United States General Accounting Office

GAO Report to Congressional Committees

August 1996 ACQUISITION

REFORM

Purchase Card Use

Cuts Procurement

Costs, Improves

Efficiency

G O A

years

1921 - 1996

GAO/NSIAD-96-138

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-271689 

August 6, 1996

Congressional Committees

In 1993, the Vice-President’s National Performance Review (NPR)

recommended that agencies increase their use of government commercial

credit cards, called purchase cards, for small purchases to cut the red tape

normally associated with the federal procurement process. In 1994, card

use was further facilitated by the Federal Acquisition Streamlining Act of

1994 (FASA) and Executive Order 12931. FASA eliminated some

requirements for purchases of $2,500 or less, called micropurchases.1

 The

executive order encouraged agencies to use that micropurchase authority

to allow staff in program offices to use the card. As of fiscal year 1995,

cards were used at most federal agencies for over 4 million purchases

worth more than $1.6 billion.

As part of our legislatively mandated review of FASA implementation, we

reviewed the nature and extent of progress in using the purchase card.

Specifically, we examined the extent to which card use has led to

administrative savings or other benefits, the potential for growth in card

use, and the management controls over the program at the agency level.

We also looked for opportunities for governmentwide changes that would

help agencies improve their purchase card programs. Our review included

12 civilian and military agencies, including the agencies with the 9 largest

purchase card programs (see app. I). Combined, these 12 programs

account for more than 87 percent of the funds spent with the card.

Results in Brief Agencies have found they can support their missions at reduced costs by

having program staff use the purchase card for simple purchases. Further,

agency studies have shown that purchase card use reduces labor and

payment processing costs. In fact, a 1994 interagency study showed that

costs were often cut by more than half. Other studies have identified

millions in savings or potential savings from purchase card use. In

addition, some agencies have found that the card helped them absorb

some of the impact of their recent staff reductions. Others have found that

card use improved their abilities to support their missions by increasing

their efficiencies.

1

Micropurchases are exempt from the Buy American Act, certain small business requirements, and the

general requirement for competition.

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Since purchase cards first became available governmentwide, their use has

skyrocketed. However, there is significant potential for the program to

grow further as agency management encourages card use and as agencies

target purchases to be made with the card. For example, agencies

identified millions of purchases that could be made with the card. The

average purchase card transaction was $375 in fiscal year 1995, well below

the micropurchase threshold.

Although purchase card use has greatly increased, we found no evidence

that this has led to increased abuse. In fact, with the electronic data

maintained on all purchase card transactions, card use can be closely

monitored. Inspector general, audit agency, and internal agency reviews of

card programs since 1993 generally have found either that agencies’

controls were adequate to protect the government’s interests or that

agencies were addressing those instances where procedures were not

followed or control weaknesses existed. Overall, the reports did not

identify significant patterns of misuse.

Several inspectors general and other review reports we reviewed noted

that agencies were not getting the full benefit of the card because of how

their programs were being implemented. Most of the agencies in our

review indicated they were trying to improve their card programs by

emphasizing card use, reengineering their processes, and increasing their

use of automation. Still, there are opportunities to improve the program on

a governmentwide level. Officials at most of the agencies we reviewed

believed that the Federal Acquisition Regulation (FAR), which governs

federal procurement, should more clearly address the use of the card.

Also, while agencies want to learn from each other’s experiences, no

effective mechanism exists for them to communicate with each other to

share their improvements.

Background Purchase cards first came into use as part of the government’s effort to cut

the cost of buying goods and services. In March 1982, the President issued

an executive order directing executive agencies to reduce administrative

procurement costs. Under that order, in 1986, several agencies pilot tested

use of a government commercial credit card, called a purchase card, and

found that it reduced such costs. According to a report on the pilot tests,

those agencies found that the purchase card had advantages over other

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procurement methods.2 Generally, the card could be a less costly and

more efficient way to buy goods and services.

