# Presentation: 750889

## GSA SmartPay® Program Update 

**U.S. General Services Administration**

**GSA SmartPay® Program Update**** **

**David J. Shea****Director, GSA SmartPay®**
**Visa Government Forum****Washington, DC**
**April 25, 2006**

**Notes:**
Left hand side. Two pictures of GSA SmartPay(r) charge cards, one purchase card and the other a travel card.

## Together, We’ve Come a Long Way...

- FY05 - $17 billion in spend; 26 million transactions; 300 thousand cardholders

**Notes:**
A chart showing an overview of the GSA SmartPay® Purchase Card program from 1999 to 2005.  This chart shows total spend (in billions), number of transactions (in millions) and the number of cardholders (in thousands).
There has been a steady increase in spend and transactions.  The number of cardholders decreased in 2000 and has remained lower ever since, even though it has leveled off recently.  
Purchase card spend and transactions have increased over the years, but number of cardholders has decreased.  Overall, there has been a trend to reduce the number of cardholders within an agency to minimize the risk from credit exposure and the potential for fraud, waste, and abuse.

The micro-purchase card limit is $2500.

##  Together, We’ve Come a Long Way...

- FY05 - $7 billion in spend; 43 million transactions; 1.9 million cardholders

**Notes:**
A chart showing the GSA SmartPay® Travel Card program from 199 to 2005. This chart shows total spend (in billions), number of transactions (in millions) and the number of cardholders (in thousands).
There has been a steady in crease in all three areas.  In 2002 transaction level slightly decreased but has been steady since.  The number of cardholders had a steady decrease from 200 to 2003 and has been consistent since.  
The number of travel cardholders has decreased over the years.  Overall, there has been a trend to reduce the number of cardholders within an agency to minimize the risk from credit exposure and the potential for fraud, waste, and abuse.

##  Together, We’ve Come a Long Way...

- FY05 - $1 billion in spend; 24 million transactions

**Notes:**
Overall fleet card spend and transactions have increased.

A chart showing the GSA SmartPay® Fleet Card program from 199 to 2005. This chart shows total spend (in billions) and number of transactions (in millions).
Between 200 and 2001 there was a drastic increase in spend due to US Postal Service joining the program.

## GSA SmartPay® provides service to over 350 federal agencies, organizations, and Native American tribal governments
Over 92 million purchase, travel, and fleet transactions processed in FY05 through 2.6 million cards
Total program spend of nearly $25 billion in FY05
Earnings of over $118 million in agency refunds in FY05
Give yourselves a hand!

Total spend across all business lines from FY99 to FY05:  $147 billion 

- Over 92 million purchase, travel, and fleet transactions processed in FY05 through 2.6 million cards
- Total program spend of nearly $25 billion in FY05
- Earnings of over $118 million in agency refunds in FY05
- Give yourselves a hand!
- Total spend across all business lines from FY99 to FY05:  **$147 billion**

**Agencies, Industry and GSA**** Working Together... A Success Story**

**What this means... Is Mission Support**

## Delinquency Management
February 2006 Government-wide IBA delinquency rate was 3.26%
8.2% decrease from one year ago and an 82% decrease since 2000
Reduction in number of cards deployed
738,621 fewer cards in FY05 than FY00
22% fewer cards in FY05 than FY00
OMB Circular A-123 Appendix B, Improving the Management of Government Charge Card Programs, was issued 10/1/2005
Requires agencies to submit charge card management plans
Requires training for all participants and refresher training every 3 years
Requires agencies to implement risk management policies and controls
Requires agencies to maintain and report data and performance metrics

- February 2006 Government-wide IBA delinquency rate was 3.26%
- 8.2% decrease from one year ago and an 82% decrease since 2000
- Reduction in number of cards deployed
- 738,621 fewer cards in FY05 than FY00
- 22% fewer cards in FY05 than FY00
- OMB Circular A-123 Appendix B, *Improving the Management of Government Charge Card Programs*, was issued 10/1/2005
- Requires agencies to submit charge card management plans
- Requires training for all participants and refresher training every 3 years
- Requires agencies to implement risk management policies and controls
- Requires agencies to maintain and report data and performance metrics

**Continuous Management Improvement Process**

## Could the following transactions be proper?

A purchase made at a bar... 

A purchase made at a liquor store...

- A purchase made at a bar...
- A purchase made at a liquor store...

**Examples of Oversight Challenges**

## 
A purchase at a bar... 
This was a legitimate purchase (though made through unconventional means) made by an individual who needed to rent a horse for a funeral.  The bar owner’s brother owned the horse.
A purchase made at a liquor store...
This was a legitimate purchase made by an Army chaplain for sacramental wine.

Better methods for more readily identifying and preventing improper purchases need to be found and implemented.  This is key to future program growth, although the actual rate of card fraud/misuse/abuse is very low.

- A purchase at a bar...
- This was a legitimate purchase (though made through unconventional means) made by an individual who needed to rent a horse for a funeral.  The bar owner’s brother owned the horse.
- A purchase made at a liquor store...
- This was a legitimate purchase made by an Army chaplain for sacramental wine.
- Better methods for more readily identifying and preventing improper purchases need to be found and implemented.  This is key to future program growth, although the actual rate of card fraud/misuse/abuse is very low.

