[Federal Register: February 15, 2005 (Volume 70, Number 30)]
[Proposed Rules]
[Page 7704-7708]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15fe05-28]
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POSTAL RATE COMMISSION
39 CFR Part 3001
[Docket No. RM2005-3; Order No. 1430]
Negotiated Service Agreements
AGENCY: Postal Rate Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document initiates the third in a series of rulemakings
on procedures related to Negotiated Service Agreements. This proposal
addresses rules applicable to Postal Service requests to extend or
modify previously recommended Negotiated Service Agreements that are
currently in effect. The changes, if adopted, will assist in clarifying
the type of requests that qualify as extensions and the type of
conditions that constitute modifications.
DATES: Initial comments: March 14, 2005; reply comments: April 11,
2005.
ADDRESSES: Submit comments electronically via the Commission's Filing
Online system at http://www.prc.gov.
FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, general counsel,
at 202-789-6818.
SUPPLEMENTARY INFORMATION:
Regulatory History
68 FR 52552, September 4, 2003.
69 FR 7574, February 18, 2004.
70 FR 4802, January 31, 2005.
In Opinion and Recommended Decision, Docket No. MC2002-2 (Opinion),
the Commission made a commitment to initiate a series of rulemakings
designed to facilitate consideration of Postal Service requests based
on Negotiated Service Agreements.\1\ See, Opinion paras. 1006, 2007,
4026, 4041-2, 7026, and 8023. The first rulemaking, docketed as RM2003-
5, developed rules for baseline and for functionally equivalent
Negotiated Service Agreements.\2\ It also established the
organizational framework for the complete set of Commission rules
applicable to requests based on Negotiated Service Agreements.\3\
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\1\ Docket No. MC2002-2, Experimental Rate and Service Changes
to Implement Negotiated Service Agreement with Capital One Services,
Inc., was the first docket in which the Commission considered and
recommended a Postal Service request predicated on a Negotiated
Service Agreement.
\2\ PRC Order No. 1391 established the rules applicable to
baseline and functionally equivalent Negotiated Service Agreements.
The rules are incorporated into the Commission's Rules of Practice
and Procedure at Subpart L. 39 CFR 3001.190 et seq.
\3\ Space was reserved at 39 CFR 3001.197 for requests to renew
previously recommended Negotiated Service Agreements with existing
participant(s), and at 39 CFR 3001.198 for requests to modify
previously recommended Negotiated Service Agreements.
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[[Page 7705]]
A second rulemaking, docketed as RM2005-2, has been initiated to
explore whether improvements can be made to the previously issued rules
applicable to functionally equivalent Negotiated Service Agreements.
The Postal Service first invoked the rules applicable to functionally
equivalent Negotiated Service Agreements in requests filed on June 21,
2004, for proposed Negotiated Service Agreements with Discover
Financial Services, Inc. and Bank One Corporation\4\.
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\4\ Request of the United States Postal Service for a
Recommended Decision on Classifications, Rates and Fees to Implement
Functionally Equivalent Negotiated Service Agreement with Discover
Financial Services, Inc., June 21, 2004; Request of the United
States Postal Service for a Recommended Decision on Classifications,
Rates and Fees to Implement Functionally Equivalent Negotiated
Service Agreement with Bank One Corporation, June 21, 2004.
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The rules applicable to new baseline Negotiated Service Agreements
remain untested as the Postal Service has not submitted a request for a
new baseline agreement.
This notice and order represents the initiation of a third
rulemaking to address rules applicable to: (1) Postal Service requests
to extend the duration of previously recommended and currently in
effect Negotiated Service Agreements, and (2) Postal Service requests
to make modifications to previously recommended and currently in effect
Negotiated Service Agreements. Both sets of rules assume that the
previously recommended and currently in effect Negotiated Service
Agreements were fully litigated in previous dockets where all
outstanding issues have been resolved. The rules also assume that the
modifications being proposed in the new requests are non-controversial,
and do not materially alter the nature of the existing agreements.
These are necessary assumptions if the Commission is to provide
expedited review and rapid action in issuing recommendations on such
requests. The proposed rules, appearing below the Secretary's signature
to this notice and order, are discussed below.