In 1989, the purchase card was made available governmentwide through a

competitively awarded contract with Rocky Mountain BankCard System

(RMBCS), administered by the General Services Administration (GSA). The

contract specifies controls that an agency must establish before issuing

cards to their staff. It also requires that an agency designate a program

coordinator, who serves as liaison to RMBCS and GSA and who is responsible

for the purchase card program within the agency.

In 1993, NPR identified the purchase card as an acquisition reform that

could save $180 million annually if one half of small purchases were made

with the card.3 NPR recommended that all federal agencies use purchase

cards and that the FAR be amended to promote and facilitate purchase card

use for making small purchases and in ordering from established

contracts. Card use was further facilitated and encouraged in

October 1994 by FASA, Executive Order 12931, and an Office of

Management and Budget memorandum to agency senior procurement

executives and the Deputy Under Secretary of Defense for Acquisition

Reform. In December 1994, an interim FAR rule was issued making the card

the preferred method for making micropurchases.

Purchase Card Has

Enabled Agencies to

Support Missions at

Reduced Costs and

Time

Agency officials have used the purchase card and the micropurchase

authority provided in FASA to move simple purchases from procurement

offices to program offices. Several studies have shown this move reduced

the labor and payment processing costs for those purchases by eliminating

steps from the procurement process and consolidating bills for many

purchases into one payment. One interagency study showed that costs

were often cut by more than half. Several agencies in our review identified

millions of dollars in current or potential savings from using purchase

cards. In addition, some agencies are using the card to help absorb the

impact of staff reductions being made as a result of the Federal Workforce

Restructuring Act of 1994, which has a goal of reducing government

employment by almost 273,000 staff. Planned reductions particularly target

2

The pilot report discussed the cost of the card relative to the cost of (1) blanket purchase agreements

(charge accounts established with qualified sources of supply used to fill anticipated repetitive needs

for supplies and services); (2) purchase orders (government offers to buy supplies, services, or

construction from commercial sources under specific conditions and not to exceed the small purchase

limit); (3) standard forms used for on-the-spot, over-the-counter purchases; and (4) imprest funds, or

cash.

3

At that time, small purchases were those purchases of $25,000 or less. FASA raised that threshold to

$100,000.

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administrative staff, such as the procurement and finance staff who buy

supplies and pay bills. Most agencies in our review also noted that, with

purchase cards, program office staff can buy needed goods and services

more quickly, thus improving their efficiencies and their abilities to

support their agencies’ missions.

Changes in Work

Processes Reduce the

Administrative Costs of

Purchases

In 1994, an interagency group, the Purchase Card Council, performed a

cost-benefit study on using the purchase card versus purchase orders.4

The group reviewed the labor cost of requisitioning, purchasing,

administering, receiving, invoicing items, and processing bills through

finance offices for payment. For all 17 organizations in the study, it found

that purchase cards were less expensive than purchase orders. For 15

organizations, purchase card use cut costs by at least one third.5

 For 8 of

these 15 organizations, costs were cut by over half. Per transaction savings

for the 17 organizations ranged from $1.42 to over $142, with an average

saving of about $54.

Since 1989, 9 of the 12 agencies in our review have performed cost-benefit

analyses on using purchase cards, including 5 agencies that were part of

the interagency study.6

 All found that the card was less expensive to use

than other methods. However, several noted that determining savings from

using the purchase card can be difficult because of several factors. For

instance, some studies noted that the purchase card does not replace all

transactions made with any one procurement method, such as purchase

orders, but instead usually partially replaces transactions previously made

by several different methods, such as purchase orders, imprest funds, and

blanket purchase agreements. Further, studies stated that the

administrative cost of a purchase is affected by local procedures, the

dollar amount,7

 and the degree that processing systems are automated.

Most of the studies we reviewed included the labor cost for program

officials to support the procurement process when using a tool other than

4

This study included the Departments of Health and Human Services, Commerce, and State; GSA; the

Federal Emergency Management Agency; and selected bureaus and agencies within the Departments

of Treasury, Transportation, and Interior.

