Negotiated Service Agreements, 32492-32498 [05-10913]

Agencies

• Postal Rate Commission

[Federal Register Volume 70, Number 106 (Friday, June 3, 2005)]
[Rules and Regulations]
[Pages 32492-32498]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-10913]


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POSTAL RATE COMMISSION

39 CFR Part 3001

[Docket No. RM2005-3; Order No. 1439]


Negotiated Service Agreements

AGENCY: Postal Rate Commission.

ACTION: Final rule.

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SUMMARY: This document adopts rules on procedures related to negotiated 
service agreements. The rules are designed to assist in clarifying the 
type of requests that qualify as extensions and the type of conditions 
that constitute modifications. Relative to the proposed rules, the 
final set of rules reflect several changes based on consideration of 
comments. These changes include adoption of deadlines for issuance of a 
recommended decision.

DATES: Effective July 5, 2005.

ADDRESSES: Submit comments electronically via the Commission's Filing 
Online system at https://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.
70 FR 7704, February 15, 2005.

I. Introduction

    This Order concludes the rulemaking docket addressing 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. The final rules appear after the Secretary's signature in 
this Order.
    A notice and order establishing this rulemaking docket was issued 
on February 10, 2005.\1\ The notice and order proposed a set of 
applicable rules, and established a March 14, 2005, date for interested 
persons to submit comments. It also established an April 11, 2005, date 
for interested persons to submit reply comments. Initial comments were 
received from Bank One Corporation (Bank One), Discover Financial 
Services, Inc. (DFS), HSBC North America Holdings Inc. (HSBC), Office 
of the Consumer Advocate (OCA), the United States Postal Service 
(Postal Service), and Valpak Direct Marketing Systems Inc. and Valpak 
Dealers' Association, Inc. (Valpak).\2\ Reply comments were received 
from Bank One Corporation, Discover Financial Services, Inc., Office of 
the Consumer Advocate, and the United States Postal Service.\3\
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    \1\ Notice and Order Establishing Rulemaking Docket for 
Consideration of Proposed Rules Applicable to Requests to Renew or 
Modify Previously Recommended Negotiated Service Agreements, Order 
No. 1430, February 10, 2005; 70 FR 7704 (2005).
    \2\ Initial Comments of Bank One Corporation; Initial Comments 
of Discover Financial Services, Inc. (DFS); Initial Comments of HSBC 
North America Holdings Inc.; Office of the Consumer Advocate 
Comments in Response to Commission Order No. 1430; Initial Comments 
of the United States Postal Service; and Comments of Valpak Direct 
Marketing Systems, Inc. and Valpak Dealers' Association, Inc. in 
Response to PRC Order No. 1430, all filed March 14, 2005.
    \3\ Reply Comments of Bank One Corporation; Reply Comments of 
Discover Financial Services, Inc. (DFS); Office of the Consumer 
Advocate Reply Comments in Response to Commission Order No. 1430; 
and Reply Comments of the United States Postal Service, all filed 
April 11, 2005.
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    The Commission appreciates the efforts of the commenters that 
participated in the process of developing new rules applicable to 
requests to renew or modify negotiated service agreements. This process 
is ongoing, and the rules are subject to change as more experience is 
gained in reviewing requests predicated on negotiated service 
agreements. A number of comments that improve clarity or specify 
requirements that the Commission originally did not consider were 
incorporated into the rules. All comments were appreciated, whether or 
not they led to an actual modification of a proposed rule, because the 
comments provide different points of view that the Commission otherwise 
might not have considered. A discussion of notable comments follows.

II. Discussion

    Role of the Commission. Bank One argues that ``the Commission 
should adopt light-handed regulation of proposals to renew or modify 
existing NSAs as the presumptive starting point.'' This argument is 
prefaced by the statement: ``A request to renew or modify an existing 
NSA involves, by definition, an agreement whose basic terms have 
already been found by the Commission to be profitable for the Postal 
Service, free of undue discrimination against competitors of the NSA 
partner, and unobjectionable on any other identifiable ground.'' Bank 
One Comments at 8.
    A Commission recommendation of a negotiated service agreement is 
not as conclusive as characterized by Bank One. A Commission 
recommendation is based on a reasonable probability that the agreement 
will be profitable, and an appearance that the agreement will be free 
of undue discrimination against competitors of the negotiated service 
agreement's partner. These conclusions are reached after independently 
analyzing the agreement and weighing the arguments of all participants 
in the proceeding. A finding of actual profitability can only be 
estimated after

