Report to Congressional Requesters

United States General Accounting Office 

GAO 

March 2004 CONTRACT 

MANAGEMENT 

Agencies Can Achieve 

Significant Savings on 

Purchase Card Buys 

GAO-04-430 
www.gao.gov/cgi-bin/getrpt?GAO-04-430.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact David Cooper 

at (202) 512-5841 (cooperd@gao.gov) or 

Greg Kutz at (202) 512-9505. 

Highlights of GAO-04-430, a report to 

congressional requesters 

March 2004 

CONTRACT MANAGEMENT 

Agencies Can Achieve Significant 

Savings on Purchase Card Buys 

Although some agencies have begun to take actions to achieve savings 

through their purchase card programs, most have not identified and taken 

advantage of opportunities to obtain more favorable prices on purchase card 

buys—opportunities that could yield hundreds of millions of dollars in 

savings. For example, most agencies have established some discount 

agreements with major purchase card vendors (those vendors with whom 

they did more than $1 million in purchase card business in fiscal year 2002), 

but these agreements cover only a few of the hundreds of major vendors and 

a limited number of products. Further, because agency purchase card 

training programs lack practical information to help cardholders take 

advantage of existing discount agreements or GSA’s Federal Supply 

Schedule contracts, cardholders paid higher prices than necessary. The 

agencies that have taken steps to obtain better prices by negotiating 

discounts with their major vendors have achieved notable savings on 

purchase card buys. For example, in fiscal year 2003, the Agriculture 

Department negotiated a discount agreement for office supplies that yielded 

savings of $1.8 million—about 10 percent off Schedule contract prices—and 

the Interior Department recently negotiated agreements with information 

technology vendors for discounts up to 35 percent off Schedule prices. A 

conservative approach indicates that, if the agencies we reviewed obtained 

discounts of only 10 percent with their major vendors, annual savings of up 

to $300 million could be achieved. 

Most agencies have not more aggressively pursued savings through the 

purchase card because of a lack of management focus—simply put, this 

issue has not been the center of attention for managers. Further, the Office 

of Management and Budget has not leveraged its governmentwide oversight 

role by collecting and disseminating information on the successful initiatives 

some agencies have undertaken. Agency officials also expressed concerns 

that imposing additional requirements on cardholders would undermine the 

program’s intent to streamline acquisitions and that pursuing discount 

agreements with large suppliers would limit their ability to provide 

opportunities for small businesses. They also cited poor data as a barrier to 

identifying savings opportunities. However, as individual agencies have 

demonstrated, these concerns are not insurmountable. For example, the Air 

Force’s Air Mobility Command provides its cardholders a list of community 

vendors—many of which are small businesses—that offer discounts, making 

it easy for the cardholders to obtain discounts from local small businesses. 

Despite data limitations, information such as vendor sales reports could be 

used to identify major vendors with whom to pursue discount agreements 

and to provide insight into cardholder activity. 

From 1994 to 2003, the use of 

government purchase cards 

exploded from $1 billion to $16 

billion. Most purchase card 

transactions are for small 

purchases, less than $2,500. While 

agencies estimate that using 

purchase cards saves hundreds of 

millions of dollars in administrative 

costs, the rapid growth of the 

purchase card presents 

opportunities for agencies to 

negotiate discounts with major 

vendors, thereby better leveraging 

agencies’ buying power. 

To discover whether agencies were 

doing this, we examined program 

management and cardholder 

practices at the Departments of 

Agriculture, Army, Navy, Air Force, 

Interior, Justice, Transportation, 

and Veterans Affairs. GAO also 

examined why agencies may not 

have explored these opportunities.

GAO is making several 

recommendations to each of the 

agencies as well as the Office of 

Management and Budget and the 

General Services Administration 

(GSA), aimed at encouraging 

agencies to begin taking steps to 

achieve savings through the 

purchase card program. GAO 

received comments on a draft of 

this report, either written or via email, from the Departments of 

Agriculture, Defense, the Interior, 

Transportation, and Veterans 

Affairs and from GSA. In general, 

the agencies agreed with GAO’s 

findings and recommendations. 
Page i GAO-04-430 Purchase Card Pricing 

Letter 1

Results in Brief 2

Background 4

Agencies Generally Have Not Taken Advantage of Opportunities to 

Obtain Savings 8

Lack of Management Focus Has Limited Efforts to Capture Savings 18

Conclusions 27

Recommendations for Executive Action 27

Agency Comments and Our Evaluation 29

Appendix I Scope and Methodology 34 

Appendix II Comments from the Department of Defense 38 

Appendix III Comments from the General Services 

Administration 41 

Appendix IV Comments from the Department of the Interior 43 

Appendix V Comments from the Department of Veterans Affairs 47 

Appendix VI Information on Purchase Card Expenditures 52 

Appendix VII GAO Contacts and Staff Acknowledgments 55 

Related GAO Products 56 

Contents 
Page ii GAO-04-430 Purchase Card Pricing 

Tables 

Table 1: Purchase Cards and Purchase Card Expenditures, Fiscal 

Year 2002 6

Table 2: Purchase Card Expenditures and Expenditures with Major 

Vendors, Fiscal Year 2002 9

Table 3: Department of Agriculture Purchase Card Expenditures by 

Transaction Dollar Value, Fiscal Year 2002 52

Table 4: Department of Defense Military Services Purchase Card 

Expenditures by Transaction Dollar Value, Fiscal Year 

2002 52

Table 5: Department of the Interior Purchase Card Expenditures by 

Transaction Dollar Value, Fiscal Year 2002 53

Table 6: Department of Justice Purchase Card Expenditures by 

Transaction Dollar Value, Fiscal Year 2002 53

Table 7: Department of Transportation Purchase Card 

Expenditures by Transaction Dollar Value, Fiscal Year 

2002 53

Table 8: Department of Veterans Affairs Purchase Card 

Expenditures by Transaction Dollar Value, Fiscal Year 

2002 54

Figure 

Figure 1: Purchase Card Expenditures—Fiscal Years 1994 to 2003 5

Abbreviations 

FAR Federal Acquisition Regulation 

FASA Federal Acquisition Streamlining Act 

GSA General Services Administration 

JWOD Javits-Wagner-O’Day Act 

OMB Office of Management and Budget 

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Page 1 GAO-04-430 Purchase Card Pricing 

March 12, 2004 

The Honorable Susan M. Collins 

Chairman 

Committee on Governmental Affairs 

United States Senate 

The Honorable Russell D. Feingold 

United States Senate 

The Honorable Janice Schakowsky 

House of Representatives 

The introduction of government purchase cards fundamentally changed 

the way agencies make small, routine purchases of goods and services. 

The vast majority of purchase card transactions are micropurchases, 

purchases in amounts not greater than $2,500. Purchase card use has 

increased significantly over the past decade—from less than $1 billion in 

fiscal year 1994 to more than $16 billion in fiscal year 2003. This explosive 

growth has presented both challenges and opportunities. While estimates 

indicate that the use of government purchase cards could save taxpayers 

hundreds of millions of dollars in administrative costs over time, our office 

has reported that inadequate controls over purchase card programs left 

agencies vulnerable to fraud, waste, and abuse. Agencies are working, 

under the guidance of the Office of Management and Budget (OMB), to 

strengthen these controls. 

Given the rapid growth of this program, we and agency inspectors general 

have recently raised concerns about whether agencies and individual 

cardholders are seizing the opportunity to obtain discounts commonly 

available in the commercial marketplace for large volume purchasers.1

Recognizing the potential for increased savings, you asked us to (1) 

determine whether agencies are taking advantage of opportunities to help 

 1

 For example, see U.S. General Accounting Office, Purchase Cards: Navy Is Vulnerable to 

Fraud and Abuse but Is Taking Action to Resolve Control Weaknesses, GAO-02-1041

(Washington D.C.: Sept. 27, 2002), 42-43; and Department of Veterans Affairs, Office of 

Inspector General, Evaluation of The Department of Veterans Affairs Purchasing 

Practices, Report No. 01-01855-75, (Washington, D.C.: May 15, 2001). 

United States General Accounting Office

Washington, DC 20548 
Page 2 GAO-04-430 Purchase Card Pricing 

cardholders obtain more favorable purchase card prices and (2) if not, 

identify the reasons why. 

