The Federal Acquisition Streamlining Act of 1994 established a micropurchase threshold of $2,500. Purchases that do not exceed the threshold are not subject to the Small Business Act reservation requirement, may be made without obtaining competitive quotations (if the price is reasonable), and may be made by authorized government employees—such as those who will be using the supplies or services—not just by contracting officers. Under the Federal Acquisition Regulation, the governmentwide commercial purchase card is now the preferred method of paying for micropurchases. Further, the purchase card is also authorized to be used in greater dollar amounts to place a task or delivery order under an existing contract (if authorized in the basic contract, basic ordering agreement, or blanket purchase agreement) and to make payments under existing contracts when the contractor agrees to accept payment by the card. GSA administers the purchase card program governmentwide. This program has issued more than 2 million purchase cards to federal employees at government agencies, organizations, and Native American tribes. Purchase card volume increased by almost $1.5 billion, to $13.8 billion, between fiscal years 2000 and 2001. GSA’s master contract for the purchase card program defines the agreement between GSA and the five banks that issue purchase cards to government agencies. The government may exercise the option to renew the contract for up to five 1-year periods beginning in December 2003. In October 2001, GSA requested that the five banks provide data on the socioeconomic status of merchants who did business with the government via purchase cards in fiscal year 2001. An estimated 4 million U.S. merchants accept MasterCard, Visa, or both, and at least 2.1 million of these merchants did business with the government in fiscal year 2001.Because the banks that issue purchase cards do not have access to data on all of the merchants accepting the cards, MasterCard and Visa collected this information on the banks’ behalf, contracting in one case with Austin- Tetra, a private firm, to assist in the task. GSA compiled the information provided by banks and associations in a March 2002 preliminary report. In their efforts to improve the collection of socioeconomic information on purchase card merchants and to track governmentwide small business goals, SBA and GSA are interested in targeting the categories of businesses outlined in table 1. The purchase card transaction process involves the agency cardholder, the merchant and its bank, the payment card associations, and the banks that issue purchase cards to government agencies. When an agency cardholder purchases goods or services from a merchant that accepts MasterCard or Visa, the merchant transmits the transaction to its bank, through the MasterCard or Visa computer systems, to the issuing bank for payment. Figure 1 shows how transaction data are shared between the key players. Socioeconomic data are generally collected after a transaction takes place. The payment card association or its contractor collects socioeconomic information from a variety of sources. This information is appended to transaction data to create reports to GSA and the agencies. Figure 2 shows the key players involved in collecting socioeconomic information on the purchase card merchants. In response to GSA’s request for fiscal year 2001 socioeconomic data on purchase card merchants, banks and payment card associations reported that they could obtain size or socioeconomic information on about 40 percent of the merchants. They reported that about 50 percent of the purchase card dollars spent with these merchants went to small businesses. However, this information is not useful because the data collected were inconsistent and incomplete, making them unreliable. The lack of clear definitions and guidelines from GSA for the collection of socioeconomic data resulted in inconsistent reporting by the banks and payment card associations. In addition, some available sources of socioeconomic data are incomplete and unreliable. Therefore, at this time, no meaningful conclusions can be drawn about where purchase card dollars are spent or the effect on small businesses of the government use of purchase cards. Drawing on lessons learned in its first attempt at a governmentwide socioeconomic data report, GSA is continuing to work with SBA, DOD, and the private sector to improve the reliability of the data for subsequent reports. To verify and identify the characteristics of those merchants doing business with the government through purchase cards, a match had to be made between transactional data and the socioeconomic data from government and private databases. However, in its initial data collection effort, GSA did not precisely define the information it was requesting or clearly specify the criteria to be used by the banks and associations as they categorized merchants. Therefore, the data reported to GSA contained widely varying information on the socioeconomic status of merchants. The following are examples of the inconsistencies we found: A payment card association, reporting on behalf of some of the card- issuing banks, reported that it had socioeconomic information for 89 percent of the merchants, while another bank reported that it had this information for 23 percent of the merchants. These differences do not reflect relative success or failure in collecting the information; rather, they were due to varying interpretations of GSA’s guidance. Neither the associations nor the banks reported the number of merchants whose socioeconomic status was