What is the GSA SmartPay Program?
The GSA SmartPay Program is the largest government charge card and related payment solutions program in the world. The Program has more than three million Purchase, Travel, Fleet, and Integrated accounts and supports more than 560 agencies/organizations. Since the award of the inaugural GSA SmartPay Master Contract in 1998, the GSA SmartPay Program has provided convenient, efficient, and effective payment solutions for the Federal Government, Tribes and Tribal Organizations with a comprehensive portfolio of payment solutions including Purchase, Travel, Fleet, and Integrated charge card services.
Specific to purchase, the GSA SmartPay program:
- Provides commercial payment solutions and associated services in support of official government purchases;
- Streamlines ordering, payment and procurement procedures;
- Reduces administrative costs under the simplified acquisition threshold;
- Improves government operations by simplifying the financial process; and
- Allows a platform to improve government operations and accountability.
Through a master contract with multiple banks, the GSA SmartPay program enables agencies/ organizations across the Federal Government to obtain payment solutions to support mission needs. The GSA SmartPay Master Contract, administered by GSA, is a fixed price, indefinite delivery/ indefinite quantity (ID/IQ) type contract. The maximum base period for the initial order is four years with three, three-year options.
To participate in the program, Agencies/ Organizations issue a task order under the GSA SmartPay Master Contract and award their program to one of the GSA SmartPay contractor banks (Citibank or U.S. Bank). Your agency/organization receives accounts and related services through the task order with the contractor bank selected. The task order enables your agency/organization to directly work with one of the two GSA SmartPay contractor banks that provide purchase account services. Through the task order, A/OPCs set up accounts for account holders, manage accounts using the bank’s Electronic Access System (EAS), and resolve issues or questions by working directly with a bank representative.
To become a GSA SmartPay Purchase Account holder, your personal credit history is not a criterion for receiving a purchase account. In addition, use of the purchase account will not affect your personal credit history. Any government employee authorized to use the GSA SmartPay program who has a responsibility to make purchases and completes the necessary training is eligible to become an account holder. Account holders are either appointed by their Agency/Organization Program Coordinator (A/OPC) or designated by an Approving Official (AO).
What are the Benefits to using the GSA SmartPay Master Contract for obtaining payment services?
The GSA SmartPay Program has continued to grow through increased adoption as agencies/organizations realize benefits afforded under the program.
Utilizing the GSA SmartPay Master Contract means
- A faster contract acquisition process and reduced risk of protest, as compared with a full and open competitive procurement
- Favorable negotiating platform and contract terms
- Awards to contractor banks based on a competitive bidding process
- Established relationships with contract banks
- A broad range of flexible products and services for agencies/organizations as well as, the flexibility to add products and services
- Ongoing support for your agency/organizations
Other Benefits include:
- Universal Acceptance: Because GSA SmartPay accounts are either VISA or MasterCard brands, they can be used at any merchant that already accepts these types of payment.
- Refunds: Agencies receive monetary payments provided by the contractor based on the dollar or spend volume during a specified time period, which result in millions of dollars back per year for the agency.
- Electronic Access to Data: The GSA SmartPay contractor banks all provide an Electronic Access Systems (EAS), which provides account access and a variety of reports for A/OPCs to assist in the effective management of the program.
Specific to the GSA SmartPay Purchase Account
Use of the purchase account benefits the Government in many ways:
- The GSA SmartPay accounts save the Government time, money and resources.
- The GSA SmartPay purchase program provides the Government with financial and cash management control over low dollar value high volume procurements and can serve as a payment tool for larger transactions consistent with agency policy.
- The Government saves money by making only one payment to the contractor bank rather than thousands of payments to individual merchants.
- The Government improves the use of its resources by freeing up contracting personnel so they are able to focus on more complex activities that derive greater benefit from their expertise.
- Merchants throughout the world accept the GSA SmartPay purchase account because they are familiar with commercial credit cards and they understand how to accept them.
What is a GSA SmartPay Purchase Account?
A purchase account is a type of payment solution, issued by a GSA SmartPay contractor bank, and used to pay for supplies or services procured at the direction of a Federal agency/ organization under official purchase authority. Purchase accounts may be established through any payment solution listed in the GSA SmartPay master contract.
The GSA SmartPay purchase program is the preferred method of payment for federal employees to make official Government purchases for supplies, goods, and services under the micro-purchase threshold.
- The GSA SmartPay purchase accounts are both a procurement and payment mechanism for micro-purchases.
- For purchases above the micro-purchase threshold, the GSA SmartPay purchase account may be used as an ordering and payment mechanism, but not a contracting mechanism.
Account holders can purchase any commercially available supply or service within their spending limits and not prohibited by either federal or agency-specific procurement regulations.
