The federal government may be notorious for its glacial pace of change, but there is one area in which Uncle Sam is considered an early adopter: commercial charge cards.

Two million federal workers got new cards last month, and some began using them Monday, the first day of the government's SmartPay program. Under the program, all paper expense reports and filing systems have been replaced with electronic ones that track business spending.

The comprehensive system gives all federal agencies the power to review card purchases on-line and the potential to negotiate more favorable contracts with merchants.

The program has put the government at the forefront of commercial card adoption. Most U.S. corporations have been embracing these cards gradually, making slower transitions from paper to electronics.

The government, which charged $11 billion last year on commercial cards, is considered to be in a good position to lead by example. Vice President Gore has been advocating a shift to electronic commerce and advanced card technology.

Agencies using SmartPay have access not only to a sophisticated on-line reporting system but also to smart cards. One agency is planning a smart card pilot program in May.

Led by the General Services Administration, SmartPay aims to "get people to think differently about the tool they've got in their hand," said Sue McIver, who oversees the initiative for the agency.

Moreover, the GSA has been looking for systems that businesses could adapt.

"We've always felt that if it's not viable in the commercial sector banks probably wouldn't want to do it for us either," said Ms. McIver, who is deputy director of the GSA's services acquisition center. "We were not looking for government-only type of stuff."

Five big banks have issued SmartPay cards for travel, purchases, and fleet expenses; some cards combine all three functions. Bank of America, Citibank, and U.S. Bank have won the most agency contracts, and Bank One and Mellon Bank have won a few.

Three-quarters of the government cards are Visa branded, and most of the rest are MasterCard.

Some agency deals are so large that they give the contractor a disproportionate share of government card business, Ms. McIver said.

For example, she said, "U.S. Bank picked up the Department of Defense's purchase card contract, which is half the purchase cards and half the purchase volume" for the whole government. U.S. Bancorp is a Visa issuer.

Now the GSA plans to set an example. The Federal Technology Service-a GSA unit that manages telecommunications and information technology contracts for the government-says it will deploy smart cards for all 350 to 400 workers slated to move in May to a new office in Tysons Corner, Va.

These cards, to be issued by Citibank, will have a magnetic stripe for conventional use and an integrated circuit chip that will authenticate employees on the agency's computer network. Each workstation will have a smart card reader and a biometric identifier. Each card will store, among other things, an image of its owner's index finger.

Each card also will bear a photograph of the user, plus a chip that can be waved in front of a reader for building access. Citibank will be a digital certificate authority and will make a public key for each employee.

"The certificate will be maintained on the card, so the card will act as a secure hardware token for the key," said David Temoshok of the GSA's Office of Electronic Commerce, who is chairman of the federal Smart Card Task Force.

Initially, the cards will be used for "administrative purposes," Mr. Temoshok said, but "ultimately we're targeting this relationship-GSA and Citibank and the SmartPay banks-to issue smart cards for secure Internet purchasing and authentication services."

The project breaks ground in several ways, Mr. Temoshok said. "This is not a service that Citibank normally does," he said. "Their corporate banking may provide for Citibank to act as a certificate authority, but we're not talking about home banking-we're talking about government functions.

"This partnership will build a business relationship that we can use as a model for the other agencies that want to move into this area of electronic commerce."

Dennis J. Fischer, commissioner of the Federal Technology Service, is a smart card advocate. He has decided that every worker in the Tysons Corner building should have one - even people who do not regularly travel for business or purchase supplies. Those functions, he said, can be activated or deactivated in an instant, as needed.

"We're a technology organization, so I'm thinking there have got to be ways and places that we can demonstrate the use of technology," Mr. Fischer said.

He calls smart cards "an empowerment device" and plans to promote their use by having chip-driven vending machines installed in the Tysons Corner building.

"Twenty years ago nobody had PCs, and now everybody does," Mr. Fischer said. "To me, the chip is just a further migration of technology into the possession of the individual-so let's figure out how we can do that to the max."

To encourage electronic commerce, the GSA has posted an on-line supply catalog for federal workers on its Web site. Ms. McIver said purchasing card spending totals are bound to skyrocket because at least one large- volume agency-the Department of Defense-has declared that small-dollar items should be bought with a card.

SmartPay replaces a program called IMPAC, which had three approved vendors for all agencies: American Express Co. for travel cards, U.S. Bank for purchase cards, and Wright Express for fleet cards.

This time around, the GSA selected six vendors, and agencies got to choose from competing offerings. (American Express was one of the six but decided to drop out, saying the business had not proven lucrative enough).

Ms. McIver said banks' eagerness to participate in SmartPay showed how much the commercial card market has evolved in a short time.

"When we did this procurement five years ago, we went out and met with industry and thought we were going to get some competition, but we really didn't," she said. Few banks had developed product lines.

When the GSA solicited bids last year, "we really did have a variety of offers, and they were good," Ms. McIver said.

Now that SmartPay is up and running, the agencies are working to fix a handful of card malfunctions and to familiarize workers with the new procedures. Once agency officials grow nimble with the systems, Ms. McIver said, hopes are that they will press for further innovation.

Already, the GSA is enjoying some of its own system's capabilities.

"The charges that came in yesterday for GSA, my finance office is planning to pay today," Ms. McIver said Tuesday. "You've got a length of time within which you can dispute the transaction after the fact, so we will go ahead and pay immediately and reconcile down the road."

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