GOVERNMENT PROCUREMENT CARD

This page is intended as an introduction to the Government Procurement Card (GPC), what it is, how it works, how it came about and how you might benefit from using it.

A short history lesson

This is a Treasury initiative launched in October 1997. It was an immediate response to the results of an National Audit Office (NAO) enquiry in the Ministry of Defence into the purchase of very low value items It found that the cost of the purchase, requisitioning, obtaining quotes, issuing purchase orders, etc. outweighed by far the value of the items purchased. Indeed the particular item in question was a padlock costing about 80 pence that it was calculated cost some £90 to buy!! A competitive tendering exercise resulted in Treasury awarding a contract to VISA along with five issuing banks to run the card fro central Government.

Before taking up the GPC, Finance and Resource Management Directorate (FRM) had an independent study conducted by KPMG to look at the potential savings to the Department were we to introduce it. They came up with a figure of a process cost saving of over 50% for each transaction. Of course we know that such savings in reality don’t automatically equate to lower costs but nonetheless this was encouraging. We instigated a small group including Internal Audit to look at the issue and it was decided that we should take things forward This resulted in the Department running its own internal tendering exercise and choosing Barclays as our GPC provider.

Following this, we conducted a trial use of the card in four Directorates for a period of six months. It was used against the Niceday stationery contract as well as for the purchase of books, office equipment and other small goods. The trial has been successfully concluded and has resulted in the agreement to roll out the GPC to those in the Department that feel they can make use of it.

Finally we were further encouraged to proceed with the adoption of the card as we have viewed this as an electronic medium for purchasing. The Department along with all of Government has a target that "by March 2001 all routine procurement of goods should be conducted electronically". The use of the GPC will go some way towards meeting that aim.

What is it?

• The GPC is a charge card. It is provided to selected members of staff to buy low value goods and services directly from suppliers.
  
• It cuts out the need to issue purchase orders or contracts or to enter commitments onto the Order Processing and Commitment Module of the Department Accounting System (RAB).
  
• Only one invoice is submitted each month from the bank - in DTI’s case Barclays, instead of sometimes dozens.
  
• A financial delegation is agreed for up - front spend limits for each card holder both for individual transactions - typically £500, and a monthly ceiling - typically £1,000.
  
• Card limits can be changed - either up or down very simply by a single phone call. The change can be for a single specific transaction or permanent.

How does the card work?

• The card holder will be issued by line management delegated authority to use the card
  
• A card application form will be completed and sent to Finance and Resource Management Directorate (FRM) for processing and onward transmission to Barclays. This will amongst other things set out precise spend limits for each card holder
  
• Barclays will process the cards and return them to DTI within five working days.
  
• Card holders will then be able to start using the card directly with suppliers that accept VISA
  
• Orders are placed directly with suppliers either by personal visit, telephone , FAX or ultimately via email or internet.
  
• Card holders will keep a transaction log to monitor items ordered. Usually a simple spreadsheet will suffice.
  
• The supplier in turn keys the transaction into a terminal including the unique card holders identification umber.
  
• Once accepted approval to release the goods or services is given
  
• These are delivered directly to the card holder - or any other nominated delivery point.
  
• The supplier’s own account is credited within 2-4 days.
  
• Card holders are provided with monthly statements. These statements will be checked against the transaction log for accuracy by the cardholder.
  
• Finance and Resource Management Directorate present receive a consolidated statement covering total Department spend for the month and arrange for payment. This is paid from a suspense account
  
• Individual Management Units with card holders will if satisfied with their own monthly statements arrange to clear the suspense account by monthly journal entries. We hope soon to institute a simpler method.

So who benefits by the use of the GPC

It should be clear that from the Department’s point of view the main benefit will be the saving of time and effort on low value purchases. This frees up valuable resources for other uses. From the supplier’s point of view this means quicker payment. They are assured of payment within 2-4 days instead of what might be up to 28 days. This in turn assists with our own prompt payment target.

Commonly posed questions and answers

Q. How can I be assured that it is safe to give one of my staff a card. Won’t there be a temptation to mis-use it?

A. There may be, but evidence suggests that there is in fact a lower incidence of procurement fraud with those that have a procurement card than with traditional procurement methods. There are in-built controls such as transaction and monthly spend limits as well as detailed management reports that deter fraud

Q. What about the terms of Government Accounting and Internal Audit and the issue of separation of duties? Are the National Audit Office and Internal Audit content with the card?

A. Government Accounting has recently been amended to take account of the GPC. Whilst it urges Departments to be mindful of the costs of introduction, if savings are realised they should offset this. Internal Audit have been involved in the process of the card introduction and are content with the existing controls. Also as will be clear from the introduction, the National Audit Office have urged Departments to consider the use of the card.

Q. What is the cost to the Department and my Management Unit for using the card?

A. The card is provided free. The bank secures its profits by the its charge to suppliers. Indeed they rebate to us a sum of money based upon the throughput of card usage.

Q. What happens if a supplier doesn’t accept the card as payment?

A. If this is the case you can use the traditional procurement route; you can seek out another supplier that accepts the card, but at no additional cost, or you can persuade the supplier to accept the card. There are standard letters that can be used to send to suppliers that spell out the benefits to them of accepting VISA.

Q. Is there any chance that if I send my card number via a FAX or through email that someone might hack into it?

A. Despite a great deal of media hype about exposing your card to such dangers, the fact is that the risk of the number being "stolen" is insignificant. In fact there is more risk of mis-use if you were to hand it to a waiter in a restaurant.

Q. What do I do if I lose my card?

A. In the unfortunate likelihood of this happening you should contact Finance and Resource Management Directorate immediately who will take action with Barclays.

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