By Steve Kelman

Blog archive

Good intentions gone bad -- will this bill language kill the purchase card program?

It's easy to understand why people get upset at the idea that some government contractors are delinquent on their taxes. It gets me mad too.

Out of this natural reaction have grown various attempts in Congress recently to check contractor unpaid tax liabilities against contractor bills to the government, and offset government payments against such liabilities.

There is, however, a provision in S. 680, one of the pieces of contracting legislation currently being considered on the Hill, that would extend this idea to the purchase card program. So, presumably, purchase card vendors would be required to match all their payment requests from government purchase card buys against some IRS-provided database of company tax liabilities, and then withhold payments to those vendors.

Remember the idea that if we want vendors who sell mostly to the commercial marketplace also to sell to the government, we have to be careful about putting government-unique requirements on them? Adopting that idea as part of Clinton-era procurement reform led to an unprecedented growth in the availability of commercial products and services into the government marketplace, which is good for government missions and the taxpayer.

Government sales represent about 2% of the business of the major credit card companies. Adapting to this tax collection requirement, however well-intentioned, would require these companies to change the contract they sign with every merchant and could easily lead some merchants to seek out credit card companies that don't do business with the government, in addition to requiring costly, and ongoing, changes in how credit card companies deal with their payments process.

When I was in government, the most common reason civil servants I didn't know stopped me on the street or in the Metro (this didn't happen often, but it happened sometimes) was to thank the Administration for the purchase card program, which produced a dramatic improvement in the quality of worklife of civil servants, who could now get everyday items they needed for their jobs in hours or days, rather than months. The program has also saved the government billions of dollars, literally, in administrative costs for processing small purchases.

This provision in S. 680 is well-intentioned, but it's a big mistake. We don't want to risk the death of the purchase card program. Spread the word, and let's hope reason prevails.

Posted by Steve Kelman on Aug 01, 2007 at 12:08 PM


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