THE IMPACT OF CHANGING PATTERNS OF COMMERCIAL CARD USE BY THE U.S.

GOVERNMENT ON GOVERNMENTAL EFFICIENCY AND COST SAVINGS

International Public Procurement Conference Dublin, Ireland

August 2014

Richard Palmer, Mahendra Gupta and Nathan Palmer

Agenda

• Background on U.S. Federal government use of commercial cards.

• The rise of card use and its rationale.

• The recent decline of card use and possible explanations.

• Trade-offs between efficiency and control.

• Conclusion

Background

• Commercial card use began in the 1980s.

• Key benefits:

– Process simplification

– Administrative cost savings

• $70 per transaction

– Reduced cycle time

– Financial incentives

• $300 million in rebates

FIGURE 4 U.S. Government Spending on Purchasing, Travel, and Fleet Cards, 2000-2013

$12.3

$13.8

$15.2

$16.4 $17.1

$17.4 $17.8

$18.7

$19.8 $19.5 $19.7 $19.5

$18.5

$16.9

$4.9 $5.5

$6.6 $6.4 $6.9 $6.6

$7.7 $7.3

$8.5 $8.3 $9.0 $9.1

$8.5

$7.0

$0.5 $0.5 $0.5 $0.6 $0.7 $1.0 $1.2 $1.3

$2.5

$1.5 $1.8 $2.2 $2.3 $2.1

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

$16.0

$18.0

$20.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sp

en

din

g (

in $

bil

lio

ns)

Purchasing Card Spend

Travel Card Spend

Fleet Card Spend

FIGURE 5 Purchasing Card Transactions and Spending Per Transaction by U.S. Government,

1997-2013*

11.3

16.1

19.4

23.5 24.4

25.8 26.5 26.5

25.9 25.3

24.7 25.5

22.4

23.3 22.4

21.4

19.8

$446 $491

$522 $524

$564

$592

$618

$644

$672

$701

$756

$779

$872

$845

$870 $865 $851

$400

$500

$600

$700

$800

$900

$1,000

10

12

14

16

18

20

22

24

26

28

30

32

34

36

38

40

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Pu

rch

asin

g C

ard

Sp

en

din

g P

er T

ra

nsa

ctio

n

Pu

rch

asin

g C

ard

Tra

nsa

cti

on

s (

in M

illio

ns

)

PurchasingcardTransac ons

SpendingPerTransac on

FIGURE 6 Purchasing Cards Distributed to Employees, by U.S. Government, 2000-2013

241

314

381

448

465

396

351

329

316 310

303

288 290

277 281 287

302

200

250

300

350

400

450

500

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Pu

rch

as

ing

Card

Card

ho

lders

(in

th

ou

sa

nd

s)

FIGURE 9 Card to Employee Ratio with Spend as a Percent of Budget (one year lagged)

1990-2013*

12.16%

7.60%

0.76% 0.76%

0.49%

0.0%

0.3%

0.5%

0.8%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

12%

13%

14%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Pu

rch

asin

g C

ard

Sp

en

din

g a

s a

% o

f B

ud

ge

t

Pu

rch

asin

g C

ard

-to

-Em

plo

ye

e R

ait

o

Puchasing Cards as a Percent of Employees

Purchasing Card Spend as a Percent of Budget

FIGURE 10 Total Administrative Transaction Cost Savings and Card Issuer Rebates from

Purchasing Card Spending by U.S. Government, 2000-2013

$1,664

$1,757

$1,846

$1,929$1,942

$1,906

$1,878

$1,845

$1,905

$1,737

$1,841

$1,758

$1,695

$1,565

$1,500

$1,550

$1,600

$1,650

$1,700

$1,750

$1,800

$1,850

$1,900

$1,950

$2,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

U.S

. G

ove

rnm

en

t P

urc

has

ing

Card

Sa

vin

gs

(in

$ m

illi

on

s)

Total Savings

What’s at Issue

• GAO audit concerns for Military in 2002

• Change in laws regarding supervisory accountability in 2012

• Problems with how data-mined card use “problems” are reported in press

FIGURE 11 Civilian versus Military Purchasing Card Spending, 2000-2013

$2.8

$4.2

$5.6

$6.8

$7.7

$8.5

$9.2

$9.8 $10.1

$10.5 $10.8

$11.4 $11.3

$11.9 $12.1 $12.0 $11.6

$2.2

$3.7

$4.5

$5.4

$6.1

$6.8 $7.2 $7.3 $7.3 $7.3

$7.9 $8.4 $8.3

$7.7 $7.4

$6.5

$5.3

$0

$2

$4

$6

$8

$10

$12

$14

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sp

en

din

g (

in $

bil

lio

ns

) CivilianPurchasingCardSpending

MilitaryPurchasingCardSpending

FIGURE 13(a) Civilian versus Military Number of Purchasing Cards, 2000-2013

150

173 184

213

233

189

199 196

191 188 188

179 183

174 175

184

202

90

141

197

235

207

152

133

126 122

115

109 107 103 106 104

100

80

100

120

140

160

180

200

220

240

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Ca

rdh

old

ers

(in

th

ou

san

ds)

CivilianPurchaseCardholders

MillitaryPurchaseCardholders

FIGURE 14 Civilian versus Military Purchasing Card Spend as a Percent of Budget, 2000-2013

0.2%

0.3%

0.4%

0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5%

0.4% 0.4% 0.4% 0.4% 0.4%

0.9%

1.4%

1.7% 1.7%

1.9% 1.8%

1.7%

1.5%

1.4%

1.3% 1.4%

1.3%

1.2%

1.1%

1.0%

0.9%

0.8%

0.0%

0.5%

1.0%

1.5%

2.0%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Civilian Purchasing Card Spend as a Percent of Budget

Military Purchasing Card Spend as a Percent of Budget

TABLE 1 Summary of Differences in Military and Civilian Purchasing Card Statistics 1997-2013

Conclusion

• Commercial cards offer significant benefit to government. – Transparency – Efficiency – Savings – Online compatible

• Civilian card programs may go way of Military unless leadership communicates trade-offs between efficiency and control

• Control concerns of other procurement methods are non-transparent, making comparison difficult.