[[Page 32493]]

the fact.\4\ Similarly, an agreement that appears free of undue 
discrimination upon recommendation, could later exhibit undue 
discrimination in actual operation.
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    \4\ This is the primary purpose of the data collection plans 
included in all recommendations thus far.
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    In regard to a request to renew an ongoing agreement, a review of 
the profitability of the initial agreement and consideration of any 
adverse effects that the agreement may have had on competitors and 
other mailers is required. It would be imprudent to renew an agreement 
without examining experience under the existing agreement. The burden 
initially falls on the proponents of the renewal request to demonstrate 
likely profitability during the extension, and past experience is an 
important consideration. Cost and revenue changes, along with the 
effect of any exogenous events that may have occurred since the 
original recommendation also must be considered. To support updated 
costs and volume projections, the proponents of the renewal request may 
rely on the accuracy of estimates in the existing agreement's docket.
    The conclusiveness of Bank One's statement also implies that the 
Commission has, a priori, conclusively determined there is no risk from 
a negotiated service agreement. In most instances, this is impractical 
if not impossible.
    The Commission strives to provide a forum for reviewing negotiated 
service agreements that is as expeditious and cost effective as 
achievable, while assuring that every agreement is in compliance with 
the requirements of the Act. With this in mind, the rules are designed 
to permit ``light-handed'' treatment consistent with the Commission's 
statutory obligations. The rules allow inquiry as necessary to meet the 
complexities presented by the actual request.
    Bank One also suggests that ``[i]n the absence of a showing of 
probable cause to believe that the modified or extended NSA terms would 
violate the Act, the Commission should terminate the proceeding and 
recommend implementation of the renewed or modified NSA forthwith.'' 
Id. at 14.
    The implication of this statement is that if no participant raises 
an issue in regard to complying with a requirement of the Act, the 
Commission's inquiry is at an end. The only Commission function which 
remains would be to issue a recommendation to implement the agreement. 
This implication ignores the Commission's responsibility under the Act 
to issue recommended decisions that are in accordance with the 
requirements of the Act. To fulfill this responsibility, the Commission 
independently analyzes every Postal Service request. The Commission 
relies substantially on the efforts of participants, especially 
proponents, in informing its recommendations; however, the Commission 
will act sua sponte to fill in gaps in information required to reach 
its recommendations.
    Role of OCA. In PRC Order No. 1430 at 3, the Commission stated: 
``The intent [of Sec.  3001.197] is to limit use of the rule to 
instances where the proposed agreement and the existing agreement share 
substantially identical obligations. * * * In instances where there are 
no contested issues it should be possible for the Commission to issue 
its recommendation shortly after the prehearing conference.'' \5\
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    \5\ Similarly, ``[t]he intent of the rule [Sec.  3001.198] is to 
expedite proceedings where limited modifications are being proposed 
that do not materially alter the nature of the agreement.'' PRC 
Order No. 1430 at 6.
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    Valpak expresses a concern that almost no mailer would be motivated 
to spend the funds necessary to challenge the assertion that the NSA 
renewal was substantially identical to the original agreement. Valpak 
urges the Commission to charge the Office of the Consumer Advocate 
(OCA) with the responsibility for investigating these factual matters. 
Valpak Comments at 1-2. In a similar light, Valpak suggests that OCA 
also be tasked with investigating ``intervening events'' when those 
issues arise in a request. Id. at 3.
    The Postal Service's expectation is that the Commission will 
appoint OCA to represent the general public in 39 CFR 3001.197 and 
3001.198 proceedings, but argues that OCA can decide for itself how to 
allocate its resources. Postal Service Reply Comments at 6.
    In a somewhat broader context, Bank One asserts ``[u]nder the 
circumstances, a general requirement that the OCA launch a full blown 
investigation in every proceeding under Rule 197 or Rule 198 is likely 
to make society worse off by wasting the Commission's resources and 
deterring the establishment or renewal of arrangements that otherwise 
would have made both the Postal Service and third-party mailers better 
off.'' Bank One further asserts ``[r]ather, the extent (if any) of any 
activity by the OCA in an NSA proceeding should be left to the 
professional judgment of the OCA itself.'' Bank One Reply Comments at 
2-3.
    OCA is in the unique position of being appointed, as opposed to 
intervening, to represent the interests of the general public in 
virtually every proceeding before the Commission. Not only does OCA 
frequently provide an important counterpoint to the proponents' 
arguments, as referred to by Valpak, it performs its own independent 
analysis which is useful in better informing the Commission. The 
Commission, in this instance, will not promulgate a rule specifically 
assigning or excluding a particular issue for OCA to examine. This 
preserves the OCA's ability to inform the Commission with an 
independent point of view, and allows OCA to allocate its resources as 
it believes necessary.
    Burden of Proof. Bank One argues when a request for a renewal or a 
modification does not materially alter the terms of an existing 
negotiated service agreement, it not only warrants accelerated review, 
but a presumption that the modified agreement is just, reasonable, and 
otherwise lawful. It suggests that opponents of an agreement ``should 
bear the burden of making a showing of probable cause that the modified 
terms would violate one or more provisions of the Postal Reorganization 
Act.'' Bank One Comments at 11-12. HSBC's comments parallel those of 
Bank One. HSBC Comments at 3.
    OCA contends that in regard to requests for renewals, proponents 
should not have to support retention of existing provisions, absent 
changed circumstances, but should be required to demonstrate the 
immateriality of changes they do wish to make. OCA notes that it is the 
lack of significant change that permits expedition in the first place. 
In regard to requests for modifications, OCA argues that expedition is 
more difficult. It contends that the proponent should be required to 
explain why the needed modification was overlooked in the initial 
proceeding and why the Commission should believe that no other 
difficulties still exist. OCA Reply Comments at 2.
    The Postal Service argues that where particular issues surrounding 
a negotiated service agreement have been litigated, or could have been 
litigated before the Commission when the agreement was first 
recommended, there should be a rebuttable presumption that the 
agreement would not violate the Act. However, if the renewal or 
modification involves a change in rates or classifications, the Postal 
Service would expect to bear the burden of justifying such changes. 
Postal Service Reply Comments at 4-5.

