FR Doc 03-22478
[Federal Register: September 4, 2003 (Volume 68, Number 171)]
[Proposed Rules]               
[Page 52546-52555]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04se03-24]                         

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POSTAL RATE COMMISSION

39 CFR Part 3001

[Docket No. RM2003-5; Order No. 1383]

 
Negotiated Service Agreements

AGENCY: Postal Rate Commission.

ACTION: Proposed rule.

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SUMMARY: This document provides notice that the Commission is 
establishing a docket to address the first in a series of anticipated 
rulemakings concerning negotiated service agreement dockets. This 
initial rulemaking concerns baseline and functionally equivalent 
negotiated service agreements. It provides guidance to the Postal 
Service and others on the procedures the Commission proposes following 
for certain negotiated service agreement requests. It also establishes 
the organizational framework for the comprehensive set of rules. 
Adoption of these rules, with any revisions deemed appropriate after 
considering comments, will facilitate expeditious consideration of 
negotiated service agreements.

DATES: Initial comments due September 29, 2003; reply comments due 
October 14, 2003.

ADDRESSES: Submit comments electronically via the Commission's Filing 
Online system, which can be accessed at http://www.PRC.gov.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
202-789-6818.

SUPPLEMENTARY INFORMATION:

Introduction

    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. This notice and order represents the 
initiation of the first such rulemaking, and will address rules 
applicable to consideration of Postal Service requests to recommend 
baseline negotiated service agreements and negotiated service 
agreements that are functionally equivalent to then-effective 
negotiated service agreements.\2\ The intent of this rulemaking is to 
facilitate the consideration of baseline negotiated service agreements 
and the extension of the terms and conditions of ongoing negotiated 
service agreements to similarly situated mailers. As the first such 
rulemaking, the proposed rules also establish the organizational 
framework for the complete set of Commission rules in regard to 
requests based on negotiated service agreements.
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    \1\ Docket No. MC2002-2, Experimental Rate and Service Changes 
to Implement Negotiated Service Agreement with Capital One, was the 
first docket in which the Commission considered and recommended a 
Postal Service request predicated on a Negotiated Service Agreement.
    \2\ A baseline negotiated service agreement is a negotiated 
service agreement that is not predicated on a functionally 
equivalent negotiated service agreement currently in effect. The 
term ``baseline'' is used to denote that the negotiated service 
agreement potentially may form the basis of a future Postal Service 
request to recommend a functionally equivalent negotiated service 
agreement. The term emphasizes the policy that functionally 
equivalent negotiated service agreements should be made available to 
qualifying similarly situated mailers.
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    When the Postal Service filed its request of the United States 
Postal Service for a recommended decision on experimental changes to 
implement Capital One NSA (request), September 19, 2002, the Commission 
did not have procedural rules specifically tailored for consideration 
of negotiated service agreements. The Postal Service filed its request 
noting potential application of the Commission's rules for requests 
involving experimental changes. See rules 67-67d. Although the concept 
of a request based on a negotiated service agreement could be 
considered somewhat experimental, the functional elements of the 
request included features that were only of a limited experimental 
nature. See Opinion Chapter IV. Furthermore, the Commission's rules for 
experimental changes connote a standard of review and procedures 
appropriate for consideration of an experiment, which might not be 
appropriate for the review of a request based on a negotiated service 
agreement. Considering these issues and others that arose during the 
proceeding, such as initial intervention by parties to the negotiated 
service agreement and treatment of co-proponents discussed below, it 
became apparent that the process could be improved if the Commission's 
rules were revised specifically to accommodate consideration of 
negotiated service agreements.
    The docket no. MC2002-2 experience provided the impetus for the 
Commission to propose rules specifically applicable to the review of 
Postal Service proposals based on negotiated service agreements. The 
goal of this rulemaking is foremost to develop rules to assure that 
Commission recommendations on proposals based on negotiated service 
agreements satisfy the requirements of the Act. The rules must balance 
the development of an adequate record against the burdens on

[[Page 52547]]

the participants and the Commission. The rules must assure the 
provision of a timely review, while safeguarding due process 
requirements. The rules also provide for a standard of review that is 
appropriate for negotiated service agreements.
    This rulemaking considers rules for reviewing Postal Service 
proposals based on baseline and functionally equivalent negotiated 
service agreements. The intent of the proposed rules for functionally 
equivalent negotiated service agreements is to reduce the procedural 
burden and expedite the proceeding otherwise applicable to a de novo 
review of a new or unique baseline negotiated service agreement.
    The proposed rules do not include a definition for what qualifies 
as a functionally equivalent negotiated service agreement. The many 
possible forms and features that a negotiated service agreement can 
encompass make development of a universal definition of functional 
equivalency difficult, if not impossible. The proposed rules place the 
burden on proponents to explain why the newly proposed negotiated 
service agreement is functionally equivalent to a previously 
recommended negotiated service agreement.\3\ The Commission will be 
left to decide, on a case by case basis, whether the Postal Service has 
met this burden. If the case for functional equivalency is not 
persuasive, the request will be subject to Sec.  3001.195.
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    \3\ Functional equivalency is broader than the literal terms and 
conditions of the negotiated service agreement. Just as similarly 
situated mailers do not necessarily have to have identical 
characteristics, functionally equivalent negotiated service 
agreements do not necessarily have to have identical terms and 
conditions. The Commission will have to examine the facts and 
surrounding circumstances of each proposal to make a functional 
equivalency determination. As an example of factors outside of the 
literal terms and conditions of the negotiated service agreement, 
whether the Postal Service derives a ``functionally equivalent'' 
benefit from the proposed agreement could bear on an argument for 
functional equivalency.
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A. General Rules