**Oversight Challenges**

## Strategic sourcing
Similar to what is obtainable with individual consumer cards, Government should receive spend reports from Industry as a common practice; can play a role in agency strategic sourcing efforts

Larger Dollar Value Transactions
Cardless systems with lower interchange rates
Micropurchase level may increase
Need to be sensitive to interchange payment issue

Data challenges
Access to Level 3 transaction data is still a major challenge for Government. GSA SmartPay® contractors are required to pass all the data they receive from merchants; however, the program has no privity of contract with merchants.  
Approach towards incentivizing merchants to pass Level 3 data – while progress has been made -- needs to be revisited/reinvigorated. May be innovative ways to obtain this data....
Government should have consistent access to data-driven business intelligence, meaningfully presented

- Similar to what is obtainable with individual consumer cards, Government should receive spend reports from Industry as a common practice; can play a role in agency strategic sourcing efforts
- Larger Dollar Value Transactions
- Cardless systems with lower interchange rates
- Micropurchase level may increase
- Need to be sensitive to interchange payment issue
- Data challenges
- Access to Level 3 transaction data is still a major challenge for Government. GSA SmartPay® contractors are required to pass all the data they receive from merchants; however, the program has no privity of contract with merchants.
- Approach towards incentivizing merchants to pass Level 3 data – while progress has been made -- needs to be revisited/reinvigorated. May be innovative ways to obtain this data....
- Government should have consistent access to data-driven business intelligence, meaningfully presented

**Future Program Opportunities**

## Small business transactions
Getting industry to provide data/reports on small business transactions is still an issue (SF-294/295/e-SRS, etc.)
Industry needs to be more aggressive/innovative in driving increased small business merchant acceptance
Small business is critical economic driver – education about card benefits and costs needs to be improved and simplified 
New card products – need to challenge the status quo
Debit cards offer lower fraud protection coverage and lower or no rebates compared to charge cards.  Must this be true?
Prepaid cards may provide a greater degree of control over program spending.  Do we have a training/education issue here?
Card member benefits that are provided to commercial clients should also be available to the Government
We can’t we have cards that can turned on/off as needed?
Can’t we come up with better alternatives to convenience check use?

- Getting industry to provide data/reports on small business transactions is still an issue (SF-294/295/e-SRS, etc.)
- Industry needs to be more aggressive/innovative in driving increased small business merchant acceptance
- Small business is critical economic driver – education about card benefits and costs needs to be improved and simplified
- New card products – need to challenge the status quo
- Debit cards offer lower fraud protection coverage and lower or no rebates compared to charge cards.  Must this be true?
- Prepaid cards may provide a greater degree of control over program spending.  Do we have a training/education issue here?
- Card member benefits that are provided to commercial clients should also be available to the Government
- We can’t we have cards that can turned on/off as needed?
- Can’t we come up with better alternatives to convenience check use?

**Future Program Opportunities**

## Security
In cards offered to individuals, industry offers features such as virtual account numbers and system-generated e-mails for defined events, such as receipt of a payment, spending reaching a certain pre-defined level, etc.  Why don’t we have these features?  Imagine a world where, for example, a supervisor receives an e-mail whenever one of his/her employees transacts business on a card.... 
Similar to consumer cards, industry should be able to provide Government cardholders with timely warnings of potentially high risk transactions
Sensitive government data (including employee data) must be protected from improper disclosure at all levels – prime and subcontractor
Card information shall not be shared by “open” e-mail
Misuse/abuse/fraud
While there is a some commonality to industry and government’s definition/ understanding of fraud, a common definition of it, as well as of misuse and abuse, needs to be implemented
Government is getting better at detecting fraud but greater collaboration with industry to understand purchasing policies and provide innovative tools and approaches is key to sustaining gains

**In cards offered to individuals, industry offers features such as virtual account numbers and system-generated e-mails for defined events, such as receipt of a payment, spending reaching a certain pre-defined level, etc.  Why don’t we have these features?  Imagine a world where, for example, a supervisor receives an e-mail whenever one of his/her employees transacts business on a card.... **
**Similar to consumer cards, industry should be able to provide Government cardholders with timely warnings of potentially high risk transactions**
**Sensitive government data (including employee data) must be protected from improper disclosure at all levels – prime and subcontractor**
**Card information shall not be shared by “open” e-mail**
**Misuse/abuse/fraud**
**While there is a some commonality to industry and government’s definition/ understanding of fraud, a common definition of it, as well as of misuse and abuse, needs to be implemented**
**Government is getting better at detecting fraud but greater collaboration with industry to understand purchasing policies and provide innovative tools and approaches is key to sustaining gains**

**Future Program Opportunities**

## Tax recovery
Federal Government transactions made on centrally billed accounts (CBAs) should not be taxed
Taxes assessed on CBA transactions should be 100% recoverable
Tax levy issue remains a concern...

A/OPC staffing challenges
Need to reduce time necessary to effectively manage the program
Many A/OPCs perform this work as a collateral duty
Need to develop better, more innovative practices and tools
Can automation/better policies/better training help?