[[Page 32494]]

    The Commission's starting point is that the Postal Service has the 
initial burden of demonstrating that all aspects of its requests are in 
compliance with all aspects of the Act.\6\ In regard to requests for 
functionally equivalent agreements or requests to modify or extend 
existing agreements, the Postal Service is allowed to rely on (within 
limits) record testimony from previous dockets, and implicitly on the 
findings and conclusions of the Commission from those previous dockets. 
This reliance effectively creates a rebuttable presumption on the 
status of many issues that have been, or to some extent that could have 
been, previously litigated. Thus, the Postal Service fulfills much of 
its initial burden merely by referencing the applicable record 
testimony and Commission findings and conclusions.
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    \6\ In regard to requests predicated on negotiated service 
agreements, the Postal Service may rely on testimony from its co-
proponents to meet this burden.
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    The burden that remains is for the Postal Service to demonstrate 
that any change, internal or external, affecting an agreement does not 
cause the agreement to violate the Act. This obligation is broader than 
only justifying changes in rates or classifications. For example, if 
applicable new cost data or actual volumes become available during the 
span of the existing agreement, the Commission expects the Postal 
Service to incorporate such data into a request for renewal. 
Incorporation of these data may or may not lead to a rate or 
classification change. However, the proponents, including the Postal 
Service, still have the initial burden to demonstrate that the renewal 
agreement, with the new cost and volume data, continues to meet the 
requirements of the Act.
    Normally, a prehearing conference is scheduled for the purpose of 
discussing issues in regard to Postal Service requests. At this 
conference, participants are required to address whether or not any 
material issues of fact exist that might require discovery or 
evidentiary hearings. Ideally, the information obtained at the 
conference allows the Commission to frame the issues open for 
discussion, and to limit discussion on issues that have been previously 
resolved or that are not relevant to the instant request. This limits 
the burden imposed on the proponents.
    There is a distinct disadvantage in moving the initial burden to 
those that oppose a Postal Service request. Early in the process, 
interested persons may not be privy to sufficient information to make 
an informed decision on whether or not to challenge a request. This 
could lead to prolonged discovery because participants would have to 
probe every aspect of an agreement to determine the existence of 
issues. Because of the asymmetrical information advantage held by the 
proponents of the request, it is more expedient for the proponents to 
carry the initial burden, and to provide sufficient information with 
the request, so that other participants can make more informed 
decisions.
    The Commission is not persuaded that the initial burden is onerous, 
or that it is improper to place this burden upon the Postal Service 
(and its co-proponents).
    Scope of Proceeding. Bank One notes that the proposed rules are 
limited to proposals that do not materially alter the terms of an 
existing negotiated service agreement. It expresses concern that the 
three enumerated circumstances that could justify modifications to a 
negotiated service agreement may be too limiting. Bank One requests 
clarification that the list of allowable justifications is 
illustrative, and not exclusive. As an example of a desired 
modification that would not be allowed under the new rules, Bank One 
describes a change where ``the nature and circumstances of the likely 
modification may be foreseeable from the outset, but the parties may 
want to defer considering the changes until after gaining experience 
from actual operation of the NSA.'' Bank One Comments at 10-11.
    HSBC's comments parallel those of Bank One. HSBC Comments at 2-3. 
DFS also supports Bank One's position. DFS Reply Comments at 1-2. The 
Postal Service concurs that the list should be illustrative and not 
exhaustive. It asserts that participants will have adequate 
opportunities to oppose a request to modify an agreement should such a 
case arise. Postal Service Reply Comments at 4.
    The breadth of the proposed rules is an area of concern for the 
Commission. The goal is to draft rules for cases involving minimal 
controversies so that expedition can be realized, and bureaucratic 
requirements minimized. The key to meeting this goal is to limit the 
allowable differences open for consideration between the renewal or 
modification agreement, and the ongoing agreement.
    For 39 CFR 3001.197 renewal requests, the focus of the Commission 
is on the Postal Service's justification for requesting the extension 
of a presumably beneficial negotiated service agreement. Maximum 
expedition can be afforded if the only request is to extend the 
termination date of the existing agreement. However, the Commission 
realizes that a renewal provides an opportune time to allow for 
additional modifications for the purpose of bringing an agreement up to 
date. The rule explicitly requires that any additional modifications 
``do not alter the nature of the existing agreement.'' This is key to 
preserving the ability to expedite the procedure. The proposed 
rationale for updating an agreement could be to incorporate the effects 
of an intervening event into the agreement, or to incorporate new cost 
and volume information that might be used to update the schedule of 
rates and fees. These secondary modifications are in addition to 
extending the termination date. A third possibility, correction of a 
technical defect, is included because it would not be prudent to 
continue an agreement with a known technical error.\7\
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    \7\ The Commission also is open to considering proposals for 
clearly minor changes that are sufficiently documented and justified 
which do not alter the nature of the existing agreement, but which 
may not technically fall into one of the listed characterizations, 
under the expedited rules.
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    For 39 CFR 3001.198 modification requests, the focus of the 
Commission is on the Postal Service's justification for requesting the 
modification. The requirement that the proposed modification does not 
materially alter the nature of the existing agreement is implicit, if 
the proceeding is to be expedited. The rule provides three rationales 
for modifying an existing agreement: 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. The stated reasons 
are sufficiently broad to allow for many types of modifications.
    The Postal Service has several other options that it may choose to 
pursue if its request is broader than the scope of the proposed rules. 
For more extensive proposals, the Postal Service might find it 
appropriate to file under 39 CFR 3001.195 (new baseline proposal) or 39 
CFR 3001.196 (functionally equivalent proposal).
    Describing the allowable modifications as material versus 
immaterial, as suggested by Bank One, could be misleading. The 
Commission does not require that any of the allowable modifications be 
``immaterial.'' However, requests for modifications that do not change 
the nature of the original agreement will be afforded expedition 
because most issues will have been resolved in the original agreement's 
docket.

[[Page 32495]]

