postalnews blog

In a complaint filed last week with the Postal Regulatory Commission, Capital One claims that the US Postal Service is breaking the law by refusing to agree to a Negotiated Service Agreement similar to the deal it implemented with Bank of America earlier this year. The Bank of America deal was criticized for using ten year old industry average data as a baseline to measure improvement. Capital One claims that when it attempted to open discussions with the USPS on a “functionally equivalent” arrangement for itself, the USPS refused:

Over the past year, Capital One Services, Inc. (Capital One), faced with the competitive advantage conferred on Bank of America by the NSA, has repeatedly asked the Postal Service for a similar NSA. Indeed, it has even proffered a substantively identical agreement “to use the vast array of the specified processes on the vast majority of its qualifying mail for the full NSA term, as done by BAC.”10 The Postal Service, however, has refused, and has insisted on mailer-specific baselines and reduced per-piece discounts in an attempt to enforce true “pay-for-performance” conditions that were never imposed on Bank of America.

Capital One submitted what it claims to be an proposal identical to the BAC agreement, which the complaint says was rejected by the USPS. When asked to specify which provisions of the proposed NSA needed to be changed, Capital One’s Director of DM Operations, Ben Lamm, says the USPS declined, and suggested a face to face meeting. Lamm says he met with USPS VP Stephen Kearney on June 9:

During that meeting, Mr. Kearney explicitly stated that the Postal Service would not offer the same NSA to Capital One that it offered to Bank of America, and, more specifically, that, rather than the 1998 industry-average baselines offered to Bank of America, Capital One would have to use mailer-specific baselines. In addition, the per-piece discount rates would have to be reduced to reflect that Capital One was not the “first” adopter. Mr. Kearney argued that the changes in the baselines and discount schedules were justified by changes in circumstances. When asked whether those changes had occurred since the date of implementation (April 1, 2008), he said that they had not.

If there is any benefit to the Postal Service from Bank of America’s adoption of the technologies specified in its NSA, those same benefits should accrue if Capital One is given the opportunity to participate in a similar NSA. If not allowed that opportunity, however, our Company is placed at a real competitive disadvantage, making it relatively more expensive for us to conduct our business by millions of dollars.

Capital One has asked the PRC to expedite the processing of its complaint, contending that the information to decide the case already exists in the record. The PRC has opened docket C2008-3 to consider the complaint.

The Postal Regulatory Commission today established Docket No. PI2008-3 and invited public comment on universal postal service and the postal monopoly in the United States. The Postal Accountability and Enhancement Act (PAEA) requires the Commission to submit a report to the President and Congress on “universal postal service and the postal monopoly in the United States, including the monopoly on the delivery of mail and on access to mailboxes”. The report is to be submitted not later than December 19, 2008.

In preparing its report, the PAEA requires the PRC to “consult with the Postal Service and other Federal agencies, users of the mails, enterprises in the private sector engaged in the delivery of the mail, and the general public”. Further, the legislation requires the Commission to address in its report any written comments that it receives. As part of its effort to fulfill these obligations, the Commission is initiating this docket to solicit comments on universal postal service and the postal monopoly.

Initial comments are due 60 days after publication of the notice in the Federal Register. Reply comments are due 90 days after publication of this notice in this Federal Register. All comments and suggestions received will be available for review on the Commission’s website at www.prc.gov.

In addition to this solicitation of comments, the Commission intends to hold several public hearings at locations outside of Washington, D.C., in order to hear from a broad cross section of the mailing public. The dates and locations for those hearings are as follows:

May 21, 2008 (2 pm):
Flagstaff City Hall
211 West Aspen Avenue
Flagstaff, AZ 86001

June 5, 2008 (10 am):
City Hall/Court House Building
City Council Chambers, 3rd Floor
15 Kellogg Boulevard
St. Paul, MN 55102

June 19, 2008 (2 pm):
City Hall
1 Junkins Avenue
Portsmouth, NH 03801

Additionally, the Commission intends to sponsor an open workshop in Washington, D.C. during May 2008, to receive public comment.

Further details on the field hearings and other steps to be taken in this docket will be posted on the Commission’s website at www.prc.gov.

On January 3 of this year, postal activist Douglas Carlson filed a complaint alleging that the USPS had improperly stopped offering Bound Printed Matter rate to retail customers. On February 4, the Postal Service filed a motion requesting that the PRC suspend action on the complaint, saying that it was preparing “classification changes intended to resolve the substance of the instant Complaint”. If the changes were to be approved by the Board of Governors, the USPS would then “file a further pleading in this docket explaining how the action resolves this Complaint”. If that arrangement wasn’t acceptable to the PRC, the USPS requested an additional two months to prepare a statement on the Carlson complaint.

Yesterday the PRC denied the USPS motion, pointing out that under the law, the Commission must either dismiss or take action on complaints within 90 days. Since that time period will expire on April 2, the USPS’s suggested deadline of April 4 for its statement on the complaint was not acceptable. The PRC denied the USPS motion, and ordered it to issue a statement on the complaint no later than March 7.

