[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.

-----------------------------------------------------------------------

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)?

[[Page 35934]]

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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