Securing Government Micro-Purchases

The Federal government purchases virtually every business product and service imaginable. Most people assume that government contracts are required for each of these purchases, but for the past thirty years, there has been an exception to this: micro-purchases.    

Government Micro-Purchases   

Since 1988, the United States Federal government has used credit cards for small purchases, known as micro-purchases in government parlance. Micro-purchases at the Federal level are all sales under $3,000 ($2,500 before 2007). The program began as a way to avoid the slow paper-based procurement process for Federal line managers who required products or services quickly.

The first incarnation of the government credit card was the IMPAC card, devised by Rocky Mountain Bankcard. The SmartPay Program replaced the IMPAC program in 1998, and is the program in place today.

Technically there are three types of cards Feds can use: travel, fleet and micro-purchase. The travel card is used for travel-related expenses (airfare, hotel, etc); the fleet card is used when driving a Federal vehicle (gas purchases, etc); and the micro-purchase card can be used with traditional storefronts or web-based businesses.

We will deal here with the micro-purchase card.

SmartPay

First, some quick facts:

  • There are 275,000 SmartPay micro-purchase cards currently in use
  • There were 25,500,000 purchases made on SmartPay cards in FY 2008
  • There was $19.9 billion spent on micro-purchases in FY 2008
  • Each purchase must be under $3,000
  • No contract (no paperwork!) is required

The Federal government operates throughout the country, and the needs of the front-line personnel are often immediate. A US Army Corp of Engineers line manager in a field activity can walk into a local hardware store to purchase supplies his/her group may need that day. A techie at a Veterans Administration clinic can go to the local office supply store for toner cartridges, paper, etc. Front-line Federal managers can also go to online vendors to make their purchases. The requirement on them is to purchase items priced in a competitive way from reputable vendors.

The SmartPay card provides a flexible purchase framework. In addition to everyday purchases, the card is often used during emergencies that involve Federal agencies. It can also be used to spend Federal stimulus program money.

In order for your company to accept the SmartPay card, you simply have to be able to process Visa and MasterCard purchases. Hundreds of B2B catalog companies, merchants selling business products over the web, and thousands of storefronts get Federal business via the credit card, and many simply do not know it. Unless you look closely at the credit card when you are processing it, or if you know the card prefix numbers (VISA cards starting with 4486, 4614 or 4716 and MasterCard cards starting with 5568 or 5565 are all Federal credit cards). Many of the BtoB catalogers have targeted the government credit card purchasers by mailing directly to the cardholders. Government credit card orders with the catalog companies average 15% larger than BtoB orders.

One way to encourage government credit card buyers is to include the SmartPay logo on your marketing materials and your website. More information on the SmartPay program, including some downloadable SmartPay logos, is available at the GSA SmartPay website: www.gsa.gov/smartpay

The top Federal agencies using the credit card are (in order):

  • Department of Defense (DOD)
  • Veterans Administration (VA)
  • Department of Justice (DOJ)
  • Department of Interior (DOI)
  • Health and Human Services (HHS)
  • Department of Agriculture (USDA)
  • Department of Homeland Security (DHS)
  • Postal Service (USPS)
  • Department of Transportation (DOT)
  • Department of Commerce (DOC)

Most state and local governments also use government-issued credit cards for small purchases, but statistics for state and local government use are not available.

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