We examined purchase card program management practices at eight 

federal agencies that account for over 85 percent of the government’s 

purchase card spending: the Departments of Agriculture; the Interior; 

Justice; Transportation; Veterans Affairs; and within the Department of 

Defense (DOD), the Departments of the Army, Navy, and Air Force.2

 In 

addition, we reviewed selected fiscal year 2002 purchase card 

transactions, at or below the micropurchase level, with major vendors at 

the eight agencies and compared prices paid to prices available through 

the General Services Administration’s (GSA) Federal Supply Schedule 

(Schedule)3

 and telecommunications contracts. Although these 

transactions were selected at random from the population of micropurchase4

 transactions with vendors having the highest purchase card 

sales at the eight agencies, we cannot project the results to the population 

of transactions governmentwide. We also engaged the Dun and Bradstreet 

Corporation to perform a spend analysis of the Interior Department’s fiscal 

year 2002 purchase card transactions to illustrate how a detailed analysis 

could begin to identify opportunities for purchase card savings. We 

conducted our work in accordance with generally accepted government 

auditing standards. For more information on our scope and methodology, 

see appendix I. 

Although we found some initiatives under way to obtain vendor discounts, 

the agencies we reviewed generally had not seized opportunities to obtain 

more favorable prices on purchase card buys—opportunities that could 

yield hundreds of millions of dollars in savings. Agency efforts were 

generally fragmentary and incomplete. For example, most agencies had 

established some agencywide discount agreements with major purchase 

card vendors, but the agreements generally covered only a few of the 

 2

 We also met with officials of the Department of Homeland Security because certain 

components of the Departments of Agriculture, Justice, and Transportation were 

transferred to the new department in March 2003. 

3

 The Schedule program offers a large group of commercial products and services ranging 

from office supplies to information technology services. 

4

 Micropurchases are acquisitions of supplies or services the aggregate amount of which 

does not exceed the micropurchase threshold. Generally, the micropurchase threshold is 

$2,500, but for certain purchases the Federal Acquisition Regulation defines a different 

threshold (FAR 2.101). 

Results in Brief 
Page 3 GAO-04-430 Purchase Card Pricing 

hundreds of major vendors—those with whom an agency spent $1 million 

or more using the purchase card. Some discount agreements did not cover 

the full range of products cardholders purchased from the vendors. In 

addition, most agency training has appropriately focused on internal 

controls, but the training has not focused on incorporating practical 

information to help cardholders take advantage of existing discount 

agreements or Schedule contracts. Consequently, we found that some 

cardholders paid higher prices than necessary. For example, hundreds of 

Interior Department purchase card transactions with three major office 

supply vendors were for a particular model of ink cartridge, but most of 

these purchases were made at prices higher than the vendors’ Schedule 

prices. The experience of some agencies demonstrates agencies can 

achieve significant savings on purchase card buys. For example, the 

Agriculture Department negotiated a discount agreement for office 

supplies that yielded savings of $1.8 million—or about 10 percent off 

Schedule contract prices—during fiscal year 2003. Interior recently 

negotiated agreements with information technology vendors that give 

cardholders discounts of up to 35 percent off Schedule prices. If the 

agencies we reviewed negotiated and properly executed agreements 

providing discounts of just 10 percent off of Schedule prices with the 

major purchase card vendors from whom they currently buy in volume, a 

conservative approach indicates that $300 million in savings could be 

realized annually.5

Agencies have not taken advantage of potential opportunities to capture 

purchase card savings because of a lack of management focus and 

oversight. The opportunity simply has not been the center of attention for 

most agency managers, who have been absorbed in improving internal 

controls and other priorities. Further, OMB has not leveraged its 

governmentwide oversight role by collecting and disseminating 

information on the successful initiatives some agencies have undertaken. 

In addition, agency officials identified several challenges that, in their 

view, have hindered them from more aggressively pursuing savings 

through the purchase card program. First, agencies are reluctant to impose 

additional requirements on cardholders, fearing that the intent of the 

program as a streamlined acquisition process would be subverted. Second, 

agency officials told us that actively pursuing discount agreements with 

large suppliers would provoke concerns about their ability to comply with 

socioeconomic requirements such as providing opportunities for small 

 5

 See appendix I, “Scope and Methodology.” 
Page 4 GAO-04-430 Purchase Card Pricing 

businesses. Third, officials cited the lack of detailed information on the 

specific products and services purchased as a hindrance to analyzing 

purchase card trends. These concerns are not insurmountable, and, in fact, 

individual agencies have been successful in addressing them. For example, 

some cardholders found Schedule contract and discount agreement 

vendors an effective and convenient way to fill their needs rather than a 

burden. The Air Force’s Air Mobility Command provided its cardholders a 

list of community vendors—many of which were small businesses—that 

offered discounts, making it easy for the cardholders to obtain discounts 

from local small businesses. Further, despite the data limitations, agencies 

can fairly easily identify major vendors with whom they could pursue 

discount agreements. Vendor reports on sales under discount agreements 

can provide insight into whether cardholders are using the agreements. 

To encourage agencies to begin taking steps to capitalize on opportunities 

for savings through the purchase card program, we are making 

recommendations to OMB, GSA, and the Departments of Agriculture, 

Defense, the Interior, Justice, Transportation, and Veterans Affairs 

concerning actions that could be taken to increase management attention 

on purchase card pricing issues, such as negotiating discount agreements 

with major vendors, improving cardholder training, and developing 

mechanisms for evaluating cardholder buying practices to assess whether 

cardholders are receiving favorable pricing. GSA and the Departments of 

Agriculture, Defense, and Veterans Affairs generally agreed with our 

recommendations. The Departments of Transportation and the Interior did 

not explicitly agree or disagree with our recommendations but offered 

several observations on our report. We did not receive comments from the 

Departments of Homeland Security or Justice or from OMB. The written 

comments we received are reproduced in appendixes II through V. 

Through the purchase card program, agency personnel can acquire the 

goods and services they need directly from vendors. GSA, which manages 

the purchase card program governmentwide, has awarded contracts to 

banks to provide standard commercial charge cards for use by federal 

employees. When GSA first pilot-tested the purchase card in the late 1980s, 

its use was restricted to procurement personnel. In 1994, however, the 

Federal Acquisition Streamlining Act (FASA)6

 defined micropurchases as 

purchases in amounts not greater than $2,500. The act authorized 

 6

 P.L. 103-355, Sec. 4301. 

Background 
Page 5 GAO-04-430 Purchase Card Pricing 

cardholders to make micropurchases without obtaining competitive 

quotations if they considered the price reasonable and directed that 

purchases be distributed equitably among qualified suppliers. The Federal 

Acquisition Regulation (FAR) designated the purchase card as the 

preferred method of making micropurchases.7

 By shifting authority for 

small purchases from procurement offices to individual cardholders, 

agencies dramatically improved their ability to acquire quickly and easily 

items that were needed for day-to-day operations and to reduce 

administrative costs. 

Since the passage of FASA, the dollar value of goods and services acquired 

through the purchase card has exploded, as figure 1 shows. This growth 

was accompanied by an increase in the number of personnel using the 

purchase card. 

Figure 1: Purchase Card Expenditures—Fiscal Years 1994 to 2003 

 7

 FAR 13.201(b). Further, FAR 13.301 establishes guidelines for the use and management of 

the purchase card. 
Page 6 GAO-04-430 Purchase Card Pricing 

Table 1 provides information on fiscal year 2002 purchase card activity for 

the eight agencies we reviewed. Purchase card transactions at these 

agencies account for over 85 percent of the government’s purchase card 

spending. While purchase cards may be used to make payments under 

established contracts in addition to making micropurchases, an 

overwhelming majority of transactions are micropurchases. At the eight 

agencies reviewed, micropurchases represented 98 percent of transactions 

and accounted for 63 percent of the dollars expended. Appendix VI 

provides additional information on purchase card activity at the agencies 

we reviewed. 