Proposed 39 CFR 3001.197 requests to renew previously recommended
Negotiated Service Agreements with existing participant(s). Subsection
(a) establishes that rule 197 is applicable to requests to extend the
duration of a previously recommended and currently in effect Negotiated
Service Agreement (the existing agreement). The intent is to limit use
of the rule to instances where the proposed agreement and the existing
agreement share substantially identical obligations. This restriction
is necessary to limit the issues open to litigation, and to otherwise
expedite the proceeding as much as possible. In instances where there
are no contested issues it should be possible for the Commission to
issue its recommendation shortly after the prehearing conference.
Rule 197 allows for three instances where modifications to the
terms and conditions (including modifications to the Domestic Mail
Classification Schedule) may be appropriate: (1) Correcting a technical
defect, (2) updating the schedule of rates and fees, and (3) accounting
for an intervening event since the recommendation of the existing
agreement. The rule notes that the above modifications should not
materially alter the nature of the existing agreement. This notation
serves as a reminder of the limited applicability of rule 197, and that
modifications of any substance may not allow for expedited review, or
in the more extreme case may cause the request to be considered de
novo. This rule is inapplicable when material features are proposed to
be significantly modified, added, or removed from the existing
agreement.
The exceptions are provided predominately to allow for correction
of errors or to update the terms and conditions to the current
situation when the existing agreement is renewed. The correction of
technical defects, for example, allows for correction of scrivener's
errors, and to correct for errors in description. An example of an
error in description could be an instance of where the parties to the
contract, the Commission, and the participants in the original docket
understood the intent of a term or condition, but what was actually
described in the documentation was technically not correct. Thus, the
exception would allow the documentation to be corrected or clarified.
Updating the schedule of rates and fees refers to updating the
schedule of rates and fees to reflect the current conditions at the
time the Negotiated Service Agreement is extended. It does not refer to
a wholesale revamping of the schedule of rates and fees to accommodate
new or remove existing incentives, or which change the underlying
nature of the existing agreement.
Accounting for intervening events since the recommendation of the
existing agreement refers to an internal or an external event,
typically unanticipated or unforeseen, that has occurred since
recommendation of the agreement and that has an impact on some aspect
of the agreement. For example, a merger, a change in the nature of a
provided postal service, or an external economic occurrence that forces
a change in business plans could be intervening events. It is important
to stress that the more significant the event and the associated
modification required, the less applicable rule 197 becomes and the
more likely that the request would have to be considered de novo.
Subsections (a)(1) through (7) highlight particular areas of
interest to the Commission in reviewing requests to renew existing
agreements. Supplemental testimony might be required to fully comply
with these subsections.
Subsection (a)(1) requires identification of the record testimony
from the existing agreement docket, or any other previously concluded
docket, on which the Postal Service proposes to rely. The identified
record testimony will form the basis of the record of the instant
request, with supplemental testimony completing the record where
necessary.
Subsection (a)(2) focuses on the modifications that are being
proposed to be made to the agreement, which includes the terms and
conditions of the actual contract and the contents of the Domestic Mail
Classification Schedule as previously recommended by the Commission and
approved by the Governors of the United States Postal Service. It
requires a ``from to'' description of all proposed modifications to the
agreement's documentation.
Subsection (a)(3) requires an explanation or reason for the
modifications that are being proposed to be made to the agreement. It
focuses on describing the technical defect, rationale for revising the
schedule of rates and fees, or intervening event, if any, that has
necessitated a proposed modification.
Subsection (a)(4) requires the Postal Service to provide all
studies pertinent to the request which have been completed since the
recommendation of the existing agreement. These studies are likely to
be probative of the level of success of the existing agreement or they
might shed light on the proposals being made in the request.
Subsection (a)(5) requires a financial analysis applicable to the
existing agreement comparing actual performance with predicted
performance. Because the request for extending the duration must occur
before the actual termination date of the existing agreement, an
allowance is made for a final projection based on
[[Page 7706]]
actual data. Except for the final projection, all of the data required
to comply with this subsection previously should have been collected as
required by the existing agreement's data collection plan.\5\ The
intent of this subsection is to facilitate the continuation of
beneficial agreements.
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\5\ Required by 39 CFR 3001.193(g), as of requests filed after
February 11, 2004.
