# Presentation: 352113

## GSA SmartPay® 2Update

**David J. Shea****Director, GSA SmartPay®****GSA SmartPay® Conference****August 2006**

## Agenda

- GSA SmartPay® Program Office Service and Support
- GSA SmartPay® Procurement Preference Data – FPDS-NG Reports
- GSA SmartPay® 2 Highlights
- Level 3 Data
- Transition Timeline
- Legislative Updates
- Questions

**Agenda**

## Original GSA SmartPay® established in 1998
Enables agencies to obtain Purchase, Travel, Fleet, and Integrated Charge Cards, through a 10 year Master Contract (5 year base, 5 one-year options) with five banks
US Bank, Citibank, Bank of America, JP Morgan Chase, Mellon Bank (purchase only)
Largest program of its kind in the world.  Provides program service to over 350 federal agencies, organizations, and Native American tribal governments
Over 92 million purchase, travel, and fleet transactions processed in FY 05 through 2.6 million cards

- Enables agencies to obtain Purchase, Travel, Fleet, and Integrated Charge Cards, through a 10 year Master Contract (5 year base, 5 one-year options) with five banks
- US Bank, Citibank, Bank of America, JP Morgan Chase, Mellon Bank (purchase only)
- Largest program of its kind in the world.  Provides program service to over 350 federal agencies, organizations, and Native American tribal governments
- Over 92 million purchase, travel, and fleet transactions processed in FY 05 through 2.6 million cards

**Program Overview**

## Program Overview (cont’d)

- Total program spend of nearly $25 billion in FY 05
- Total program spend for FY 06 through May is $17.8 billion through more than 64 million transactions
- Existing contracts end November 2008
- Recompetition effort underway (“GSA SmartPay® 2”)
- Draft RFP released May 25, 2006; comments due June 23
- Program Office has received over 1,000 comments from government and industry
- Currently analyzing these comments

## Program Overview (cont’d)

**Program Overview (cont’d)**

**Top 10 Customers by Transactions – FY 05**
**Total Program – All Business Lines**

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## Program Overview (cont’d)

**Average delinquency rate was 3.35% in FY 05, **
**close to that of corporate card programs**

## Supported OMB Circular A-123 Appendix B revision process to rescind creditworthiness check requirement on purchase and centrally-billed charge travel cards (requirement still applies to individually billed travel charge cards)
Issued first government-wide Privacy Act Notice addressing purchase card data collection and use (agencies, except in unusual circumstances, will not need to expend the effort to put their own notices in place)
Key participant in Federal Contractor Tax Compliance (FCTC) task force along with Department of Treasury.  Working to balance issue of recovering unpaid merchant taxes with need to maintain key purchase card benefits of ease of use and lower processing cost

- Issued first government-wide Privacy Act Notice addressing purchase card data collection and use (agencies, except in unusual circumstances, will not need to expend the effort to put their own notices in place)
- Key participant in Federal Contractor Tax Compliance (FCTC) task force along with Department of Treasury.  Working to balance issue of recovering unpaid merchant taxes with need to maintain key purchase card benefits of ease of use and lower processing cost

**GSA SmartPay® Program Service and Support**

## FPDS-NG is currently in the second phase of software development to capture socioeconomic data on purchase card transactions  
The software will allow agencies to develop and generate reports that will track use of the purchase card against socioeconomic goals
The data is received from the GSA SmartPay® banks and the card associations (Visa & MasterCard)
The project is currently in the internal testing phase.  We intend to invite agencies to participate in later testing phases. Roll-out is scheduled for late CY 06.

- The software will allow agencies to develop and generate reports that will track use of the purchase card against socioeconomic goals
- The data is received from the GSA SmartPay® banks and the card associations (Visa & MasterCard)
- The project is currently in the internal testing phase.  We intend to invite agencies to participate in later testing phases. Roll-out is scheduled for late CY 06.