Table 1: Purchase Cards and Purchase Card Expenditures, Fiscal Year 2002 

Agency 

Purchase cards 

 (as of Sept. 30, 2002) 

Expenditures 

(dollars in thousands) 

Department of Agriculture 23,448 $592,296 

Department of Defense 

 Air Force 77,318 1,604,367 

 Army 101,398 2,739,612 

 Navy 22,594 1,784,128 

Department of the Interior 88,736a 487,282 

Department of Justice 16,274 593,576 

Department of Transportation 22,243 425,431 

Department of Veterans Affairs 32,421 1,560,309b

Total 384,432 $9,787,001 

Source: GSA, GAO analysis. 

a

The Department of the Interior has an integrated card program, with a single card being used for 

purchases, travel, or fleet expenditures. Data represent the total number of charge cards. 

b

Does not include about $2.7 billion in purchase card transactions under Veterans Affairs’ prime 

vendor program. 

GSA, whose mission is to help federal agencies better serve the public by 

offering acquisition services at the best value, has created several tools 

that can help cardholders obtain more favorable pricing for goods and 

services. The most common of these is the Schedule program, which 

offers discounted prices on a wide range of commercial goods and 

services from multiple vendors.8

 The GSA Advantage on-line shopping 

 8

 Although GSA negotiates to obtain discounted prices on its Schedule contracts, the GSA 

Inspector General has raised concerns about whether GSA is getting the best possible 

prices from vendors. GSA is currently examining options to address these concerns. 
Page 7 GAO-04-430 Purchase Card Pricing 

service allows agencies to compare prices under various Schedule 

contracts, place orders, and make payments over the Internet. In addition, 

GSA has awarded contracts that offer federal agencies discounted prices 

on telecommunications services. 

Our prior work found that weak internal controls left purchase card use at 

DOD and several civilian agencies vulnerable to fraud and abuse. The list 

of Related Products at the end of this report identifies recent work in this 

area. To address these concerns, Congress has enacted legislation that 

directs DOD to improve program management by limiting the number of 

purchase cards, providing appropriate training to purchase card officials 

and cardholders, monitoring purchase card activity, disciplining 

cardholders who misuse the purchase card, and assessing the credit 

worthiness of cardholders.9

 We recently reported10 that DOD has taken a 

number of actions to improve the controls over the purchase card program 

based on congressional action and our recommendations. To improve 

management of the purchase card program governmentwide, the proposed 

Purchase Card and Travel Card Accountability Act of 200311 would require 

the Administrator of the Office of Federal Procurement Policy to prescribe 

a governmentwide policy regarding the appropriate and inappropriate uses 

of the purchase and travel cards. In addition, the proposed Credit Card 

Abuse Prevention Act of 200312 would require civilian agencies to 

promulgate regulations to establish safeguards and internal controls to 

prevent fraud, misuse, and abuse. 

 9

 Bob Stump National Defense Authorization Act for Fiscal Year 2003, P.L. 107-314, Sec. 

1007; Department of Defense Appropriations Act, 2003, P.L. 107-248, Sec. 8149 as amended 

by Department of Defense Appropriations Act, 2004, P. L.108.87, Sec.8144. 

10 U.S. General Accounting Office, Purchase Cards: Steps Taken to Improve DOD Program 

Management, but Actions Needed to Address Misuse, GAO-04-156 (Washington, D.C.: Dec. 

2, 2003). 

11 H.R. 3165, Sec. 2. 

12 H.R. 3329, Sec. 2(b)(c). 
Page 8 GAO-04-430 Purchase Card Pricing 

Although we found some initiatives under way to obtain vendor discounts 

from major purchase card vendors, agencies generally had not seized 

opportunities to obtain more favorable prices on purchase card buys—

opportunities that could yield hundreds of millions of dollars in savings. 

Agency efforts to obtain more favorable prices for purchase cardholders 

had generally been limited to a few agencywide agreements with major 

vendors—that is, vendors with whom an agency spent $1 million or more 

in fiscal year 2002. Further, training for cardholders usually focused on 

internal controls and regulatory policies and did not provide practical 

information about steps cardholders can take to get better prices. As a 

result, cardholders often paid higher prices than necessary. The successful 

initiatives taken within some agencies demonstrate that, if agencies 

negotiated effective discount agreements with major purchase card 

vendors and improved communications to cardholders about how to 

obtain more favorable prices, significant savings could be realized. 

We found a wide variation in the number of agencywide discount 

agreements that the eight agencies we reviewed had negotiated with their 

major purchase card vendors. For example, Veterans Affairs had 

negotiated agencywide discount agreements with 37 of its 196 major 

purchase card vendors—the largest number of any of the agencies 

reviewed. The Army, Navy, and Air Force each had agencywide 

agreements with several major information technology vendors and one or 

more office supply vendors. Agriculture, Interior, and Justice each had a 

few agencywide agreements, which covered information technology 

products or office supplies. Transportation’s senior procurement 

executive told us this agency had no discount agreements that could be 

used agencywide. As shown in table 2, cardholders at the agencies we 

reviewed are using the purchase card to a great extent to buy items from 

major purchase card vendors, an indication that opportunities exist to 

negotiate additional discount agreements with these vendors. 

Agencies Generally 

Have Not Taken 

Advantage of 

Opportunities to 

Obtain Savings 

Scope and Coverage of 

Negotiated Discount 

Agreements Varied 
Page 9 GAO-04-430 Purchase Card Pricing 

Table 2: Purchase Card Expenditures and Expenditures with Major Vendors, Fiscal Year 2002 

Expenditures with major purchase card 

vendors 

Agency 

Total expendituresa

 (dollars in thousands)

Number of major

 purchase card vendors Dollars (thousands) Percent of total 

Agriculture $592,296 34 $71,932 12 

Defense 

 Army 2,739,612 217 774,361 28 

 Navy 1,784,128 145 395,142 22 

 Air Force 1,604,367 130 444,928 28 

Interior 487,282 32 85,161 17 

Justice 593,576 56 153,578 26 

Transportation 425,431 27 73,732 17 

Veterans Affairs 1,560,309 196 822,153 53 

Total $9,787,001 $2,820,987 29 

Source: GAO analysis of bank-provided data. 

a

Does not include about $2.7 billion in purchase card transactions under Veterans Affairs’ prime 

vendor program. 

The effectiveness of the agreements that are in place also varied widely, 

and we found a number of ways in which agencies had not maximized 

their agreements’ potential to capture additional savings. First, agencies 

did not always take full advantage of competitive forces to ensure that 

their discount agreements with large vendors offered the most favorable 

prices, as shown in the following examples. 
Page 10 GAO-04-430 Purchase Card Pricing 

Second, some agency discount agreements covered a limited range of 

products and therefore did not provide cardholders more favorable prices 

on all the items they purchase from a vendor. Overall, in 18 of the 27 

transactions we reviewed where agencies had a discount agreement in 

place, the agreement did not cover the specific items that cardholders 

purchased, as demonstrated in the following examples. 

Finally, some discount agreements were not well-coordinated within the 

agency, creating the potential for overlap, as shown in the following 

example. Representatives of a number of agency components told us that, 

while they believed that their regional and local organizations had 

negotiated some discount agreements, they had no information on these 

agreements. 
Page 11 GAO-04-430 Purchase Card Pricing 

Each of the agencies we reviewed had developed guidance and training 

programs for their cardholders that focused on regulatory policies and 

internal controls intended to prevent misuse of the purchase card. 

However, most of the guidance and training programs did not provide 

cardholders with practical information to help them get better pricing by 

using Schedule contracts or agency discount agreements, as in the 

following examples. 

Most Guidance and 

Training Did Not Provide 

Practical Information on 

Obtaining Favorable 

Pricing 
Page 12 GAO-04-430 Purchase Card Pricing 

Some training programs, however, had successfully communicated 

practical information to their cardholders on how to seek better prices, as 

in the following examples. 
Page 13 GAO-04-430 Purchase Card Pricing 

Dun and Bradstreet’s analysis of fiscal year 2002 Interior transactions, 

conducted on our behalf, illustrates that cardholders frequently paid more 

than necessary. For example, the company analyzed Interior purchases 

from three office supply vendors that provided product descriptions along 

with their purchase card billing information. This analysis showed that ink 

cartridges were the most frequently purchased product. For one specific 

model of ink cartridge, 411 of 791 purchases were made at prices higher 

than the Schedule prices the vendors offered, indicating that cardholders 

had generally not taken advantage of discounts available through Schedule 

contracts. The prices paid for the same cartridge model ranged from 

$20.00 to $34.99. 

