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.