    For example, assume that a negotiated service agreement partner 
merges with another entity, and would like to incorporate that entity's 
mail volumes under the existing agreement. Further assume that the 
combined entity's mail characteristics are different from those 
considered in reviewing the existing negotiated service agreement, and 
as a result, additional Postal Service cost savings can be 
demonstrated. The Postal Service and its partner could properly seek to 
modify the existing agreement. In this instance the modification would 
accommodate a material change, but it would not alter the overall 
nature of the original agreement.
    The Bank One example of where a modification is foreseeable from 
the outset, but the parties desire to gain experience before making a 
change does not fall into the acceptable category of modifications. 
What Bank One describes is experimental in nature. A negotiated service 
agreement may contain an experiment, but the primary purpose of a 
negotiated service agreement should not be to ``experiment.'' 
Negotiated service agreements should be based on sound financial 
analysis that indicates a likely win-win outcome from inception. If 
however, an intervening event might have been foreseeable, that fact 
does not prevent a modification to reflect the new situation that 
exists as a result of the intervening event.
    The descriptions of allowable modifications in both rules fulfill 
the Commission's intent of narrowing the applicability of the rules 
such that expedition can be provided.
    Establishing a Schedule. The Postal Service suggests that the 
Commission add language to proposed 39 CFR 3001.197(c) and 39 CFR 
3001.198(c) requiring that: ``a schedule will be established which 
allows a recommended decision to be issued not more than 60 days after 
the determination is made to proceed under Sec.  3001.197 [or Sec.  
3001.198].'' It argues that this language is in furtherance of the 
important objective for expedition, and is similar to the 39 CFR 
3001.196(d)(1) language, which was helpful in expediting the 
proceedings in Docket Nos. MC2004-3 and MC2004-4.\8\ Postal Service 
Comments at 2-3. Upon consideration of the initial comments from other 
commenters, the Postal Service modifies its position and suggests a 30- 
or 45-day schedule if there is no hearing, and a 90-day schedule if 
there is a hearing. Postal Service Reply Comments at 2-3.
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    \8\ For example, 39 CFR 3001.196(d)(1) (functionally equivalent 
request) requires that a schedule be established which allows a 
recommended decision to be issued not more than: (1) 60 days after 
the determination is made to proceed under 39 CFR 3001.196, if no 
hearing is held; or (2) 120 days after the determination is made to 
proceed under 39 CFR 3001.196, if a hearing is scheduled.
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    Bank One contends that ``litigation costs are a major deterrent to 
pursuing an NSA, and the absence of clear procedural deadlines is an 
invitation to open-ended delay during the heat of litigation.'' Because 
of the more limited scope of proceedings under 39 CFR 3001.197 or 
3001.198, than anticipated under 39 CFR 3001.196, Bank One proposes a 
45-day schedule if there is not a hearing, and a 90-day schedule if 
there is a hearing. Bank One Comments at 12-13. HSBC's comments are in 
agreement with Bank One, and suggest identical time periods. HSBC 
Comments at 3-4.
    DFS expresses similar concerns by arguing that ``[s]pecific time 
frames yield certainty.'' It submits that time frames of 30 days 
without a hearing, and 90 days with a hearing would be appropriate. DFS 
Comments at 3-5.
    OCA argues that ``[s]uch deadlines would actually create incentives 
for delay.'' It contends that if the proponents knew that the 
