Mostly a curiosity just a couple of years ago, the use of purchase cards appears to be an inexorable part of the future of procurement for state and local governments.
Mostly a curiosity just a couple of years ago, the use of purchase cards appears to be an inexorable part of the future of procurement for state and local governments. Florida, which has begun to live the paperless future electronic commerce has long promised, is at the leading edge of this movement.
Using electronic data interchange (EDI) to link agencies with Bank of America, which issues the Visa purchase card, Florida aims to eliminate paper-based invoicing and check-paying for purchases less than $25,000. In doing so, the state expects to save as much as 80 percent on the $80 to $150 cost of making purchases through each written purchase order. It also hopes to save $750,000 a year by avoiding late payments by agencies to vendors.
Tom McGurk, who heads Florida's Department of Management Services (DMS), also believes the card and EDI will help the state manage its spending better.
"We are excited with the potential it provides to collect data on our trading partners," he said. "For example, it will allow us to negotiate more favorable air fares because we can use [the information provided through] the purchase card to build a focused database on who travels where and how much they pay. There's been no realistic way, using the paper-based method, to do that."
As the backbone for the state's electronic commerce plans, EDI is central to the purchase card program, said Bill DuBose, purchase card financial administrator in the state Comptroller's Office. One of the main requirements in the initial request for proposals for the program was that the issuing bank be able to provide information in a standard EDI format.
One of the challenges will be to convince individual agencies that the purchase card-and EDI-is something that really will be of benefit to them.
"The purchasing card is a major change for this government," said Patty Romig, DMS' state purchasing card administrator. "Though the previous system was very paper-intensive, people knew how to operate and what the various levels of approvals were. We think switching to a totally electronic medium will actually improve on security and capability, but we know we have to convince people of that."
Banks say it takes about three years to fully implement a purchase card program, she said, and Florida has seven state entities that have been enrolled in its program for a full year, "so it will be a couple of years yet before we know how well we've done and what yet still needs to be done."
While there's little difference in implementing a purchase card program for state governments compared with one for commercial concerns, most other states have not gone as far as Florida has with their programs, said Jeri Winkleblack, a vice president at Bank of America and the account manager for the Florida program.
"I would say that Florida is more innovative than most," she said. "It uses EDI for everything, and there is no paper whatsoever involved. We have a direct EDI interface with the state, and it pays us every day for purchases made on the card. I don't know if any other state's program is that completely electronic."
States are not unified in their view of purchase cards, said Richard Thompson, interim president of the National Association of State Purchasing Officials and director of Maine's Division of Purchasing. Maine, for example, still requires paper processing in its program, but that "has been cut in half over the past year."
States still are reluctant to use purchase cards, particularly using the cards with EDI, he said, "but that is disappearing day by day. The controls included with the card-and the information that comes with its use-are very compelling reasons for its use." To that extent, he said, Florida's purchase card program is a good indicator of what will happen nationally in the future.
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