[Federal Register Volume 80, Number 120 (Tuesday, June 23, 2015)]
[Notices]
[Pages 35932-35934]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-15336]
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Notices
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Federal Register / Vol. 80, No. 120 / Tuesday, June 23, 2015 /
Notices
[[Page 35932]]
DEPARTMENT OF AGRICULTURE
Food and Nutrition Service
Request for Information: SNAP and WIC Seeking Input Regarding
Procurement and Implementation of Electronic Benefit Transfer (EBT)
Services
AGENCY: Food and Nutrition Service (FNS), USDA.
ACTION: Notice; Request for Information.
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SUMMARY: The Food and Nutrition Service (FNS) is interested in
identifying ways to stimulate increased competition in the Electronic
Benefit Transfer (EBT) marketplace and identify procurement or systems
features that are barriers to new entrants. FNS is also seeking
suggestions which will improve procurement of the delivery of EBT
transaction processing services through modifications to, or
replacement of, the existing business model. The procurement and
implementation of EBT systems by State agencies administering the
Supplemental Nutrition Assistance Program (SNAP) and Special
Supplemental Nutrition Program for Women, Infants, and Children (WIC)
needs to be sustainable for all parties involved.
The landscape of EBT is in a heightened state of change, due in
part to the recent decision by one of three primary companies providing
EBT transaction processing services for SNAP and WIC to no longer
solicit or accept any new prepaid card business, including for SNAP and
WIC EBT services. In addition, there are numerous EBT projects moving
toward the October 1, 2020, statutorily-mandated deadline for WIC
Program implementation.
This Request for Information (RFI) seeks to obtain input from EBT
stakeholders and other financial payment industry members and
interested parties, regarding options and alternatives available to
improve the procurement and current operational aspects of EBT. In this
document, FNS has posed various questions to prompt stakeholder
responses. We intend to consider and follow up on the alternatives and
suggestions that appear to be most viable from both a technical and a
cost/benefit standpoint.
Interested stakeholders are invited to respond to any or all of the
questions that follow, and to identify issues which may not be listed.
DATES: Comments must be submitted on or before August 24, 2015.
ADDRESSES: Comments may be submitted through the Federal eRulemaking
Portal at www.regulations.gov. Follow the online instructions for
submitting comments electronically. Comments can also be mailed or
delivered to: Andrea Gold, Director, Retailer Policy and Management
Division, Supplemental Nutrition Assistance Program, Food and Nutrition
Service, U.S. Department of Agriculture, 3101 Park Center Drive, Room
424, Alexandria, Virginia, 22302.
All comments submitted in response to this notice will be included
in the record and will be made available to the public at
www.regulations.gov. Please be advised that the substance of the
comments and the identity of the individuals or entities commenting
will be subject to public disclosure.
FOR FURTHER INFORMATION CONTACT: Andrea Gold, Director, Retailer Policy
and Management Division, Supplemental Nutrition Assistance Program,
(703) 305-2434, or via email at [email protected]
Background
All SNAP State agencies and some WIC State agencies conduct EBT
using magnetic stripe cards similar to debit or credit cards. Almost
all EBT systems today are integrated such that all of the service
requirements are provided within a single system to the relevant State
agencies, often referred to as a turnkey system. Over the years, some
States have obtained SNAP EBT services by contracting for individual
EBT service components to one or more service providers (such as
authorization platform, retailer management, transaction switching,
client help desk services, and card production). A few State agencies
have performed certain EBT services themselves, to control costs or
meet the needs of State operations. These State-operated services may
include such functions as transaction authorization, retailer training
and management, EBT card distribution, and management and customer
service. In the WIC Program, several of the State agencies use smart
card or chip card systems, sometimes referred to as off-line systems,
while others have chosen an on-line system using a magnetic stripe
reader. The trend in WIC, for State agencies choosing both mag-stripe
and smart card solutions, is toward contracted EBT services via a
turnkey processor.
