Looking to transition its purchasing card (p-card) program from one banking provider to another, the Washington State Department of Transportation (WSDOT) found almost no available information to help guide them through an orderly transition. So, the largest purchasing card program in the state found its own way to demonstrate to internal customers that it could provide a seamless transition without disrupting department operations.

In the end, WSDOT successfully transitioned its highly mature and robust purchasing card program, converting more than 1,000 cards and its widely used automated business processes from one banking provider to another. In the process, WSDOT improved reconciliation practices, automated data accuracy, increased transaction visibility and enhanced auditing capability.

The transition involved creation of a new online reconciliation, management and reporting tool to process 135,000 transactions annually. A new automated interface was also developed between the p-card system and WSDOT's general ledger system. Other facets of the transition included retraining hundreds of card users and the financial staff on the new software and replacing more than 1,000 cards. The transition project was completed between April 2008 and October 2009.

"We learned that the transition process is difficult, but it can be done with a lot of hard work," said David A. Davis, WSDOT's purchasing and materials manager.

A robust p-card system

P-card users at the WSDOT pay for everything from office supplies to automobile repair parts, from computers to guard rails to traffic control equipment. The basic card level has limits of $250 per transaction or $2,500 per month. However, some cards are authorized at up to $1 million a month, according to a scale that reflects purchasing needs and the level of confidence in the employee.

Although most cards are lower-level cards used to buy hardware and office supplies, high-use cards provide a way of increasing card volume (and the rebate tied to it) without opening the masses of cards to higher limits. For example, WSDOT's centralized IT purchasing office uses cards to place orders for replacements of computers, servers and other IT equipment. Between 2003 and 2007, net p-card spending had increased by more than 150 percent per year, and the program generated almost $1.5 million in cash rebate incentives. In 2008 alone, the program generated $435,000 in cash rebate incentive payments based on a spend of $42 million (representing a 1 percent discount for every purchase). There are just 24 bank payments annually.

The program also saved an estimated $7.5 million annually in processing cost avoidance (based on a conservative industry estimate of $55 in savings per p-card transaction).

WSDOT used the same p-card provider for 10 years and had customized and built interfaces and accounts payable systems to work with the provider's systems. In 2008, the Department of General Administration determined that state law prohibited the contract from extending past October 2009 without a fresh competitive solicitation. The state then evaluated several credit card providers and adopted a Western States Contracting Alliance contract with a different bank provider.

However, the new provider's software was significantly different, and systems had to be changed to accommodate the difference. Using the new bank's front-end systems would have required hundreds of internal customers to retrain and entailed major modifications to the interface with the general ledger. WSDOT clearly faced costs and hassles of converting to the new provider, but they also wanted to create new systems that would help them avoid incurring such burdensome transition costs next time they change providers. Complicating the changeover to a new card provider was the fact that the transition period extended across two state fiscal years.

Davis convinced Bill Ford, WSDOT's assistant secretary for administrative operations, to move forward with a transition plan. It wasn't a hard sale because Mr. Ford had been kept well-informed of the many business efficiencies resulting from the card program. The challenge was to come up with numbers to demonstrate that a new system would pay for itself in a short time. Ford is in charge of the IT function as well as accounting and procurement. With his support, WSDOT identified Elliott Hewitt, an internal project manager from the IT group, to pull the new system together.

Transitioning to a new provider

A cross-functional project team was established consisting of staff from the purchasing and materials management office (PMMO), the accounting and financial services division (AFS), the office of information technology, the internal audit office and organizational stakeholders. The team held weekly meetings to review progress, plan future actions and to update team members on issues. The driving force behind the effort was Kevin White who, as the p-card program administrator from its earliest stages, had an in-depth understanding of both the department's financial systems and the bank card applications.

"Because we were managing the program from the first day, it was our responsibility to manage through the transition and make it satisfactory to the auditors and accounting group," said Davis.

WSDOT used internal IT resources to develop, test and field a new internal database and reconciliation system called the Purchasing Card Management System (PCMS). The new database application would combine transaction data from the bank each day with reconciliation data provided by users on a Web-based interface. Users could go into the system to see a transaction and could then enter information about the transaction and the proper charge codes. The new system also allowed supporting documentation, such as invoices, receipts and notes, to be scanned in electronically and tied to the appropriate transaction.

The new system was an improvement over the interface with the old p-card provider, which allowed only 250 characters of information to be entered for each transaction and could not accommodate scanned documentation, which previously had to be kept in hard copy and passed along during the approval process.

"A lot of offices were reluctant to let go of their only copy [of receipts, for example], so they spent hours at a copy machine making multiple copies of receipts from a hardware store," said Davis. Now, it's all Web-based: Each p-card or group of cards is associated with a manager who receives an email notification that there are transactions to review, which can all be done online. The new database system is also tied into WSDOT's general ledger system, which is a 30-year-old legacy AMS system.

Benefits of the new system

Best of all, in-house creation of the PCMS system ensures that it can continue to function without disruption when future bank supplier transitions take place. The basic concept is for future transitions to be invisible to the end-user. Only the backend data transfer from either the bank or the credit card provider will change with little effect on other internal systems.

The transition also had to meet the approval of state finance personnel, including management, auditors and treasury officials. WSDOT submitted documentation to demonstrate the new system meets the state's requirements. Now, the state is looking at the WSDOT system as a model to increase the use of p-cards statewide.

Direct costs of the transition included a $240,000 investment in information technology development, $100,000 to program support staff and $6,000 for hardware and software. Other costs of staff time were recognized, but were absorbed by organizational operating budgets. Those costs totaled $57,500, representing work hours by the accounting and financial services, internal audit office and other organizational stakeholders.

Lessons learned

Davis and his colleagues learned many lessons during the transition. "When you're dealing with other [internal] organizations, be careful that the faces at the meetings don't change," said Davis. "We were meeting with people assigned to help us out, but we found that those people change throughout the development process. When it came time to put this into deployment, we found out they hadn't kept their bosses informed. My counterparts in other departments weren't informed of the status of the project, so we had to make adjustments in the end, although we had expected their people to keep them informed along the way."

The project also illuminated the breadth of process variations throughout the WSDOT. There are eight operating units, each with their own accounting staffs. "We found out that they each had overlaid their own requirements on the card users," said Davis. "Some were allowing the originating office to keep the receipt copies. We ended up streamlining the process even more than it was before."

The new system now provides better visibility of each transaction over the Internet, and each manager is able to see the cards under his purview, to do queries and to examine what's being spent. Also, transactions can now be easily split among various programs and budgets. The system also provides vendor-level visibility of the spend, which allows better analysis of which vendors are being paid both by credit card and by check. "We can start driving payment to vendors one way instead of multiple ways," said Davis.

The WSDOT is also now using the same p-card payment process to make travel card payments for airline and hotel reservations. Previously, travel cards were paid using a different process by the accounting office. "By capturing airline and hotel expenses in the new, faster payment process, they qualify for the rebate," said Davis.

About the author

Larry Anderson is the editor of GoPro.