citibank presents: program optimization for the purchase card
TRANSCRIPT
GSA Federal Supply Service
Citibank Presents:Program Optimizationfor the Purchase Card
Citibank Presents: Program Optimization for the Purchase Card
Citibank® Commercial Cards, Government Services
The Eighth Annual GSA SmartPay ConferenceJoyce Heath, Martin Johnson, Valerie Mawdsley, August 1, 2006
Explore
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Goal & Objectives
Discover new ways to grow your existing card program
Find out how you can optimize your program
Listen to a success story
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Agenda
Industry Trends
Program Growth – Then and Now
Strategies to Grow Your Program
Program Optimization
Case Study – Social Security Administration
Summary
Questions
4
Industry Trends
Purchase card benefits– Streamlines the purchase order process for micro-purchases– Replaces petty cash or imprest funds– Provides data for auditing and reporting– Improves spending control – Reduces resources required– Method of payment
Traditionally used to purchase high-volume, low dollar transactions under $2,500
– Maintenance, repairs, operations (MROs)– Services (training / education, technical)– Office supplies
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Industry Trends (continued)
Annual Federal procurement market estimated at $200 billion
Federal purchase card spending– $17.4 billion in spending and 25.9 million transactions
for FY 2005– $1.4 billion in cost savings ($54 x no. of transactions / year)
Efficiencies and accomplishments– Quicker ordering and receipt of goods and services– Maximizes resource availability– Generates detailed reporting– Utilizes common metrics– Earns rebate on spend
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Program Growth – Then and Now
Fiscal Year Volume Transactions Cards
2005 $17.4B 25.9M 301,217
2004 $17.1 B 26.5 M 310,861
2003 $16.3 B 26.4 M 326,850
2002 $15.2 B 25.7 M 392,576
2001 $13.8 B 24.4 M 406,290
2000 $12.3 B 23.4 M 670,374
1999 $10.2 B 20.6 M 517,082
U.S. government purchase card spending
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0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
FY 99 FY00 FY 01 FY 02 FY 03 FY 04 FY 05
Fiscal Year
Num
ber o
f Car
ds
0
100
200
300
400
500
600
700
800
Avg.
Tra
nsac
tion
Siz
e
Number of CardsAvg. Transaction Size
U.S. government purchase card trends
Program Growth – Then and Now (continued)
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Program Growth – Then and Now (continued)
Independent conclusions
Study (Year)Cost of
Purchase OrderCost of
Purchase Card
Net Savings (From Using
Purchase Card)
AGA Study (2006) N/A N/A $87
Palmer & Gupta Study (2005) $89 $21 $60
U.S. Army Audit Agency (1997) $155 $62 $93
GSA Purchase Card Council (1994) $94 $40 $54
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Strategies to Grow Your Program (continued)
Government that works better and costs less– Presidential Executive Order 12352, March 1982– Government chose purchase card, 1989– OMB Circular A-123, August 2005
Benefit #1 - Increased controls– Oversight– Documented internal policies and procedures– Transaction controls
• MCC restrictions• Transaction and monthly spending limits• Cardholder and department level restrictions
Why purchase card?
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Strategies to Grow Your Program (continued)
Benefit #2 - Obtain better purchasing data– Citibank® Custom Reporting System– Citibank® Electronic Reporting System– Electronic file output
Benefit #3 - Improve vendor management and strategic sourcing
– Reports can paint a bigger picture• Identify top ten vendors• Number of transactions per year• Dollars spent per year• Negotiate better pricing with identified vendors
– Association reports (Visa and MasterCard) • Provides list of vendors who accept the purchase card• Merchant acceptance teams
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Strategies to Grow Your Program (continued)
Uniform purchase & cleaning
Security expenses (fingerprinting, drug tests, etc.)
Software
Subscriptions
Rental equipment
Safety supplies
Utilities
Telecommunications
Courier services
Licenses
Health services
Short-term leasing
Snow removal
Landscaping
Furniture
Plumbing
HVAC
Purchase orders and blanket purchase orders can be paid for with the purchase card. When soliciting for bids,
stipulate preferred method of payment is by purchase card.
Expanded uses for paying with purchasing cards
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Strategies to Grow Your Program (continued)
Senior management support– “…increased likelihood of receiving endorsements and
resources for existing initiatives, encouraging compliance to policies, and increasing visibility and buy-in.”Deloitte & Touche 2003 Procure-to-Pay study
Strong A/OPC leadership– Influence current and potential procedures– Strongest knowledge of day-to-day operations
Development of a team– Share the workload between purchasing department,
acquisitions, finance, administrative payments, IT, etc. – Involve key stakeholders– Share the success as well!