5

In the other two organizations, using the card cut costs by about 28 percent and 10 percent,

respectively.

6

Several other agencies have used the $54 figure from the interagency study to estimate their savings.

7

The amount of administrative savings that may be realized from use of the purchase card depends in

part on whether a purchase exceeds the micropurchase threshold of $2,500. Many purchases in excess

of that amount are subject to various requirements, such as competition, that do not apply at or below

the micropurchase threshold.

Page 4 GAO/NSIAD-96-138 Acquisition Reform
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the card (e.g., ensuring funds are available, preparing a procurement

request, and identifying a vendor). About half of the studies also included

the labor cost for program officials to place purchase card orders or

reconcile statements. In some cases, the studies included the cost of an

administrative service fee charged by RMBCS until early 1994. None

included the value of rebates as part of the benefit.8

 All of the studies we

reviewed identified significant savings. However, because of the

previously mentioned factors, we found no one precise dollar figure that

could be used to reliably calculate savings for all government agencies.

Several agencies’ studies identified millions of dollars in current or

potential savings from card use. For instance, in 1994, Health and Human

Services identified the potential to save about $5.7 million a year by using

the card.9

 The Postal Service, currently the second largest card user, also

identified major current cost reductions. It estimated that using the card,

instead of other means, reduced costs by about $22 per transaction. In

fiscal year 1995, the Postal Service had almost 700,000 purchase card

transactions. Using the $22 figure, it would have reduced costs by over

$15 million. The Postal Service developed its estimate of cost reduction

per transaction by comparing the costs of ordering and making payment

for purchase card purchases versus noncompeted, single source

purchases. It found the shortest time for processing purchases without the

card was eight times longer than the shortest time with the card, for a

labor savings of $15.65 a transaction. It also estimated payment savings of

over $6.00 a transaction, based on the cost of paying for transactions

individually versus paying for all purchase card transactions with a single

monthly check.

According to officials at the Office of Federal Procurement Policy,

agencies can maximize the savings potential of the purchase card by

promoting streamlining and empowerment and eliminating unnecessary

paperwork. Officials stated that one way agencies could do this would be

to identify high-dollar aggregate purchases from individual merchants and

negotiate discounts with those vendors, as recommended by NPR. They

also noted that agencies have access to central purchasing contracts that

have quantity discounts negotiated into the prices. As an example, they

cited a contract for office supplies recently awarded by GSA that allows for

8

Under the contract, RMBCS will pay rebates based on sales volume for agencies that receive and pay

invoices electronically, receive reports electronically, and/or have an average of less than 54 days

between the date a charge is posted and the date payment is received.

9

This figure includes the Social Security Administration, which has since become an independent

agency. Without the Social Security Administration, such savings would be about $5.6 million a year.

Page 5 GAO/NSIAD-96-138 Acquisition Reform
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24-hour delivery and payment by purchase card and has prices below

discounted retail prices.

Shifting Purchases to

Program Offices Lessens

the Impact of Staff

Reductions

Agencies have reported that using the purchase card reduces the workload

in procurement and finance offices. At the same time, the number of staff

in those offices is being targeted for reductions by government reform

efforts. In 1993, the executive branch announced a goal to eliminate

252,000 government jobs, particularly targeting administrative areas. The

Federal Workforce Restructuring Act of 1994 later raised that goal to

272,900. According to the September 1995 update of NPR, more than

160,000 of those positions had been eliminated.

Several agencies in our review cited staffing cuts in support areas as one

reason they are emphasizing purchase cards. The Department of the

Interior noted that its procurement workforce has decreased by 12 percent

since 1993 and that its ability to manage its workload with reduced staff

can be partially attributed to the card. Social Security Administration

officials also told us that the finance staff is scheduled to be reduced by

about one third in fiscal year 1996 and that they will be better able to

manage those losses since the card has reduced the number of bills the

finance office is paying.

Card Use Helps Program

Offices Improve Efficiency

and Service Delivery

The reforms contained in FASA have enabled program staff to use the card

to make many purchases that had been handled by procurement offices.