Commission is committed to issuing a decision in a certain, short time, 
they would have no incentive to submit detailed information up front 
and leave the Commission to reach a rapid decision on the basis of 
incomplete information. OCA Reply Comments at 3.
    The Commission included a scheduling requirement in the rules for 
functionally equivalent negotiated service agreements partly because of 
the belief that requests for functionally equivalent agreements should 
be less complex to review than requests for new baseline agreements. 
The complexity should be less because most issues would have been 
litigated and resolved in the baseline docket, and the proponents of 
the functionally equivalent request would be allowed to rely on record 
testimony from the baseline docket. The perception that functionally 
equivalent requests are less complex to review allowed the Commission 
to be comfortable with including scheduling requirements. In practice, 
this expectation has been validated. Participants have identified and 
resolved issues within the applicable time periods.
    The proposed rules for modifications and renewals are purposely 
designed to be applicable only in specific, limited circumstances, 
which appear more restrictive than a request for a functionally 
equivalent request. Most, if not all, policy and methodology issues 
should have been litigated and resolved in the original docket, and 
will be off the table with a modification or renewal request. Thus, the 
Commission finds it reasonable to include a scheduling requirement in 
the rules for modifications and renewals. The Commission will initially 
adopt a 45-day, 90-day scheduling requirement. The time frames can be 
revisited after actual experience is gained.
    The Commission will strive to issue its decisions as expeditiously 
as possible consistent with due process and the statutory requirements; 
however, shorter time frames might not allow sufficient opportunity for 
analysis if issues do arise. In addressing the OCA's concern, if there 
is an absence of detail with the material submitted with the request, 
or complex issues do arise, the Commission will be able to adjust its 
schedule to allow participants adequate time to address relevant and 
material concerns, even if this means not meeting the self-imposed 
scheduling requirements.
    DFS contends that it is not clear whether a participant can request 
a hearing in 39 CFR 3001.197 or 3001.198 when there are material 
questions of fact that need to be resolved. DFS Comments at 4.
    Including a separate scheduling requirement for instances when a 
hearing is requested is a clear indication that participants may 
request a hearing on requests for either modification or renewal. As in 
all proceedings, discovery is available after notice of the request, 
and the filing of a notice of intervention. The Commission will add 
subsection (d) to rule 39 CFR 3001.197 as follows:
    (d) The Commission will treat requests to renew negotiated service 
agreements as subject to accelerated review consistent with procedural 
fairness. If the Commission determines that it is appropriate to 
proceed under 39 CFR 3001.197, a schedule will be established which 
allows a recommended decision to be issued not more than: (1) 45 days 
after the determination is made to proceed under 39 CFR 3001.197, if no 
hearing is held; or (2) 90 days after the determination is made to 
proceed under 39 CFR 3001.197, if a hearing is scheduled.
    The Commission will add subsection (d) to rule 39 CFR 3001.198 as 
follows:
    (d) The Commission will treat requests to modify negotiated service 
agreements as subject to accelerated review consistent with procedural 
fairness. If the Commission determines that it is appropriate to 
proceed under Sec.  3001.198, a schedule will be established which 
allows a recommended decision to be issued not

