The U.S. Postal Service filed two negotiated service agreement cases with the Postal Rate Commission yesterday seeking a three-year test with Bank One Corp. and Discover Financial Services Inc.
Negotiated service agreements are special service and rate arrangements negotiated between the USPS and a mailer or group of mailers. Proponents say NSAs will encourage greater volume by rewarding the postal service's major customers with discounts and premium services.
Capital One has the only NSA in effect received the first NSA last year.
Under the proposal, Bank One would be eligible for volume discounts of 2.5 cents to 5 cents per piece for the next three years if its annual First-Class bulk volume exceeds 535 million pieces. Discover would be eligible for discounts of 2.5 cents to 4.5 cents per piece if its annual First-Class bulk volume exceeds 405 million pieces. The discounts rise as volume increases and are higher than those given for automated First-Class letters that are presorted by ZIP code and carrier route.
As part of the NSA, the postal service would not return undeliverable First-Class mail solicitations. Instead, the companies would receive electronic address corrections. Both companies also would have to update any databases they maintain for solicitation mail.
The NSAs aim to produce a net reduction in the postal service's costs related to handling undeliverable-as-addressed mail as well as reduce postage costs for both financial institutions.
For the Bank One filing, the USPS estimates it will benefit by $11.6 million over the life of the NSA: $7.7 million in Address Correction Service cost savings plus $6.8 million in increased contribution, minus $2.9 million in revenue. For Discover, the USPS expects to benefit by $6.8 million: $8 million in ACS cost savings and $2 million in increased contribution, minus $3.2 million in revenue.