**GSA SmartPay® Procurement Preference Data - FPDS-NG Reports**

## Overall SmartPay® 2 Themes

- Build upon success of the past – keep the good and improve the rest
- Master contract will set best practices as defaults – but wording will allow agencies to tailor their task orders based upon their specific mission needs
- Be more sensitive to A/OPC function as collateral duty – challenge banks to provide tools / processes that make it easier and more efficient to manage cardholders well and spot / deal with problems
- Require offerors to demonstrate that their EAS’ actually have the capabilities they claim
- Increase security requirements
- Require client agency and GSA sign-off before “flipping the switch” to pump transactions through new contracts
- Provide for continuity of charge card services until transition complete

## Since August 2004, the GSA SmartPay® team has been collecting customer and stakeholder feedback for GSA SmartPay® 2 from a number of different sources, including:
Customer Feedback Survey of A/OPCs (437 respondents)
Stakeholder Interviews (55 interviews conducted)
Includes customer agencies, oversight agencies, and industry
Focus Groups (4 held)
Topics included: program management; data management and reporting; transition planning; procurement and payment processes
Intra-Agency Committee Member Interviews (18 completed)
Executive Steering Committee Member Interviews (18 completed)
Panel discussions at GSA SmartPay® Conference (10 panels)
Request for Information and one-on-one Industry Meetings

- Customer Feedback Survey of A/OPCs (437 respondents)
- Stakeholder Interviews (55 interviews conducted)
- Includes customer agencies, oversight agencies, and industry
- Focus Groups (4 held)
- Topics included: program management; data management and reporting; transition planning; procurement and payment processes
- Intra-Agency Committee Member Interviews (18 completed)
- Executive Steering Committee Member Interviews (18 completed)
- Panel discussions at GSA SmartPay® Conference (10 panels)
- Request for Information and one-on-one Industry Meetings

**GSA SmartPay® 2 Highlights**

## Utilizing research results, the GSA SmartPay® team is focusing on improvements to these areas:
Access to data and data management/reporting tools
Keeping an eye on developing legislation regarding “statistical machine learning” and “pattern recognition technologies” 
Development of government-wide data warehouse under study 
Requiring banks to make association data / reporting tools available
Data management controls including support in strategic sourcing
More data required
Standard interface requirements

- Access to data and data management/reporting tools
- Keeping an eye on developing legislation regarding “statistical machine learning” and “pattern recognition technologies”
- Development of government-wide data warehouse under study
- Requiring banks to make association data / reporting tools available
- Data management controls including support in strategic sourcing
- More data required
- Standard interface requirements

**GSA SmartPay® 2 Highlights (cont’d)**

## GSA SmartPay® 2 Highlights (cont’d)

- Security levels (Purchase Card Industry Security Standards, etc.)
- Solicitation requires security plan which will be evaluated  during source selection
- Invokes FISMA and Purchase Card Industry security requirements
- Detection of misuse, fraud, waste and abuse
- Automatic e-mail to supervisor when purchase card is used
- Summary report for supervisors with large number of cardholders
- Can be deactivated at task order level (default is “on” for purchase; value added offering for other charge card business lines)

## GSA SmartPay® 2 Highlights (cont’d)

- Improving card use in emergency situations
- Developing training package
- Emergency plans required of banks, including COOP plans
- New cards will look very different and have new anti-misuse / abuse features
- Considering adjusting rebate “floor” to assist agencies in negotiating better deals at the task order level
- Streamlining the dispute process
- Requesting paperless process (no more faxing dispute forms)
- Seeking longer dispute period
- Electronic Access Systems – testing required, expanded capabilities
- Billing and payment process optimization

## GSA SmartPay® 2 Highlights (cont’d)

- Requesting better (lower) pricing on intergovernmental transactions
- Improving tax recovery, exemption, and reclamation
- Primarily affects fleet card
- Standardizing rebate and IFF calculations
- Consistent approach required across all banks
- Creditworthiness – requiring offerors to provide at task order level if requested by agency / organization

## GSA SmartPay® 2 Highlights (cont’d)

- Improving training
- Training to be provided at no cost for groups of 20 or more (as opposed  to 25)
- Easier capability to turn cards on and off as needed
- Improving customer service
- Annual customer service survey with results reported at GSA SmartPay® Conference
- Convenience check reduction
- Linking check fees to checks
- Propose alternatives
- No rebates on checks except if agency requests at task order level
- Addressing the federal government’s tax levy issue
- Working to develop workable process above micro-purchase threshold
- Included requirement in draft solicitation

## Lack of data remains an significant customer agency concern
Under the current and future Master Contracts, GSA SmartPay® contractors are required to pass to agencies all the data they receive from merchants.  However...
... the GSA SmartPay® program has no privity of contract with merchants who accept the charge cards, and cannot require them to collect or pass through level 3 data to banks in the GSA SmartPay® program
For proposals for the GSA SmartPay® 2 contract, bidders will receive evaluation points for proposing a plan to increase the number of merchants providing level 3 data
Exploring other methods to obtain level 3 data are being explored (e.g., direct from vendor, etc.)