Douglas Carlson, who has been a frequent intervenor in Postal Rate/Regulatory Commission proceedings, has filed a complaint with the PRC alleging that the Postal Service has illegally made it difficult, if not impossible, for individual customers to mail packages at the bound printed matter rate, which is lower than the standard media mail rate. Carlson cites instances where he attempted to mail a dictionary, only to be told by window clerks that the rate was no longer available, that the book did not qualify for the rate, or, bizarrely, that it could only be accepted if it already had postage on it when he brought it to the window.

Carlson also notes that the USPS web site’s rate calculator no longer mentions the rate, and that it is not available from the Automated Postal Centers in post office lobbies.

Carlson’s complaint alleges that “When a customer presents items for mailing at a retail window and asks for the least-expensive shipping method and the window clerk knows or should know that the item would qualify for a Bound Printed Matter rate, Postal Service policy prohibits the window clerk from offering or suggesting Bound Printed Matter service to the customer, even if Bound Printed Matter service might or would fulfill the customer’s shipping needs at the lowest price of any service.”

He says this policy “unduly and unreasonably discriminates against individual and small business mailers, in a manner not specifically authorized by title 39. Compared to large mailers, individual and small-business mailers are less likely to know about services that window clerks do not offer, that Automated Postal Centers do not offer, and that the Postage Rate Calculator at www.usps.gov does not mention.”

Press release:

The Postal Regulatory Commission today issued its Opinion enabling the Governors of the U.S. Postal Service to provide a final review of the proposed Negotiated Service Agreement between the Postal Service and the Bank of America Corporation (Docket No. MC2007-1). “While the Commission found the agreement in compliance with the requirements of the Postal Accountability and Enhance Act (PAEA), we also found that the agreement could cost the Postal Service anywhere from $25 million to $45.8 million should the Governors move forward with the agreement,” said Commission Chairman Dan G. Blair.

“We hope the Governors will carefully review the findings in the Commission Opinion in making its final decision on whether to adopt the agreement,” said Blair. Under the proposed agreement, Bank of America would use improved address barcode technology in exchange for discounted postage rates. A principal feature of the proposal would be the commitment by Bank of America to use the Intelligent Mail Barcode (IMB) system, and other new systems, designed to facilitate mail acceptance and processing.

The Postal Service expects IMB to play a critical role in the measurement of the service standards it is developing in consultation with the Commission. Because the PAEA requires the Commission to report annually on how well the Postal Service is meeting its service standards goals, testing IMB and other advanced programs now will benefit all postal customers. Both these benefits and the potential financial losses from this proposed agreement will be weighed by the Governors.

The Commission found that claimed savings of $5.5 million produced by this agreement were based on 1999 read/accept rates. The Commission proceedings uncovered more recent read/accept rates from 2006 and 2007. When the more recent information is used, it shows that the Postal Service stands to lose $25 to $45.8 million should the agreement be implemented.

“Congress, through the PAEA, granted the Postal Service greater autonomy to set its own rates and enter into NSAs. The Act requires that such agreements either improve the net financial position of the Postal Service or enhance its operations. The Postal Governors will have to make the final decision of whether this agreement makes good business sense for the Postal Service,” concluded Blair.

The Commission noted in its Opinion “…that read/accept rates have improved to such an extent that Bank of America will not have to make any improvements in barcode readability to receive all available mail processing performance discounts.” The Commission also cautioned that because the Postal Service will require “…the use of IMB for all automation discount mail in the near future, incentives under this Agreement would be paid to Bank of America while other mailers may be being required to adopt the same mailing practices without similar incentives.”

The Commission’s Opinion was issued on a 4-1 vote, with Vice Chairman Dawn Tisdale dissenting. Attached is the summary of the Opinion, concurring opinion by Commissioner Ruth Goldway, and Vice Chairman Tisdale’s dissent. The Opinion is available on the Commission’s website at www.prc.gov.

Dawn A. Tisdale, vice chairman of the Postal Regulatory Commission (PRC), announced today that he will leave the Commission on November 22, 2007. He has advised President George W. Bush that he will not seek renomination.

“Three years ago, when I was sworn in as a Commissioner, I promised my family that I would return home to Texas when my term of office was over. I am following through on that commitment,” said Commissioner Tisdale. “Although every day is special with your children, my daughters are 14 and 16 years old. I want to share in the excitement of their passage into young adulthood.

“I am proud of my contributions to the Commission during what has been a very active period. Over the past three years, we have decided two rate cases, including the first fully litigated case since 2001, R2006-1. I have been involved with the reorganization of the PRC resulting from the enactment of the Postal Accountability and Enhancement Act, the PAEA, last December and the issuance of the proposed regulations for a new ratemaking process; participated in other rate and classification decisions; and presided over the Postal Service’s Evolutionary Network Development plans, N2006-1, which brought needed transparency to the Service’s network development plans.

“I wish my fellow Commissioners well as they continue the transformation of the Commission into the strengthened regulator envisioned by the PAEA. It has been my privilege to serve with Chairman Dan Blair, Commissioners Ruth Goldway, Tony Hammond, Mark Acton, and former Chairman George Omas,” said Commissioner Tisdale.