Proposed Sec.  3001.5(r)--Definitions
    The proposed rules begin with a definition of the term ``negotiated 
service agreement.'' The definition is necessary for distinguishing the 
applicability of the proposed rules from rules that cover other subject 
areas. Several concepts are important in the definition. First, a 
negotiated service agreement is a contract. Second, the terms and 
conditions of the contract apply only to the Postal Service and the 
specific mailer, or mailers, named in the contract. Third, the contract 
controls the provision of mailer-specific rates, fees, and/or postal 
services. Fourth, the duration of the contract must be defined in the 
contract.\4\ Finally, the contract must be memorialized in writing. The 
proposed definition of a negotiated service agreement appears in 
attachment A, Sec.  3001.5(r).\5\
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    \4\ The proposed language is interpreted to be broad enough to 
include allowing for triggering events that may initiate or 
terminate the contract, in addition to setting a fixed duration.
    \5\ The complete text of each proposed rule appears in 
attachment A. The proposed rules in attachment A should be read in 
parallel with the explanations provided in this notice and order.
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Proposed Sec.  3001.51 and Sec.  3001.61--Applicability Amendments
    The proposed amendments to rules 51 and 61 specify that Postal 
Service requests based on negotiated service Agreements, which 
otherwise would be considered pursuant to subparts B or C, shall 
instead be considered pursuant to subpart L.
Proposed Sec.  3001.190--Applicability
    Subsection (a) establishes that the rules proposed under subpart L, 
``Rules Applicable to Negotiated Service Agreements,'' are applicable 
to Postal Service proposals based on negotiated service agreements. 
This subsection also incorporates subpart A, ``Rules of General 
Applicability,'' into subpart L.
    Subsection (b) states the general policy considerations of the 
Commission to justify the need for the proposed rules for negotiated 
service agreements. These policy considerations do not supercede any 
provision of the Act, but merely highlight issues that the Commission 
will consider important when reviewing negotiated service agreements.
    This subsection also expresses the Commission's strong preference 
that negotiated service agreements be limited in duration to three 
years or less. Negotiated service agreements by their nature have 
features that are discriminatory, and have the potential to cause harm 
to the marketplace.\6\ There also is a potential for harm to the Postal 
Service, and thereby to other mailers, where negotiated service 
agreements are predicated on less than complete knowledge of the 
mailer-specific mailing costs and characteristics.\7\ Furthermore, over 
time, the material facts on which an agreement is based will tend to 
change, making uncertain the future benefits of any agreement. Imposing 
a maximum duration limits the time that any potential risk might be in 
effect, and allows a fixed time over which an analysis can be performed 
to quantify this risk. It also provides an opportunity to periodically 
analyze the pros and cons of allowing the agreement to extend into the 
future.
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    \6\ Negotiated service agreements are discriminatory in that 
their application is restricted to the contracting parties. The 
negative connotation of discrimination is presumed to be ameliorated 
by making similar negotiated service agreements available to 
similarly situated mailers. The proposed rules are designed to 
facilitate this process.
    \7\ For example, the Capital One Negotiated Service Agreement 
was predicated on Postal Service average costs as opposed to mailer-
specific costs, and on less than complete knowledge of Capital One's 
likely future mailing strategies.
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    The Commission's preference to place a limit on duration is also 
based on the concern that the interaction between negotiated service 
agreements and omnibus rate cases is not understood. Overall Postal 
Service costs and revenues are reviewed during every omnibus rate 
proceeding--which typically occur every three years. The methodology 
for incorporating the impact of negotiated service agreements into an 
omnibus rate case has not been developed. Furthermore, the effect of an 
omnibus rate case on a negotiated service agreement is not known. There 
is a potential that the impact of negotiated service agreements on 
overall costs and revenue, information that is required when 
considering an omnibus rate case, could perpetually escape review if 
not properly incorporated. While the preference for a maximum three-
year duration does not fully address these concerns, it should at least 
help by placing bounds on the possible effects of negotiated service 
agreements which must be evaluated in future omnibus rate proceedings.
    The preference for a three-year maximum duration contains two 
explanatory notes. The proposed subpart L contemplates a procedure for 
rapid and repeated renewals of a previously recommended negotiated 
service agreement. There is no known reason that a negotiated service 
agreement that is shown to benefit the Postal Service, meets the 
statutory requirements, and does not cause any undue harm, should not 
be allowed to be renewed indefinitely. The proposed rule also allows 
for the prompt review of a functionally equivalent negotiated service 
agreement. The intent of the rule is that the duration of the 
functionally equivalent negotiated service agreement should not be 
dependent on the duration of the underlying negotiated

[[Page 52548]]

service agreement.\8\ The benefits of a functionally equivalent 
negotiated service agreement could be reduced if it were required to 
terminate at the same time as the baseline negotiated service 
agreement.
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    \8\ For example, a functionally equivalent negotiated service 
agreement may be recommended for a three year duration even though 
the baseline negotiated service agreement has been in effect for two 
years.
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Proposed Sec.  3001.191--Filing of Formal Requests
    Subsection (a) provides general instruction for filing whenever the 
Postal Service proposes changes to rates, fees, or the mail 
classification schedule based on a negotiated service agreement. The 
Postal Service is directed to clearly indicate whether its request is 
for the review of a baseline negotiated service agreement, the review 
of a functionally equivalent negotiated service agreement, the review 
of a renewal for an ongoing negotiated service agreement, or the review 
of a modification to an ongoing negotiated service agreement. This 
designation is used to trigger specific rules applicable to each type 
of request. After receiving the Postal Service's request, the 
Commission shall provide notice through the Federal Register of the 
Postal Service's request.
    Subsection (b) addresses procedural issues in regard to 
intervention and to the treatment of the proponents of the direct case. 
In docket no. MC2002-2, motions were filed requesting intervention of 
Capital One prior to public notice of the docket, and requesting 
submission of testimony out of turn. This was necessary to allow 
Capital One to submit direct testimony simultaneous with the Postal 
Service's direct testimony, and to be treated as a co-proponent with 
the Postal Service. The rules in proposed subsection (b) eliminate this 
motions practice. The Postal Service is required to identify all 
parties to the negotiated service agreement. Identification of the 
parties shall serve as an automatic notice of intervention. It also 
shall serve as notice that the identified parties are to be treated as 
co-proponents with the Postal Service in the proceeding.\9\
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    \9\ The Postal Service is recognized as the ``lead'' co-
proponent. This is dictated by the Act, as a co-proponent other than 
the Postal Service cannot initiate a request before the Commission, 
nor can the Postal Service be bound to adhere to a proposal that is 
not in its best interest.
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Proposed Sec.  3001.192--Filing of Prepared Direct Evidence
    Subsection (a) requires the filing of the Postal Service's and, if 
it is to be filed, its co-proponent's direct evidence simultaneous with 
the filing of the request. This subsection eliminates the need for a 
co-proponent to file a motion requesting that its direct testimony be 
accepted out of turn.
    Subsection (b) requires the Postal Service to review and affirm 
that any direct evidence filed by a co-proponent can be relied on in 
concert with the Postal Service's direct evidence. Co-proponent 
testimony that is not consistent with the Postal Service's direct case 
would in effect be rebuttal testimony, and would be inappropriate as 
part of a direct case. It is expected that the co-proponents present a 
unified case. It is also expected that the Postal Service, as the lead 
proponent, understands and agrees with the parameters of all testimony 
presented in support of the direct case.
Proposed Sec.  3001.193--Contents of Formal Requests
    Currently, when the Postal Service requests a change in rates, fees 
or the mail classification schedule, it must file a request that 
conforms with the ``contents of formal requests'' requirements 
delineated in Sec.  3001.54 and/or Sec.  3001.64. The requirements 
direct the Postal Service to produce a large quantity of information. 
The relevance of the bulk of the information tends to vary in relation 
to the system-wide significance of the change being proposed. 
Typically, with more limited proposals, the Postal Service seeks a 
waiver requesting relief from providing material that is not relevant 
or not available in regard to that particular proposal. The intent of 
proposed rule 193 is to tailor the content requirements of rules 54 and 
64 to what is necessary to support a proposal based on a negotiated 
service agreement. This should provide the Postal Service with better 
direction on what the Commission expects, and should eliminate most of 
the motions practice requesting waivers for material that is either not 
available or not relevant.\10\
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    \10\ The Postal Service as the lead proponent is required to 
respond to the items delineated in this section, with the 
Commission's understanding that some responses may actually be 
prepared and presented by other co-proponents.
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    Subsection (a)(1) provides the general requirements for 
presentation of a direct case in support of a negotiated service 
agreement. This is substantively the same general requirement that the 
Postal Service complies with under rules 54 and 64.
    Subsection (a)(2) specifies the procedure to request a waiver of a 
filing requirement in instances where otherwise required filing 
information is not available. The explanation accompanying the request 
for waiver will carry significant weight. The Commission expects that 
the Postal Service take reasonable steps to compile the necessary 
information, when practicable, or to take reasonable steps to develop 
reliable estimates of the required information. This rule recognizes 
that there might be instances where required information is just not 
available.
    Subsection (a)(3) specifies the procedure to request a waiver of a 
filing requirement in instances where the Postal Service believes the 
provision of information is not required. This subsection is to be used 
where the requested information is considered not relevant to the 
proceeding, whether or not it is available.
    In instances where a waiver is granted under subsection (a)(2) or 
(a)(3) for unavailable or not required information, subsection (a)(4) 
precludes future argument related to the absence of such information, 
except in extraordinary circumstances. Participants contending the 
absence of such information should bear on the merits of the proposal 
must demonstrate that the Postal Service was clearly unreasonable, or 
that there are other compelling or exceptional circumstances, that show 
why the absence of information that was alleged to be unavailable or 
not required should be used as a basis for rejection of the request.
    Subsections (a)(5) and (a)(6) reserve the right of the Commission 
and the presiding officer to request whatever information that is 
deemed necessary to analyze the Postal Service's proposal in the 
process of issuing an opinion and recommended decision. If a 
participant contends that information not originally provided is now 
necessary to develop relevant and material analysis of the request, the 
burden shifts to the participant that now finds the information 
necessary to seek this information through discovery.
    Subsection (b) requires that a copy of the negotiated service 
agreement be included with the request. In docket no. MC2002-2, a 
question arose whether the copy of the negotiated service agreement was 
or was not executed prior to filing. This occurred because the copy 
included with the request was not signed. The resolution of this issue 
favored by the Commission is to file an unsigned text file copy with 
the request, and not require the Postal Service to file an executed 
copy. The presumption will be that the Postal Service would not file a 
request without all parties in agreement to its terms and conditions, 
and that the parties other that the Postal Service would not support a 
request as co-proponents unless they agreed to

