Rebate Envy

Some agencies think the Veterans Affairs Department is sucking up more than its fair share of purchase card rebates; VA officials think they're getting their just deserts. Fairness aside, the facts remain. VA collected 83 percent-a cool $1.9 million-of the government's refund total for August 1996 through January.

Agencies can earn two kinds of rebate: up to 2 basis points of annual purchases-a basis point is 1/1,000 of a percent-for receiving and paying bills electronically, and increasing percentages of sales for each day sooner the agency pays its bills within 54 days of receiving them.

VA is getting the maximum rebate-$6.60 per $1,000 in purchases-by paying daily through a sophisticated form of electronic commerce and data interchange known as the credit card system (CCS), which it implemented in May 1996. "Each morning we dial into the Rocky Mountain BankCard System computer system, grab all the VA transactions, pick up the accounting information and download it to the [VA] finance center and the transactions are interfaced into an Oracle relational database," says William Shelton, VA deputy assistant secretary for financial operations. "We make payment the same day through the treasury to First Bank [which owns Rocky Mountain]. CCS then translates the RMBCS data and posts each transaction to the appropriate VA account. In a little more than a year, CCS has netted VA more than $2.7 million in rebates, the Vice President's Hammer Award and growing attention from other agencies.

Not everyone thinks what VA is doing is kosher. The Defense Department general counsel has ruled same-day payments violate the 1988 Prompt Payment Act's ban on paying bills too early. VA believes the purchase card contract, by including the rebate payment schedule, permits daily payments.

At issue is the cost of money. Does the government as a whole gain more by keeping extra cash on hand to pay VA's bills immediately so VA gets rebates, or by doing other things with the money for a longer time? For now, VA, rather than government as a whole, is getting the benefit.

Some observers wish more agencies would follow VA's lead. "It's sad for us because we worked hard to build rebates into the contract as an incentive to use the card," says Dennis Fischer, chief financial officer at the General Services Administration, which administers the card contract. But even if others could copy VA's system, they couldn't work the same rebate deal for long. Rebates are due for reworking via the new card contract to take effect November 1998.

VA is quite willing to share its success. The Austin, Texas, finance center where CCS lives is a franchise operation ready and willing to handle other agencies' card payments for a fee.

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