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Subsection (a)(6) requires a financial analysis to be performed
over the duration of the extended agreement. The analysis is to be
performed utilizing the methodology employed by the Commission in its
recommendation of the existing agreement. Utilizing the Commission's
methodology to the maximum extent possible should avoid the need to re-
examine and possibly relitigate methodology-related issues, which
should result in an expedited proceeding. The financial analysis will
weigh heavily in the Commission's recommendation.
Subsection (a)(7) requires the Postal Service to identify
circumstances that are unique to the request. This is a catch-all
provision where the proponents can provide the Commission with
additional information pertinent to the Commission's analysis. For
example, any change in a service, change in a mailer's business plans,
or change in the interaction between the mailer and the Postal Service
since the initial recommendation that potentially bears on the
Commission's recommendation should be discussed.
Subsection (b) requires the Postal Service to provide written
notice of its request to certain participants who are assumed to be
those potentially interested in the proceeding. This is in addition to
the public notice that will result from filing the request. The
requirement balances the Commission's intent to limit the time period
for intervention which will help expedite consideration of requests
under this rule, and the requirement for interested participants to be
adequately notified of a pending proceeding.
Subsection (c) establishes that a prehearing conference will be
scheduled for each request. At the time of the prehearing conference,
participants shall be prepared to address whether or not it is
appropriate to proceed under the rules for renewing existing
agreements, and whether or not there are any material issues of fact
that require discovery or evidentiary hearings. The Commission will
promptly determine, on the basis of materials submitted with the
request and argument presented at or before the prehearing conference,
whether or not it is appropriate to proceed under these rules and what
direction the proceeding should follow. If it is determined that it is
not appropriate to proceed under 39 CFR 3001.197, the Commission shall
proceed under 39 CFR 3001.195. After experience is gained operating
under rule 197(c), and the review of Negotiated Service Agreements
becomes routine, the Commission will entertain proposals to further
streamline the early phases of the proceeding.
Proposed 39 CFR 3001.198 requests to modify previously recommended
Negotiated Service Agreements. Subsection (a) establishes that rule 198
is applicable to requests to modify a previously recommended and
currently in effect Negotiated Service Agreement (the existing
agreement). The intent of the rule is to expedite proceedings where
limited modifications are being proposed that do not materially alter
the nature of the agreement. The rule limits modifications to those:
(1) Correcting a technical defect, (2) accounting for unforeseen
circumstances not apparent when the existing agreement was first
recommended, and (3) accounting for an intervening event since the
recommendation of the existing agreement. The allowed modifications are
not meant to include instances where a material feature is proposed to
be significantly modified, added, or removed from the existing
agreement. Restricting the allowable types of modifications is
necessary to limit the issues open to litigation, and to otherwise
expedite the proceeding as much as possible. The proceeding should take
considerably less time to review, depending upon the extent of the
modifications, than having to review the entire agreement de novo.
The correction of technical defects and accounting for intervening
events since the recommendation of the existing agreement were
discussed above in proposed rule 197. Accounting for unforeseen
circumstances not apparent when the existing agreement was recommended
is intended to allow for modifications to be made after some experience
has been gained operating under the agreement. For example, it might
not be initially recognized that there is a more advantageous method of
performing a specific function under the agreement. In such an
instance, it might be appropriate to modify the agreement to reflect
utilization of the more advantageous method.
Subsections (a)(1) through (6) highlights particular areas of
interest to the Commission in reviewing requests to modify existing
agreements. Supplemental testimony might be required to fully comply
with these subsections. Subsection (a)(1) requires identification of
the record testimony from the existing agreement docket, or any other
previously concluded docket, on which the Postal Service proposes to
rely. The identified record testimony will form the basis of the record
of the instant request, with supplemental testimony completing the
record where necessary.
Subsection (a)(2) focuses on the modifications that are being
proposed to be made to the agreement, which includes the terms and
conditions of the actual contract and the contents of the Domestic Mail
Classification Schedule as previously recommended by the Commission and
approved by the Governors of the United States Postal Service. It
requires a ``from to'' description of all proposed modifications to the
agreement's documentation.
Subsection (a)(3) requires an explanation or reason for the
modifications that are being proposed to be made to the agreement. It
focuses on describing the technical defect, unforeseen circumstance, or
intervening event that has necessitated the proposed modification.
