No. 226

March 2003

SMALL BUSINESS

RESEARCH

SUMMARY

Impact of Purchase Card Activity 

on Small Business

by Eagle Eye Publishers, Inc.,

2002. [18] pages. Fairfax, Virginia.

under contract no. SBAHQ-98-C-0016 

This Small Business Research Summary (ISSN 1076-8904) summarizes one of a series of research papers prepared under contracts

issued by the U.S. Small Business Administration’s Office of Advocacy. The opinions and recommendations of the authors of this study do

not necessarily reflect official policies of the SBA or other agencies of the U.S. government. For more information, write to the Office of

Advocacy at 409 Third Street S.W., Washington, DC 20416, or visit the office’s Internet site at www.sba.gov/advo.

Purpose

To reduce paperwork and time associated with federal procurement, agencies have turned to using credit

cards to purchase the goods and services they need.

Credit card purchases are by their nature small purchases that should be set aside for small firm procurement; however, federal agencies are not currently making all such purchases from small firms. This

study looks at the impacts of federal agency credit

card use on small business.

Overall Findings

Although credit card purchases are small purchases,

the increasing use of credit cards by the government

is decreasing small businesses' share of federal procurement. The finding is clear, but would be clearer

if the data required to be collected were in fact collected and available.

Highlights

• The use of government credit cards began as a

pilot program in 1986 and became the preferred

method for making small purchases in 1994.

• There are currently three types of government

charge card programs: purchase cards, travel cards,

and fleet cards. This study focuses primarily on purchase cards.

• In FY 2001, 3.2 million government credit cards

were used to spend $19.7 billion on goods and services;

purchase cards accounted for $13.8 billion of the

credit card total. 

• Purchase cards accounted for 6 percent of total

government procurement dollars in FY 2001.

• Dollars spent through purchase cards nearly doubled every year from FY 1990 to FY 1996 but

increased relatively little from FY 2000 to FY 2001.

• The size of the average purchase card transaction

more than doubled over the FY 1989-FY 2001 period

as the cards were used for larger and larger purchases.

• GSA data that might give an accounting of the

small business share of purchase card procurement

are too incomplete to allow conclusions to be drawn.

• Data available for one agency, the National

Aeronautics and Space Administration (NASA), indicate that the small business share of purchase card

dollars fell from 16.7 percent in FY 2000 to 15.7 percent in FY 2001.

• Findings based on the NASA data indicate that

agencies are not following through in setting aside

their government purchases between $2,500 and

$100,000 for small businesses, and that purchase

card buys contribute to this effect. 

• The report indicates that small firms are receiving lower shares of prime contracting dollars with

purchase cards than through other procurement

methods, as agencies shift small business set-aside

procurements towards purchase cards. 
Scope and Methodology

The contractor began this project by searching for

socioeconomic data required to be collected in the

U.S. General Services Administration's (GSA) 1998

master SmartPay contract for each credit card purchase. After a search of agency, GSA, and credit card

bank data, it became apparent that the requirement

had fallen through the cracks. Fortunately, some

information was available.

Only partial GSA credit card data breaking out the

small firm segment were available. Four GSA sources

were identified and evaluated in the appendix. NASA

did have a small firm breakout. Using NASA as a

representative agency is a conservative approach as

in comparison with some other agencies, NASA is

more likely to involve small businesses in the procurement process.

There are three government credit cards—purchase cards, travel cards and fleet cards. The purchase card is used to buy commodities like office

supplies, computers and peripherals, subscriptions,

and small bundles of services, while the fleet card is

used for minor vehicle-related expenses and the travel card is used for government travel. The three are

referred to as the SmartPay program. The report

focuses on purchase cards because they constitute

the largest share of government credit card purchases

and they allow the buyer more choice of vendors.

The analysis period was FY 1989 to FY 2001.

Ordering Information

The full text of this report and summaries of other

studies performed under contract to the U.S. Small

Business Administration’s Office of Advocacy are

available on the Internet at www.sba.gov/advo/research.

Printed copies are available for purchase from:

National Technical Information Service

5285 Port Royal Road

Springfield, VA 22161

Tel. (800) 553-6847

TDD: (703) 487-4639

www.ntis.gov

Order number: PB2003-100243

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