Recently several government departments that I've been in touch with have raised the question of whether the public sector should consider using Procurement Cards. They feel that it might be ok for the private sector but you can't entrust GOVT officials with it.

Any ideas on whether procurement cards should be used in the public sector?

Perhaps some examples?

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Is profit made when you buy or when you sell?

Please elaborate on this Bernie. As we deal with governement and especially National treasury and some other big national and also provincial rollouts and I have not come across this yet. Would love to know more.

Hi Bernie, it would be ideal to introduce procurement or purchase cards in government, however it will need a major shift in thinking and a decentralisation of procurement functions to the end users. There are corporate B2B systems in place that will dramatically cut the time and cost by allowing electronic transactions. I learned in 2001, when I attended the International e-procurement conference that already, one of the Departments in the USA was in the process of implementing purchase cards.

Designated individuals should be issued with these cards with preset delagations and they can transact with accredited vendors that are on the vendor database. Imagine cutting out the time of obtaining quotes, placing orders, tracking delivery and the payment cycle.

Procurement must be able to provide end user with their requirements at the time required. Procurement must change its face towards becoming a business management function and this will not be realized until we take advantage of electronic tool that are available.

The emphasis needs to shift from processing paperwork to smart buying. The procurement office is then freed to focus on creating strategic relationships with suppliers.

The only disadvantage of procurement cards is that we might loose out on economies of scale and volume discounts. However, the benefits associated with reduction in turn around time and effort should be able to offset this

We have to remember that that is in the US, not in South Africa where we have a general lack of/in even basic computer skills. Staff turnaround is also huge in government and therefore keeping track of these payments/cards would be a major operation. Governement is actually moving more towards a centralised environment at the moment for administrative purposes.
Using only 'some' ("accredited") suppliers also does not promote the PFMA and PPPFA. Who will make the decisions as to which suppliers to use etc. You are looking at a aministrative nightmare and leaving the door open for even more fraudulent dealings.

Personally i think that it will take a loooong time before anything of the sort is introduced here. It just won't work at this stage.

I agree, although by using procurement cards you could set up your own credit limit and vendors - it really doesn't matter whether we are in the States or not - the principle remains the same. It is up to top management to identify key personnel that could be entrusted with procurment cards.
I'm sure if you using a decentalised approach you can still use best-in-class procurement skills to manage this facility. It will also eliminate maverick spend as well as provide MIS, enabling you to track history on a certian item etc.
I would suggest(in my humblest opinion) to approach the relevant credit institutions and investigate your options.Line of business would play a very strategic role in this decision making process and therefore it would be heavily debated - good luck!

Graham, I agree with your last sentence here .

I work with government on a daily basis as we supply supply chain management solutions and there is just such a big demand for trustworthy people that will be able to be entrusted with such cards, that coupled with the high movement / turnover of staff will make it a very difficult idea to implement.

Our software already covers all the reporting needs on inventory, suppliers, spend tracking, contracts etc etc etc.

I definately agree that in private sector it could work, but I stand by my (also humblest )opinion that government is not close to ready for anything like this.

Purchasing cards have been used by government departments in Australia (both state and federal) for a number of years. The main focus has been on purchasing low value low risk items and travel expenses. Transaction costs can be reduced depending on the type of system used. The biggest issues are controlling the types of items purchased, account reconciliation and delays with cost transfer to accounts. The purchasing cards are useful but strict control measures and sound audit and reporting processes are required.

Hi Bob, welcome from "Down Under"!

1. What is the typical transaction limit that Australian govt depts place per procurement card transaction? Over here its about R5000 or Ozzie$ 1000.

2. Also, do you have a limit based on certain commodities / suppliers? Some of the card solutions here (VISA and AMEX) allow users to only buy certain categories from defined suppliers.

3. What is the average cost of a purchasing tranaction in yr neck of the woods? In govt here its R550 = +/-Ozzie $110.

1. The transaction limit varies depending on the organisation and type of goods purchased.The purchasing cards are usually used when there is not an offical need to obtain quotes. Some departments have limits set at $200 but others are as high as 10,000. The cards with the higher limits are usually used for travel expenses (airfares, accommodation). I cuurently work for a local government council and our transaction limits are set $500 Aus.

2. Yes, limits are based on commodities and the supplier type. The banks categorise the suppliers and then allow card holders to determine the categories that can be accepted by the card. Simple example is the entertainment category. Resturants, hotels etc would be grouped in one category by the bank. The government department can then elect to stop transactions from that category from being accepted (at the time of purchase).

3. Very similar to Australia. Average purchasing transaction costs vary from $80 to $150 depending on the processes and system used. We are slowly getting better.

Another area of corncern is accounting for Goods and Servises Tax (GST/VAT). The transactions downloaded from the bank do not provide a break up of the costs

The ground in South African government and admistration as a developing country is not fertile for such an exercise, taking into cognisance the balancing act between the Socio-economic challenges of this country and procurement being deemed as one of the key vehicles to close the gap between the established business and ermergng black business makes it impossible to implement these so-called purchase cards.