unknown. As a result, the information presents an incomplete and misleading picture of the socioeconomic status of purchase card merchants. MasterCard, Visa, and the banks used different methods to classify merchants. One method placed businesses that were corporations but where no socioeconomic data were available in the same category with large businesses. Another method followed SBA standards more closely in categorizing the size of businesses. In one case, GSA’s guidance compounded the problem. GSA instructed banks to use the criterion of 500 employees or fewer to identify small businesses, if no other verification was available, rather than directing them to follow SBA’s guidance that ties size to specific industry classifications. SBA officials, who had not been involved in GSA’s initial data collection effort, raised concerns about this definition and are now providing GSA with assistance in determining appropriate guidelines to categorize the data. An SBA official explained that, in certain industry categories such as construction, using 500 employees or fewer as a criterion would encompass virtually all businesses. No meaningful conclusions can be drawn using the data compiled by GSA for fiscal year 2001, as the reported data are incomplete. The banks and payment card associations were only able to establish merchants’ size or socioeconomic status for about 40 percent of total purchase card dollars because, in some cases, available data sources did not provide complete and reliable information. For example, Pro-Net yielded information on size status for only 9.5 percent of merchants. While some categories of small businesses are required to register in SBA’s Pro-Net in order to be certified, other categories of small business are not required to register. Therefore, businesses requiring certification, such as HUBZone and small disadvantaged businesses, are easier to categorize than businesses for which registration is voluntary, such as woman-owned small businesses. Further, according to industry officials, it is not uncommon for the data in some merchant transaction data fields to contain incorrect information. For example, merchants sometimes place their customer service telephone numbers in the field designated for city so that their telephone number is included on the customer’s credit card statement. In our review of MasterCard and Visa reports and merchant data files, we found obvious errors such as this, as well as duplicate files for the same merchant, the same telephone number for multiple businesses, and missing zip codes. Since the spring of 2002, GSA has been working with SBA and other agencies to create more specific guidance for banks and payment card associations. GSA has also included banks and payment card associations in these discussions. GSA’s efforts include defining small business categories, establishing quality standards for data sources, and standardizing reporting. After some initial data have been collected, SBA officials agreed to develop policies for the use of the data in tracking progress towards agencies’ small business goals. According to officials from Austin-Tetra, if definitions and guidelines are agreed upon and adhered to, information about size status may be available for an estimated 65 to 80 percent of merchants. Some officials expressed concern about the potential for double-counting small business dollars if, in the future, purchase card data are automatically transferred to the Federal Procurement Data System (FPDS) and socioeconomic data are applied toward agencies’ small business achievements. If purchase cards are used for payments on contracts or orders that have already been reported to FPDS, double-counting could occur. However, it is not clear that this problem would materialize on a widespread basis. For example, the Director of DOD’s Purchase Card Joint Program Management Office told us that there is little likelihood that DOD’s dollars would be double-counted. Currently, DOD generates automatic reports to FPDS for contracts or orders that are placed through traditional procurement methods such as purchase orders. The official said that it is extremely rare for a purchase card to be used for payments that have already been reported to FPDS. While GSA’s efforts eventually may enable the government to obtain socioeconomic information on a large percentage of purchase card merchants, inherent challenges suggest that it is not possible to gather complete data on all merchants. Payment card associations’ transaction systems were designed to clear transactions, not to meet the socioeconomic reporting needs of the federal government. The data exchanged during transactions generally focus on information needed to ensure that the merchant is paid and the cardholder’s account is charged. As a result, the infrastructure and processes of the purchase card systems and the legal relationships between the merchants, banks, payment card associations, and the government were not designed to accommodate the collection of socioeconomic data. The master contract between GSA and the five banks that issue purchase cards cannot ensure the collection of socioeconomic information. Although the contract requires the contracting banks to provide transaction data to the government, which might include limited socioeconomic data, banks are only required to provide this information if the merchant provides it and the contracting banks obtain it. The contract clauses referring to reports containing socioeconomic data are vague, both in specifying the data required and in establishing the level of obligation involved.