While procurement offices had done the actual buying, program office

staff supported the procurement process by identifying the needed

supplies or services, preparing procurement requests, ensuring money was

available, and following up with procurement and other offices involved in

the purchases. With the authority provided in FASA and the purchase card,

program staff can buy the needed item or service. Most of the agencies in

our review reported that, with this change, program offices can improve

their efficiency by filling their requirements more quickly and reducing

procurement lead times. This improved efficiency enables them to better

deliver their services.

One example where service delivery has improved is at the Department of

Veterans’ Affairs, which pilot tested the use of the card in its vocational

rehabilitation and counseling program offices. In the pilot test, those

offices reduced the time veterans had to wait for services by an average of

22 days. They did this by using the card to pay for books, tools, and other

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items veterans needed to enter rehabilitation programs. This use of the

card allowed them to better serve veterans by reducing the time the

veterans waited to attend classes or to obtain the tools or books needed

for classwork. Based on the success of the pilot test, Veterans’ Affairs

plans to use the purchase card in vocational rehabilitation and counseling

programs nationwide.

Purchase Card

Program Has

Significant Growth

Potential

Since the beginning of the purchase card program, the use of the cards has

skyrocketed. However, there is still significant growth potential for card

use. During fiscal year 1990, the first full year that cards were available

governmentwide, the cards were used for about 271,000 purchases worth

about $64 million.10 Over the next 5 years, card purchases increased by

about 1,500 percent, and the value of those purchases increased by almost

2,400 percent until, by fiscal year 1995, purchase cards were used for more

than 4 million purchases worth over $1.6 billion. According to agency and

GSA officials, this growth is generally due to purchases below the

micropurchase level. In fiscal year 1995, the average purchase card

transaction, which could include purchases of several items, was $375.

The program growth by number of transactions and by dollars is shown in

figure 1.

10All sales figures are in constant fiscal year 1995 dollars.

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Figure 1: Program Growth

FY90 FY91 FY92 FY93 FY94 FY95

0

1,000

2,000

3,000

4,000

5,000

Thousands of transactions

FY90 FY91 FY92 FY93 FY94 FY95

0

500

1,000

1,500

2,000

Millions of dollars in sales

Source: RMBCS.

Currently, most agencies use purchase cards to some extent. Still, agency

data show many purchases that could be made with the card are being

made by other means. Some agencies have set goals for card use or have

identified purchases that they believe should be made with the card. For

instance:

• The Department of Agriculture could make 207,000 purchases by using the

card instead of purchase orders.

• Health and Human Services could make about 100,000 purchases using the

card in program offices instead of purchase orders in procurement offices.

• Veterans’ Affairs could make most of its 1.4 million micropurchases with

the card.

Neither GSA nor the agencies we reviewed believed the cards have been

used to their fullest potential. Instead, they believe that use will increase

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as agencies continue to emphasize card use for existing cardholders and

add new cardholders in program offices. The results can be dramatic. In

the first 4 months of fiscal year 1996, Veterans’ Affairs exceeded by almost

200 percent the number of card purchases it had made in all of fiscal year

1995. Card use is also growing at the Department of the Army, which has

the largest agency card program. In the first 10 months of fiscal year 1995,

the Army more than doubled its fiscal year 1994 card purchases, from over

310,000 to over 701,000. According to Army data, that number could

increase to almost 1.4 million if the Army were to make 80 percent of its

micropurchases with the card.

Concerns About

Systematic Abuse

Have Not Materialized

The emphasis in the purchase card program has been on using the cards to

allow staff in program offices to make simple purchases. At the same time,

however, there have been concerns that placing the cards in the hands of

program staff would lead to increased abuse. We found no evidence of

increased abuse. In fact, with the controls required by the purchase card

contract and some tools that agencies have developed, purchase card use

can be closely monitored.

