BofA Bows Out of Bidding for Federal SmartPay Card Contract

  Bank of America Corp. says it will not bid on a 10-year contract with the U.S. General Services Administration to issue payment cards to federal employees in the second go-round of the agency's SmartPay program.
  "We have appreciated the opportunity to participate in the SmartPay program over the years and to serve a number of federal agency clients," notes a BofA statement. "However, we have concluded that the economics of the SmartPay 2 program are not economically viable for us."
  That leaves larger pieces of the GSA's pie for other banks bidding to provide card products for purchasing, travel, fleet and other spending needs of 350 federal agencies, organizations and Native American tribal governments.
  In fiscal 2006 spending on nearly 3 million MasterCard- and Visa-branded cards in the SmartPay program generated more than 98 million transactions amounting to $26.5 billion.
  The GSA's request for proposals, issued Sept. 28, included several enhancements from the expiring SmartPay program. In SmartPay 2, the GSA wants new core products and services such as prepaid and contactless cards, and customer support in foreign languages for some employees working abroad.
  And the GSA wants better security features on cards to prevent fraud and abuse both by strangers and some employees. Such requested features include e-mails to supervisors when cards are used, easier ability to activate and deactivate travel cards, and more-detailed data-management capabilities.
  Current SmartPay card purchases incur commercial interchange rates from issuers, but SmartPay 2 seeks lower interchange rates for government-to-government payments. "We view the risk of a transaction between two government agencies to be lower than that of a standard commercial purchase," David Shea, director of the GSA's SmartPay program, says.
  Five banks issue cards under the GSA's current SmartPay contract, which began in 1998 and ends in Nov. 2008. The institutions include BofA, Citigroup, U.S. Bancorp, JPMorgan Chase and Mellon Bank. Despite the departure of BofA, other veteran issuers consider SmartPay 2's requirements worth the effort.
  A GSA spokesperson would not disclose which banks have bid to join SmartPay 2. Citigroup Inc., which provides card services to agencies such as the Navy and Department of Veterans Affairs as the SmartPay program's largest issuer, confirmed that it is one of the bidders for SmartPay 2.
  U.S. Bancorp, which serves the Defense Department (except the Navy), the executive office, Homeland Security and the U.S. Postal Service as SmartPay's second-largest issuer, also confirms that it has bid for SmartPay 2.
  The GSA says the SmartPay program has saved the government billions of dollars by replacing many slower, and more-costly, paper-based payments with electronic methods. In fiscal 2006 the GSA's purchasing card program alone helped its customer agencies avoid some $1.4 billion in administrative processing costs. And government agencies earned $118 million in rebates from issuers in fiscal 2005 (fiscal 2006 figures are not yet available).
  Winners of SmartPay 2 card-issuing contracts for fleet, travel, purchasing and other government spending needs will be announced at an unspecified date this year.
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