<B> Govt. Card Contracts Set</B>
By Lynn Woods
Joining previously announced winners NationsBank and Citibank, U.S. Bank and First National Bank of Chicago have been selected as the vendors for the next generation of credit cards by federal agencies that recently announced new contracts.
U.S. Bank won two contracts for purchasing cards--with the U.S. Postal Service, which spent $320 million on purchasing-card expenses last year, and with the Department of Defense (excluding the Navy), which had purchasing-card volume of $2.7 billion in 1997. That amount is expected to grow to $9 billion during the three-year contract with U.S. Bank, making it the world's largest-volume purchasing-card account, said Steve Putney, president of corporate payment systems at U.S. Bank.
The new contracts have made U.S. Bank the leading purchasing-card provider among the five credit-card vendors competing for government business. "We have retained over 40 percent of purchasing-card business for the federal government between these two accounts," Putney said.
Last February, the General Services Administration selected six card issuers from which federal agencies could choose their travel, purchasing-card, and fleet programs. One vendor, American Express, dropped out of the bidding last spring. Six previous contracts that have been announced were awarded to Citibank and NationsBank.
The new contracts, ranging in duration from two to five years, with additional renewal options up to 10 years, go into effect Nov. 30. Previously, the government relied on just three vendors: American Express for travel, U.S. Bank for purchasing and Wright Express for fleet.
Purchasing-card programs with the government are especially lucrative because the amount of charges are increasing significantly due to a recent raise in the limit on the maximum amount allowed per purchase, from $2,500 to $25,000, noted Putney. Because of the change, the government's total spend on purchasing cards has increased from $6 billion to $11.5 billion in the last year, he said.
But high volume isn't the only significant characteristic of the new U.S. Bank accounts. Through its I.M.P.A.C. card--the name for the purchasing card used by the government over the last decade--U.S. Bank already has helped streamline the procurement process for the government. The new contracts will enable the bank to speed the Postal Service and the Department of Defense toward a paperless procurement system, which ultimately might include a card with a chip to authorize digital signatures over the Internet, enabling government employees to purchase products over the Web securely and at the negotiated government prices, noted Putney.
In order to meet the federal government's specifications for automation of its payment processes, future integration of card programs, and the capability to provide smart cards, electronic shopping, and other innovations, U.S. Bank has developed a new system, called Customer Automation and Reporting Environment. CARE will enable program administrators to open and close accounts, maintain authorization hierarchies and do ad-hoc reporting on line.
Available to the government the last quarter of this year and deployed the first quarter of next year in the commercial marketplace, CARE is designed to be "customized in 50,000 ways" depending on the client's needs, Putney said.