Contractors compete for State EBT business in a comparatively small
marketplace. FNS has long encouraged healthy competition in this
marketplace because the Agency believes it helps to control costs,
ensures a level playing field for businesses who are interested in
supporting EBT delivery processes, and encourages innovation. Two of
the biggest concerns for FNS and State agencies with the limited
competition within the EBT market, are the increased risk for
sustainability of the industry over time, and the impact limited
competition could have on pricing.
Up until most recently, in the SNAP EBT environment, there have
been three dominant primary EBT contractors with State agency EBT
contracts. In the WIC EBT environment, these same three on-line EBT
SNAP contractors have also provided EBT on-line services for WIC. There
are also two other off-line EBT contractors for WIC.
In January 2014, one of the primary contractors announced that the
firm would no longer solicit or accept any new prepaid card business,
which includes their EBT services. The firm is in the process of
fulfilling its existing contracts but is not pursuing any further
business in this area. As a result, only two of those three active
primary EBT contractors remain in the market. There has been a new
entrant to the SNAP market, a company that has been active in the WIC
market; however, at this time, it is unclear whether any other firms
will choose to enter this market.
State agencies have acquired EBT service through one of two major
approaches: Procurements dedicated to a single State agency, and multi-
state procurements. The latter approach leverages pricing through
economies of
[[Page 35933]]
scale and standardizes requirements and contract provisions in a way
that can reduce the burden on contractors of responding to separate
contract solicitations by many State agencies. Typical contracts have a
base period such as 5 years with several optional extension years, but
there are situations where State procurement rules dictate a shorter
timeframe with limited renewals. Due to the burden to develop re-
procurements and manage the potential transition to a new contractor
when an incumbent does not win award, it is not unusual to see a State
agency choose to exercise the optional years, resulting in contract
lengths of 7-10 years. It is safe to say that FNS and State agencies
are interested in the best value and service for EBT projects
regardless of the size of a specific State agency.
The Agricultural Act of 2014, Public Law 113-79 (the Act) has also
brought important changes to the SNAP EBT landscape that impacts States
and SNAP EBT contractors looking forward.
That legislation removed the requirement for States and their
contractors to provide no cost point-of-sale (POS) devices to all
authorized SNAP retailers who were not already using a commercial
payment provider. The Act also changed manual voucher processing used
when retailer sales do not warrant the cost to receive a POS device
from the government and for back up during system outages and
disasters.
On the WIC side, while there is no new legislation at play, most of
the 90 WIC State agencies are beginning to convert to an EBT delivery
model to meet the October 1, 2020, deadline mandated by the Healthy
Hunger-Free Kids Act of 2010, Public Law 111-296. These State agencies
are acquiring services from the on-line and off-line contractors.
In sum, EBT services have developed a pricing model that has
evolved since the early projects were initiated in the 1980s.
Currently, contractors will bid to provide all the services, including
cards, benefit account management, purchase authorization, customer
service, retailer equipage and settlement to food retailers for a
single cost for each household or case served in a month. Sometimes
retailer equipage, pay-phone surcharges for toll-free calls and other
fees have been separated from the case-month price. This pricing model
allows for fluctuations in caseload related to economic changes or
other growth factors. To the degree other pricing models exist, they
have not taken root within either SNAP or WIC to date. Pricing can be,
and often is, set up in tiers to reduce the case-month fee when certain
caseload thresholds are reached either due to increases (or decreases)
in household participation or if multiple State agencies have
contracted together for economies of scale with the same requirements
and contract standards.
The major functional components of on-line EBT for SNAP and WIC are
outlined in Appendix A, and off-line smart card WIC EBT is described in
Appendix B.
Request for Information
This RFI seeks to obtain input from EBT stakeholders, other
financial payments industry members and other interested parties
regarding options and alternatives available to improve the procurement
and operational aspects of EBT. FNS has posed various questions below
to prompt stakeholder responses, and, before those, has also noted a
few primary concerns and key objectives for this effort.
Primary Concerns
Less available competition and potential that smaller
State agencies may not receive affordable proposals, or even any
proposals, in response to State agency solicitations.
An increase in procurement activity and system conversions
by SNAP State agencies as those using the services of the departing
company migrate to the remaining processors.
