The government may change the way it awards its lucrative credit card contracts.
The General Services Administration, which since the 1980s has awarded single-vendor contracts for travel and entertainment, small-dollar purchases, and fuel spending, is proposing a program under which each federal agency would issue its own contracts.
There are more than 100 federal agencies. The move would affect more than $4 billion in annual card spending by federal employees.
The plan, which would take effect in November 1998, reflects "a new opportunity for us that opened up under the Federal Acquisition Streamlining Act," said Donna Bennett, deputy commissioner of the federal supply service for the GSA.
The agency said it would be a "dramatic shift in procurement policy" for governmentwide financial services.
Current contract holders - American Express Co., First Bank System, and a fuel card vendor - theoretically would have more competition in 1998 when their deals expire.
In 1993 American Express wrested the travel and entertainment contract from Citicorp's Diners Club, which had held it for 10 years. To get the business, Amex agreed to pay an $18 million transition fee and a $120 million rebate over the life of the contract. Rocky Mountain Bankcard System, a First Bank subsidiary, was awarded the procurement card contract in 1994.
"Day in and out you have to satisfy the agencies, so you're always better off doing your business at an important decision point," said Philip G. Heasley, vice chairman of First Bank System.
The agency said it will host a briefing for merchants and card issuers on July 10 in the Washington area and plans to run additional meetings and focus groups. It will accept written comments through Aug. 9.
Initial contracts could be for five years and include renewal options, the GSA said. "For each business line, there would be a certain set of common requirements" under the proposal, Ms. Bennett said.
"I think having multiple issuers makes a good deal of sense as long as the issuers are operating under a similar contract," said Stanley Anderson, president, Anderson & Associates, a procurement card consulting firm in Arvada, Colo.
Each agency has its own accounting systems, he added, which makes it difficult for an issuer to have one product to satisfy all of government.
"Right now it's one bag of goods, Mr. Heasley said. "What's going to happen is that some agencies are going to be more profitable than others. I think it will allow people who are doing business with the government to really understand which ones they want to win versus which ones they want to lose."
William Westervelt, principal, with First Annapolis Consulting in Maryland, said the proposal would likely generate more interest among issuers, especially now that there are more players in the corporate and procurement card markets.
Mr. Anderson expressed a similar view. "If you've got agencies issuing their own contracts, you may have four different brands of cards," he said. "You may have a Diners Club, an American Express, a Visa, and a MasterCard."
