NEW BASELINE NSA CAN SERVE AS A MODEL FOR FUTURE AGREEMENTS

The following is a postal perspective by Maxine Moss, assistant director of postal and government affairs for Bookspan. Moss was an integral part of the team that worked closely with the Postal Service on the recent negotiated service agreement. Bookspan is represented on the PostCom Board of Directors and Moss serves on a number of PostCom committees, including education and planning.

The Postal Rate Commission has now approved two baseline negotiated service agreements (NSA). The first baseline NSA was with Capital One in First-Class Mail and the second and most recent was with Bookspan in Standard Mail class. To date, there are three functionally equivalent to the first baseline – all with large financial institutions.

The Bookspan Standard Mail NSA is important to the industry for a number of reasons other than being the first straight volume-based NSA. The agreement has changed the NSA landscape by making it more open and approachable to other USPS partners seeking a functionally equivalent NSA. And it has created possibilities for Postal Service partners seeking a new baseline.

The Bookspan NSA uses a protective contract mechanism instead of a cap to mitigate risk. As Postal Service Manager of Pricing Mike Plunkett correctly observed in his testimony, “A cap has the unintended consequence to make a NSA impracticable for some companies who considered themselves competitors – because they do not present a large enough cost savings opportunity to justify the perceived transaction costs.” Plunkett further testified that “a cap also limits the universe of potential NSAs to those who present substantial cost savings opportunities.”

Bookspan uses the Postal Service almost exclusively for all its mailings. Each member of a club generates an average of 50.5 pieces of mail per year. The pieces of mail might include the following: catalogs, don’t send responses, book orders, book shipments, payments, dunning letters and general member correspondence. In the early 1990s, Robert Posch, Bookspan’s senior vice president of legal and postal affairs, coined the phrase “multiplier effect” to describe this mail generation. The multiplier effect has been presented before the Postal Rate Commission in a number of proceedings prior to this case.

In FY 2005, Standard Mail volume for the first time exceeded First-Class volume. It is not that Standard Mail is dramatically on the rise, it is just that First-Class Mail is rapidly declining. Standard Mail has replaced First-Class Mail as the locomotive that drives the Postal Service. It is increasingly becoming the future of the Postal Service. An NSA geared to an increase in Standard Mail use is real progress toward securing the future.

Another way to further secure the future would be to increase the heavy letters from 3.5 ounces to 4 ounces. As recited on page 10 of the Bookspan Recommended Decision, witness Posch explains that increasing the maximum weight of automation-rated letters made it economically feasible for many direct marketers to expand their mailing efforts and develop new lines of business. As an example, Posch points to Bookspan’s predecessor’s use of the automated letter weight in developing a large member base for Bookspan’s Crossings book club. Without the more favorable automation rates this would not have been possible. Bookspan recognized the opportunity and was able to cost effectively include inserts promoting Crossings in existing member promotional mailings as well as promote the club through inserts in promotions of related products. This kind of growth benefits everyone and provides stability across the board.

Anyone entering or planning to enter into an NSA should read page eight of the Recommended Decision where the PRC commends Bookspan for its cooperation and its willingness to provide the commission with as much information as possible. The commission said that such cooperation between participants should serve as a model for future cases.