Significant increase in procurement activity and system
implementation by WIC State agencies leading up to the October 1, 2020,
deadline for WIC State agencies to convert to an EBT delivery system.
Management of risks associated with greater activity in a
shorter period of time.
Main Objectives
FNS is inviting stakeholder input on how the opportunities and
risks associated with these changes can best be recognized and managed.
There are two main objectives:
1. Increased competition for EBT services, including that which can
possibly be achieved through changes or alternatives to the current
business model.
2. More stability and sustainability for this market, including
that which can possibly be achieved through alternative pricing models
and contract terms.
Questions
The Agency will consider all comments, and plans to follow up on
alternatives and suggestions that appear to be most viable from both a
technical and a cost/benefit standpoint. Responses will help inform any
future actions or guidance issued by the Agency, including guidance to
States on issuing EBT Requests for Proposals (RFPs).
Interested stakeholders are invited to respond to any or all of the
following questions, and to identify other issues which may not be
listed. Responses which clearly reference the pertinent question below
would facilitate FNS' review of the stakeholder feedback.
Procurement
1. Do State agency procurements provide sufficient information
about the operational characteristics of their EBT projects for new
entrants to the EBT market? If not, are there alternatives for
potential vendors to obtain the information needed?
2. How do State Agency requirements, (such as call center response
standards, transaction processing requirements, card issuance
timeframes and adjustment policies), compare to commercial practices?
Would adjusting some of these requirements to closely resemble the
commercial world increase the interest of potential new vendors, or
impact contract costs or willingness of current vendors to bid? If so,
what requirements or practices should be considered?
3. Are the amounts for liquated damages and penalty clauses
currently required by State agencies reasonable? If not, what would be
more reasonable amounts or ways for State agencies to safeguard against
such problems as project delays, unscheduled system downtime, and
below-standard processing times, etc.?
4. Can more economies of scale be realized without increasing
complexity through any of the following:
a. Multi-state shared services for commercial call center services,
card production and delivery, training and other services?
b. The inclusion of more agencies/programs?
5. Are there requirements for vendor experience that are necessary
to establish minimum qualifications to bid to provide EBT services? Are
there requirements you have seen that should not be used because you
believe that they unnecessarily limit competition?
6. Would any vendors be interested in providing select service
components (i.e. call centers, transaction processing, training, etc.)
if there were an option to offer proposals for one or some rather than
all of the service components? What pricing model(s) would work best
for separate services when not bundled into the cost per case month
pricing (CPCM)?
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7. What alternative procurement models might State Agencies
consider to ensure they receive viable competitive bids?
8. Should State agencies pursue coalition procurements with the
benefits they bring, such as economies of scale, or does it tend to
limit competition or discourage new entrants into the marketplace?
Pricing
9. Does the impact of the EBT vendor assuming development and
implementation costs before they begin processing transactions pose a
major barrier to entering the market?
10. Are there ways to separate EBT system development/startup costs
from operational costs to reduce risk for new entrants when bidding on
a project? If so, what are they? \1\
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\1\ SNAP procurements involve acquiring an operational process
with costs for start-up activities included in the monthly
operational cost-per-case-month. WIC procurements are conversions
from paper to electronic delivery with deliverables and milestones
for start-up that may be priced separately.
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11. Are there other changes to the CPCM pricing model that would
encourage potential vendors to enter the EBT market?
12. The tiered pricing model involves tiers within the CPCM pricing
model, adjusted at smaller or larger intervals for different caseload
levels. How can State consortia which want to procure together better
realize economies of scale given their varying caseload sizes, and
still benefit from a blended CPCM price based on their collective
caseload volumes?
13. Are there pricing models other than the CPCM model that would
be advantageous in reducing pricing risk to the vendor and still
maintain sustainable prices for the State agencies? How can the
disadvantages to State agencies in forecasting expenses be overcome, if
costs are no longer tied to caseload levels?
Managing Risk
Several stakeholders have advised FNS that too many procurements
occurring in close succession may increase the risk that smaller State
Agencies may receive fewer or even no bids, as vendors will devote
scarce resources to preparing proposals for the most potentially
profitable customers. Similarly, if too many implementations or
conversions are scheduled in close succession, it may mean that vendors
will not have sufficient technical resources to assign their top team
to each one. Both of these situations represent risks which FNS would
like to help State Agencies manage and mitigate.