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what was filed. Furthermore, even if the agreement were signed, the 
agreement does not go into effect until after the Commission submits 
its opinion and recommended decision, and the Governors of the United 
States Postal Service provide their approval. Thus, the actual 
signatures have very little effect on the Commission's proceeding and 
will not be required.
    The intent of the Commission is to make the actual contracts 
publicly available on the Commission's Web site. The Postal Service 
should take this into consideration while constructing its contracts by 
avoiding use of what might be considered proprietary information. 
Public disclosure is necessary to curtail any claim of discrimination 
or secret dealing, to make the operations of the Postal Service more 
transparent, and most importantly, to provide other similarly situated 
mailers the opportunity to seek similar negotiated service agreements. 
Any request for protective conditions being placed on the contract 
itself will have to meet a high burden before being granted.
    Subsection (c) requires the Postal Service to provide a statement 
describing and explaining the proposed changes to the domestic mail 
classification schedule and any associated rate schedule. This includes 
the actual proposed changes to the text of the domestic mail 
classification schedule, and any associated rate schedule, presented in 
legislative format. The requirements of this rule do not differ from 
similar rules that the Postal Service currently complies with when 
filing rate, fee, or classification requests.
    Subsection (d) requires the Postal Service to describe the 
operative components of the negotiated service agreement. For instance, 
the Capital One NSA contained two operative components, the declining 
block discount component, and the return mail/address correction 
component. The level of detail provided with the Capital One NSA 
request and associated testimony was appropriate for meeting this 
requirement. This subsection generally requires the Postal Service to 
explain how the components work. There should be a detailed explanation 
of the actions required by the Postal Service and the actions required 
by the other co-proponents in implementing the agreement. There also 
should be an explanation of why each action has a benefit to each 
party, and an explanation of any risks. This is necessary to provide a 
fuller understanding of the benefits and risks of proceeding with the 
agreement.
    This subsection also requires an explanation of the reasons and 
bases for including particular components in the agreement. In the case 
of agreements based on multiple components, it is expected that there 
be an explanation of why the components are proposed to be grouped 
together, and not offered separately. There also should be a discussion 
of any interactions between the components, where necessary. For 
example, with the Capital One NSA the block discount acted as an 
incentive to increase mail volume and as a method of returning to 
Capital One a portion of the savings earned through the address 
correction component.
    Subsection (e) requires the Postal Service to provide a financial 
analysis of the proposed agreement. Several concepts are important in 
the proposed rule. The analysis is to be performed over the duration of 
the agreement, and for each year that the agreement is in effect. The 
analysis is to use mailer-specific information, where practical. Both 
before implementation and after implementation financial conditions 
must be analyzed. Finally, the proposed rule requires an analysis of 
the agreement's effect on institutional cost contributions.
    In the Capital One NSA case, the Commission had no established 
guidelines for presenting a classification and rate request premised on 
a negotiated service agreement. There, the Postal Service used a test-
year analysis method. Test-year analysis provides probative estimates 
for omnibus rate cases, however, it proved ill-suited to requests based 
on negotiated service agreements where the Postal Service is 
negotiating detailed custom agreements of specified duration.
    The Postal Service is expected to understand the ramifications of 
its contract negotiations. One of the important issues that the Postal 
Service should be considering when entering into a new agreement is 
whether it will be financially better or worse off by entering into the 
agreement. Positive cash flow in the test-year, especially where the 
test-year is chosen to be the first year of a multi-year agreement, is 
not necessarily indicative of cash flow in the subsequent years. The 
test-year approach is the best way to estimate the vast number of 
aspects of national economic activities. For a limited participation, 
limited duration contract, good business practice dictates a more 
focused analysis. The Postal Service presumably will not make a 
determination based solely on a test-year analysis, nor should the 
Commission have to make a recommendation based on the limited insight 
provided by such an analysis.
    The proposed rule provides that the Postal Service use mailer-
specific information in its analysis, where practical. Using mailer-
specific information should result in an analysis that more accurately 
represents the actual before and after financial effects of the 
negotiated service agreement on the Postal Service. Using system 
average information is less likely to give a true representation of the 
financial effects of the agreement, especially in cases where the 
mailer's characteristics do not coincide with the system-wide averages.
    Use of mailer-specific information becomes more important where a 
facet of the agreement is based on the mailer deviating from the 
averages. For example, part of the justification for the Capital One 
NSA was Capital One's higher than average return rate. This information 
was vital in analyzing the benefit of the agreement to the Postal 
Service. Even more mailer-specific information than presented by the 
Postal Service would have been helpful in accurately analyzing the true 
costs that the Postal Service incurs in handling Capital One's mail.
    The rule proposes that the Postal Service provide an initial 
analysis of cost, volume, and revenue assuming the rates and fees in 
effect absent the implementation of the negotiated service agreement. A 
second analysis is then required that assumes the implementation of the 
agreement. Each component or feature of the agreement should be 
independently analyzed in evaluating the overall financial impact. The 
results of the individual analyses should then be combined to provide 
an indication of the overall impact of the agreement on the finances of 
the Postal Service. When used in conjunction with the data collection 
plan, discussed below, this analysis also can form the basis for 
tracking the performance of the agreement.
    Finally, the rule proposes that the Postal Service provide an 
analysis of the effect of the negotiated service agreement on 
contribution. This analysis should verify that the Postal Service will 
be no worse off as a result of the agreement. It should consider the 
effect on contribution from mailers that are not parties to the 
agreement. This is necessary to evaluate concerns raised by Professor 
Panzar in docket no. MC2002-2. Panzar discussed a potential problem 
where contribution to the Postal Service received from parties to an 
agreement increases, but the system-wide contribution might decrease 
due to competitive effects in the marketplace.