Our review of selected transactions also showed that, because they lacked 

practical information on how to achieve savings on purchases, 

Lacking Information, 

Cardholders Paid More 

Than Necessary 
Page 14 GAO-04-430 Purchase Card Pricing 

cardholders paid more than necessary, as highlighted in the following 

examples. Some cardholders we talked to were simply unaware of the 

savings potential of using Schedule contracts or agency discount 

agreements. Of the transactions we reviewed where items were available 

through a GSA contract, a number of cardholders were unaware that the 

items could have been purchased through the GSA contract. 

Some cardholders appeared to not understand their fundamental 

responsibility for getting reasonable prices, as in the following examples. 

Other cardholders purchased products that were not available through the 

particular vendor’s Schedule contract. Because the cardholders did not 

consider whether products that met their needs were available from other 

Schedule vendors, they were unable to take advantage of lower, 

discounted prices these vendors might have offered, as shown in the 

following examples. Of the 135 transactions we reviewed, 70 included 

items that were unavailable through the selected vendor’s GSA contract. 
Page 15 GAO-04-430 Purchase Card Pricing 

Other cardholders appeared to be confused about whether they were 

getting favorable prices. 
Page 16 GAO-04-430 Purchase Card Pricing 

We also found cardholders who were not aware that they had received 

significant discounts, as in the following cases. 
Page 17 GAO-04-430 Purchase Card Pricing 

Several agencies or agency components reported significant savings from 

their initiatives to leverage their buying power by negotiating discount 

agreements with major vendors, suggesting the potential for significant 

savings governmentwide. In all cases, the discount agreements are 

available to cardholders. Several examples follow. 

Experience at Some 

Agencies Suggests 

Significant Savings Are 

Possible 
Page 18 GAO-04-430 Purchase Card Pricing 

While the scope of our work did not include developing a governmentwide 

estimate of the potential savings from leveraging purchase card buying 

power, these examples indicate that the potential for savings could be 

significant. Given the range of savings under discount agreements 

currently in place with major vendors (8 to 35 percent) at the agencies we 

reviewed, a conservative approach indicates that, if these agencies were to 

achieve savings of just 10 percent on their purchase card expenditures 

with major vendors, annual savings of $300 million could be realized. 

The primary reason that agencies have not taken advantage of potential 

opportunities to capture savings through the purchase card program is the 

lack of management focus on this issue. Further, OMB has not leveraged 

its governmentwide oversight role by collecting and disseminating 

information on the successful initiatives some agencies have undertaken. 

In addition, agency officials identified several challenges that, in their 

view, have hindered them from more aggressively pursuing savings 

through the purchase card program. First, they noted that the purchase 

card is intended to streamline buying, and they are reluctant to impose 

requirements on cardholders that would undermine the simple, quick 

purchase card buying process. Officials also cited the need to balance 

governmentwide socioeconomic requirements—including providing 

Lack of Management 

Focus Has Limited 

Efforts to Capture 

Savings 
Page 19 GAO-04-430 Purchase Card Pricing 

opportunities for small businesses and purchasing products manufactured 

by non-profit agencies for the blind or severely handicapped (referred to 

as “JWOD” products)13—with efforts to get better purchase card prices. 

Finally, officials noted that little detailed information is available on the 

specific products and services purchased through the purchase card, 

hampering efforts to analyze trends in order to achieve more savings. 

Although agency officials consistently identified these challenges, our 

review suggests that the challenges are not insurmountable, as evidenced 

by individual agency initiatives to address them. 

Agency purchase card managers have yet to turn their attention to 

capturing opportunities for savings in their purchase card programs. In the 

mid-1990s, managers were focusing on capturing the savings in 

administrative costs that use of the purchase card made possible and 

reengineering administrative processes that discouraged use of the card. 

In more recent years, our work and the work of agency inspectors general 

highlighted weaknesses in internal controls that left purchase card use 

vulnerable to fraud and abuse. Agency managers have made a concerted 

effort to address these internal control weaknesses, but have not paid 

similar attention to capitalizing on opportunities for savings on purchase 

card buys. In general, the agency management structures and processes do 

not establish departmentwide goals for the effectiveness of micropurchase 

activity, such as savings goals. 

To monitor agencies’ progress in implementing better internal controls, 

OMB requires agencies to report quarterly on such topics as investigations 

of potential fraud, disciplinary actions for fraudulent or improper card use, 

and initiatives to improve program management. However, OMB’s 

reporting requirement does not include gathering information on agency 

efforts to save money on purchase card buys. Consequently, 

governmentwide information on opportunities to achieve savings is not 

available. 

 13 The Javits-Wagner-O’Day (JWOD) Act established the Committee for Purchase from 

People Who Are Blind or Severely Disabled and charters the Committee to develop a 

procurement list of commodities produced and services provided by nonprofit agencies (41 

U.S.C. Sec. 46, Sec. 47). GSA’s proposal instructions for office supply Schedule contracts 

require vendors that are authorized JWOD distributors to describe the procedures they 

have in place to ensure that federal customers do not purchase commercial items when 

JWOD products are available. The act also directs agencies to buy items or services on the 

procurement list from nonprofit agencies for the blind or severely handicapped if the items 

are available within the period required by the government. (41 U.S.C. Sec. 48). 

Agencies and OMB Have 

Not Focused on 

Opportunities for Savings 
Page 20 GAO-04-430 Purchase Card Pricing 

OMB representatives stated that they would consider the benefits of 

having agencies share information on leveraging purchasing power. They 

believe that increased focus on purchase card pricing issues is appropriate 

and mentioned that periodic cross-agency forums, sponsored by GSA, 

could be one mechanism for agencies to share successes they have had in 

negotiating discounts with major vendors. They also acknowledged that 

the currently-required quarterly reports could be used to gather 

information on the steps agencies are taking to better leverage their 

purchase card buying. Most of the agency officials we met with expressed 

interest in learning of steps being taken within the government to capture 

purchase card savings, particularly in light of the challenges discussed 

below. 

Several agency officials noted that promoting—or in some cases, 

requiring—the use of specific vendors with whom they have negotiated 

discount agreements could hinder cardholders from meeting their needs in 

the simplest, most expeditious manner. They fear that cardholders, who 

are generally not procurement officials, would be expected to spend more 

time seeking better prices—time that should be spent meeting mission 

requirements. While the FAR requires agencies to obtain reasonable 

prices, it limits the actions agencies need to take to verify price 

reasonableness. Given the wide variety of missions that cardholders must 

meet on a daily basis, they must retain the flexibility to make their 

purchases in a way that meets their needs. Our work showed that in some 

cases, as those shown below, Schedule contracts and discount agreements 

were not effective in meeting cardholder needs. In these cases, the 

cardholders took advantage of the purchase card’s flexibility to find other 

ways to fill their requirements. 

Steps to Capture Savings 

Need Not Burden 

Cardholders 
Page 21 GAO-04-430 Purchase Card Pricing 

On the other hand, some cardholders were pleased with the Schedule 

contracts and agency discount agreements they used. Cardholders were 

able to easily place orders with the vendor, and the vendor filled their 

orders promptly and reliably, as in the following examples. 
Page 22 GAO-04-430 Purchase Card Pricing 

GSA is working to further simplify cardholder access to discounted prices. 

To receive Schedule discounts, cardholders generally must place orders 

with a vendor through the GSA Advantage on-line shopping service or 

other designated ordering procedures. Some of GSA’s Schedule contracts, 

however, provide vendors the option of offering cardholders discounts at 

the point of sale in the vendors’ retail stores. For example, one GSA 

contracting officer modified a vendor’s contract to provide for point-ofsale discounts. The vendor then programmed cash registers in its retail 

stores to recognize a federal government purchase card when a shopper 

presents one and to apply the appropriate Schedule discount to the 

shopper’s order. GSA has partnered with DOD purchase card program 

officials to explore ways to increase the number of vendors that offer 

point-of-sale discounts to federal purchasers. Civilian agency officials 

expressed strong interest in this approach to facilitating cardholder access 

to Schedule discounts. 
Page 23 GAO-04-430 Purchase Card Pricing 

Balancing governmentwide socioeconomic policies—such as providing 

federal contracting opportunities to small businesses—with initiatives to 

leverage agency buying power has also been a recurring concern for 

agencies. Although agencies are not required to reserve micropurchases 

for award to small businesses, officials we met with repeatedly noted that 

because large national vendors would be in the best position to win 

agencywide discount agreements, concerns would be raised that 

opportunities for small, local vendors could be reduced. Officials similarly 

raised concerns about the effect agencywide discount agreements would 

have on their ability to meet requirements to purchase JWOD products. 

