Government Purchase Cards
From GOVSALESWIKI
Installment [ 31 ] Government Purchase Cards By Richard White
Our broad topic right now is government e-procurement. Last week we talked about electronic signatures. This week we'll talk about government purchase cards.
One of the big benefits of e-procurement and procurement reform, from the vendor's perspective, is that there's more opportunity now to get paid quickly. If you know the rules and have the tools, you may not have to wait as long for money to come in, compared to a few years back.
Basically, there are three ways to receive payment from the federal government:
- Invoice
- Purchase card
- Federal Acquisition Network (FACNET)
We'll talk briefly about the first of these, invoice, and in more detail about the second, purchase card. We'll save FACNET for a future installment.
Invoice
The Prompt Payment Act was signed into law in 1982, and later amended in 1988, to help alleviate the widespread problem of payment delays to federal contractors.
The act sets out general rules establishing that (unless a contract states otherwise) the government must pay vendors within 30 days of receipt of an invoice or acceptance of products or services. (In the case of construction contracts, it's within 14 days after receipt of the progress payment request. OMB A-125.) If the government is not timely, an interest penalty will be assessed. The current federal interest rate 5.5% per annum.
Interest is paid if there is:
- A contract or purchase order in place,
- An acceptance of a product or service,
- No dispute over quality, quantity or other contract term,
- A proper invoice received by the payment office.
To be "proper" invoices must have:
- Shipping and payment terms,
- Contract number or other authorization for delivery,
- Description, price and quantity actually received or completed,
- Other information required by the contract.
Vendors can even get double interest if the government sends out a late payment that doesn't include the owed interest.
The Prompt Payment Act has been relatively effective in keeping the government in line. Most vendors can count on receiving payment within 30 days of invoicing.
Purchase Card
With government purchase cards, however, vendors can get paid even faster.
These days, most federal purchases under $2,500 (micropurchases) are conducted with a government purchase card.
But it's important to remember that use of the government purchase card is not limited to micropurchases. In this regard, the Federal Acquisition Regulation (FAR) states:
Agency procedures should not limit the use of the Governmentwide commercial purchase card to micro-purchases. Agency procedures should encourage use of the card in greater dollar amounts by contracting officers to place orders and to pay for purchases against contracts established under Part 8 [Required Sources of Supplies and Services] procedures, when authorized; and to place orders and/or make payment under other contractual instruments, when agreed to by the contractor. FAR 13.301
Beyond micropurchases, the purchase card may be used to:
- Place a task or delivery order (if authorized in the basic contract, basic ordering agreement, or blanket purchase agreement); or
- Make payments when the contractor agrees to accept payment by the card.
You want your buyers to take advantage of this flexibility. Generally, you want them to use purchase cards so that you can get paid faster on both micropurchases and higher purchases. When a buyer uses a purchase card, payment usually arrives in your account within 48 hours of posting the transaction.
What can you do to make this happen? Having a Level-3 merchant account is a great first step.
Level-3 Merchant Processing
Levels-1, -2 and -3 refer to the different amounts of information that are transmitted during credit card transactions.
Level-3 is a larger set of data elements that includes such detail as item description, quantity, unit of measure, price, and more. This "extra information" provides an electronic accounting solution to government agencies. Level-3 describes exactly what is being purchased and delivers this information electronically to appropriate agency personnel.
Level-3 processing has become a high priority in government purchasing. Government employees are encouraged to do business with merchants that pass Level-3 data because this extra detail:
- Eliminates the need for receiving reports and other paperwork, and
- Helps monitor the buying practices of government card holders.
(This second factor has become more important in recent months after a GAO Report came out citing glaring incidents of waste, fraud and abuse at the Navy's Spawar Systems Center and Public Works Center.)
In one study, ninety percent of purchasing managers reported that receiving Level-2 or Level-3 data from a supplier is important when making a purchase card transaction using electronic purchasing.
Vendors that have Level-3 merchant capability also enjoy lower processing fees.
Most vendors have merchant account capability (i.e., accept credit cards), but many are not yet Level-3 capable. Having Level-3 capability can set you apart from your competitors and, as we've said, help you get paid faster.
Tools to Get it Done
How do you get set up with Level-3 merchant capability? We've entered into a partnership with US Bank and 3Delta Systems to bring you a competitive, full service program called InstantPay. For companies that qualify, the processing rate is 2.10% to 2.20% (depending on volume) with a monthly fee of $25. That's a good rate.
For more on InstantPay, go to http://www.fedmarket.com/productTour/creditCard/. To apply, fill out the short contact form here: http://www.fedmarket.com/productTour/creditCard/instantpay_contact.php
How do you find government credit card holders? Our CD-Rom of Federal Credit Card Holders can help you reach this important market segment. http://www.fedmarket.com/productTour/buyerContacts/.
Resources
InstantPay
http://www.fedmarket.com/productTour/creditCard/
GSA SmartPay http://www.gsa.gov/Portal/content/ offerings_content.jsp?contentOID=119096&contentType=1004
Prompt Payment Homepage http://www.fms.treas.gov/prompt/
Prompt Payment Act Interest Rate http://www.publicdebt.treas.gov/opd/opdprmt2.htm