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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.