The purchase card contract requires that agencies have certain specified

procedures in place before any purchase cards can be issued to agency

staff. For example, agencies must have procedures to

• identify, by name, those persons who are authorized to use cards;

• set spending limits for cardholders and offices, including single purchase

limits and monthly limits;

• approve purchases and ensure funds are available before goods or

services are bought; and

• reconcile and approve cardholder statements.

Agencies may add other management and financial controls they deem

necessary. Also, agencies have recently been able to obtain RMBCS

electronic data that identify purchases by cardholder, approving official,

date, dollar amount, merchant type, and merchant name. Those agencies

in our review that have begun using this electronic data are finding that

the card leaves a trail that is more complete and easier to follow than

traditional paper records. In addition to these procedural controls,

agencies have another safeguard against fraudulent use of the card by

unauthorized individuals—they can dispute any purchases they find

questionable. In such cases, the contract requires RMBCS to issue a credit

against that purchase until the dispute is resolved.

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One organization that has used the electronic data is the Postal Service.

Postal Inspection Service officials developed surveillance software that

allows them to analyze thousands of card transactions from a remote

location with limited manpower. They are able to analyze transactions by

cardholder, approving official, dollar amount, date of purchase, vendor

name, vendor type, vendor city, and other attributes. At the

recommendation of the Inspection Service, the surveillance software is

being made available to appropriate Postal Service managers nationwide.

Postal Service officials believe that this will improve their oversight of the

card program, since the electronic reviews are more expedient than

reviews of paper records.

Since 1993, agency inspectors general, audit agencies, or internal review

offices have reviewed card programs at most of the agencies in our review.

Generally, those reviews found either that controls were adequate or that

agencies were taking steps to address control weaknesses. Such

weaknesses included noncompliance with procedures and failure to

record purchases of accountable property. The reviews did identify

several instances where cards were used for prohibited or questionable

purchases. Also, officials from one inspector’s general office expressed

concern about the rapid growth in card use and questioned whether

budgetary and other management controls were sufficient to ensure that

credit card purchases were warranted and justified. Overall, the reviews

did not identify significant patterns of misuse.

Opportunities Exist to

Further Enhance

Agency Card

Programs

Several inspectors general, audit agencies, and internal review reports

noted that agencies were not achieving the full benefit of the card because

much of the paperwork had not been eliminated from processes, cards

had not been provided to staff outside of procurement offices, or card use

had not been encouraged or had been excessively limited. Most of the

agencies we reviewed indicated they were taking steps to address such

concerns. Agency officials told us they were emphasizing card use,

reengineering their processes, and developing automated tools to improve

their programs. They stated that their efforts were producing benefits,

including increased savings. There are still opportunities, though, for the

program to be improved on a governmentwide level. For instance, most

agencies in our review believed that more explicit guidance to promote the

purchase card was needed in the FAR. At present, the FAR only discusses

the card in the micropurchase section. Also, we found no effective

mechanism for agencies to communicate with each other about their

experiences and share innovations.

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FAR Guidance for

Purchase Card Is

Insufficient

In 1993, NPR recommended that the FAR be amended to promote and

facilitate purchase card use for making small purchases and ordering from

established contracts.11 At the time, the FAR provided no guidance on card

use, although the cards had been available governmentwide since 1989. As

part of implementing FASA, an interim FAR rule for micropurchase

procedures was issued in December 1994 that encouraged the use of

purchase cards or electronic purchasing techniques for micropurchases to

the extent practicable.

Officials at most of the agencies in our review told us that more explicit

coverage to promote the card in the FAR would be helpful, although some

were concerned that coverage not be too restrictive. While agencies have

their own regulations and policies for card use, those documents typically

refer to the FAR for guidance.12 In fact, as far back as 1989, Health and

Human Services identified the need for purchase card coverage in the FAR

and agency regulations. Health and Human Services noted then that, like

all agencies, it was being encouraged to use the purchase card, but FAR

coverage had not yet been developed and agency regulations would

naturally follow the FAR, rather than precede it.