Despite these concerns, some agencies have been able to leverage 

purchasing power while providing opportunities for small businesses, as 

highlighted in the following examples. 

Further, agency experience indicates that appropriately structured 

discount agreements can help ensure that cardholders purchase JWOD 

products when required, as in the following cases. 

Concerns about Balancing 

Governmentwide 

Socioeconomic Policies 

with Purchase Card 

Savings Initiatives Can Be 

Mitigated 
Page 24 GAO-04-430 Purchase Card Pricing 

Agency officials point to the lack of adequate data as a barrier to taking 

steps to analyze purchase card activity. They raised concerns about their 

ability to analyze purchase trends due to a lack of detailed information on 

the specific products and services purchased, known as “level 3” data.14

The banks that provide the agencies’ purchase cards generally do not have 

such data. For example, our analysis of Interior’s fiscal year 2002 

transaction data indicated that less than 15 percent of all transactions 

included descriptions of the items and services purchased. Dun and 

Bradstreet found that many merchants have not invested in the electronic 

point-of-sale devices needed to transmit item descriptions along with other 

transaction information. A common reason offered by major vendors for 

not providing level 3 data is that their customers—the ordering agencies—

have not requested it. Agency officials told us, however, that they have 

made clear to the banks that issue their purchase cards that access to level 

3 information would be very helpful to them in gaining an understanding 

of what their cardholders are buying. 

 14 Level 1 data include basic information about the transaction, such as the date and 

amount and basic identifying information about the merchant. Level 2 data include 

information on sales tax charged and additional information about the merchant. Level 3 

data include details on the descriptions, quantities, and prices of items purchased. Our 

report —U.S. General Accounting Office, Contract Management: Government Faces 

Challenges in Gathering Socioeconomic Data on Purchase Card Merchants, GAO-03-56, 

(Washington, D.C: Dec. 13, 2002)—discussed the lack of detailed purchase card transaction 

data. 

Available Data, Though 

Limited, Can Be Used to 

Identify Potential Savings 
Page 25 GAO-04-430 Purchase Card Pricing 

GSA and other agencies are pursuing initiatives to provide agencies better 

data on their purchase card activity. GSA’s contracts with the banks that 

provide purchase cards, for example, require summary and analytical 

reports on agency purchase card activity, including information on the top 

100 vendors by agency and on the types of vendors. According to the GSA 

purchase card program manager, these reports were intended to provide 

GSA with data it could use to help agencies gain insight into their purchase 

card expenditures and identify opportunities to leverage their purchasing 

power. The program manager indicated, however, that reports from the 

banks have frequently not been provided, not been provided timely, or not 

been provided in a format that facilitates analysis. For example, until the 

most recent reporting period, GSA had not received even basic 

information, such as the top 100 purchase card vendors, from some banks. 

The GSA program manager is pursuing efforts to encourage the banks to 

provide more useful reporting so that GSA will be able to provide more 

effective assistance to agencies, such as negotiating point-of-sale 

discounts with vendors. Other initiatives are also in place. GSA is working 

with DOD and other agencies to determine what barriers limit the level 3 

data agencies receive and to explore ways to overcome these barriers. In 

addition, the Air Force Materiel Command is piloting a system intended to 

accumulate more consistent and specific information on purchase card 

transactions. 

While the lack of level 3 data is a valid concern, agencies can use the 

information that is available to start taking steps to get better prices. For 

example, we obtained from the banks a listing of all fiscal year 2002 

purchase card transactions for each agency we reviewed. Using this 

listing, we summarized information on the vendors with whom 

cardholders at each agency had done $1 million or more in business during 

fiscal year 2002. All agencies have access to these data. When we shared 

this information with agency officials, several indicated that simply being 

able to identify major vendors was a useful first step in identifying 

opportunities to leverage their buying power. 

Several agencies have taken the initiative to begin analyzing their purchase 

card expenditures to identify opportunities for additional savings, 

although these initiatives in some cases had limitations, as in the following 

examples. 
Page 26 GAO-04-430 Purchase Card Pricing 

While analyses conducted by agency components can provide useful 

insight into opportunities to leverage their purchasing power, they do not 

reflect the bigger picture of agencywide expenditures or agencywide 

opportunities to capture savings. 

Several of the agency discount agreements we reviewed require vendors to 

report periodically on sales made under discount agreements. This 

information can help agencies determine whether cardholders are taking 

advantage of favorable pricing. 
Page 27 GAO-04-430 Purchase Card Pricing 

Agencies have just begun to tap the potential of leveraging the purchase 

card for better pricing. If greater management attention were paid to 

capitalizing on the opportunities to obtain more favorable prices, 

hundreds of millions of dollars in savings could be realized annually. Given 

the volume of purchase card activity, agencies could take advantage of 

these opportunities without sacrificing the ability to acquire items quickly 

or compromising socioeconomic goals. If agencies were to build on their 

initial experiences and duplicate these steps governmentwide, they would 

have the opportunity to save the taxpayer almost $300 million annually. 

OMB should take the lead in focusing management attention on this 

opportunity and guiding agencies towards capturing these savings. 

We are making the following eight recommendations to OMB, GSA, and 

the agencies we reviewed: 

To focus governmentwide management attention on taking advantage of 

opportunities to achieve savings on purchase card buys, we recommend 

that the director of OMB take the following two actions: 

• Require agencies to report—either through the current quarterly 

reports or another mechanism—on the steps they are taking to 

leverage their purchase card buys in areas such as 

• negotiating discount agreements with major purchase card vendors, 

• implementing initiatives to better inform cardholders of 

opportunities to achieve savings, 

• conducting analyses to identify such opportunities, and 

Conclusions 

Recommendations for 

Executive Action 
Page 28 GAO-04-430 Purchase Card Pricing 

• assessing, through mechanisms such as vendor reports, whether 

cardholders are taking advantage of savings opportunities. 

• Annually report to Congress on the government’s progress in 

identifying and taking advantage of opportunities for savings on 

purchase card micropurchases. 

To assist agencies in identifying opportunities to achieve savings on 

purchase card buys and to facilitate cardholder access to discounted 

prices, we recommend that the administrator of GSA direct the purchase 

card program manager to take the following three actions 

• continue efforts to improve reporting by the banks that provide 

purchase cards so that GSA will have the data it needs—including basic 

information such as top vendors and level 3 data where feasible—to 

assist agencies in effectively identifying opportunities to leverage their 

purchasing power; 

• work with GSA’s acquisition center contracting officers to pursue 

point-of-sale discounts with large vendors; and 

• as part of the existing cross-agency forums for purchase card 

discussions, encourage agencies to share information on their 

successes in leveraging the purchase card to obtain better prices as 

well as strategies for overcoming challenges that could hinder 

agencies’ ability to achieve purchase card savings. 

To more effectively capture the significant potential for savings that 

agencies can achieve, we recommend that the Secretaries of Agriculture, 

Defense, the Interior, Justice, Transportation, and Veterans Affairs direct 

their purchase card program managers—in coordination with officials 

responsible for procurement, finance, small business utilization, and other 

appropriate stakeholders—to take the following three actions: 

• Develop mechanisms that provide cardholders more favorable pricing 

from major vendors or for key commodity groups, such as agencywide 

discount agreements with major vendors or simpler mechanisms that 

capitalize on trade discounts offered by local merchants. In designing 

such mechanisms, purchase card program managers should consider 

the need to 

• take full advantage of competitive forces to assure the most 

favorable prices, 

• ensure that agreements cover an adequate range of the products 

cardholders are likely to buy, 
Page 29 GAO-04-430 Purchase Card Pricing 

• coordinate negotiation activities within the department to reduce 

duplication of effort, and 

• ensure that agreements appropriately support agencies’ efforts to 

meet governmentwide socioeconomic requirements. 

• Revise programs for communicating with cardholders to ensure that 

the programs provide cardholders the information they need to 

effectively take advantage of mechanisms the agency has established to 

achieve savings. Such information would include telling cardholders 

about 

• the GSA Schedule contracts or agency-specific agreements chosen 

as vehicles for leveraging the agency’s buying power, and 

• procedures cardholders should follow to access and use these 

vehicles when they plan to make a purchase from these vendors. 

