Amex Folds Federal Card Bid

<B> Amex Folds Federal Card Bid</B>

By Mary Ann McNulty

<I>New York</I> - Saying that the competition for government accounts is too intense to leave room for profits, American Express last week told Washington it will no longer bid on the purchase and travel charge card accounts of the various federal agencies.

In February, the General Services Administration chose American Express as one of six card issuers that federal agencies could select for purchasing, travel and fleet expenditures (<I>BTN</I>, March 2). But as Amex met with the various agencies, it found "they were asking for non-traditional pricing and custom enhancements. We couldn't leverage the technology developments they wanted for corporate business," said Amex spokesperson Christine Levite.

At the same time, Levite said, Amex's bank competitors "are providing irrational pricing to get some sort of toehold into the market. But based on our knowledge of the business, the pricing cannot be justified."

The decision surprised even many within Amex itself, as the company has worked with GSA for more than a year to draft what eventually became the government's request for proposals for its next generation of charge cards. Like all the bidders, Amex made a substantial investment in even responding to the enormous RFP that was finally issued late last fall.

To win the last GSA travel award in October 1993, Amex agreed to more than $18 million in rebates over the life of the contract. It lost millions of dollars in the first few years before finally pulling the account into the black, Levite said. Of late, Amex has issued 1.5 million government cards that generated $3.5 billion in charge volume.

In announcing its new vendors in February, GSA said the contracts would cover expenditures valued at more than $8.5 billion in fiscal year 1997. Use of the travel card generated more than $20 million in refunds to the government in fiscal year 1997. The purchase card generated $7 million in refunds, and savings in administrative costs of $616 million.

Unlike the winner-take-all strategy of the previous contracts, the new one was designed to encourage competition to ensure that vendors meet the unique needs of diverse government units. GSA selected five banks--American Express, Citibank, First National Bank of Chicago, NationsBank and U.S. Bank--to offer card products that integate travel, purchasing and/or fleet. In addition to those five, it selected Mellon Bank to provide only purchasing cards. For travel-only accounts, federal governments can select from Amex, Citibank, NationsBank and US Bank. For fleet-only cards, only Amex, Citibank and U.S. Bank can be chosen.

Under the current contract, which expires Nov. 29, the government is served by just three vendors: American Express for travel, U.S. Bank for purchasing, and Wright Express for fleet.

Since the new five-year contracts with five one-year renewals were awarded, various agencies have been meeting with the six potential vendors and asking them to submit proposals to handle their business. In the early selections, the Department of Defense picked NationsBank, while the GSA and Veterans Administration opted for a Citibank travel card. The only business Amex has won is the National Gallery of Art, Levite said, noting that officials will meet with gallery executives to determine what to do now.

"It was very clear in the preliminary bidding, as well as with the awards, that the competition was presenting irrational pricing," Levite said. "Clearly the banks are willing to get the business at any cost. We are not.