Every 5 years, the Micro-Purchase Threshold (MPT) for Government Purchase Cards (GPC) is reviewed and typically adjusted upward for inflation. Discussing the 2025 review period, the Baroni Center for Government Contracting at George Mason University issued an interesting White Paper on June 4th titled “The Potential Effects of Raising the Micro-Purchase Threshold”. The White Paper examines the costs and benefits of raising the MPT from the current $10,000 to $20,000, $30,000, $40,000 and even $50,000.
About the White Paper
This study makes the case for the potential of government wide cost savings through expansion of purchase card programs and strongly argues that small and disadvantaged businesses can benefit too. No one argues that inflation is not real and that MPT increases are not warranted. However, in isolation, increases in the MPT may not achieve the anticipated effect.
In the decades leading up to this study, increasing the MPT and SAT have not helped small businesses realize the true potential for government discretionary spending under the Federal Acquisition Regulations (FAR). Historical evidence strongly suggests that failures to address operating risks and transactional “blind spots” in card data have stunted the efficacy of increasing the MPT and continue to limit the growth of card utilization and revenue opportunities for small business.
The GSA accurately reports the two-decade trend of growth in transactions, both in average value and total dollars now reaching $37.5B annually. However, these annual increases did not reflect a linear relationship resulting from the quadrupling of the MPT from $2,500-$10,000. In fact, if quadrupling the MPT was effective, SmartPay programs should conservatively exceed $100 Billion today.
The truth is, the majority of transaction growth now stems from the incentive to earn SmartPay refunds by using cards to pay bills on pre-awarded and negotiated agreements and contracts. This was never the intent of the card program and signals the inherent challenges facing the construction and competitive make-up of SmartPay 4.
The Future of SmartPay
SmartPay programs are on the precipice of change required to impact the success and continued participation of card issuing banks and interchanges, impacting efficient government operations and the growth of small business utilization. In an age where networks can process trillions of transactions per minute, our online economy must move beyond thresholds required in the 1990s when the majority of transactions were made in-store (card-present) or over the phone.
At Paperless Innovations, we believe in commercial acquisition reforms based on data-driven decision making. We fully support and continue to drive secure, compliant, and transparent financial management in the use of all appropriated funds. We urge you to participate in this discussion and stay tuned next week for our top three CFO recommendations for SmartPay Program reforms.