Government Purchase Cards:

Opportunities Exist to Leverage Buying Power

GAO-16-526: Published: May 19, 2016. Publicly Released: Jun 20, 2016.

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makm@gao.gov

 

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What GAO Found

The agencies in GAO's review—the Departments of Defense (DOD), Veterans Affairs (VA), the Interior (Interior), Homeland Security, and Energy (Energy), and the Environmental Protection Agency (EPA)—have made varied use of purchase card data, and additional opportunities exist to negotiate discounts and leverage buying power. As the chart below shows, spending with government purchase cards represents billions of dollars each year.

The Office of Management and Budget (OMB) guidance that prescribes policies for agencies on how to manage their purchase card programs (1) requires agency officials to incorporate purchase card data into strategic sourcing analysis and (2) recommends that agencies review and analyze purchase card spending patterns for opportunities to negotiate discounts, improve buying processes, and leverage buying power. All the agencies in GAO's review incorporated purchase card data into overall spend analysis to support strategic sourcing efforts as required by OMB, but officials noted challenges that impede review of purchase card data. For example, purchase card data do not always include enough specificity to identify particular commodities to target for savings. Despite these challenges, four of the six agencies GAO reviewed took additional steps to independently analyze purchase card spending patterns as recommended by OMB. Two agencies—EPA and Interior—identified opportunities for savings through such analysis, demonstrating that savings can be found. However, Energy and certain DOD components, such as the Air Force and Navy, did not perform analysis of purchase card spending. Without more focused efforts, these agencies may be missing opportunities to find cost savings.

GAO also found instances where regional VA offices were successful in identifying opportunities for local or agency-wide savings on items procured with purchase cards. For example, one office recognized an opportunity for savings when purchasing wheelchair ramps for disabled veterans, resulting in savings of $1.1 million and faster delivery. Federal internal controls state that management should communicate the necessary information to achieve objectives. Given the examples GAO found, developing guidance and sharing information may help agencies identify opportunities to leverage buying power with purchase cards.

Why GAO Did This Study

The purchase card program was designed to streamline relatively small dollar value acquisitions of goods and services. In fiscal year 2015, the government spent approximately $19 billion using purchase cards.

GAO was asked to review whether agencies are effectively leveraging their buying power when using purchase cards. This report assesses the extent to which selected (1) agencies analyze purchase card data to identify opportunities to leverage buying power agency-wide and (2) purchase cardholders seek opportunities to achieve cost savings when using purchase cards.

GAO analyzed data from the three banks that work with the six selected agencies—selected in part on varying levels of purchase card spend volume—to manage their purchase card programs. GAO evaluated policies, reviewed strategic sourcing efforts related to purchase cards, and interviewed officials. GAO also interviewed officials from the General Services Administration who manage the government's purchase card contracts, and interviewed selected cardholders at the two agencies with the highest purchase card spend.

What GAO Recommends

GAO recommends that Energy analyze purchase card data and DOD ensure its components do the same. GAO also recommends that each agency develop guidance to encourage local officials to examine purchase card spend patterns and share this information. Four agencies concurred, Interior partially concurred, and EPA did not comment.

For more information, contact Marie A. Mak at (202) 512-4841 or makm@gao.gov.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In providing comments on this report, DOD concurred with this recommendation and in September 2016, DOD issued guidance asking its components to analyze purchase card spend for potential cost savings and to consider broader application of cost savings opportunities across the department. DOD reported in October 2017 that the components completed their analyses and found that purchase card strategic sourcing analysis was already part of components overall strategic sourcing efforts and that they may be expanded when appropriate. DOD drafted additional DOD-wide guidance to support implementation of the September 2016 memorandum, encouraging components to identify recurring purchases and, where appropriate, use strategic sourcing contract vehicles for future acquisitions. Further, the Office of Defense Procurement and Acquisition Policy drafted language concerning strategic sourcing purchase card procurements that was incorporated into the Defense Contracting Management Agency's program management review guidance in April 2018.

