Banking Giant Forms Government E-Procurement Company

Bank of America is teaming with NIC Commerce to form a new company that will provide electronic payment and purchasing services to state and local governments.

Bank of America says the new venture is the first Web-based solution to integrate shopping and payment functions for the public sector. The new offering, dubbed “Banc of America Purchase Street, LLC,” will enable state and local governments to place orders online with preferred suppliers, request a quote from businesses for services, process transactions, initiate payments, and reconcile transactions.

Government agencies will also be able to personalize their services to reflect preferred suppliers, contract requirements and other conditions through the browser-based catalog.

Perfectly Suited

Charlotte, North Carolina-based Bank of America and Reston, Virginia-based NIC Commerce are hoping that their combined strengths will net them a large portion of the government e-commerce pie. Recent research from Gartner predicts that government e-commerce spending will grow from $1.5 billion (US$) in 2000 to more than $6.2 billion by 2005.

Bank of America is the largest bank in the United States, with $656 billion in assets. Additionally, it provides financial products and services to 30 million households and two million businesses. It is also the largest issuer of state government purchase cards, representing more than 25 percent of states.

NIC Commerce is already a leader in the business of governmental e-commerce. It currently boasts an over 35 percent market share in federal e-commerce deployments and counts among its customers the U.S. Air Force, the National Aeronautics and Space Administration (NASA), and the U.S. Navy.

Inside the Deal

Financial terms of the deal were not disclosed, but Ralph Falzone, NIC Commerce spokesman, told the E-Commerce Times that Bank of America and NIC Commerce will be equal equity owners of Banc of America Purchase Street, LLC and will share revenues.

The agreement will give Bank of America the opportunity to become a strategic investor in NIC Commerce’s parent company, NIC, upon the new company’s achievement of certain revenue performance criteria.

Warrants of up to 2.5 percent of the fully diluted shares of outstanding NIC common stock will become exercisable upon achievement of revenue targets. The warrants are priced in two equally sized series at $34.44 and $44.77.

Trial Run

Among its first projects, Banc of America Purchase Street, LLC will provide electronic procurement services to the Houston-Galveston Area Council of Governments (H-GAC). The deal, negotiated before the formation of the new company, calls for Bank of America to provide payment and other services to the H-GAC through December 2005. NIC Commerce will provide electronic procurement software, manage catalog content and secure software server hosting services.

Under the terms of the deal, Bank of America is the primary contractor and NIC Commerce is a subcontractor. However, Falzone said work for the project would be assigned to Banc of America Purchase Street, LLC.

The H-GAC Cooperative Purchasing program helps more than 1,100 local governments purchase more than $150 million annually in products ranging from heavy trucks to radios.