• To the extent possible using available data, such as information on 

major vendors, analyze purchase card expenditure patterns to identify 

opportunities to achieve additional savings and to assess whether 

cardholders are getting good prices. Where available data are not 

sufficient for such analyses, investigate the feasibility of gathering 

additional information. In evaluating options for gathering additional 

information, purchase card program managers should carefully 

consider the costs and benefits of obtaining comprehensive 

information and imposing unwarranted burdens on cardholders, 

vendors, and other stakeholders. 

We received written comments on a draft of this report from DOD, GSA, 

the Department of the Interior, and the Department of Veterans Affairs. 

We received comments via e-mail from the Departments of Agriculture and 

Transportation. The Department of Homeland Security, the Department of 

Justice, and OMB did not provide comments. 

DOD concurred with our recommendation that the department develop 

mechanisms that provide cardholders more favorable prices, but stated 

that negotiating agencywide discount agreements might impede achieving 

the department’s small business goals. Accordingly, DOD intends to 

emphasize installation-level initiatives to obtain discounts from local 

vendors and to pursue point-of-sale discounts with larger vendors. DOD 

also concurred with our recommendation to revise programs for 

communicating with cardholders and partially concurred with our 

recommendation to analyze purchase card expenditure patterns to identify 

opportunities for savings. DOD stated that, until data on specific 

purchases is widely available, the feasibility of developing informed and 

Agency Comments 

and Our Evaluation 
Page 30 GAO-04-430 Purchase Card Pricing 

cost-effective strategic sourcing decisions is questionable. Our 

recommendation, however, contemplated agencies using readily available 

data to gain insight into their purchase card expenditure patterns. Analysis 

of available purchase card transaction data could provide agencies a 

clearer understanding of which vendors are significant to their purchase 

card program. DOD’s written comments are reproduced in appendix II. 

GSA concurred with our findings and recommendations and stated that 

the report provides an objective analysis of the savings that agencies can 

obtain through the Schedule program and purchase card program. GSA’s 

written comments are reproduced in appendix III. 

The Department of the Interior did not specifically agree or disagree with 

our recommendations, but offered several observations on our report. 

The department took exception to our statement that lack of management 

focus and oversight had led to agencies’ not taking advantage of 

opportunities to capture purchase card savings. This statement was 

intended to portray the general picture at all the agencies we reviewed, 

and our report discusses the instances we noted where agencies had 

focused management attention on capturing savings and the benefits 

agencies obtained by doing so. Interior also commented that our 

recommendation that departments develop mechanisms to provide 

cardholders with more favorable prices should be directed to GSA rather 

than Interior, and that GSA’s buying programs should be revised to 

incorporate greater price reductions and be expanded to cover more 

vendors. We did not audit GSA’s buying programs as part of this report; 

however, recognizing the benefits of point-of-sale discounts, we have 

made a recommendation to GSA to pursue these discounts with large 

vendors. At the same time, we found that individual agencies could 

achieve savings in the short term by negotiating discount agreements, such 

as Interior has done for information technology products. Interior—

pointing to convenience and simplicity as key benefits of the purchase 

card program—also commented that we should further highlight in our 

recommendations the need for purchase card managers to take into 

account the costs and benefits of obtaining comprehensive information 

and imposing unwarranted burden on cardholders and others. We believe 

that our recommendations, as stated, afford program managers sufficient 

flexibility to develop mechanisms for more favorable pricing while not 

inconviencing cardholders. Finally, Interior recommended that we 

incorporate into the report a table of “best practices.” The scope of our 

work did not include gathering information to verify that the agreements 

agencies have negotiated represent best practices. Interior’s written 

comments are reproduced in appendix IV. 
Page 31 GAO-04-430 Purchase Card Pricing 

The Department of Veterans Affairs concurred with our recommendations 

and cited a number of planned and ongoing actions intended to provide 

cardholders with more favorable prices. In addition, Veterans Affairs 

expressed concern that our recommendation to OMB would impose a 

cumbersome and costly data-gathering burden on agencies. Veterans 

Affairs is apparently interpreting our recommendation as requiring 

agencies to report on discounts obtained on specific transactions. We 

agree that the availability of data to prepare such a report may be an issue 

and therefore are not recommending that OMB require such a report. 

Instead, we recommend that OMB require agencies to report on initiatives 

they have taken, such as analyzing purchase card expenditure patterns and 

negotiating discount agreements that cardholders can use. Veterans 

Affairs also endorsed our recommendation that GSA pursue point-of-sale 

discounts with large vendors and suggested that GSA consider 

encouraging vendors to program point-of-sale devices to recognize that 

federal purchases are exempt from sales taxes. Veterans Affairs’ 

comments are reproduced in appendix V. 

In comments sent via e-mail, the Department of Agriculture concurred 

with our recommendations and outlined a number of steps the department 

will take to implement them. Commenting on our finding that 

Agriculture’s discount agreement for office supplies did not take full 

advantage of competitive forces to ensure the most favorable prices, 

Agriculture stated that it reviews this agreement annually and will recompete the agreement when these annual reviews indicate that recompetition is warranted. We believe that periodic—but not annual—recompetitions would provide the best information for assessing whether 

the agreement continues to offer the most advantageous prices for office 

supplies. 

In comments sent via e-mail, the Department of Transportation did not 

specifically agree or disagree with our recommendations, but noted that 

our report could benefit by explicitly recognizing that the greatest savings 

could by achieved by pooling the buying power of the entire federal 

government. We agree that leveraging governmentwide buying power 

would result in the greatest savings. While this would be the best endstate, we see this as a long-term effort with many obstacles to be 

overcome before it can be achieved. Our work identified initiatives—

relatively simple to implement—that agencies can begin now to start 

achieving savings. In addition, Transportation commented that our report 

does not adequately depict the fundamental difficulties of complying with 

JWOD purchase requirements while at the same time achieving best value. 

We believe our report appropriately reflects the concerns agency officials 
Page 32 GAO-04-430 Purchase Card Pricing 

expressed to us about complying with socioeconomic requirements, 

including JWOD, and we provide several examples of how some agencies 

have taken steps appropriately structure discount agreements so that they 

help ensure that cardholders purchase JWOD products when required. In 

addition, Transportation commented that the report should discuss some 

of the positive accomplishments of the purchase card program. Our report 

acknowledges that the purchase card has fundamentally changed the way 

agencies make small, routine, purchases and we believe the report 

appropriately reflects the administrative cost savings and convenience 

purchase cards have provided. Finally, Transportation suggested a 

technical correction, which we have incorporated in the report. 

As arranged with your offices, unless you publicly announce its contents 

earlier, we plan no further distribution of this report until 30 days from its 

issue date. At that time, we will send copies of this report to the 

Secretaries of Agriculture, DOD, Homeland Security, the Interior, Justice, 

Transportation, and Veterans Affairs; the director of OMB; the 

administrator of GSA; and other interested congressional committees. We 

will provide copies to others on request. This report will also be available 

at no charge on GAO’s Web site at http://www.gao.gov. 
Page 33 GAO-04-430 Purchase Card Pricing 

If you or your staffs have any questions about this report or need 

additional information please call David Cooper at (202) 512-4841 

(cooperd@gao.gov) or Gregory Kutz at (202) 512-9505 (kutzg@gao.gov). 

Key contributors to this report are acknowledged in appendix VII. 

David E. Cooper 

Director 

Acquisition and Sourcing Management 

Gregory D. Kutz 

Director 

Financial Management and Assurance 
Appendix I: Scope and Methodology 

Page 34 GAO-04-430 Purchase Card Pricing 

We reviewed laws and regulations relating to the purchase card program, 

held discussions with GSA officials responsible for governmentwide 

program management and OMB representatives responsible for program 

policy and oversight, and reviewed governmentwide policy and guidance 

for the program. We also performed our work at the Departments of 

Agriculture, Defense (DOD), the Interior, Justice, Transportation, and 

Veterans Affairs. These agencies accounted for over 85 percent of 

governmentwide purchase card expenditures during fiscal year 2002. 