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Such an agreement might not benefit the Postal Service.
    Subsection (f) requires the Postal Service to provide an estimate 
of the competitive effects of the negotiated service agreement on both 
the competitors of the Postal Service and on the competitors of the 
other co-proponents. The intent is to have a basis for analyzing the 
issues raised by Professor Panzar in docket no. MC2002-2. In instances 
where proposals are strictly cost-based, the competitive issues should 
take on less significance, with less of a filing burden encountered. In 
instances where proposals are not cost based, such as with a declining 
block discount proposal, the filing burden might be greater. Special 
studies might have to be considered to fully analyze these competitive 
issues.
    An estimate of the impact of the agreement on mail users as a group 
also is required. It is important that mailers not be made worse off 
due to the implementation of a negotiated service agreement.
    Subsection (g) requires the Postal Service to propose a data 
collection plan. The intent is not to burden the Postal Service with a 
data collection plan such as required for an experimental proposal. The 
intent is for a data collection plan to gather data that would 
typically be collected in the normal course of business, and that would 
be useful in making business decisions. The Postal Service should be 
collecting this data in any event for its own internal use and to 
determine the success or failure of the agreement. The Commission 
anticipates that the data will be necessary for consideration of future 
proposals. The data can be used to justify the renewal of an ongoing 
negotiated service agreement. It can be used to justify extending a 
similar agreement to a similarly situated mailer. It can be used if the 
Postal Service needs to propose modifications to the ongoing agreement. 
It also can be used, in general, to determine which characteristics of 
negotiated service agreements work, and which do not. This will be 
helpful to the Postal Service and the Commission in considering future 
proposals.
    The proposed rule states that the data is to be reported on an 
annual or more frequent basis. Frequent data reports are not necessary 
if the data are only to be used to renew, extend to other participants, 
or modify existing agreements. It would only be necessary to be 
produced when those events occur. However, annual data reports will 
help the Commission gain a more real-time understanding of which types 
of agreements work, and which do not, such that the Commission can make 
more informed recommendations for future requests. More importantly, 
the Commission anticipates that methodologies will have to be developed 
for dealing with the interaction of ongoing negotiated service 
agreements and future omnibus rate cases. Periodic reporting of data 
should help in the development and implementation of those 
methodologies.
    Subsections (h), (i), and (j) titled ``Workpapers,'' 
``Certification by officials,'' and ``Rejection of requests'' parallel 
rule 54 subsections (o), (p), and (s) respectively, and require no 
further explanation.
Proposed Sec.  3001.194--Failure To Comply
    The proposed rules balance the Commission's goal of considering 
negotiated service agreements in a timely manner against the 
requirement to develop an adequate record, and to consider the due 
process requirements of all participants. This section places the 
Postal Service on notice that failure to provide information necessary 
for the proceeding could result in the schedule being stayed until 
satisfactory compliance is achieved.

B. Case Specific Rules

Proposed Sec.  3001.195--Requests To Recommend a Baseline Negotiated 
Service Agreement
    Subsection (a) begins by describing the applicability of Sec.  
3001.195 to Postal Service proposals based on baseline negotiated 
service agreements. It defines a baseline negotiated service agreement 
as a negotiated service agreement that is not predicated on a 
functionally equivalent negotiated service agreement currently in 
effect. This could include a new or unique negotiated service agreement 
that is being proposed for recommendation for the first time. It also 
could include a negotiated service agreement that could have been 
considered functionally equivalent to a previously recommended 
negotiated service agreement, but for the expiration of the previous 
negotiated service agreement. This category of negotiated service 
agreement is included because the rules for a functionally equivalent 
negotiated service agreement allow for reliance on evidence presented 
in the baseline docket. The passage of time after the expiration of an 
agreement (including the time that the agreement was in effect) 
potentially makes this evidence less reliable. Thus, a more 
comprehensive presentation is required.
    In general, the Postal Service is required to respond to each 
element of Sec.  3001.193 when submitting a request to consider a 
proposal based on a negotiated service agreement. In addition, 
subsection (a)(1) addresses an issue that is unique to consideration of 
a baseline negotiated service agreement. Subsections (a)(2) and (a)(3) 
stress issues that the Commission would like the Postal Service to 
emphasize in its request.
    Subsection (a)(1) requires the Postal Service to describe why the 
proposal is in the form of a negotiated service agreement as opposed to 
a less restrictive form of classification. The Commission's preference 
is to recommend classifications that are open to wide participation. 
Because negotiated service agreements are restrictive in participation, 
there is a potential for unwarranted discrimination. Proposals that 
exhibit unwarranted discrimination would not be fair and equitable 
under Sec. Sec.  3622(b)(1) or 3323(c)(1), and could not be 
recommended. The response to this subsection will be used to analyze 
this issue.
    Subsection (a)(2) requires the Postal Service to describe the 
operational bases of the negotiated service agreement. This requirement 
emphasizes that the Commission is interested in the specific details of 
the operational requirements placed on each party.
    Subsection (a)(3) requires the Postal Service to describe the 
expectations of the parties regarding performance. This requirement 
emphasizes that the Commission is interested in the rationale for 
entering into the negotiated service agreement, and the anticipated 
future of the agreement.
    Subsection (b) establishes the scheduling requirements for the 
Commission to consider Postal Service proposals predicated on baseline 
negotiated service agreements. The proposed scheduling requirement 
recognizes that a negotiated service agreement can take many forms, and 
may include unique and novel issues. Because of this, it is difficult 
to predict the duration of a proceeding before initial review of the 
actual request. A schedule will be established in each case, to allow 
for prompt issuance of a decision consistent with procedural fairness.
Proposed Sec.  3001.196--Requests To Recommend a Negotiated Service 
Agreement That Is Functionally Equivalent to a Previously Recommended 
Negotiated Service Agreement
    In general, the Postal Service is required to respond to each 
element of Sec.  3001.193 when submitting a request to