Purchases that are STRICTLY PROHIBITED include:
- Long-term rental or lease of land or buildings
- Travel or travel-related expenses (not including conference rooms, meeting spaces, and local transportation services)
- Cash advances (unless permitted by your agency/ organization)
Federal Acquisition Regulation (FAR) Case 2018-017:
John S. McCain National Defense Authorization Act for Fiscal Year 2019, Section 889(a)(1)(A):
Effective August 13, 2019, Federal Acquisition Regulation (FAR) Case 2018-017 amends the FAR to implement section 889(a)(1)(A) of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 to better mitigate risks from identified foreign actors.
This interim rule prohibits agencies from procuring, obtaining, extending, or renewing a contract for equipment, systems, or service that uses covered telecommunications and video surveillance equipment or services. This applies to purchases of commercial and off-the-shelf items made at or below the Simplified Acquisition Threshold and the micro-purchase threshold.
Applicable FAR clauses are required in all solicitations to prohibit the use of covered equipment, systems, or services and will require all offerors to identify any covered equipment or services that will be provided to the Federal Government. In addition, contractors and subcontractors are required to report any such equipment, systems, or services discovered during contract performance.
Waivers to this interim rule require executive agency head approval and are subject to restrictions. For more information, please consult FAR 4.2104 Waivers.
A list of the sources (“vendors”) of the covered telecommunications equipment and/or services is posted on the GSA SmartPay website at: https://smartpay.gsa.gov/content/about-gsa-smartpay#sa1340
John S. McCain National Defense Authorization Act for Fiscal Year 2019, Section 889(a)(1)(B):
Effective August 13, 2020, Federal Acquisition Regulation (FAR) Case 2018-017 amends the FAR to implement section 889(a)(1)(B) of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 which prohibits Federal agencies from purchasing products or services from entities that use covered equipment or services as a substantial or essential component of any system, or as critical technology as part of any system, regardless of whether that usage is in performance of work under Federal contract.
This prohibition applies to all contracts, regardless of dollar amount, including micropurchases on charge cards as well as formal contracting actions.
The full text of the related Federal Acquisition Regulation (FAR) interim rule on section 889 can be
viewed at: https://www.regulations.gov/document?D=FAR-2019-0009-0003.
What is a Centrally Billed Account vs an Individually Billed Account? Why is it important to know the difference?
Because the agency is invoiced for purchases and payments are made directly to the contractor banks by the Federal Government, all purchase accounts are considered Centrally Billed Accounts (CBAs). In contrast, Individually Billed Accounts (IBAs) are invoiced directly to the account holder and payment is the responsibility of the account holder, who is then reimbursed by the agency/ organization.
The distinction between CBA and IBA is important when determining state tax exemption. All GSA SmartPay CBAs should be exempt from state taxes. In addition, with a CBA, the Federal Government accepts liability for charges made by an authorized account holder, but is not liable for any unauthorized use. Unauthorized use means the use of an account by a person, other than the account holder, who does not have actual, implied or apparent authority for such use and from which the account holder receives no benefit. When the CBA has been used by an authorized account holder to make an unauthorized purchase, the Government is liable for the charge and the agency is responsible for taking appropriate action against the account holder.
What happens if a GSA SmartPay purchase account is lost or stolen?
Instruct your account holders to report a lost or stolen purchase account promptly to:
- The contractor bank;
- You, the program coordinator (A/OPC); and
- Their supervisor.
Once an account has been reported as lost or stolen, the contractor bank immediately blocks that account from further usage and a new account number will be issued to the account holder.
Reporting the account as stolen does not relieve the account holder or the Government of payment for any transactions that were made by the account holder prior to reporting it stolen. If the account holder does not recognize a transaction appearing on their statement, they are responsible for notifying the contractor bank within 90 calendar days from the transaction date to initiate a dispute, unless otherwise specified by the agency/organization. This notification of transaction dispute may occur via the electronic access system, by telephone, or other electronic means (e.g. email).
Note: The account holder relinquishes their right to recover a disputed amount after 90 calendar days from the date that the transaction was processed. It is their responsibility to dispute questionable charges. If they don’t, they will be held personally liable for the amount of the questionable charge.
What are some of the innovative solutions offered under GSA SmartPay 3?
Innovative payment solutions provide agencies/organizations with increased payment flexibilities and strategies for making payments. There are several innovative solutions offered under the GSA SmartPay 3 Master Contract including:
- ePayables: A solution that replaces the accounts payables process such that electronic transactions take place directly between the Government and the supplier. ePayables solutions are typically used with merchants who are either:
- Traditionally paid by convenience check or EFT or
- Merchants who do not accept charge card payments (e.g., utility companies)
- Mobile Application : The ability to access EAS, pay invoices, receive text/email alerts, and view statement and payment information over a mobile device. Your contractor bank provides mobile application capabilities, upon request, at no additional cost. Mobile application capabilities include:
- the ability to access EAS,
- pay invoices,
- receive text/email alerts and
- view statement and payment information over a mobile device.
