Acquisition Reform

Purchase Card Use Cuts Procurement Costs, Improves Efficiency Gao ID: NSIAD-96-138 August 6, 1996

The National Performance Review recommended in 1993 that agencies increase their use of government commercial credit cards--called purchase cards--for small purchases to cut the red tape normally associated with federal procurement. Since then, legislation has eliminated some requirements for purchases of $2,500 or less, called micropurchases. Agencies have found that they can carry out their missions at lower cost by having staff use the purchase cards for simple purchases. Further, agency studies have shown that card use reduces labor and payment-processing costs. In fact, a 1994 interagency study showed that costs had often been cut by more than half; other studies have identified millions in potential savings from card use. Since the cards first became available governmentwide, their use has skyrocketed. Even so, significant room for growth exists: the average purchase card transaction was $375 in fiscal year 1995, well below the micropurchase threshold. Despite the growth in purchase card use, GAO found no evidence of increased abuses. In fact, the electronic data stored on all purchase card transactions permits close monitoring of card use. Officials at most agencies GAO reviewed believe that the Federal Acquisition Regulation, which governs federal procurement, should more clearly address card use. Also, although agencies want to learn from one another's experiences, no mechanism exists for them to communicate with one another and to share their improvements.

GAO found that: (1) the use of purchase cards for small purchases can reduce agencies' mission support, labor, and payment processing costs 50 percent by moving simple purchases from procurement offices to program offices and consolidating payments; (2) some agencies have found that purchase card use has helped them absorb the impact of administrative staff reductions and improve service delivery; (3) although the use of purchase cards has increased since 1990, there is potential for greater card use; (4) in fiscal year 1995, the average purchase card transaction was $375, well below the micropurchase threshold of $2,500; (5) there is no evidence of increased abusive use of purchase cards despite tremendous growth in the purchase card program; (6) electronic records of all purchase card transactions allow close and detailed monitoring of card use; (7) agencies' management controls are adequate to protect the government's interest and agencies are addressing control weaknesses and failures to follow proper procurement procedures; (8) most agencies are trying to improve their card programs by emphasizing card use, reengineering their processes, and increasing their use of automation; and (9) opportunities to improve the card program include revising the Federal Acquisition Regulation (FAR) to address card use more thoroughly and establishing a mechanism so agencies can share their innovations and experiences.


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