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 procurement methods. 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. 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. 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 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. In 1994, an interagency group, the Purchase Card Council, performed a cost-benefit study on using the purchase card versus purchase orders.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. 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. 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, 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 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. 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. 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 24-hour delivery and payment by purchase card and has prices below discounted retail prices. 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. 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 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. 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. 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. 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.