- Under the current and future Master Contracts, GSA SmartPay® contractors are required to pass to agencies all the data they receive from merchants.  However...
- ... the GSA SmartPay® program has no privity of contract with merchants who accept the charge cards, and cannot require them to collect or pass through level 3 data to banks in the GSA SmartPay® program
- For proposals for the GSA SmartPay® 2 contract, bidders will receive evaluation points for proposing a plan to increase the number of merchants providing level 3 data
- Exploring other methods to obtain level 3 data are being explored (e.g., direct from vendor, etc.)

**Level 3 Data**

## Visa and MasterCard currently use incentives to encourage more merchants to provide level 3 data, for example:
Visa provides a cheaper interchange rate for transactions over $5,000 that have level 3 data
MasterCard provides financial incentives for transactions that pass level 3 data; or has a 3rd party subcontractor look at the data, analyze it, and break it down if possible
According to FY 05 Visa statistics, 15.9% of GSA SmartPay® transactions and 16.3% of transaction spend have level 3 line item data

- Visa provides a cheaper interchange rate for transactions over $5,000 that have level 3 data
- MasterCard provides financial incentives for transactions that pass level 3 data; or has a 3rd party subcontractor look at the data, analyze it, and break it down if possible
- According to FY 05 Visa statistics, 15.9% of GSA SmartPay® transactions and 16.3% of transaction spend have level 3 line item data

**Level 3 Data (cont’d)**

## Transition Timeline

**Transition Timeline**

## GSA SmartPay® 2 contracts to be awarded in Spring 2007; transition to occur through November 2008
The GSA SmartPay® team is looking for agencies to be “early adopters” and transition in 2007
Agencies should plan for additional budget and other resources that will be needed to support your agency’s transition to the new contract. For example, additional funds may be needed for:
Card Issuance (new cards must be issued to all cardholders under the new contract)
Training (in new or modified EAS, for example)
Testing support (particularly if switching banks or new EAS with exiting bank) / ”certification to proceed” approach
IT resources (financial interface and other systems work; security)
Administering two contracts concurrently
The GSA SmartPay® Program Office will:
Work with agencies and banks to facilitate a seamless transition
Develop transition planning tools for agency use
Provide a BPA for transition support contractors to help agencies in transitioning to the new program

- The GSA SmartPay® team is looking for agencies to be “early adopters” and transition in 2007
- Agencies should plan for additional budget and other resources that will be needed to support your agency’s transition to the new contract. For example, additional funds may be needed for:
- Card Issuance (new cards must be issued to all cardholders under the new contract)
- Training (in new or modified EAS, for example)
- Testing support (particularly if switching banks or new EAS with exiting bank) / ”certification to proceed” approach
- IT resources (financial interface and other systems work; security)
- Administering two contracts concurrently
- The GSA SmartPay® Program Office will:
- Work with agencies and banks to facilitate a seamless transition
- Develop transition planning tools for agency use
- Provide a BPA for transition support contractors to help agencies in transitioning to the new program

**Transition Timeline (cont’d)**

## Legislative Updates

- Revised “Government Credit Card Abuse Prevention Act of 2006”       S.3480 introduced in Senate June 8; requires charge card management action many agencies already have in place, but:
- Adds requirement for technology utilization to prevent / identify fraud
- Strict penalties for card misuse
- Steps be taken to recover cost of improper purchases, including salary offset
- Also, new Senate legislation (S.457), entitled “Purchase Card Waste Elimination Act of 2006”
- Passage in House remains – no companion to Senate version at this time
- Contains annual SPE reporting requirement on areas such as: strategic purchasing / vendor discounts, cardholder communications programs, assessment of purchasing practices, best practices, and small business participation
- If passed, GSA will provide tools to support agency compliance

## Questions?

**David Shea**
- Director, GSA SmartPay®
- david.shea@gsa.gov
- (703) 605-2867

**Questions?**