23 October 1997
SAVING TIME - SAVING MONEY GOVERNMENT CHARGE CARD CUTS COSTS FOR TAXPAYERS
More than 60 million Pounds of taxpayers' money could be saved every year using a new procurement card for Government Departments launched by Paymaster General Geoffrey Robinson today.
The first Government-wide charge card, arranged in partnership between the Treasury and Visa International and involving five major banks, will enable purchasers to order and pay for goods and services directly and without the need to raise an expensive series of orders and invoices, saving time and money.
Launching the Government Procurement Card (GPC), Geoffrey Robinson said:
"Buying essential small items has long been a cause of frustration and waste for Government.
"Because of the need to keep track of spending, these had to be ordered and paid for through a time consuming and expensive system of individual orders. This could cost 70 Pounds or more even though the goods involved might cost 100 Pounds or less - in one case identified by the National Audit Office only 98pence!
"That is an unacceptable waste of public money when modern charge card technology offers a better deal, potentially more than halving the cost of buying low value items. When we consider that well over 100 million Pounds is spent merely on processing low value purchases, the potential savings - over 60 million Pounds - are obvious.
"Paying for goods on the spot with a Government Procurement Card will end much of that waste, as well as making sure that suppliers - often small businesses - get paid faster.
"Modernising the process will cut costs and improve cost tracking and control through a single monthly statement showing where and when every item was bought, just like the one private cardholders receive for their household purchases.
"This is another good example of Government learning from the private sector, where these ideas were developed, then working with business to deliver the goods more cheaply for the taxpayer and offering faster settlement for suppliers."
Each Department and agency will vary its GPC arrangements to meet their own requirements, but each scheme will offer broadly the same elements. GPCs offer great flexibility . They can be coded to restrict purchases to certain types of suppliers or to nominated suppliers, or below a certain value. This gives effective, focussed control over the buying ability of individual purchasers, related to separate cost centres and purchasers.
As a GPC is a charge card, it is paid off in full each month by the purchasing department on receipt of a single, fully itemised statement. It is not a credit card designed to offer extended payment periods. The supplier of goods is paid directly by the bank, generally within four working days of the purchase, as for any High St retail purchase. It benefits suppliers as well as purchasers by avoiding the need to raise and send invoices and await payment under standard commercial terms.
NOTES FOR EDITORS
- The Government Procurement Card (GPC) scheme has been developed together between the Treasury and Visa International, which is coordinating development of the scheme. Visa International has also provided consultancy and other support at no cost to the Treasury to assist in the development of the GPC concept and to help Government Departments prepare for its introduction.
- The National Audit Offices and the Treasury Officer of Accounts have been consulted on the development of the GPC scheme and are satisfied that the controls provided represent best practice which meet accounting and operational requirements for efficient purchasing without increasing the risk of fraudulent purchase activity.
- Customs & Excise have also been consulted and are satisfied that the GPC scheme fulfills necessary requirements in relation to VAT.
- Operating under the Visa GPC scheme, five major banks will agree their own terms and conditions with individual Government Departments and agencies using the GPC. This will increase competition between them for a share of the substantial business available, providing the best possible deal for users and, ultimately, the taxpayer.
- The five banks are: Barclays Bank plc, Midland, Nat West, Royal Bank of Scotland and Ulster.
- A more detailed note on the operation of the GPC scheme is attached.
- Media queries about the GPC scheme should be addressed to Charles Keseru, HM Treasury Press Office, on 0171 270 5188 or Camilla Saunders, Visa, on 0171 795 5267.
- Business and all other enquiries should be addressed to Keith Outterside (HMT Procurement Unit) on 0171 270 1621 or Nicki Bidgaard (Senior Manager, Visa Purchasing) on 0171 937 8111.
GOVERNMENT PROCUREMENT CARDS
What are they ?
GPCs are charge cards issued to buyers in participating public sector bodies to enable them to purchase and pay for low value items without raising unnecessary paperwork, just as private citizens do with their own purchases. They are issued by, currently, five banks participating in the scheme set up by Visa UK plc.
These are :
- Barclays Bank plc
- Midland
- Nat West
- Royal Bank of Scotland
- Ulster
Procurement cards are recognised as an effective means of reducing the disproportionately high administrative and processing costs - 70 Pounds or more per order - of buying items which often cost no more than 100 Pounds. They can cut the cost by up to 60 per cent, producing savings of 60 million Pounds per year across central government.
How do they work ?
Just like charge cards used by private individuals, except that they can be coded to restrict the type of supplier, authorised suppliers, and the value of individual and monthly purchases.
The purchasing organisation receives a fully itemised statement each month, listing the previous months' transactions. The purchasing organisation pays this single invoice in full within the agreed settlement period, with a single monthly payment regardless of how many times the GPC has been used.
The significant savings are clear. Previous arrangements usually required separate order forms - often requiring counter-signature - for each item, produced separate invoices to be processed - again often counter-signed - and separate payment of each, often requiring separate cheques to be issued for each invoice even if they were bought from only one or two suppliers.
Banks will provide statement details in a variety of formats to suit individual requirements. An electronic version may also be available to enable the division of the total amongst relevant cost centres.
What do they tell us ?
GPC statements carry valuable information for purchasers and suppliers. They give buyers an instant, single sheet record of transactions, enabling them to monitor frequency, volume and patterns of purchasing.
GPC users receive more detailed information than ordinary charge card users, as they provide more detailed management information about purchasing. Each transaction can be recorded by supplier, cardholder, department, cost centre and value, details of the product or services purchased, individual item costs and full VAT details.
The amount of information provided depends on the type of card merchant the supplier is. While a GPC can be used at any supplier who accepts the card issuer's generic card product, ie in this case Visa, only suppliers who are accredited procurement card merchants will record full details.
So ordinary retail outlets accepting Visa cards will only register details of the total sale value and the sale authorisation. Procurement card merchants will be able to register far more detailed information, including VAT details, item and commodity type details.
When are they used ?
Mostly for smaller purchases, typically under 500 Pounds. But GPCs are not the only means of achieving cost savings on low value purchases. They can be used in conjunction with framework agreements, ie single contracts with designated suppliers to aggregate large numbers of purchases (although these are likely to be of slightly higher value than typical GPC purchases), or telephone or electronic ordering systems.
They are versatile in use and can be tailored to individual requirements. As well as restrictions on individual cards or users, they might be held by a central buying team acting on behalf of others within organisation, or issued to named individuals where, eg, the workforce is more mobile and widespread.