14. Besides sharing known and estimated RFP release dates and
conversion dates, what can FNS do to help State Agencies manage these
risks and ensure smooth transitions?
Other Questions
15. Are there other areas or issues that we have not specifically
asked for a response on which you would like to offer comment related
to the two main objectives of this RFI?
Dated: June 10, 2015.
Jeffrey J. Tribiano,
Acting Administrator, Food and Nutrition Service.
Attached: Appendix A: EBT Functions for Online SNAP and WIC EBT
Appendix B: EBT Functions for Offline WIC EBT Cards (Smart
Cards)
Appendix C: Web sites to RFP and other EBT information:
Appendix A
EBT Functions for On-line SNAP and WIC EBT
(1) Account setup and benefit authorization--support for on-line
accounts for SNAP or WIC households authorized to receive benefits;
(2) Card issuance and participant training--provide cards,
equipment (PIN pads, card readers and training materials);
(3) Participant account maintenance--receive daily and monthly
benefit updates from State agency systems, aging benefits and
reporting;
(4) Transaction processing--approval or denial of food purchases
made at authorized SNAP and WIC retailers/vendors; WIC processing
includes, but is not limited to, matching of food item UPC, price
and quantity;
(5) Customer service--24x7 toll-free call support with help desk
customer service representatives and Interactive Voice Response and
web portal services inquiries related to purchase activities and
balances from cardholders, merchants and State agency staff;
(6) Retailer participation--support commercial third party
switching services and installation and maintenance of payment
terminals in smaller retail locations. Manual backup vouchers for
authorizations during system interruptions or for low volume SNAP
merchants;
(7) EBT settlement--daily payment to authorized retailers for
approved purchases; reconciliation via reports and data file
exchanges, WIC also includes food item detail;
(8) EBT reporting--administrative and batch data exchange for
reporting card account activities by card number and retail
location; daily financial settlement reporting and reconciliation;
and,
(9) Disaster Benefit Services (SNAP only)--providing card and
benefit services for natural disasters.
Appendix B
EBT Functions for Offline WIC EBT (Smart Cards)
WIC off-line EBT processing relies on State agencies to load a
smart card chip with WIC food balances that can be read in grocery
store lanes. Card and Personal Identification Number (PIN) support
is provided by the State agency using the clinic system that tracks
and determines participant benefits. Purchases are authorized off-
line in the grocery lane (without an on-line authorization) and a
daily claim file is sent to the WIC EBT host for processing payment
to the WIC vendors. A hot card file, reconciliation file and
authorized product list (APL) (containing the list of approved
Universal Product Codes (UPC) and price look-up (PLU) codes called
the APL file) are provided to the WIC grocer via the EBT host (an
FTP server).
(1) EBT host processing--processing of daily WIC claim files
containing WIC transaction purchases, editing for Not-to-Exceed
price limits, and pick-up of hot card, APL and reconciliation files
to authorized WIC retail vendors.
(2) Retail vendor equipage & integrated support (State agency
option)
(3) Customer Service (State agency option)--toll-free call
center support including customer service representatives,
Interactive Voice Response (IVR) and/or web portal services for
cardholder and retailer and State agency staff inquiries.
(4) EBT Reporting--administrative and batch data to support all
processing and authorization activities.
(5) Settlement and Reconciliation--similar to SNAP settlement
but also includes food product information.
Appendix C
Web sites to RFP and other EBT information
SNAP EBT Status--http://www.fns.usda.gov/ebt/general-electronic-benefit-transfer-ebt-information
WIC EBT Status--http://www.fns.usda.gov/wic/wic-ebt-activities
WIC Technology Partners (Provides links to new and updated
solicitations)--http://www.wictechnologypartners.com/solicitations/RFP-B2Z12017/index.php
[FR Doc. 2015-15336 Filed 6-22-15; 8:45 am]
BILLING CODE 3410-30-P