Subsection (a)(4) requires the Postal Service to provide all
studies pertinent to the request which have been completed since the
recommendation of the existing agreement. These studies are likely to
be probative of the level of success of the existing agreement or they
might shed light on the proposals being made in the request.
Subsection (a)(5) requires a financial analysis to be performed
over the duration of the extended agreement. It should be performed
only if the proposed modification has an effect upon the financial
analysis in the opinion recommending the existing agreement. The
analysis is to be performed utilizing the methodology employed by the
Commission in its recommendation of the existing agreement. Utilizing
the Commission's methodology, to the maximum extent possible, will
avoid the need to reexamine and possibly relitigate methodology-related
issues, which should result in an expedited proceeding.
Subsection (a)(6) requires the Postal Service to identify
circumstances that are unique to the request. This is a catch-all
provision where the proponents can provide the Commission with
additional information pertinent to the Commission's analysis. For
example, any change in a service, change in a mailer's business plans,
or change in the interaction between the mailer and the Postal Service
since the
[[Page 7707]]
initial recommendation that potentially bears on the Commission's
recommendation should be discussed.
Subsections (b) and (c) parallel the notice and prehearing
conference requirements discussed above for 39 CFR 3001.197(b) and (c).
Comments. By this order, the Commission hereby gives notice that
comments from interested persons concerning the proposed amendments to
the Commission's Rules are due on or before March 14, 2005. Reply
comments may also be filed and are due April 11, 2005.
Representation of the general public. In conformance with 39 CFR
3624(a) of title 39, U.S. Code, the Commission designates Shelley S.
Dreifuss, director of the Commission's Office of the Consumer Advocate,
to represent the interests of the general public in this proceeding.
Pursuant to this designation, Ms. Dreifuss will direct the activities
of Commission personnel assigned to assist her and, upon request, will
supply their names for the record. Neither Ms. Dreifuss nor any of the
assigned personnel will participate in or provide advice on any
Commission decision in this proceeding.
Ordering Paragraphs
It is ordered:
1. Docket No. RM2005-3 is established to consider Commission rules
applicable to Postal Service proposals to extend the duration of, or
make modifications to, previously recommended and currently in effect
Negotiated Service Agreements.
2. Interested persons may submit comments no later than March 14,
2005.
3. Reply comments also may be filed and are due April 11, 2005.
4. Shelley S. Dreifuss, director of the Office of the Consumer
Advocate, is designated to represent the interests of the general
public in this docket.
5. The Secretary shall arrange for publication of this notice of
proposed rulemaking in the Federal Register.
Issued: February 10, 2005.
By the Commission.
Steven W. Williams,
Secretary.
List of Subjects in 39 CFR Part 3001
Administrative Practice and Procedure, Postal Service.
For the reasons discussed above, the Commission proposes to amend
39 CFR part 3001 as follows:
PART 3001--RULES OF PRACTICE AND PROCEDURE
1. The authority citation for part 3001 continues to read as
follows:
Authority: 39 U.S.C. 404(b); 3603; 3622-24; 3661, 3662, 3663.
2. Amend Sec. 3001.197 as follows:
a. Revise the heading of section 3001.197 to read as follows:
Requests to renew previously recommended Negotiated Service Agreements
with existing participant(s).
b. Add new paragraphs (a), (b) and (c) to read as follows:
Subpart L--Rules Applicable to Negotiated Service Agreements
Sec. 3001.197 Requests to renew previously recommended Negotiated
Service Agreements with existing participant(s).
(a) This section governs Postal Service requests for a recommended
decision seeking to extend the duration of a previously recommended and
currently in effect Negotiated Service Agreement (existing agreement).
The purpose of this section is to establish procedures that provide for
accelerated review of Postal Service requests to extend the duration of
an existing agreement under substantially identical obligations. In
addition to extending the duration of the existing agreement,
modifications may be entertained that do not materially alter the
nature of the existing agreement for the purposes of: correcting a
technical defect, updating the schedule of rates and fees, or
accounting for an intervening event since the recommendation of the
existing agreement. The Postal Service request shall include:
(1) Identification of the record testimony from the existing
agreement docket, or any other previously concluded docket, on which
the Postal Service proposes to rely, including citation to the
locations of such testimony;
(2) A detailed description of all proposed modifications to the
existing agreement;
(3) A detailed description of any technical defect, rationale for
revising the schedule of rates and fees, or intervening event since the
recommendation of the existing agreement, to substantiate the
modifications proposed in (a)(2) of this section;
(4) All studies developing information pertinent to the request
completed since the recommendation of the existing agreement;
(5) A comparison of the analysis presented in Sec.