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consider a proposal based on a negotiated service agreement. However, 
Sec.  3001.196(a) allows the Postal Service to streamline the responses 
required by Sec.  3001.193 where a functionally equivalent negotiated 
service agreement is being proposed, thereby providing the opportunity 
for expedition of the procedural schedule. The intent is to shift the 
procedural focus from consideration of the general, functional and 
operational aspects of the agreement, which are assumed to have been 
fully litigated in the previous (baseline) docket, to the mailer-
specific issues pertinent to consideration of the functionally 
equivalent docket.
    Subsection (a) begins by describing the applicability of Sec.  
3001.196 to Postal Service proposals based on functionally equivalent 
negotiated service agreements. The purpose of proposing rules that 
expedite procedures for considering functionally equivalent negotiated 
service agreements is to assure that similarly situated mailers are 
given timely consideration and not placed at an undue disadvantage when 
seeking to secure a negotiated service agreement with the Postal 
Service.
    Subsections (a)(1) and (a)(2) require the Postal Service to explain 
the similarities and differences between the functionally equivalent 
and baseline agreements. The Commission anticipates using this 
information to determine whether the proposal is in fact functionally 
equivalent to the proffered baseline agreement. This determination will 
bear on the decision of whether or not to proceed under Sec.  3001.196. 
The comparison of similarities and differences will also alert the 
participants to areas of the agreement that may require closer 
inspection.
    Assuming that the Postal Service is persuasive in arguing that its 
proposal is in fact functionally equivalent to an ongoing baseline 
agreement, subsection (a)(3) allows the Postal Service to cite and rely 
on record evidence from a baseline docket, or any other completed 
docket. It should be stressed that the Postal Service is expected to 
utilize this subsection as the primary method for expediting the 
procedural schedule. It is expected that the majority of the 
justification for the agreement has been filed in the baseline docket, 
and that much of this information will be applicable to the 
functionally equivalent docket. This should save the Postal Service 
time and effort by not having to recreate a substantial amount of 
evidence related to the agreement. If the proposed evidence has been 
litigated in a previous docket, there should be less need for 
discovery, or to litigate evidence in the new docket. Developing the 
record where possible in this fashion should save time and effort and 
help shorten the procedural schedule.
    Subsection (a)(4) requires the Postal Service to provide any 
special studies pertinent to the negotiated service agreement. 
Consistent with the intent of focusing on the mailer-specific issues 
related to the functionally equivalent proposal, it is anticipated that 
special studies will analyze mailer specific information pertinent to 
the new proceeding, and thus should be highly relevant.\11\
---------------------------------------------------------------------------

    \11\ This does not preclude the disclosure of studies related to 
any other aspect of the agreement.
---------------------------------------------------------------------------

    Subsection (a)(5) requires the Postal Service to identify 
circumstances that are unique to the new proceeding. While subsections 
(a)(1) and (a)(2) focus more on the agreement itself, subsection (a)(5) 
focuses more on the mailer, and the specific interactions between the 
mailer and the Postal Service. This subpart will provide information 
relevant to the extent that the agreement is functionally equivalent to 
a baseline agreement. It will also provide mailer-specific information 
pertinent to the Commission's analysis.
    The anticipated response to the subsection can best be explained by 
example. Using the Capital One NSA as a baseline, assume a functionally 
equivalent agreement for a mailer with one half the volume, and twice 
the return rate. The distinctive volume and return rate would be unique 
circumstances, which should be identified and discussed. A second 
example would be a description of the way that the second mailer 
prepares its mail versus the methods employed by Capital One.
    Subsection (a)(6) provides the Postal Service with an opportunity 
to propose limiting issues to be considered in the proceeding. The 
responses to subsections (a)(1) through (a)(5) above should have 
provided the framework for identifying the relevant issues. The 
proposal to limit issues should focus the proceeding on relevant 
issues, and suggest elimination of issues that have been previously 
determined or that are outside the scope of the proceeding. The goal is 
to aid in expediting the procedural schedule. However, the Postal 
Service should not seek to avoid presenting the financial impact of the 
Negotiated Service Agreement over the duration of the agreement, or 
discussing the fairness and equity issues necessary for the 
Commission's consideration. These issues are material and relevant to 
every proceeding.
    Subsection (b) requires the Postal Service to provide written 
notice of its request to certain participants. This is in addition to 
the requirement of providing notice by posting on the Commission's web 
site. The purpose of this is to reduce the potential for participants 
to allege that notice was inadequate. This purpose should be considered 
in light of the Commission's intent to limit the time period for 
intervention in functionally equivalent proceedings. Presumably, 
parties will be familiar with the nuances of the agreement through the 
baseline agreement proceeding and will need less time to consider 
whether or not to intervene. Limiting the intervention period will help 
expedite consideration of requests under this rule.
    Subsections (c) and (d) establish the procedures for considering 
Postal Service proposals based on functionally equivalent negotiated 
service agreements. The schedule is expedited based on the assumption 
that the new proposal is functionally equivalent to a previously 
recommended negotiated service agreement, for which a Commission record 
has been developed that can be relied on in the new docket. If it is 
determined that the proposal does not represent a request for a 
functionally equivalent negotiated service agreement, Sec.  3001.195 
will become applicable.
    The Commission will promptly determine, on the basis of materials 
submitted with the request, and argument presented at or before the 
initial pre-hearing conference, whether or not it is appropriate to 
proceed under the rules for functionally equivalent negotiated service 
agreements. If it is appropriate and no hearing is held, a schedule 
will be established which allows for a recommended decision to be 
issued not more than 60 days after determination is made to proceed 
under the functional equivalency rules. If it is appropriate and a 
hearing is scheduled, a schedule will be established which allows for a 
recommended decision to be issued not more than 120 days after 
determination is made to proceed under the functional equivalency 
rules.
    Where there is no need to expand on the previous record other than 
to enter evidence pertinent to the specifics of the new proposal, and 
where no issues warrant further exploration, the issuance of the 
recommended decision could occur within 10 days of the determination to 
proceed under the rules for functionally equivalent negotiated service 
agreements. In such cases, the Postal Service practice of negotiating a 
stipulation and agreement, which typically helps narrow the issues

[[Page 52552]]

for consideration, should become unnecessary.
Proposed Sec. Sec.  3001.197 and 3001.198--Procedural Rules
    Proposed Sec. Sec.  3001.197 and 3001.198 are reserved for use in 
future rulemakings governing specific rules for renewal and 
modifications of negotiated service agreements.

