HM Treasury News Release
125/97 23 October 1997
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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 98
pence!
"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
1. 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.
2. 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.
3. Customs & Excise have also been consulted and are satisfied
that the GPC scheme fulfills necessary requirements in
relation to VAT.
4. 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.
5. The five banks are :
Barclays Bank plc
Midland
Nat West
Royal Bank of Scotland
Ulster
6. A more detailed note on the operation of the GPC scheme is
attached.
7. 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.
8. 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.
9. If you have access to the Internet, you can find this news
release at http://www.hm-treasury.gov.uk. Other Treasury
material can also be found at this address.
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.