

The companies bidding for the project are no strangers to electronic benefits transfer.

Deluxe Data Systems Inc. of Milwaukee, has enlisted as subcontractors each state's largest bank - Norwest Corp. of Minneapolis and Milwaukee- based Firstar Corp.

Tom McLaughlin, vice president of government services with the Deluxe Data Corp. unit, said that with programs running in New Jersey, Massachusetts, Maryland, and Utah, it "has the most EBT installation and processing experience of the three bidders." The company is also involved in 12 other state projects.

Transactive's bid also includes Norwest as a subcontractor. Transactive runs the benefits transfer program for Texas - the country's largest to date, according to Marc Palazzo, a spokesman for the Austin-based firm. It has more than one million cases, 16,000 retailers, and $3 billion worth of benefits transferred annually. Transactive will also be implementing a system in Illinois.

IBM enlisted as subcontractors Envoy Corp., a transaction processor, and First Bank Systems Inc., another big Minnesota bank. A third IBM subcontractor, Transfirst Inc. of Dallas, has been providing electronic benefits transfer services to the Twin Cities since 1987, giving it an edge over the competition.

Transfirst chairman and chief executive Walter Patterson, , said he agreed to work with IBM because "we felt we needed a partner with strength, stability, and name recognition."

IBM is trying to use electronic benefits transfer as a launch pad to providing other electronic services to the government, such as electronic commerce applications, said Martin S. Ross, manager of electronic financial services for the computer giant.

IBM is a subcontractor to Citicorp's Citibank subsidiary for the Northeastern Coalition, handling networking and administration terminals and training for the regional benefits transfer group. Surprisingly, Citibank, which has won contracts with 22 states, including those in the Southeastern Alliance as well as the Northeastern Coalition, did not bid on the Midwestern Alliance.

The job was "probably too small for Citibank," said Mr. Patterson, adding, "They have an awful lot on their plate right now."

Citibank declined to comment.

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