Domestic Negotiated Service Agreements
BACKGROUND:
The U.S. Postal Service is authorized to enter into negotiated service agreements (NSAs) -- customized contractual agreements between the Postal Service and specific mailers that provide customers special rebates, discounts, or pricing flexibility in return for increased mail volume and revenue growth.
The Postal Service is required to file documentation with the Postal Regulatory Commission showing that a prospective agreement will improve the Postal Service's net financial position or mail processing functions and will not cause undue discrimination to the marketplace. In addition, market dominant NSAs cannot cause unreasonable harm to the market. While the Postal Service is able to verify volume and revenue increases associated with NSAs, an inherent challenge in measuring the success of an NSA is determining whether an increase is the direct result of the agreement or would have occurred, without the agreement.
There were 53 competitive NSAs and one market dominant NSA in effect for fiscal year 2012. In addition, as of March 26, 2013, the Postal Regulatory Commission approved 40 competitive NSAs for the fiscal year. Our objective was to evaluate the process for managing domestic NSAs and determine whether they resulted in mail volume and revenue increases.
WHAT THE OIG FOUND:
The domestic NSAs we reviewed generally resulted in mail volume and revenue increases; however, we could not determine whether the increases were the direct result of incentives created by the agreements. In addition, the data used to calculate rebates, discounts, and mail volume growth were not always accurate. Further, the data reported to the Postal Regulatory Commission did not always agree with data the Postal Service used to calculate discounts and rebates. We identified $1.2 million in incorrect and questionable customer rebates and quarterly price adjustments. Lastly, the Postal Service does not have specific criteria governing retention of NSA data. We also noted another matter related to the statutory requirement that NSAs cannot cause unreasonable harm to the marketplace.
WHAT THE OIG RECOMMENDED:
We recommended the Postal Service develop and implement standardized procedures for managing NSAs and establish data retention schedules and a central repository.