Support for the program
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Strategies to Grow Your Program (continued)
#1 - Analyze higher ticket opportunities – Transactions above $2,500 (micro purchase level)– FedBid Online Marketplace with ePayment
#2 - Identify new pockets of spend– Transactions below $2500 that are not currently
on the purchase card
#3 - Eliminate convenience checks and third-party drafts– Identify opportunities to convert check transactions
to purchasing card
#4 - Participate in Visa’s Program Optimization– Visa will consult with your agency on ways to grow your
program
Four Strategies
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Strategies to Grow Your Program (continued)
Works best when buying commodities such as:
Computer Hardware, Software & Accessories
Office Equipment, Supplies & Furniture
Medical and Laboratory Equipment & Supplies
Electronic & Security Equipment
Facilities Equipment & Supplies
Simple Services
#1 - FedBid is ... the buyer driven online marketplace for government
“FedBid is like eBay in reverse for government.”Dr. Steve Kelman, Former OFPP Administrator
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Strategies to Grow Your Program (continued)
Key Benefits of FedBidImproves buyers’ compliance with the FAR
Ensures “the consistent use of fair and open competition”
Documents all competition and bidding information
Reduces cost of goods purchased with reverse auction bidding
Improves small and minority business utilization
Provides seller recruitment and support services
Last 12 Months Federal Metrics – 20 Federal Departments, Agencies, and Corporations
Average no of firms bidding 6.5
Average number of bids per auction 15.9
NET Savings percentage 12.57%
% of dollars going to small business 68.96%
Program Optimization for the Purchase Card
Martin JohnsonVisa USA
What is Program Optimization?
Purchase Card Program Optimization assists federal agencies in improving the effectiveness of their procurement programs
The program:• Identifies opportunities to increase the use of the purchase card • Provides insight for improvement opportunities within the program • Generates recommendations for improving the program
Program Optimization Approach
Track Progress
Deliver Results
Conduct Agenc
Interviewsy
Produce Interim Results
AnalyzeAccountsPayable
Data
EvaluateOpportunity/
EnrollAgenc
y
Our team follows a six-phase process* for program optimization
* Activities may be modified as appropriate to meet agency objectives.
Optimization A/P File Data Requirements
General Ledger Code
Business Unit Code
Cost Center Code
Gross Amount
Invoice Number Payment Date Payment
Method1Supplier
Name
Alpha-numeric
Alpha-numeric
Check, Card, ACH,
etc.MM/DD/YYYYNumericAlpha-
numericAlpha-
numericAlpha-
numeric
Dat
aEl
emen
tFo
rmat
Payment data
G/L Code G/L Description
Spend Category
Alpha-numeric Alpha-numeric Alpha-
numeric
Dat
aEl
emen
tFo
rmat
General Ledger cross-reference information Element is Required
1If payment method is not available the client should provide a list of suppliers which are paid electronically
Supplier Street
AddressSupplier City Supplier
State
Alpha-numeric
Supplier Zip Code
Alpha-numericAlpha-numeric Alpha-numeric
Dat
aEl
emen
tFo
rmat
Illustrative
Visa has created online consultative tools to complement the program optimization efforts, including:
Estimates financial benefits of improving procurement efficiencyCalculates potential benefits of reducing paper and electronic purchase orders
Rates program performance against best practicesRecommends and quantifies benefit of implementing best practices
Benefits CalculatorPerformance Gauge
Procure-to-Pay Consultative Tools
Accounts Payable Analysis ToolThe A/P analysis reports facilitate identification of non-card transactions - resulting in actionable expansion opportunities
Visa U.S.A. Confidential
Transactions between $0 and $2,500 for Fiscal Year 2004Visa Accepting Vendors Totals $40,000,000 75,000Top 1% (40) of Visa Acceptors 53% 42%
Matched Yes
DataNAME OBJ DESCR Total Amount Trans CountFEDERAL EXPRESS CORPORATION $3,539,045 11,844VERIZON $2,796,209 1,805AT&T $1,729,103 1,784QWEST $1,053,575 1,040BELL SOUTH TELECOMMUNICATIONS (UTIL) LOCAL SERVICES $853,159 736
TELECOMMUNICATIONS (UTILITY)DATA/NETWORK $45,275 31TELECOMMUNICATIONS (UTILITY) TOLL CHARGE $31,465 78COMMERCIAL LOC SER/ACCESS DIST $15,181 45COMMERCIAL DATA COMMUNICATIONS $5,554 62TELECOMMUNICATIONS (UTILITY FTS) SERVICE $813 23MISC CONTRACTUAL SERVICES-NOT CLASSIFIED $778 3PENALTY PAYMENTS FOR PROMPT PAYMENT ACT $0 1
BELL SOUTH Total $952,226 979
Illustrative
“Drill – down ability” for each supplier
Spend Details
Policy Tier Total Spend w/ Visa Accepting Vendors
Program Optimization for the Purchase Card