3001.193(e)(1)(ii) and Sec. 3001.193(e)(2)(iii) applicable to the
existing agreement with the actual results ascertained from
implementation of the existing agreement, together with the most recent
available projections for the remaining portion of the existing
agreement, compared on an annual or more frequent basis;
(6) The financial impact of the proposed Negotiated Service
Agreement on the Postal Service in accordance with Sec. 3001.193(e)
over the extended duration of the agreement utilizing the methodology
employed by the Commission in its recommendation of the existing
agreement; and
(7) If applicable, the identification of circumstances unique to
the request.
(b) When the Postal Service submits a request to renew a Negotiated
Service Agreement, it shall provide written notice of its request,
either by hand delivery or by First-Class Mail, to all participants in
the Commission docket established to consider the original agreement.
(c) The Commission will schedule a pre-hearing conference for each
request. Participants shall be prepared to address at that time whether
or not it is appropriate to proceed under Sec. 3001.197, and whether
or not any material issues of fact exist that require discovery or
evidentiary hearings. After consideration of the material presented in
support of the request, and the argument presented by the participants,
if any, the Commission shall promptly issue a decision on whether or
not to proceed under Sec. 3001.197. If the Commission's decision is to
not proceed under Sec. 3001.197, the docket will proceed under Sec.
3001.195.
3. Amend Sec. 3001.198 as follows:
a. Revise the heading of section 3001.198 to read as follows:
Requests to modify previously recommended Negotiated Service
Agreements.
b. Add new paragraphs (a), (b) and (c) to read as follows:
Sec. 3001.198 Requests to modify previously recommended Negotiated
Service Agreements.
(a) This section governs Postal Service requests for a recommended
decision seeking a modification to a previously recommended and
currently in effect Negotiated Service Agreement (existing agreement).
The purpose of this section is to establish procedures that provide for
accelerated review of Postal Service requests to modify an existing
agreement where the modification is necessary to correct a technical
defect, to account for unforeseen circumstances not apparent when the
existing agreement was first recommended, or to account for an
intervening event since the recommendation of the existing agreement.
This section is not applicable to requests to extend the duration of a
Negotiated Service Agreement. The Postal Service request shall include:
[[Page 7708]]
(1) Identification of the record testimony from the existing
agreement docket, or any other previously concluded docket, on which
the Postal Service proposes to rely, including citation to the
locations of such testimony;
(2) A detailed description of all proposed modifications to the
existing agreement;
(3) A detailed description of the technical defect, unforeseen
circumstance, or intervening event, to substantiate the modifications
proposed in (a)(2) of this section;
(4) All studies developing information pertinent to the request
completed since the recommendation of the existing agreement;
(5) If applicable, an update of the financial impact of the
Negotiated Service Agreement on the Postal Service in accordance with
Sec. 3001.193(e) over the duration of the agreement utilizing the
methodology employed by the Commission in its recommendation of the
existing agreement; and
(6) If applicable, the identification of circumstances unique to
the request.
(b) When the Postal Service submits a request to modify a
Negotiated Service Agreement, it shall provide written notice of its
request, either by hand delivery or by First-Class Mail, to all
participants in the Commission Docket established to consider the
original agreement.
(c) The Commission will schedule a pre-hearing conference for each
request. Participants shall be prepared to address at that time whether
or not it is appropriate to proceed under Sec. 3001.198, and whether
or not any material issues of fact exist that require discovery or
evidentiary hearings. After consideration of the material presented in
support of the request, and the argument presented by the participants,
if any, the Commission shall promptly issue a decision on whether or
not to proceed under Sec. 3001.198. If the Commission's decision is to
not proceed under Sec. 3001.198, the docket will proceed under Sec.
3001.195.
[FR Doc. 05-2883 Filed 2-14-05; 8:45 am]