Commissioner Tisdale was nominated by President Bush on February 11, 2004, to complete a term expiring on November 22, 2006. He was confirmed by the United States Senate on November 21, 2004, and is currently in his holdover year. Mr. Tisdale previously served in various positions within the U.S. Postal Service from 1966-2000, and served in the U.S. Navy from 1962 to 1966. He is a native and longtime resident of Austin, Texas.

The PRC issued the following press release today:

WASHINGTON, DC, FEBRUARY 22, 2007: The Postal Regulatory Commission will announce its Recommended Decision to the Governors of the U.S. Postal Service at 11 AM, Monday, February 26, 2007 in its Hearing Room located at 901 New York Avenue, NW, 2nd Floor, West Tower, Washington DC.

The decision will include recommendations on postal rates and fees affecting all mail users. The decision will also address the request to establish a “Forever Stamp” that would allow consumers the opportunity to purchase a non-denominated, non-expiring stamp that would be valid regardless of future rate changes.

The Postal Rate Commission yesterday issued its “Opinion and Recommended Decision” in the Evolutionary Network Development (END) proceedings. The PRC found that the USPS had ”not provide assurance that the proposed realignment program, as currently envisaged, will meet its declared goals.  In particular, the record reflects flawed or absent information on certain crucial aspects of the Postal Service’s plan for network realignment.”

The PRC found that the plan’s flaws included:

• Questionable or Incomplete Cost and Service Estimates
• Inadequate Review of Local Impacts
• Insufficient Provisions for Public Participation

The commission analyzed the Area Mail Processing (AMP) process for evaluating individual plant consolidations, and found that:

• AMP Reviews Lack Consistency
• AMP Process Lacks Criteria for Approval
• The Post Implementation Review Process (PIR) is Flawed

The commission also criticized the USPS for failing to fully consider the service implications of plant realignments:

The Postal Service is a service organization, perhaps the largest such organization in the country.  It does not seem prudent, in the Commission’s view, for an organization of its size and economic importance to commit itself to a logistics network restructuring program of this magnitude, without first having a full grasp of its likely effect on the service that it provides its customers.  If the Postal Service’s representations in this docket are accurate, however, that is what the Postal Service is considering.  The Commission recommends that the Postal Service choose a “most likely” network realignment outcome for planning purposes, and estimate the full range of service impacts that would result from that outcome before it commits further resources to this program.

Commissioner Ruth Goldway wrote in a concurring opinion that the Commission’s opinion “fails to express sufficiently serious concern about the problems that have arisen in initial stages of the Postal Service’s consolidation efforts, in places such as Southern California, El Paso, Texas and Las Vegas, Nevada.”

I am concerned that unless the Postal Service management is truly attentive to improving the AMP change process, implementation of network realignment is likely to result in substantial, unexpected, and potentially expensive service disruptions throughout the nation.  A clear example is that the AMP change analysis performed prior to the recent consolidation of the Marina Del Rey facility into the existing Los Angeles facility totally failed to predict the myriad of service disruptions that occurred in the weeks and months after implementation.

…Before the Postal Service implements the dozens of consolidations required by network realignment, it should improve the AMP change process to insure that service disruptions are minimized.  The best way to improve that process is to fully review each consolidation that has already occurred. It should honestly face and thoroughly analyze mis-estimates and determine the lessons learned.  Going forward, the Postal Service should require forecasts of possible changes in service levels to the end users in planning every AMP change, require measurement of customer feedback in any post implementation review, and then accurately measure the net cost savings by including changes in post-implementation workforce, transportation or other adjustments.

ADVISORY OPINION CONCERNING A PROPOSED CHANGE IN THE NATURE OF POSTAL SERVICES

The White House yesterday confirmed that Dan Blair, deputy director of the Office of Personnel Management, and a former aide to Congressman John McHugh has been nominated to a seat on the Postal Rate Commission, “and upon confirmation designate Chairman”.

The nomination had been predicted last month by Linn’s columnist and veteran postal correspondent Bill McAllister, who wrote at the time that “Blair’s appointment to a five-year term is a highly significant move signaling that the administration wants a strong commission to oversee the Postal Service.”

The US Postal Service yesterday filed its reply brief in the END Plant Consolidation case being considered by the Postal Rate Commission. The agency repeated its contention that “The Commission is not tasked by § 3661 to second-guess the judgment of postal management in proposing the service changes in question. Nor is it the Commission’s task under § 3661 to determine whether some alternative objectives would be “better” for the Postal Service to pursue.”, and argued that any opinion the PRC renders will be “advisory only”.

Best line in the brief has to be the footnote on page 3. After pointing out the many layers of existing oversight the USPS operates under, the brief notes that ‘At page 74, the OCA [Office of the Consumer Advocate] refers to a need for “continued surveillance” of postal management.’ The footnote asks “Can postal rendition be far behind?”

USPS N2006-1 Reply Brief
USPS N2006-1 Initial Brief
Complete Listing of Briefs filed