The Federal Purchase Card: Still a Viable Procurement Method for B2B

The U.S. federal government remains the largest buyer of products and services anywhere, spending over $600 billion annually. Most B2B catalogs and multichannel merchants have had success with government sales via the Federal SmartPay charge card. Since the program inception in 1989, there has been about $200 billion in sales that have gone through the federal purchase charge cards.

The charge card program began for several reasons, among them to eliminate costly paper-based purchasing practices for small purchases. There was a significant cost-savings for the government in avoiding the paper-based procurement method. Another reason was to give front-line managers faster access to the products and services they required to get things done on a timely basis.

Most state governments and many local governments also use purchase cards for official business.

In Federal FY 2013 there was a total spend of 26.1 billion on the SmartPay card, which includes the purchase, travel and fleet cards. The purchase card accounted for $16.5 billion of that total.

The SmartPay (formerly IMPAC) card was originally designed for ‘micro-purchases’, which are purchases under $3,000. In FY 2013, $6 billion of the purchases via SmartPay purchase card were over $10,000.

In the 1990s and through the late 2000s, MCM and catalog companies without government contracts selling at or below the micro-purchase threshold were picking up a significant portion of the annual spend through the charge cards. Some B2B companies dedicated resources to selling to the government and did very well. As early as 1990 National Audio Visual created a “Government Edition” catalog with a reference to the government charge card on the cover. Only the cover was different. The government edition was mailed only to known government buyers and did pretty well. The company was run by the father and son team of Joe and Scott Heller, and was eventually sold.

In the early days all you really had to do was have a “government edition” and some sales would occur even if you had no government contract.

Over the past decade we have seen a shift, and those companies not carrying any government contracts are seeing the percentage of their federal sales via the charge card shrink.

There are several reasons for this, but the main reason is the push from General Services Administration (GSA), which manages the charge card program, to educate the 3 million-plus card holders to buy from government contracts when possible. GSA offers online training for both the cardholders and the agency card managers. This training includes where, when and how to use the charge card. Preference is to be given to companies with government contracts when possible.

This does not mean that if you don’t have a contract you will lose all your federal sales. However, if you have been monitoring sales by industry, you have noticed a decade-long gradual but increasingly significant decline in your federal sales.

So what can you do to stem the shrinkage?

First, know how to identify federal charge card purchases. They have a distinct look, but as most purchases will be online or over the phone, look for the unique first four digits of the cards. All federal charge cards begin with 4486, 4614, 4716, 5568 or 5565. Only federal charge cards will begin with these numbers.

Your sales records should indicate to agency or department buying the product.  Your records will also tell you what they are purchasing.

If you have two or three agencies that are your main customers, it is important to do some research into these agencies and determine what contracts they use to buy the products you offer. Many people assume that the preferred contract will be a GSA Schedule, but this is not always the case.

Your web site must have a dedicated government sections helps establish your credibility as a legitimate source even without a contract. Having the SmartPay logo in the government section is a good move and you can download it from the GSA web site –

Staying in touch with all government buyers is important. Do not overlook finding them on social networks like LinkedIn.

While not yet required on all contracts, processing charge card purchases at Level 3 is frequently mentioned in the training programs for card managers and cardholders. Level 3 processing requires the seller to capture more data from the buyer, but it gives the cardholder and card manager more detailed reports on what was purchased. It also offers a higher degree of security during the purchasing process. If you do not yet offer Level 3, look into it. The benefit for the seller (you) is usually a lower processing fee.

Having a government section at the web site, using to SmartPay logo on the site and in your catalog, and offering Level 3 processing can help slow down your shrinking government sales, but sooner or later you may need to consider a more formal arrangement with the agencies that buy from you.

At some point you need to make a “go/no go” decision regarding getting some sort of government contract, a GSA Schedule, a Blanket Purchase Agreement of some other agency contract of government-wide contracts, known as GWACs.

Before proceeding into any contractual arrangement with federal, state or local governments, get some professional advice. Once you enter into a contractual agreement with Uncle Sam, your business infrastructure will need to adapt quickly. It is not a simple decision and pursuing government contracts is not the best decision for all companies.

Mark Amtower ([email protected]) is the author of Government Marketing Best Practices and Selling to the Government. He has advised companies on selling to the government since 1985.