With the current coverage, some agencies in our review had differing

opinions or were confused about how the card could be used above and

even below the micropurchase threshold. Areas of confusion or dispute

included whether the card could be used to pay for services or

nonexpendable items. The FAR does not provide guidance on usage of the

card comparable to the guidance provided for imprest funds, purchase

orders, and blanket purchase agreements. Each of those has a separate

section in the FAR. The purchase card, on the other hand, is only discussed

in the FAR’s micropurchase section. That section states that use of the card

is not limited to micropurchases if otherwise authorized under agency

procedures. However, no guidance is provided for such use.

As the FAR was being revised to incorporate changes from FASA, GSA

commented on the proposed changes during the public comment period.

GSA commented that the small purchase/simplified procedures section was

11Authority for revising the FAR is shared by the three executive agencies represented on the Federal

Acquisition Regulatory Council by the Secretary of Defense, the Administrator of General Services,

and the Administrator of National Aeronautics and Space or their designees. The Office of Federal

Procurement Policy within the Office of Management and Budget is responsible for providing overall

leadership and for ensuring action in cases where the three agencies cannot agree or fail to issue FAR

revisions in a timely manner.

12The Postal Service, which is not subject to the FAR, has amended its Procurement Manual to include

the card.

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illogical, confusing, and of limited usefulness to the program staff.

Specifically, GSA said that the proposed language did not provide the

necessary encouragement to agencies to make maximum effective use of

the card and did not promote the objectives of Congress or the executive

branch. GSA added that even with the proposed changes, the FAR would

provide more coverage for imprest funds, which the government wants to

deemphasize, than for purchase cards, which the government wants to

encourage.

An interagency team has looked at how the FAR addresses small

purchases/simplified procedures to determine what revisions may be

necessary and has proposed FAR language. In its proposal, the team has

included a separate section on the purchase card. A proposed FAR rule is

planned for issuance later this year.

Agencies Lack an Effective

System for Sharing

Innovations and

Experiences

Most of the agencies in our review have identified the potential to increase

their savings or efficiencies gained from card use by reengineering their

programs or using automated tools to improve their processes. Agency

officials told us that they are interested in communicating with each other

about their efforts and have identified instances where tools developed by

one agency can be useful to other agencies. However, we found no

effective system for agencies to communicate with each other about their

successes or problems. In fact, several agencies in our review identified

problems that we learned had been addressed or partially addressed by

other agencies’ efforts.

Agencies have found that efforts to improve their programs can be very

resource-intensive, requiring input from several offices, top management

support, and good communication. However, they have also found that

such efforts can have a significant payoff. Agriculture, for example,

initially emphasized purchase cards because it found that the process cost

was less than half of that for a purchase order, or $32 versus $77. It has

since determined that reengineering can cut the process cost almost in

half again. By automating the billing and payment processes as

recommended by a cross-functional team guided by a top management

review board, Agriculture expects to reduce the card process cost to $17.

According to its business process reengineering report, this could lead to

over $45 million in savings from fiscal years 1996 through 2000. This

amount is in addition to what is already saved by using cards instead of

purchase orders. Agriculture has already eliminated an administrative

payment system costing $400,000 per year.

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Other agencies have also automated or reengineered their payment

processes, including the Social Security Administration, Veterans’ Affairs,

and, within the Department of Transportation, the Coast Guard, which

accounts for about 70 percent of Transportation’s card purchases. Agency

officials told us that, by improving how they pay their bills, they have also

increased their potential for rebates. In fact, from November 1994 through

July 1995, the most current period for which data were available,

Transportation was the largest rebate recipient. Over that time period,

Transportation received 34 percent of all rebates paid to agencies, even

though it accounted for only 8 percent of sales. In addition to these efforts,

some other agencies or organizations within agencies have developed

automated tools to address particular problems. For example:

• Within the Department of Defense, the Defense Mapping Agency

developed a database intended to help streamline the process for

reconciling cardholder statements and maintain accounting information

and property accountability for goods and services purchased with the

card.