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 September 29, 2003. Reply 
comments may also be filed and are due October 14, 2003.

Representation of the General Public

    In conformance with Sec.  3624(a) of title 39, 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. RM2003-5 is established to consider Commission rules 
applicable to Postal Service proposals requesting Commission review of 
baseline negotiated service agreements and negotiated service 
agreements that are functionally equivalent to previously recommended 
negotiated service agreements.
    2. Interested persons may submit comments no later than September 
29, 2003.
    3. Reply comments also may be filed and are due October 14, 2003.
    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: August 27, 2003.

    Dated: August 28, 2003.

    By the Commission.
Steven W. Williams,
Secretary.

List of Subjects in 39 CFR Part 3001

    Administrative practice and procedure, Postal Service.

    For the reasons set forth in the preamble, 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, 3663.

Subpart A--Rules of General Applicability

    2. Amend Sec.  3001.5 by adding new paragraph (r) to read as 
follows:


Sec.  3001.5  Definitions.

* * * * *
    (r) Negotiated Service Agreement means a written contract, to be in 
effect for a defined period of time, between the Postal Service and a 
mailer, that provides for customer-specific rates or fees and/or postal 
services in accordance with the terms and conditions of the contract.

Subpart B--Rules Applicable to Requests for Changes in Rates or 
Fees

    3. Revise Sec.  3001.51 to read as follows:


Sec.  3001.51  Applicability.

    The rules in this subpart govern the procedure with regard to 
requests of the Postal Service pursuant to Sec.  3622 of the Act that 
the Commission submit a recommended decision on changes in a rate or 
rates of postage or in a fee or fees for postal service if the Postal 
Service determines that such changes would be in the public interest 
and in accordance with the policies of the Act. The Rules of General 
Applicability in Subpart A of this part are also applicable to 
proceedings on requests subject to this subpart. For requests of the 
Postal Service based on Negotiated Service Agreements, the rules 
applicable to negotiated service agreements, Subpart L, supersede the 
otherwise applicable rules of this subpart.

Subpart C--Rules Applicable to Requests for Establishing or 
Changing the Mail Classification Schedule

    4. Revise Sec.  3001.61 to read as follows:


Sec.  3001.61  Applicability.

    The rules in this subpart govern the procedure with regard to 
requests of the Postal Service pursuant to Sec.  3623 of the Act that 
the Commission submit a recommended decision on establishing or 
changing the mail classification schedule. The Rules of General 
Applicability in Subpart A of this part are also applicable to 
proceedings on requests subject to this subpart. For requests of the 
Postal Service based on Negotiated Service Agreements, the Rules 
Applicable to Negotiated Service Agreements, Subpart L, supersede the 
otherwise applicable rules of this subpart.
    5. Amend Part 3001 by adding Subpart L--Rules Applicable to 
Negotiated Service Agreements to read as follows:
Subpart L--Rules Applicable to Negotiated Service Agreements
Sec.
3001.190 Applicability.
3001.191 Filing of formal requests.
3001.192 Filing of prepared direct evidence.
3001.193 Contents of formal requests.
3001.194 Failure to comply.
3001.195 Requests to recommend a baseline negotiated service 
agreement.
3001.196 Requests to recommend a negotiated service agreement that 
is functionally equivalent to a previously recommended negotiated 
service agreement.
3001.197 Requests to renew previously recommended Negotiated Service 
Agreements with existing participant(s). [Reserved]
3001.198 Requests to modify previously recommended Negotiated 
Service Agreements. [Reserved]

Subpart L--Rules Applicable to Negotiated Service Agreements


Sec.  3001.190  Applicability.

    (a) The rules in this subpart govern requests of the Postal Service 
for recommended decisions pursuant to Sec.  3622 or Sec.  3623 that are 
based on Negotiated Service Agreements. The Rules of General 
Applicability in subpart A of this part are also applicable to 
proceedings on requests subject to this subpart. The requirements and 
procedures specified in these sections apply exclusively to requests 
predicated on Negotiated Service Agreements, and except where 
specifically noted, do not supersede any other rules applicable to 
Postal Service requests for recommendation of changes in rates or mail 
classifications.
    (b) In administering this subpart, it shall be the policy of the 
Commission to recommend Negotiated Service Agreements that are 
consistent with statutory criteria, and benefit the Postal Service, 
without causing unreasonable harm to the marketplace. Except in 
extraordinary circumstances and for

[[Page 52553]]

good cause shown, the Commission shall not recommend Negotiated Service 
Agreements of more than three years duration; however, this limitation 
is not intended to bar the Postal Service from requesting:
    (1) The renewal of the terms and conditions of a previously 
recommended Negotiated Service Agreement, see Sec.  3001.197; or
    (2) Recommendation of a Negotiated Service Agreement that is 
functionally equivalent to a previously recommended Negotiated Service 
Agreement, see Sec.  3001.196.


Sec.  3001.191  Filing of formal requests.

    (a) Whenever the Postal Service proposes to establish or change 
rates or fees and/or the mail classification schedule based on a 
Negotiated Service Agreement, the Postal Service shall file with the 
Commission a formal request for a recommended decision. The request 
shall clearly state whether it is a request for a recommended decision 
pursuant to:
    (1) The review of a baseline Negotiated Service Agreement, see 
Sec.  3001.195;
    (2) The review of a Negotiated Service Agreement that is 
functionally equivalent to a previously recommended Negotiated Service 
Agreement, see Sec.  3001.196;
    (3) The renewal of the terms and conditions of a previously 
recommended Negotiated Service Agreement, see Sec.  3001.197; or
    (4) The modification of the terms and conditions of a previously 
recommended Negotiated Service Agreement, see Sec.  3001.198. Such 
request shall be filed in accordance with the requirements of 
Sec. Sec.  3001.9 through 3001.12. Within 5 days after the Postal 
Service has filed a formal request for a recommended decision in 
accordance with this subsection, the Secretary shall lodge a notice 
thereof with the director of the Office of Federal Register for 
publication in the Federal Register.
    (b) The Postal Service shall clearly identify all parties to the 
Negotiated Service Agreement. Identification by the Postal Service 
shall serve as Notice of Intervention for such parties. Parties to the 
Negotiated Service Agreement are to be considered co-proponents, 
procedurally and substantively, during the Commission's review of the 
proposed Negotiated Service Agreement.