- Mobile Payments: The ability to make payments via mobile device at the point-of-sale. Your contractor bank provides the ability for account holders to make secure payments using a mobile device at the point-of-sale.
- Net Billing: The process of ensuring that merchant discounts or refunds offered are deducted at the point-of-sale and guaranteeing such discount arrangements. For example, the contractor bank ensures that discount information is identified on the invoice and passed to the agency/organization, when available. If Mark purchased a toner cartridge for $100 and the merchant offers a Government discount of $4.00 to the agency/organization based on existing agreements, the contractor bank shall net bill only $96 for the transaction.
- Single-Use Account (SUAs): SUA payment solutions leverage a single virtual account number for each payment. The limit on each account is set to the specific payment amount. Internal controls such as MCC blocks, spend limits, timeframes, and account expiration dates can be used for increased control. Agencies also have the ability to append accounting data for seamless reconciliation. Examples of use include payment invoice and contract payments, which help to ensure that merchants are not able to charge more than approved amounts. Benefits to SUAs include:
- Accounts can be activated in real time
- Controls can be placed on account allowing for increased oversight of spend
- Disposable; one-time use account numbers reduce the risk of fraud
- Seamless reconciliation, and
- Reduces the necessity for using convenience checks
- Tokenization: Tokenization is the use of a secure, unique “token” in place of a 16-digit account number to provide extra security for transactions.
- Virtual Cards: The Contractor shall provide virtual accounts that may be used during a limited time, for a limited amount and possibly for a specific vendor.
- Declining Balance Cards: Declining Balance Cards can be applied for a specific purpose, a finite balance, or for a specified time period. Credit limits can either be reset as needed or the card becomes inactive once the balance is used. These accounts can be easily loaded and distributed to employees in case of emergency or disaster situations. Benefits may include:
- Financial flexibility and security,
- Reduction of agency/organization administrative fees,
- A flexible option for applicants who cannot be issued a traditional account, and
- Safe and excellent alternative to cash and paper checks.
- Ghost Cards: Ghost Cards are for agencies who frequently do business with one vendor and have recurring payments. An account number can be assigned to the vendor and authorized agency personnel transactions occur without having to use multiple cards or accounts. Many agencies use this product for purchases such as airline tickets. Benefits may include:
- Reduced number of open accounts (payment processing and oversight easier)
- Allows for multiple users
- Allows for a high level of control
- Reduces the risk of lost or stolen cards
What are Convenience Checks?
Some agencies allow for the use of convenience checks. Convenience Checks are a contractor-provided instrument that is written, dated and signed against an account within established dollar limits. Convenience checks are intended only for the use with merchants that do not accept the GSA SmartPay purchase account. Convenience checks should be used as a payment method of last resort, only when no reasonable alternative merchant is available who accepts the GSA SmartPay purchase account.
If your agency/organization determines a need for convenience checks, your contractor bank will provide a supply of checks to the designated account holder drawn on the account holder's purchase account. The checks will be processed as they are presented for payment.
Convenience checks are multi-copied (one copy for the account holder's records; the original for the merchant). Due to the increased potential of fraud and abuse, specialized training on convenience checks is required prior to being authorized to write checks. If any misuse or abuse is discovered, the employee will lose convenience check and purchase account privileges. That employee will then be referred for disciplinary action in accordance with agency procedure.
Convenience checks may NOT be written for purchases above the maximum dollar limit established by your agency. In addition, convenience checks may NOT be written to:
- Vendors who accept the GSA SmartPay purchase account;
- Vendor transactions already under another method of acquisition (purchase orders, contracts, etc);
- Employee reimbursements;
- Cash advances;
- Salary payments, cash awards, or any transaction processed through the payroll system;
- Travel-related transportation tickets;
- Meals or lodging related to employee travel except as related to emergency incident response; and
- Other restrictions as determined by agency policy.
Checks must be used in sequential order. Each convenience check must be entered in a check register or log for tracking purposes. The following information must be written on each check:
- Date the check is being issued
- The name of the payee
- Amount of the check
- An original signature
As an A/OPC, you are responsible for the implementation of the appropriate internal controls and oversight of convenience check activity, including ensuring that all checks issued are for official government business only and are stored in a secured location. You must verify that each check issued was both necessary and in compliance with the agency's convenience check policy.
The IRS requires that information be collected for reporting income to the IRS when a convenience check is used for purchases of services. If a person is “engaged in a trade or business and, in the course of that trade or business, pays any person $600 or more of rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits and income during a calendar year, Internal Revenue Service (IRS) Code Section 6041 generally requires them to file an information return with the IRS and to furnish an information statement to the payee.”
The IRS states that Agencies may rely on the merchant category code (MCC) in determining whether a transaction is subject to Form 1099 reporting. Failure to file a correct information return (Form 1099) by the due date may result in a penalty imposed by the IRS.