• Within the Department of Transportation, the Federal Aviation

Administration developed a database intended to help cardholders

reconcile their statements.

• The Postal Service developed surveillance software, discussed earlier in

this report, intended to improve program oversight.

• GSA and, within Defense, the Army Management Engineering College,

developed an interactive program intended to improve training for

cardholders and approving officials.

Agencies have found that their improvement efforts can be useful to other

agencies. For instance, the Postal Service has demonstrated its

surveillance software for purchase card program coordinators from 

15 agencies and inspectors general from 10 agencies, both civilian and

military. Almost all officials attending the demonstrations believed that the

software was worth deploying governmentwide and that it would be useful

for finance, accounting, inspectors general, and program management

offices. The Postal Service plans to make its software available to other

agencies. Officials said the software is being provided to the Departments

of Transportation, Treasury, and Commerce. In another example, after the

Defense Mapping Agency’s database was profiled in an issue of

“Government Computer News,” officials said they were inundated with

requests for information from other agencies, both military and civilian.

They sent copies of their database to more than 90 agencies and offices in

32 states and Europe.

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Although agencies want to share information about their innovations, we

found that innovations were not always well known outside the agencies

that developed them. We also found no effective means for agencies to

communicate with each other about their problems or improvements.

Some agency officials share information through informal networks and

there are some formal multiagency forums, such as GSA and RMBCS

purchase card conferences, the Purchase Card Council, and the Chief

Financial Officers Council’s Financial Implementation Team for Electronic

Commerce. However, these mechanisms are not readily accessible to all

officials, particularly those who are away from headquarters or who are

newer to the program. Further, there can be considerable lag time

between when an agency identifies a problem or develops an innovation

and when a formal interagency meeting or conference is scheduled.

Without a more effective means of communication, agencies may not be

able to build on the successes and failures of other agencies to improve

their purchase card programs. Officials at the Office of Federal

Procurement Policy stated that Acquisition Reform Net, a government

Internet site for acquisition reform information and discussion, could be

used for this type of communication. By its nature, it would be available to

agency officials nationwide and could be used to disseminate information

or questions quickly.

Recommendations Using the purchase card has helped government agencies achieve

administrative savings and efficiencies, absorb some of the impact of

staffing cuts, and improve their abilities to fulfill their missions. However,

the FAR does not provide guidance on usage of the card comparable to the

guidance provided for imprest funds, purchase orders, and blanket

purchase agreements. Further, agencies have no effective means to

communicate with each other about their problems and innovations. We

therefore recommend that the Administrator for Federal Procurement

Policy

• ensure, in conjunction with the Federal Acquisition Regulatory Council,

that the FAR provides clear guidance on the appropriate uses of the

purchase card as a means for making payments, purchases, and orders

from established contracts and

• establish a site on one of the government’s electronic media, such as the

Acquisition Reform Net on the Internet, to facilitate agencies’ efforts to

exchange information about problems or progress with purchase card use.

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Agency Comments In commenting orally on a draft of this report, the Office of Federal

Procurement Policy said that it had no major objections. It obtained

informal comments from the agencies we reviewed and found that they

also indicated no material objections to our report, although several

agencies stressed that any FAR coverage should emphasize flexibility and

not be restrictive. We have incorporated in our report, where appropriate,

editorial and technical comments that were provided.

Scope and

Methodology

To obtain background and program history information, we reviewed

executive and congressional guidance, including Executive Orders 12931

and 12352; the Vice President’s NPR and subsequent updates; FASA; the FAR;

and agency regulations, policies, and directives. We also interviewed

officials from the Office of Management and Budget’s Office of Federal

Procurement Policy, GSA, and the Interagency Purchase Card Council. We

obtained card program statistical data from RMBCS and GSA for the

government as a whole and by agency for 1989 through 1995. The data

included number and dollar value of transactions and rebates and the

number of cardholders. We did not validate the computer-generated data;

however, we discussed data reliability and quality with all of the agencies

in our review and with GSA.