    Recommendation: To help identify opportunities for cost savings, the Secretary of the Department of Defense should direct the Office of Defense Procurement and Acquisition Policy to issue guidance or instruction to help ensure that components make reasonable efforts to analyze component-level purchase card spend patterns to identify areas for possible savings.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: In November 2017, Energy provided GAO with a sample report from its new spend analytics database that demonstrated the agency's ability to analyze purchase card spending for dollar value and number of transactions. Further, the sample report indicated that data from the system were the basis for ongoing in-depth analysis of a specific vendor that could result in future discounts for the agency. This new database should allow Energy to regularly analyze agency-wide purchase card spending for potential savings in the future, thus we are closing this recommendation as implemented.

    Recommendation: To help identify opportunities for cost savings, the Secretary of the Department of Energy should take reasonable steps to regularly analyze agency-wide purchase card spend patterns to identify areas such as high-use vendors or frequently purchased commodities for further analysis.

    Agency Affected: Department of Energy

  3. Status: Closed - Implemented

    Comments: The department concurred with this recommendation and updated its purchase card manual November 2016 to encourage components to perform additional spend analysis for the identification of strategic sourcing opportunities. Recommended strategic sourcing opportunities are to be communicated via the Strategic Sourcing Program Office's email address located at the department's strategic sourcing web page, which is referenced in the purchase card guidance. Updated guidance adequately addresses the need for local level spending analysis to inform the department's strategic sourcing decisions, thus we are closing this recommendation as implemented.

    Recommendation: To ensure that good practices are shared within agencies, the Secretaries of Defense, Veterans Affairs, the Interior, Homeland Security, and Energy, and the Environmental Protection Agency should develop guidance that encourages local officials to examine purchase card spend patterns to identify opportunities to obtain savings and to share information on such efforts. Where applicable, we further recommend that these agencies determine the feasibility for broader application of these efforts across the agency or organization.

    Agency Affected: Department of Homeland Security

  4. Status: Closed - Implemented

    Comments: In providing comments on this report, the agency concurred with this recommendation and stated that guidance that encourages local examination of purchase card spend patterns to identify opportunities for cost savings will be developed. In September 2016, the Department of Defense issued guidance calling for component-level review of purchase card spending and asked certain components to brief their findings to the Purchase Card Senior Focus Group. These briefings found that purchase card spending analysis was incorporated into broader strategic sourcing analysis. Additional DOD-wide guidance on the subject has been drafted, encouraging components to identify recurring purchases and, where appropriate, use strategic sourcing contract vehicles for future acquisitions. Further, the Office of Defense Procurement and Acquisition Policy drafted language concerning strategic sourcing purchase card procurements that was incorporated into the Defense Contracting Management Agency's (DCMA) program management review guidance in April 2018. The guidance now suggests that DCMA review teams assess whether DOD components periodically analyze purchase card transaction data and spend patterns to identify opportunities to obtain savings and determine if they can be applied across the agency.

    Recommendation: To ensure that good practices are shared within agencies, the Secretaries of Defense, Veterans Affairs, the Interior, Homeland Security, and Energy, and the Environmental Protection Agency should develop guidance that encourages local officials to examine purchase card spend patterns to identify opportunities to obtain savings and to share information on such efforts. Where applicable, we further recommend that these agencies determine the feasibility for broader application of these efforts across the agency or organization.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: In September 2017, the Department of Energy updated its purchase card guidance to encourage local offices to analyze and evaluate purchase card patterns to assess whether opportunities exist to leverage buying power. The guidance describes tools available to conduct analysis and directs officials to send the results to the agency program coordinator to be reviewed for potential application across the department. This guidance, if followed by local offices, should provide better insight into purchase card spending and potential opportunities for savings and thus we are closing this recommendation as implemented.