Joyce HeathSocial Security Administration
Social Security Administration
Background
Presented plan to SSA management officials in March 2004
Formed an internal project team in December 2004– Review the results of the draft study – develop a plan of action to move administrative payments under $2500
to the purchase card
Citigroup and Visa provided SSA with a final report January 2005– Matched accounts payable and third party draft data to the Visa
merchant network – Included clear and concise data analysis, findings, disbursement trends
and recommendations
Social Security Administration
Background (continued)
Analysis determined that 39% of the vendors paid within those disbursements (<$2,500) were already part of Visa’s merchant network
Visa and Citigroup provided a second report to compare against previous year’s data
The following findings were identified:– Immediate opportunity to move $20MM in disbursements to the
purchase card and increase financial incentives (refunds)– Potential elimination of paper associated with over 40,000 third party
drafts (cost savings per transaction are estimated at $30, for a cost savings of $1,200,000) and;
– Directional insight for additional opportunities for optimizing the purchase card program
Current Activities
Working with Citibank and Visa to enroll merchants as identified by SSA to accept Visa for purchases, e.g., telephone companies, micro-purchases, etc. Continue movement of specific targeted category of payments to purchase card
– Telecommunications – Micro-Purchase – FedEx
Analyze payment categories for feasibility to move payments to purchase card
– Phasing in offices – Identifying all stakeholders – Reviewing policy restraints (e.g., purchase card dollar threshold limits)– Reviewing/Changing business processes – Benchmark progress and trends – Communicating to users and management by memorandum, newsletter,
website updates, and updates to training material
Future Activities
Approach management for mandates where we deem necessary
Begin Phase II – Moving targeted A/P payments to purchase card (>$0 - $2500 – Estimated spend of $9MM)
Develop mandatory awareness campaign through Interactive Video Training
Conduct telephone interviews with other agencies
What We Learned – What WorkedUpper management buy-in and support of projectEffective Team Members – Finance & Acquisition StaffDirect cardholder contact
– One-on-one training as necessary – Onsite office visits
Awareness campaign – Ongoing written communication Memoranda
– Developed newsletter – Email contact mailbox established– Bulletins and alerts – Emphasized use of centralized email contact mailbox
Strengthen policy – Changing contract language where necessary – Updating user guides and training tools– Updating Administrative Instructions Manual Systems
Placing master list of Visa matched vendors on website
Lessons Learned
What We Learned – What Didn’t Work
Difficult getting agency approval to release payment data timelyfor the Visa Program Optimization Study Executive memorandum did not get filtered down to cardholder levelsTiming of the second report was too early after implementation to reap full benefit of optimization
Lessons Learned
Benefits of Program Optimization
Provided SSA with the ability to develop a strategy to move check payments below the micro-purchase threshold of $2500Gave SSA an opportunity for an immediate payoff in those paymentcategories identified in the study Increased Agency’s electronic OMB payment goalsIdentified potential process cost savings, facilitated oversight of purchases and increased refund paymentsThe entire Optimization program was a significant success with minimal resource commitment on the Agency’s part and at no cost to SSAHighly recommend other agencies take advantage of the program
Conclusion
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Summary
Need to look for new efficiencies and growth opportunities
Purchase card benefits– Better data, increased controls, improved vendor management
and strategic sourcing
Strategies to grow– Identify new pockets of spend – Eliminate convenience checks– Analysis on higher ticket opportunities
Program optimization– Analysis to identify opportunities to expand purchase
card usage– Case study on successful program optimization
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Program Optimization for the Purchase Card
Questions?
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Reminders
Thank you for attending this session!
Visit the Citigroup Welcome Center– Majestic Ballroom C, Level Two– National Industries for the Blind will have a display of products
Visit the Citigroup Technical Demonstration Center– Landmark 5, Level One
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