Sec.  3001.192  Filing of prepared direct evidence.

    (a) Simultaneously with the filing of the formal request for a 
recommended decision under this subpart, the Postal Service and its co-
proponents shall file all of the prepared direct evidence upon which 
they propose to rely in the proceeding on the record before the 
Commission to establish that the proposed Negotiated Service Agreement 
is in the public interest and is in accordance with the policies and 
the applicable criteria of the Act. Such prepared direct evidence shall 
be in the form of prepared written testimony and documentary exhibits, 
which shall be filed in accordance with Sec.  3001.31.
    (b) Direct evidence may be filed in support of the Negotiated 
Service Agreement prepared by, or for, any party to the Negotiated 
Service Agreement. Direct evidence in support of the Negotiated Service 
Agreement prepared by, or for, any party to the Negotiated Service 
Agreement shall not be accepted without prior Postal Service review. 
The Postal Service shall affirm that the Postal Service has reviewed 
such testimony and that such testimony may be relied upon in 
presentation of the Postal Service's direct case.


Sec.  3001.193  Contents of formal requests.

    (a) General requirements. (1) Each formal request filed under this 
subpart shall include such information and data and such statements of 
reasons and bases as are necessary and appropriate fully to inform the 
Commission and the parties of the nature, scope, significance, and 
impact of the proposed changes or adjustments in rates, fees, and/or 
the mail classification schedule associated with the Negotiated Service 
Agreement, and to show that the changes or adjustments are in the 
public interest and in accordance with the policies and the applicable 
criteria of the Act. To the extent information is available or can be 
made available without undue burden, each formal request shall include 
the information specified in paragraphs (b) through (k) of this 
section. If the required information is set forth in the Postal 
Service's prepared direct evidence, it shall be deemed to be part of 
the formal request without restatement.
    (2) If any information required by paragraphs (b) through (k) of 
this section is not available and cannot be made available without 
undue burden, the request shall include a request for waiver of that 
requirement supported by a statement explaining with particularity:
    (i) The information which is not available or cannot be made 
available without undue burden;
    (ii) The reason or reasons that each such item of information is 
not available and cannot be made available without undue burden;
    (iii) The steps or actions which would be needed to make each such 
item of information available, together with an estimate of the time 
and expense required therefor;
    (iv) Whether it is contemplated that each such item of information 
will be supplied in the future and, if so, at what time; and
    (v) Whether sufficiently reliable estimates are available to 
mitigate the need for such information, and if so, the specifics of 
such estimates.
    (3) If the Postal Service believes that any of the data or other 
information required to be filed under Sec.  3001.193 should not be 
required in light of the character of the request, it shall move for a 
waiver of that requirement, stating with particularity the reasons why 
the character of the request and its circumstances justify a waiver of 
the requirement.
    (4) Grant of a waiver under (a)(2) or (a)(3) will be grounds for 
excluding from the proceeding a contention that the absence of the 
information should form a basis for rejection of the request, unless 
the party desiring to make such contention:
    (i) Demonstrates that, having regard to all the facts and 
circumstances of the case, it was clearly unreasonable for the Postal 
Service to propose the change in question without having first secured 
the information and submitted it in accordance with Sec.  3001.193; or
    (ii) Demonstrates other compelling and exceptional circumstances 
requiring that the absence of the information in question be treated as 
bearing on the merits of the proposal.
    (5) The provisions of paragraphs (a)(2) and (a)(3) of this section 
for the Postal Service to include in its formal request certain 
alternative information in lieu of that specified by paragraphs (b) 
through (k) of this section are not in derogation of the Commission's 
and the presiding officer's authority, pursuant to Sec. Sec.  3001.23 
through 3001.28, respecting the provision of information at a time 
following receipt of the formal request.
    (6) The Commission may request information in addition to that 
required by paragraphs (b) through (k) of this section.
    (b) Negotiated Service Agreement. Every formal request shall 
include a copy of the Negotiated Service Agreement.
    (c) Rates and standards information. Every formal request shall 
include a description of the proposed rates, fees, and/or 
classification changes, including proposed changes, in legislative 
format, to the text of the Domestic Mail Classification Schedule and 
any associated rate schedule.

[[Page 52554]]

    (d) Description of agreement. Every formal request shall include a 
statement describing and explaining the operative components of the 
Negotiated Service Agreement. The statement shall include the reasons 
and bases for including the components in the Negotiated Service 
Agreement.
    (e) Financial analysis. Every formal request shall include an 
analysis of the effects of the Negotiated Service Agreement on Postal 
Service volumes, costs and revenues. The analysis shall:
    (1) Be performed over the duration of the agreement, and for each 
individual year that the agreement is in effect;
    (2) Provide such detail that the analysis of each component of a 
Negotiated Service Agreement can be independently reviewed;
    (3) Be prepared in sufficient detail to allow independent 
replication, including citation to all referenced material;
    (4) Include an analysis, which sets forth the estimated mailer-
specific costs, volumes, and revenues of the Postal Service for each 
year that the Negotiated Service Agreement is to be in effect assuming 
the then effective postal rates and fees absent the implementation of 
the Negotiated Service Agreement;
    (5) Include an analysis which sets forth actual and estimated 
mailer-specific costs, volumes, and revenues of the Postal Service 
which result from implementation of the Negotiated Service Agreement;
    (6) Include a discussion of the effects of the Negotiated Service 
Agreement on contribution to the Postal Service (including 
consideration of the effect on contribution from mailers who are not 
parties to the agreement);
    (7) Utilize mailer-specific costs, and provide the basis used to 
determine such costs, including a discussion of material variances 
between mailer-specific costs and system-wide average costs; and
    (8) Utilize mailer-specific volumes and elasticity factors, and 
provide the bases used to determine such volumes and elasticity 
factors. If mailer-specific costs or elasticity factors are not 
available, the bases of the costs or elasticity factors that are 
proposed shall be provided, including a discussion of the suitability 
of the proposed costs or elasticity factors as a proxy for mailer-
specific costs or elasticity factors.
    (f) Impact analysis. Every formal request shall include an estimate 
of the impact over the duration of the Negotiated Service Agreement on:
    (1) Competitors of the parties to the Negotiated Service Agreement 
other than the Postal Service;
    (2) Competitors of the Postal Service; and
    (3) Mail users.
    The Postal Service shall include a copy of any completed special 
studies that were used to make such estimates. If special studies have 
not been performed, the Postal Service shall state this fact and 
explain the alternate bases of its estimates.
    (g) Data collection plan. Every formal request shall include a 
proposal for a data collection plan, which shall include a comparison 
of the analysis presented in Sec.  3001.193(f)(5) with the actual 
results ascertained from implementation of the Negotiated Service 
Agreement. The results shall be reported to the Commission on an annual 
or more frequent basis.
    (h) Workpapers.
    (1) Whenever the Service files a formal request it shall accompany 
the request with seven sets of workpapers, five for use by the 
Commission staff and two which shall be available for use by the public 
at the Commission's offices.
    (2) Workpapers shall contain:
    (i) Detailed information underlying the data and submissions for 
paragraphs (b) through (k) of this section;
    (ii) A description of the methods used in collecting, summarizing 
and expanding the data used in the various submissions;
    (iii) Summaries of sample data, allocation factors and other data 
used for the various submissions;
    (iv) The expansion ratios used (where applicable); and
    (v) The results of any special studies used to modify, expand, 
project, or audit routinely collected data.
    (3) Workpapers shall be neat and legible and shall indicate how 
they relate to the data and submissions supplied in response to 
paragraphs (b) through (k) of this section.
    (4) Workpapers shall include citations sufficient to enable a 
reviewer to trace any number used but not derived in the associated 
testimony back to published documents or, if not obtained from 
published documents, to primary data sources. Citations shall be 
sufficiently detailed to enable a reviewer to identify and locate the 
specific data used, e.g., by reference to document, page, line, column, 
etc. With the exception of workpapers that follow a standardized and 
repetitive format, the required citations themselves, or a cross-
reference to a specific page, line, and column of a table of citations, 
shall appear on each page of each workpaper. Workpapers that follow a 
standardized and repetitive format shall include the citations 
described in this paragraph for a sufficient number of representative 
examples to enable a reviewer to trace numbers directly or by analogy.
    (i) Certification by officials. (1) Every formal request shall 
include one or more certifications stating that the cost statements and 
supporting data submitted as a part of the formal request, as well as 
the accompanying workpapers, which purport to reflect the books of the 
Postal Service, accurately set forth the results shown by such books.
    (2) The certificates required by paragraph (j)(1) of this section 
shall be signed by one or more representatives of the Postal Service 
authorized to make such certification. The signature of the official 
signing the document constitutes a representation that the official has 
read the document and that, to the best of his/ her knowledge, 
information and belief, every statement contained in the instrument is 
proper.
    (j) Rejection of requests. The Commission may reject any request 
under this subpart that patently fails to substantially comply with any 
requirements of this subpart.