Within DOD, we focused our work at the Departments of the Army, the 

Navy, and the Air Force, which represented 92 percent of all DOD 

purchase card expenditures during fiscal year 2002. We contacted all 

major component agencies—referred to as major commands in the Army 

and Air Force and as major claimants in the Navy. At the civilian 

departments, we contacted the component agencies that were the largest 

users of purchase cards. 

To determine whether agencies had taken advantage of opportunities to 

obtain more favorable purchase card prices, we held discussions with 

officials responsible for the purchase card program at each department to 

obtain information on (1) efforts to identify opportunities to obtain more 

favorable prices, (2) efforts to negotiate discount agreements that made 

more favorable prices available to cardholders, and (3) guidance and 

training provided to cardholders to inform them of opportunities to obtain 

more favorable prices. We reviewed policy and guidance manuals, training 

materials, and other agency documentation that provided information on 

these topics. We also contacted the components responsible for the largest 

volume of purchase card activity within each department. Finally, to 

assess cardholder buying practices and gain insight into whether they 

were obtaining favorable prices, we selected a limited number of fiscal 

year 2002 micropurchase transactions at each department for review. We 

obtained and reviewed documentation relating to the transactions, such as 

invoices, and discussed the transactions with cardholders. 

To identify the reasons why agencies had not taken advantage of 

opportunities to obtain more favorable purchase card prices, we discussed 

these issues with officials responsible for departmental purchase card 

programs and reviewed applicable agency documentation. 

To select transactions for review, we first obtained data files of fiscal year 

2002 purchase card transactions from the banks that provided purchase 

cards to each of the departments reviewed. (In the case of the military 

services, we obtained data files from the Defense Manpower Data Center, 

which had previously obtained the files from the applicable banks.) We 

Appendix I: Scope and Methodology 
Appendix I: Scope and Methodology 

Page 35 GAO-04-430 Purchase Card Pricing 

reviewed these files to determine that they did not contain any apparent 

erroneous data and then summarized the total number and dollar value of 

transactions for each department. We reconciled these totals with totals 

reported by GSA for each department. Having determined that the data 

files were generally reliable, we summarized the data to determine the 

total number and dollar value of transactions by vendor and identified 

major purchase card vendors at each department. We defined major 

purchase card vendors as those vendors where the department had 

purchase card expenditures of $1 million or more in fiscal year 2002. 

We then combined the data on major purchase card vendors for the eight 

departments and summarized the number and dollar value of transactions 

by vendor to identify those vendors where the eight departments had the 

highest purchase card expenditures. From this combined listing, we 

determined that vendors providing information technology products, 

office supplies, and cellular telecommunications services were among the 

top vendors at all eight departments. Accordingly, we selected two of the 

top information technology vendors, two of the top office supply vendors, 

and two of the top cellular telecommunications service providers as the 

vendors for which we would select transactions for review. 

For each department, we identified the population of micropurchase 

transactions with the selected vendors. If a department did not have $1 

million or more in micropurchase transactions with the vendor, we 

excluded that vendor’s transactions from further analysis at that 

department. We then identified, for each vendor, the subpopulation of 

micropurchase transactions valued at $100.00 or more for information 

technology and office supply vendors or $25.00 or more for cellular 

telephone service providers at each department.1

 We selected—using a 

random selection process—3 transactions with each vendor at each 

department for a total of 135 transactions. Although these transactions 

were selected at random, we cannot project the results of the selected 

transactions to the population of transactions. 

To assess the prices cardholders had paid on a transaction, we ascertained 

whether the vendor had a GSA contract or agency-negotiated discount 

agreement applicable to the items or services purchased. We obtained 

 1

 We excluded transactions valued at less than $100.00 to limit our investment in 

researching transactions involving minimal amounts of money. We included smaller 

cellular telecommunications transactions because these are normally monthly, recurring 

charges that involve an annual amount greater than $25.00. 
Appendix I: Scope and Methodology 

Page 36 GAO-04-430 Purchase Card Pricing 

information on prices for the items or services under these contracts or 

agreements and used these prices as benchmarks for assessing whether 

the cardholder had obtained favorable pricing. In addition to making these 

price comparisons, we contacted the cardholders to discuss the 

transaction and gain insight into their buying practices and awareness of 

vehicles that provide favorable pricing. 

To assess the potential magnitude of savings that agencies can achieve by 

negotiating discount agreements with their major purchase card vendors, 

we considered the discounts individual departments had obtained on the 

agencywide discount agreements we reviewed during our work. Discounts 

offered under these agreements varied—for example, 8 percent under an 

Interior agreement for desktop computers, 10 percent under an 

Agriculture agreement for office supplies, and 35 percent under an Interior 

agreement for laptop computers. We considered the 10 percent discount 

that Agriculture obtained to represent a reasonable and conservative 

benchmark for the potential discounts departments could obtain from 

their major vendors. 

Our analysis showed that the agencies reviewed spent about $2.8 with 

major purchase card vendors in fiscal year 2002. Although some of these 

expenditures would have been covered by discount agreements the 

departments had negotiated, we found that agency discount agreements 

often did not cover all the items that cardholders purchased from those 

vendors. Further, we found that cardholders did not always know of, or 

take advantage of, the discounts agreements agencies had negotiated. A 

number of the transactions we reviewed were made at retail prices. If the 

agencies we reviewed obtained discounts of about 10 percent on the $2.8 

billion spent with their major purchase card vendors, their savings would 

amount to about $282 million. Actual discounts would vary with factors 

such as sales volume, profit margin, and competitiveness of the industry. If 

agencies obtained discounts equivalent to the high end of the range we 

saw during our work, savings would amount to almost $1 billion, although 

it is unrealistic to expect savings of this magnitude. Nonetheless, we 

believe it is reasonable to anticipate that the federal government could 

save hundreds of millions of dollars if agencies negotiated discounts with 

major purchase card vendors. 

Finally, we engaged the Dun and Bradstreet Corporation to perform a 

spend analyses of Interior’s fiscal year 2002 purchase card transactions to 

illustrate how a detailed analysis could begin to identify opportunities for 

purchase card savings. In addition to performing analyses of Interior’s 

purchase card transactions, Dun and Bradstreet gathered information on 
Appendix I: Scope and Methodology 

Page 37 GAO-04-430 Purchase Card Pricing 

the costs and benefits to merchants and other stakeholders of providing 

“level 3” data—which includes descriptions of the items and services 

purchased—and on barriers to vendors providing this information. 

We conducted our review between March 2003 and January 2004 in 

accordance with generally accepted government auditing standards. 
Appendix II: Comments from the Department 

of Defense 

Page 38 GAO-04-430 Purchase Card Pricing 

Appendix II: Comments from the Department 

of Defense 

Note: Page numbers in 

the draft report may differ 

from those in this report. 
Appendix II: Comments from the Department 

of Defense 

Page 39 GAO-04-430 Purchase Card Pricing 
Appendix II: Comments from the Department 

of Defense 

Page 40 GAO-04-430 Purchase Card Pricing 
Appendix III: Comments from the General 

Services Administration 

Page 41 GAO-04-430 Purchase Card Pricing 

Appendix III: Comments from the General 

Services Administration 
Appendix III: Comments from the General 

Services Administration 

Page 42 GAO-04-430 Purchase Card Pricing 
Appendix IV: Comments from the Department 

of the Interior 

Page 43 GAO-04-430 Purchase Card Pricing 

Appendix IV: Comments from the 

Department of the Interior 
Appendix IV: Comments from the Department 

of the Interior 

Page 44 GAO-04-430 Purchase Card Pricing 
Appendix IV: Comments from the Department 

of the Interior 

Page 45 GAO-04-430 Purchase Card Pricing 
Appendix IV: Comments from the Department 

of the Interior 

Page 46 GAO-04-430 Purchase Card Pricing 
Appendix V: Comments from the Department 

of Veterans Affairs 

Page 47 GAO-04-430 Purchase Card Pricing 

Appendix V: Comments from the Department 

of Veterans Affairs 
Appendix V: Comments from the Department 

of Veterans Affairs 

Page 48 GAO-04-430 Purchase Card Pricing 
Appendix V: Comments from the Department 

of Veterans Affairs 

Page 49 GAO-04-430 Purchase Card Pricing 
Appendix V: Comments from the Department 

of Veterans Affairs 

Page 50 GAO-04-430 Purchase Card Pricing 
Appendix V: Comments from the Department 

of Veterans Affairs 

Page 51 GAO-04-430 Purchase Card Pricing 
Appendix VI: Information on Purchase Card 

Expenditures 

Page 52 GAO-04-430 Purchase Card Pricing 

Table 3: Department of Agriculture Purchase Card Expenditures by Transaction 

Dollar Value, Fiscal Year 2002 

 Transactions 

Expenditures 

(dollars in thousands) 

Dollar value range Number Percent Dollar value Percent 

$0.00 to $2,500.00 1,584,822 98.4 $396,797 67.0 

$2,500.01 to 

$25,000 

25,221 1.6 158,630 26.8 

Over $25,000 793 a 36,869 6.2 

All transactions 1,610,836 $592,296 

Source: GAO analysis. 

a

Less than 0.1 percent. 