    Recommendation: To ensure that good practices are shared within agencies, the Secretaries of Defense, Veterans Affairs, the Interior, Homeland Security, and Energy, and the Environmental Protection Agency should develop guidance that encourages local officials to examine purchase card spend patterns to identify opportunities to obtain savings and to share information on such efforts. Where applicable, we further recommend that these agencies determine the feasibility for broader application of these efforts across the agency or organization.

    Agency Affected: Department of Energy

  6. Status: Closed - Implemented

    Comments: The department partially concurred with this recommendation, agreeing that it would be useful to perform analysis of purchase card spend patterns to identify opportunities for savings. The Office of Acquisition and Property Management has encouraged bureau purchase card program leads to analyze purchase card spend data to the extent practicable. Back in 2017, the department decided to refrain from issuing policy that requires this type of analysis because of limitations to the level of detail provided by data mining tools from the purchase card bank. After transitioning to a new servicing bank which provided a new suite of tools for data analysis and reporting in November 2018, the Office of Acquisition and Property Management issued a memorandum in July 2019 directing bureau procurement chiefs to use these tools to analyze purchase card transaction data at least semi-annually to identify opportunities to leverage buying power. It also provided further technical guidance on how to use the banking tools to perform periodic analysis. This guidance should provide the bureaus better insight into spending patterns and potential cost savings, thus we are closing the recommendation as implemented.

    Recommendation: To ensure that good practices are shared within agencies, the Secretaries of Defense, Veterans Affairs, the Interior, Homeland Security, and Energy, and the Environmental Protection Agency should develop guidance that encourages local officials to examine purchase card spend patterns to identify opportunities to obtain savings and to share information on such efforts. Where applicable, we further recommend that these agencies determine the feasibility for broader application of these efforts across the agency or organization.

    Agency Affected: Department of the Interior

  7. Status: Closed - Implemented

    Comments: The department concurred with our recommendation and incorporated changes into its purchase card policy to encourage agency officials to analyze spend patterns to identify opportunities to obtain savings in June 2018. Further, the agency has developed a quarterly report to identify the top merchants receiving payment through the purchase card program in order to assist officials in identifying opportunities for strategic sourcing. As result of these steps to gain better insight into purchase card spending and to identify cost saving opportunities, we are closing this recommendation as implemented.

    Recommendation: To ensure that good practices are shared within agencies, the Secretaries of Defense, Veterans Affairs, the Interior, Homeland Security, and Energy, and the Environmental Protection Agency should develop guidance that encourages local officials to examine purchase card spend patterns to identify opportunities to obtain savings and to share information on such efforts. Where applicable, we further recommend that these agencies determine the feasibility for broader application of these efforts across the agency or organization.

    Agency Affected: Department of Veterans Affairs

  8. Status: Closed - Implemented

    Comments: The agency provided comments indicating its concurrence with this recommendation, noting that it looks forward to opportunities to benchmark with other agencies and share information on approaches taken to identify opportunities which led to positive strategic sourcing outcomes. In August 2018, the EPA reported that it has established savings and spending dashboards as well as an electronic contract depository to provide contracting officials and other staff with insight into agency spending patterns and active contracts to help ensure savings when using purchase cards. Further, in July 2019, EPA provided GAO with its recently-released guidance meant to help EPA's contracting officers recognize opportunities for cost savings and develop solutions for smaller scale strategic sourcing-based contract vehicles. We found that the update asked contracting officers to perform an assessment of agency purchasing history including contracts, agreements, and purchases card purchases and notes that analyses can be focused just on purchase card data. Based on these steps to enhance analysis of purchase card data throughout the EPA, we are closing this recommendation as implemented.

    Recommendation: To ensure that good practices are shared within agencies, the Secretaries of Defense, Veterans Affairs, the Interior, Homeland Security, and Energy, and the Environmental Protection Agency should develop guidance that encourages local officials to examine purchase card spend patterns to identify opportunities to obtain savings and to share information on such efforts. Where applicable, we further recommend that these agencies determine the feasibility for broader application of these efforts across the agency or organization.

    Agency Affected: Environmental Protection Agency

 

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