Sec.  3001.194  Failure to comply.

    If the Postal Service fails to provide any information specified by 
this subpart, or otherwise required by the presiding officer or the 
Commission, the Commission, upon its own motion, or upon motion of any 
participant to the proceeding, may stay the proceeding until 
satisfactory compliance is achieved. The Commission will stay 
proceedings only if it finds that failure to supply adequate 
information interferes with the Commission's ability promptly to 
consider the request and to conduct its proceedings with expedition in 
accordance with the Act.


Sec.  3001.195  Requests to recommend a baseline negotiated service 
agreement.

    (a) This section governs Postal Service requests for a recommended 
decision in regard to a baseline Negotiated Service Agreement, e.g., a 
Negotiated Service Agreement that is not predicated on a functionally 
equivalent Negotiated Service Agreement currently in effect. The 
purpose of this section is to establish procedures which provide for 
maximum expedition of review consistent with procedural fairness, and 
which allows for the recommendation of a baseline Negotiated Service 
Agreement. The Postal Service request shall include:
    (1) A written justification for requesting a Negotiated Service 
Agreement classification as opposed to a more generally applicable form 
of classification;

[[Page 52555]]

    (2) A description of the operational bases of the Negotiated 
Service Agreement, including activities to be performed and facilities 
to be used by both the Postal Service and the mailer under the 
agreement; and
    (3) A statement of the parties' expectations regarding performance 
under the Negotiated Service Agreement, including the possibility of 
cancellation or re-negotiation of the agreement, and the perceived 
potential for renewal of the agreement for an additional period.
    (b) The Commission will treat requests predicated on a baseline 
Negotiated Service Agreement as subject to the maximum expedition 
consistent with procedural fairness. A schedule will be established, in 
each case, to allow for prompt issuance of a decision.


Sec.  3001.196  Requests to recommend a negotiated service agreement 
that is functionally equivalent to a previously recommended negotiated 
service agreement.

    (a) This section governs Postal Service requests for a recommended 
decision in regard to a Negotiated Service Agreement that is proffered 
as functionally equivalent to a Negotiated Service Agreement previously 
recommended by the Commission and currently in effect. The previously 
recommended Negotiated Service Agreement shall be referred to as the 
baseline agreement. The purpose of this section is to establish 
procedures that provide for accelerated review of functionally 
equivalent Negotiated Service Agreements. The Postal Service request 
shall include:
    (1) A detailed description of how the proposed Negotiated Service 
Agreement is functionally equivalent to the baseline agreement;
    (2) A detailed description of how the proposed Negotiated Service 
Agreement is different from the baseline agreement;
    (3) Identification of the record testimony from the baseline 
agreement docket, or any other previously concluded docket, on which 
the Postal Service proposes to rely, including specific citation to the 
locations of such testimony;
    (4) Any available special studies developing information pertinent 
to the proposed Negotiated Service Agreement;
    (5) If applicable, the identification of circumstances unique to 
the request; and
    (6) If applicable, a proposal for limitation of issues in the 
proceeding, except that the following issues will be relevant to every 
request predicated on a functionally equivalent Negotiated Service 
Agreement:
    (i) The financial impact of the Negotiated Service Agreement on the 
Postal Service over the duration of the agreement;
    (ii) The fairness and equity of the Negotiated Service Agreement in 
regard to other users of the mail; and
    (iii) The fairness and equity of the Negotiated Service Agreement 
in regard to the competitors of the parties to the Negotiated Service 
Agreement.
    (b) When the Postal Service submits a request predicated on a 
functionally equivalent 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 baseline agreement.
    (c) The Commission will schedule a prehearing conference for each 
request. Participants shall be prepared to address whether or not it is 
appropriate to proceed under Sec.  3001.196 at that time. 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.  3001.196. If the Commission's decision is to not proceed under 
Sec.  3001.196, the docket will proceed under Sec.  3001.195.
    (d) The Commission will treat requests predicated on functionally 
equivalent Negotiated Service Agreements as subject to accelerated 
review consistent with procedural fairness. If the Commission 
determines that it is appropriate to proceed under Sec.  3001.196, a 
schedule will be established which allows a recommended decision to be 
issued not more than:
    (1) 60 days after the determination is made to proceed under Sec.  
3001.196, if no hearing is held; or
    (2) 120 days after the determination is made to proceed under Sec.  
3001.196, if a hearing is scheduled.


Sec.  3001.197  Requests to renew previously recommended Negotiated 
Service Agreements with existing participant(s). [Reserved]


Sec.  3001.198  Requests to modify previously recommended Negotiated 
Service Agreements. [Reserved]

[FR Doc. 03-22478 Filed 9-3-03; 8:45 am]