WASHINGTON -- Another private-sector lobby has joined the battle to stop the Federal Reserve from bidding against banks on a contract to set up and operate the Treasury Department's federal electronic payments system.
The National Taxpayers Union, a Washington tax lobby, entered the fray alongside House Banking Committee Chairman Henry B. Gonzalez, the National Automated Clearing House Association, and some big-bank interests - powerful allies in the debate over the fairness of a Fed bid.
The Fed has said it is interested in assuming the role of central processor in the new Electronic Federal Tax Payment System, which will collect payroll and allow corporations to transmit federal tax payments electronically.
Federal Intrusion Seen
The taxpayers union echoed the automated clearing house association's belief that a Fed-run tax-processing business would be intruding into private enterprise on an unprecedented scale.
"The Fed is not playing by the same rules as private bidders," said Pete Sepp, a spokesman for the lobbying organization. "They'll lowball the bid and discover that they dramatically underestimated the cost of this project, and it'll come back to taxpayers to make up the difference."
In a letter to Treasury Secretary Lloyd Bentsen, Rep. Gonzalez, D-Tex. expressed his concern that "the Federal Reserve and the Treasury are so interdependent that it is impossible for them to have the same arm's-length relationship that would exist with any other bidder."
Regulations May Be Violated
This interdependency may even violate federal regulations designed to encourage fair and open bidding for government contracts, according to David Keating, executive vice president of the taxpayers group.
"This violation has occurred because the Treasury consulted extensively with the Fed, but not other prospective bidders, in designing the EFTPS system," he wrote in a letter Tuesday to Mr. Bentsen.
Running the system would also distract the Fed from its primary mission of maintaining sound monetary policy, Mr. Keating said in an interview Wednesday.
"It would take some time away from their main job," he said. "This is a substantial project, and Alan Greenspan has enough to worry about without doing tax deposits."
Banks Express Interest Representatives of BankAmerica Corp., Chemical Banking Corp., First National Bank of Maryland, and SunTrust Banks Inc. expressed "potential" interest in bidding for the contract, while Mr. Keating said he knew of at least 19 private-sector firms who may want to bid.
The tax payment system is intended to speed up collection of tax payments and reduce paperwork. Employee withholdings, excise taxes and other levies, totaling nearly $1 trillion a year, will be collected from corporations electronically instead of on paper forms under the new system.
The system, which would allow the government to collect some 80 million tax payments a year, has been in a test mode for the last two years. Once the system becomes fully operational, about five million companies will be required to use it.
The deadline for prospective contractors to submit bids to the Treasury's Financial Management Service is July 13, and the service hopes to award the contract by September.