Table 4: Department of Defense Military Services Purchase Card Expenditures by 

Transaction Dollar Value, Fiscal Year 2002 

Transactions 

Expenditures 

(dollars in thousands) 

Dollar value range Number Percent Dollar value Percent 

Army 

$0.00 to $2,500.00 4,512,803 98.1 $1,683,207 61.4 

$2,500.01 to $25,000 81,670 1.8 585,759 21.4 

Over $25,000 7,710 0.2b 470,646 17.2 

All Transactions 4,602,183 2,739,612 

Navy 

$0.00 to $2,500.00 2,545,170 97.6 1,141,762 64.0 

$2,500.01 to $25,000 57,595 2.2 407,594 22.8 

Over $25,000 4,451 0.2 234,772 13.2 

All Transactions 2,607,216 1,784,128 

Air Force 

$0.00 to $2,500.00 2,938,898 97.5 1,022,646 63.7 

$2,500.01 to $25,000 75,587 2.5 532,522 33.2 

Over $25,000 971 a 49,199 3.1 

All Transactions 3,015,456 $1,604,367 

Source: GAO analysis. 

a

Less than 0.1 percent. 

b

Exceeds 100 percent due to rounding. 

Appendix VI: Information on Purchase Card 

Expenditures 
Appendix VI: Information on Purchase Card 

Expenditures 

Page 53 GAO-04-430 Purchase Card Pricing 

Table 5: Department of the Interior Purchase Card Expenditures by Transaction 

Dollar Value, Fiscal Year 2002 

Transactions 

Expenditures 

(dollars in thousands) 

Dollar value range Number Percent Dollar value Percent 

$0.00 to $2,500.00 1,334,245 98.7 $356,082 73.1 

$2,500.01 to 

$25,000 

17,438 1.3 103,500 21.2 

Over $25,000 545 a 27,700 5.7 

All Transactions 1,352,228 $487,282 

Source: GAO analysis. 

a

Less than 0.1 percent. 

Table 6: Department of Justice Purchase Card Expenditures by Transaction Dollar 

Value, Fiscal Year 2002 

Transactions 

Expenditures 

(dollars in thousands) 

Dollar value range Number Percent Dollar value Percent 

$0.00 to $2,500.00 897,028 96.9 $390,784 65.8 

$2,500.01 to 

$25,000 

28,988 3.1 195,883 33.0 

Over $25,000 146 a 6,909 1.2 

All Transactions 926,162 $593,576 

Source: GAO analysis. 

a

Less than 0.1 percent. 

Table 7: Department of Transportation Purchase Card Expenditures by Transaction 

Dollar Value, Fiscal Year 2002 

Transactions 

Expenditures 

(dollars in thousands) 

Dollar value range Number Percent Dollar value Percent 

$0.00 to $2,500.00 935,892 97.9 $279,300 65.7 

$2,500.01 to $25,000 19,823 2.1 120,034 28.2 

Over $25,000 439 a 26,097 6.1 

All Transactions 956,154 $425,431 

Source: GAO analysis. 

a

Less than 0.1 percent. 
Appendix VI: Information on Purchase Card 

Expenditures 

Page 54 GAO-04-430 Purchase Card Pricing 

Table 8: Department of Veterans Affairs Purchase Card Expenditures by 

Transaction Dollar Value, Fiscal Year 2002 

Transactions 

Expenditures 

(dollars in thousands) 

Dollar value range Number Percent Dollar value Percent 

$0.00 to $2,500.00 2,540,159 96.6 $920,137 59.0 

$2,500.01 to $25,000 87,739 3.3 506,769 32.5 

Over $25,000 2,620 0.1 133,403 8.5 

All Transactions 2,630,518 $1,560,309 

Source: GAO analysis. 

Note: Data do not include about $2.7 billion in purchase card transactions under Veterans Affairs’ 

prime vendor program. 
Appendix VII: GAO Contacts and Staff 

Acknowledgments 

Page 55 GAO-04-430 Purchase Card Pricing 

John Kelly (202) 512-6926 

Michele Mackin (202) 512-4309 

In addition to the individuals named above, Robert Ackley, Victoria 

Klepacz, James Moses, Jerrod O’Nelio, Monty Peters, Jose Ramos, Harold 

Reich, Sanford Reigle, Kenneth Roberts, Sylvia Schatz, Quan Thai, 

Najeema Washington, and Gary Wiggins made key contributions to this 

report. 

Appendix VII: GAO Contacts and Staff 

Acknowledgments 

GAO Contacts 

Acknowledgments 
Related GAO Products 

Page 56 GAO-04-430 Purchase Card Pricing 

Products concerning purchase card internal controls:

Purchase Cards: Steps Taken to Improve DOD Program Management, 

but Actions Needed to Address Misuse, GAO-04-156 (Washington, D.C.: 

Dec. 2, 2003). 

Audit Guide: Auditing and Investigating the Internal Control of 

Government Purchase Card Programs, GAO-04-87G (Washington, D.C.: 

Nov. 1, 2003). 

Forest Service Purchase Cards: Internal Control Weaknesses Resulted in 

Instances of Improper, Wasteful, and Questionable Purchases, 

GAO-03-786 (Washington, D.C.: Aug. 11, 2003). 

HUD Purchase Cards: Poor Internal Controls Resulted in Improper and 

Questionable Purchases, GAO-03-489 (Washington, D.C.: Apr. 11, 2003). 

FAA Purchase Cards: Weak Controls Resulted in Instances of Improper 

and Wasteful Purchases and Missing Assets, GAO-03-405 (Washington, 

D.C.: Mar. 21, 2003). 

Purchase Cards: Control Weaknesses Leave the Air Force Vulnerable to 

Fraud, Waste, and Abuse, GAO-03-292 (Washington, D.C.: Dec. 20, 2002). 

Purchase Cards: Navy Is Vulnerable to Fraud and Abuse but Is Taking 

Action to Resolve Control Weaknesses, GAO-02-1041 (Washington, D.C.: 

Sept. 27, 2002). 

Purchase Cards: Control Weaknesses Leave Army Vulnerable to Fraud, 

Waste, and Abuse, GAO-02-732 (Washington, D.C.: June 27, 2002). 

FAA Alaska: Weak Controls Resulted in Improper and Wasteful 

Purchases, GAO-02-606 (Washington, D.C.: May 30, 2002). 

Government Purchase Cards: Control Weaknesses Expose Agencies to 

Fraud and Abuse, GAO-02-676T (Washington, D.C.: May 1, 2002). 

Purchase Cards: Control Weaknesses Leave Two Navy Units Vulnerable 

to Fraud and Abuse, GAO-02-32 (Washington, D.C.: Nov. 30, 2001). 

Related GAO Products 
Related GAO Products 

Page 57 GAO-04-430 Purchase Card Pricing 

Products concerning strategic purchasing: 

Contract Management: Restructuring GSA’s Federal Supply Service and 

Federal Technology Service, GAO-04-132T (Washington, D.C.: Oct. 2, 

2003). 

Best Practices: Improved Knowledge of DOD Service Contracts Could 

Reveal Significant Savings, GAO-03-661 (Washington, D.C.: June 9, 2003). 

Contract Management: Taking a Strategic Approach to Improving 

Service Acquisitions, GAO-02-499T (Washington, D.C.: Mar. 7, 2002) 

Best Practices: Taking a Strategic Approach Could Improve DOD’s 

Acquisition of Services, GAO-02-230 (Washington, D.C.: Jan. 18, 2002) 

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