International challenges
Industry needs to assist the government in better aligning with “chip” card technology that is required to support transactions in some countries
Industry should provide better customer service support for foreign transactions– government mission is increasingly global
Need to get a better handle on costs of international transactions

- Federal Government transactions made on centrally billed accounts (CBAs) should not be taxed
- Taxes assessed on CBA transactions should be 100% recoverable
- Tax levy issue remains a concern...
- A/OPC staffing challenges
- Need to reduce time necessary to effectively manage the program
- Many A/OPCs perform this work as a collateral duty
- Need to develop better, more innovative practices and tools
- Can automation/better policies/better training help?
- International challenges
- Industry needs to assist the government in better aligning with “chip” card technology that is required to support transactions in some countries
- Industry should provide better customer service support for foreign transactions– government mission is increasingly global
- Need to get a better handle on costs of international transactions

**Future Program Opportunities**

## Program Concerns – Commercial world in tension with Government needs

Transparent rebate calculations
The formula that banks use to calculate rebates on charge card transactions is not transparent
Rebate calculations depend on several factors which are not clearly defined and vary from bank to bank 

Cancelled cards
Transactions can still be passed through cancelled charge cards for months after the card has been cancelled
When do we “put the fork” in a dead card?

Dispute process
Government is required to dispute a transaction within a relatively short window (60 days from transaction date)
The dispute process is currently structured with a relative bias to the merchant

**Transparent rebate calculations**
**The formula that banks use to calculate rebates on charge card transactions is not transparent**
**Rebate calculations depend on several factors which are not clearly defined and vary from bank to bank **
**Cancelled cards**
**Transactions can still be passed through cancelled charge cards for months after the card has been cancelled**
**When do we “put the fork” in a dead card?**
**Dispute process**
**Government is required to dispute a transaction within a relatively short window (60 days from transaction date)**
**The dispute process is currently structured with a relative bias to the merchant**

**Future Program Opportunities**

## Transition

**Transition**

**Acquisition Planning ****Phase**

**Acquisition Management ****Phase**

**Transition Planning Phase**

**Transition Management Phase**

- Future program requirements
- Request for Information
- Press release
- Acquisition strategy
- Source Selection Plan

- Draft Request for Proposals
- Request for Proposals
- Contract award/s

- Fall 2004

- Spring 2005

- Fall 2005

- Fall 2006

- Fall 2007

- Fall 2008

- Spring 2006

- Spring 2007

- Spring 2008

**FY05**

**FY07**

**FY08**

**FY06**

**FY09**

**Notes:**
This chart shows the transition timeline for the GSA SmartPay® 2.  Fall 2004 to Fall 2005 (Fiscal Year 2005) will consist of Acquisition Planning Phase.  Fall 2005 to Spring 2007 (Fiscal Year 2006 to 2007) will consist of the Acquisition Management Phase and the Transition Planning Phase.  From Spring 2007 on will be the Transition Management Phase.

## 
We simply cannot have what happened during the first transition happen again
Financial interface challenges
Card distribution issues
Later, “crispy cards” from mail irradiation
The GSA SmartPay® program office will:
Work closely with agencies and banks to facilitate a smooth transition
Develop transition planning tools for agency use
Plan and prepare for the transition to minimize impact on cardholders
Large amount of agency and bank involvement required

**Transition**

- We simply cannot have what happened during the first transition happen again
- Financial interface challenges
- Card distribution issues
- Later, “crispy cards” from mail irradiation
- The GSA SmartPay® program office will:
- Work closely with agencies and banks to facilitate a smooth transition
- Develop transition planning tools for agency use
- Plan and prepare for the transition to minimize impact on cardholders
- Large amount of agency and bank involvement required

- Fall 2005

- Spring 2006

**FY06**

**FY08**

**FY09**

**FY07**

- Fall 2006

- Fall 2007

- Fall 2008

- Spring 2007

- Spring 2008

- Spring 2009

**Now**

**Award****Contracts**

**Notes:**
Same chare as previous slide simplified.  This chart shows where we are now (spring 2006) and when we hope to award the contract (spring 2007).

## A/OPCs need to make sure their cardholders:
Ensure that all transactions with their current bank are reconciled; subscriptions are stopped under prior accounts 
Fill out a new card application
Activate a new card
Destroy their old card and ensure no new transactions continue to be made on it Complete any new training
Contact the A/OPC if they have any issues or questions

**Transition**

- A/OPCs need to make sure their cardholders:
- Ensure that all transactions with their current bank are reconciled; subscriptions are stopped under prior accounts
- Fill out a new card application
- Activate a new card
- Destroy their old card and ensure no new transactions continue to be made on it Complete any new training
- Contact the A/OPC if they have any issues or questions

**Now**

**Award****Contracts**

- Fall 2005

- Spring 2006

**FY06**

**FY08**

**FY09**

**FY07**

- Fall 2006

- Fall 2007

- Fall 2008

- Spring 2007

- Spring 2008

- Spring 2009

**Notes:**
Same chart as previous slide.

## Questions?

**Questions?**