Board of Governors Approves Proposal
That PRC Says Could Cost USPS Millions
APWU Web News Article #113-07, Dec. 12, 2007
The USPS Board of Governors approved a Negotiated Service Agreement (NSA) [PDF] on Dec. 11 that had been sharply criticized by the Postal Regulatory Commission (PRC).
In a ruling issued Oct. 19 [PDF], the rate commission concluded that the Postal Service could lose more than $45 million if the proposed agreement with Bank of America were implemented. Despite the potential losses, the PRC decided that the proposal could be justified under the Postal Accountability and Enhancement Act.
The APWU had opposed the NSA, arguing in proceedings before the commission that USPS predictions of savings were based on obsolete data. The agreement would compare current “read and acceptance rates” for Bank of America mail to the average read and acceptance rates throughout the USPS in 1999, and reward Bank of America for exceeding those rates, the union noted. Read and acceptance rates have improved significantly in the intervening years, the union contended, so the 1999 rates could not provide a valid baseline for the NSA.
Although the commission did not reject the NSA as the APWU requested, its criticism of the agreement echoed arguments and analysis made by the union.
In its ruling, the PRC strongly cautioned the USPS Board of Governors that “several significant financial concerns related to this Agreement have come to light. This independent evaluation should be used by the Governors to inform their decision on whether or not to proceed with this Agreement.”
The Postal Service had estimated that the NSA with Bank of America would produce a cost savings of $5.5 million. But in a dissenting opinion in the PRC review, Vice Chairman Dawn Tisdale wrote, “It is too certain that the Postal Service will lose money, and certain that the losses will be too substantial, between $25 million and $45 million, for me to recommend this agreement.”
The PRC also noted that if the NSA proves profitable, other mailers may be required to adopt similar mailing practices without receiving similar incentives.
Negotiated Service Agreements are special rate and service arrangements between the USPS and a mailer. The USPS-Bank of America proposal was the first NSA considered by the PRC since the Postal Accountability and Enhancement Act became law on Dec. 20, 2006.