Administrators of government payment card programs and payment industry participants are eagerly awaiting a General Services Administration request for proposals that could redefine how federal agencies use cards to manage the expenditure of taxpayer funds.
The RFP will set out the operational, technical, and financial requirements for the next generation of GSA SmartPay, the federal payment card program used for purchases of commercial goods and services and for fleet and travel expenses.
In fiscal 2004 government purchases through SmartPay, which was introduced in 1998, totaled more than $24 billion. More than 350 federal agencies, organizations, and Native American tribes use it for nearly 90 million transactions a year.
SmartPay generated more than $123 million of refunds, based on charge volume, in fiscal 2004. Over the years it has yielded billions of dollars in savings and efficiencies, according to the GSA.
The original SmartPay vendor contracts, awarded to five card-issuing banks, will expire in November 2008. The GSA has said it intends to award the new contracts in early 2007 to allow ample time for a smooth transition.
Getting from here to there, however, requires several steps.
Sometime this year - most observers believe it will be soon - the GSA will issue a draft RFP for industry comment. After reviewing the responses, it will issue the final RFP in early 2006, setting in motion a process leading to the submission and evaluation of bids and the awarding of contracts.
The final requirements won't be known until the RFP is issued. However, the request for information that the GSA released in July may provide insight into what government payment card administrators are looking for in the next generation of SmartPay and the direction they intend to take the program.
Clearly, the objective is good stewardship of public funds through stronger financial controls and greater transparency and accountability.
In the late 1990s, when the original SmartPay requirements were published, the GSA sought innovations that pushed the limits of what is possible for card payment programs. On the basis of conversations with federal payment card executives and others in the payments industry, MasterCard expects it to do so again.
Some of what it sought in the late 1990s was light years ahead of what the industry was offering, especially in MIS reporting and the automation of card administration.
As a result, online card program administration was born. In fact, many other innovations that grew out of the requirements for SmartPay are now standard practice in business and consumer payment programs and other realms of the public sector across the United States and around the world.
Organizations that hope to compete when the contracts are put up for bid must be prepared to provide much more than a simple plastic card. They must deliver creative solutions and technologies, maybe even some that do not yet exist. Issuers will need to view themselves as an integral part in transforming business processes.
Incorporating radio frequency technology into the government's payment card program is one possibility.
Last year MasterCard introduced PayPass, an RF-based proximity payment solution. A payment application with RF technology might yield tremendous benefits if used in closed environments such as camps, posts, or stations for small-ticket transactions. Faster transaction times could lead to increased productivity.
Given that the government already uses RF technology to track shipments and material, it's not much of a stretch to imagine that some day a federal agency may want to adapt RF for payments.
One of the most important aspects of the new SmartPay program will be greater use of business intelligence tools that offer the federal government and individual agencies a clear picture of how much is being spent for various products and supplies, where it's being spent, and by whom. Such information allows for strategic sourcing of products and enables agencies to consolidate purchases with vendors that provide the best volume discounts.
Business intelligence tools also can reduce misuse of government payment cards through better monitoring. Using these tools, program administrators would be able to enforce rules for payment card use. Suspicious transactions can be automatically flagged and administrators notified electronically within hours of detection.
This would be a major improvement from the current process of reconciling paper receipts, sometimes several months after a questionable transaction took place.
As the next generation of GSA SmartPay evolves, the innovation, implementation, adaptation, learning, and application of new best practices is certain to continue. Technology that eliminates the need for additional layers of oversight, including stricter management controls, policies, and practices for ensuring appropriate card use and preventing payment delinquencies, fraud, or abuse are sure to be discovered along the way.
The result will be more cost-efficient, more transparent use of public funds, better financial management tools, and payment solutions that will ultimately benefit businesses as well as consumers.
