Citigroup Paid $7.7 Million To Help Administer 'Clunkers' Program
By Josh Mitchell, Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- Citigroup Inc. (C) was awarded an estimated $7.7
million contract to help administer the U.S. government's "cash for clunkers"
program, the Obama administration said Thursday.
The disclosure comes amid complaints that administrative problems have
prevented the government from keeping an accurate tab on the $1 billion
program's finances. The Senate is expected to approve a $2 billion extension of
the program as early as Thursday.
The Transportation Department said earlier this week that Citigroup had been
hired to process applications for vouchers under the "clunkers" program.
Thursday, Transportation Department spokeswoman Sasha Johnson said that the
estimated cost of Citigroup's contract was $7.7 million when it was awarded.
Johnson declined to comment on whether the size of the contract has grown.
Oracle Corp. (ORCL) is operating under a $1.6 million contract to manage the
Web site for the "clunkers" program, she said.
The car-voucher program, launched in late July, has come under criticism from
auto dealers and members of Congress because of Web site and staffing problems.
In the program's first days, some dealers had to wait hours to submit
applications for reimbursement because the Web site crashed under heavy traffic.
Administrators also had trouble keeping up with an unexpectedly large volume of
applications early on.
The government at one point considered suspending the program amid fears the $
1 billion budget had been exhausted.
The government has worked with contractors in recent days to improve the
program.
"Citi is working with the DOT collaboratively to address the unforecasted
record volume due to the popularity of the program and has significantly
increased the resources assigned to the effort," Citigroup said in a statement.
"The DOT is pleased with the Citi partnership in this important effort."
An Oracle spokeswoman declined to comment.
The Transportation Department's Johnson said no other contract details could
be immediately provided.
The National Highway Traffic Safety Administration "engaged in a competitive
process to find a vendor to process vouchers for the CARS program," the DOT said
in a statement earlier this week. "It was determined Citigroup was best
qualified to fulfill that role."
Transportation Secretary Ray LaHood said this week that Citigroup placed
additional workers at sites in Delaware and Buffalo, N.Y., to improve the
program. He also said Oracle had increased capacity for the "clunkers" Web site.
"We believe the process will go much smoother," he said.
The government is spending about $50 million to administer the program,
including an advertising campaign to promote the vouchers.
-By Josh Mitchell, Dow Jones Newswires; 202-862-6637; joshua.mitchell@
dowjones.com
(END) Dow Jones Newswires
08-06-091634ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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