We reviewed purchase card programs in the agencies with 12 of the largest

programs, including the 9 largest programs judged by either dollars or

transactions (see app. I). In addition to obtaining data on program size, we

obtained data on potential for growth, length of involvement in the

purchase card program, special program initiatives, and administrative

responsibility.

To determine the extent to which card use has resulted in administrative

savings or other benefits, we interviewed purchase card program

coordinators, officials from agency finance and procurement offices, and

officials from GSA, NPR, and the Office of Federal Procurement Policy. We

also obtained and reviewed cost-benefit studies, management reports, and

reengineering studies. We discussed the methodology used for those

studies, and the subsequent findings and projections, with appropriate

personnel. We did not verify the cost data and savings projections in those

studies.

To determine the potential for continued growth in purchase card use, we

examined trends in card use and projections made by the agencies in our

Page 15 GAO/NSIAD-96-138 Acquisition Reform
B-271689 

review, GSA, and RMBCS. We also reviewed agency and federal directives

encouraging, requiring, or setting goals for card use.

To identify protections against misuse, we interviewed appropriate

personnel at agencies and audit organizations. In addition, we reviewed

the RMBCS contract guide, agency purchase card procedures and

regulations, and internal audit and inspectors general reports.

To identify opportunities to improve agency card programs, we

interviewed appropriate agency personnel and reviewed public comments

on proposed FAR changes stemming from FASA and agencies’ plans to

automate or reengineer portions of their systems or processes. We also

witnessed demonstrations of the Postal Service’s surveillance software,

the Social Security Administration’s and the Coast Guard’s automated

payment systems, the Defense Mapping Agency’s and the Federal Aviation

Administration’s tracking databases, and GSA’s and the Army Management

Engineering College’s training material.

We conducted our work from May 1995 through April 1996 in accordance

with generally accepted government auditing standards.

We are sending copies of this report to the Director, Office of Management

and Budget; the Administrator for Federal Procurement Policy; the

Administrator, GSA; and officials at the agencies in our review. Copies will

also be made available to others upon request.

Please contact me or my Associate Director, David Cooper, at

(202) 512-4841 if you or your staff have any questions concerning this

report. Major contributors to this report were David Childress, Maria

Storts, and Diane Handley.

Louis J. Rodrigues

Director, Defense Acquisition Issues

Page 16 GAO/NSIAD-96-138 Acquisition Reform
B-271689 

List of Congressional Committees

The Honorable Ted Stevens, Chairman

The Honorable John Glenn, Ranking Minority Member

Committee on Governmental Affairs

United States Senate

The Honorable Strom Thurmond, Chairman

The Honorable Sam Nunn, Ranking Minority Member

Committee on Armed Services

United States Senate

The Honorable Christopher S. Bond, Chairman

The Honorable Dale L. Bumpers, Ranking Minority Member

Committee on Small Business

United States Senate

The Honorable William F. Clinger, Jr., Chairman

The Honorable Cardiss Collins, Ranking Minority Member

Committee on Government Reform and Oversight

House of Representatives

The Honorable Floyd D. Spence, Chairman

The Honorable Ronald V. Dellums, Ranking Minority Member

Committee on National Security

House of Representatives

The Honorable Jan Meyers, Chairman

The Honorable John J. LaFalce, Ranking Minority Member

Committee on Small Business

House of Representatives

Page 17 GAO/NSIAD-96-138 Acquisition Reform
Appendix I 

Agencies Reviewed

Civilian Agencies Department of Agriculture, Washington, D.C.

Department of Commerce, Washington D.C.

Department of Health and Human Services, Washington, D.C.

Department of Interior, Washington, D.C.

Department of Transportation, Washington, D.C.

Department of the Treasury, Washington, D.C.

Department of Veterans Affairs, Washington, D.C.

Social Security Administration, Baltimore, Md.

U.S. Postal Service, Washington, D.C.

Department of

Defense

Department of the Air Force

Department of the Army

Department of the Navy

(705122) Page 18 GAO/NSIAD-96-138 Acquisition Reform
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