[[Page 32496]]

more than: (1) 45 days after the determination is made to proceed under 
Sec.  3001.198, if no hearing is held; or (2) 90 days after the 
determination is made to proceed under Sec.  3001.198, if a hearing is 
scheduled.
    Additional Option to Proceed Under 39 CFR 3001.196. Following the 
prehearing conference, the Commission must decide which procedural path 
the request will follow. Several commenters argue that if the 
Commission determines it is not appropriate to proceed under 39 CFR 
3001.197 (renewal request), it might be appropriate to proceed under 39 
CFR 3001.196 (functionally equivalent request). The proposed rule only 
allows for proceeding under 39 CFR 3001.195 (new baseline request) in 
this instance. The commenters also argue for a similar change to the 
parallel terminology proposed for 39 CFR 3001.198 (modification 
request). Bank One Comments at 14-15; DFS Comments at 5-6; HSBC 
Comments at 5; Postal Service Comments at 3; and Valpak Comments at 3.
    The Commission concurs that proceeding under 39 CFR 3001.196 
(functionally equivalent request) is a viable option to proceeding 
under 39 CFR 3001.195 (new baseline request) when the Commission 
decides it is not appropriate to proceed either under 39 CFR 3001.197 
(renewal request) or 39 CFR 3001.198 (modification request). The last 
sentence of 39 CFR 3001.197(c) will be changed to read: ``If the 
Commission's decision is to not proceed under Sec.  3001.197, the 
docket will proceed under Sec.  3001.195 or Sec.  3001.196, as appears 
appropriate.'' The last sentence of Sec.  3001.198(c) will be changed 
to read: ``If the Commission's decision is to not proceed under Sec.  
3001.198, the docket will proceed under Sec.  3001.195 or Sec.  
3001.196, as appears appropriate.''
    Rule Specific Changes. The Postal Service proposes three rule 
specific changes. First, it notes that Sec.  3001.197(a)(4) and Sec.  
3001.198(a)(4) request ``[a]ll studies developing information pertinent 
to the request, whereas Sec.  3001.196(a)(4), a parallel rule, 
references ``special studies.'' The Postal Service proposes that the 
references to ``studies'' be changed to ``special studies.'' Postal 
Service Comments at 3. Second, the Postal Service proposes to add the 
phrase ``since the recommendation of the existing agreement'' after the 
words ``intervening event'' in Sec.  3001.198(a)(3) to clarify when an 
intervening event must occur, and to make this language consistent with 
Sec.  3001.197(a)(3). Id. at 4.
    Both proposals improve the consistency and clarity of the rules. 
Section 3001.197(a)(4) will be changed to: ``All special studies 
developing information pertinent to the request completed since the 
recommendation of the existing agreement.'' Section 3001.198(a)(3) will 
be changed to: ``A detailed description of the technical defect, 
unforeseen circumstance, or intervening event since the recommendation 
of the existing agreement, to substantiate the modifications proposed 
in (a)(2).'' Section 3001.198(a)(4) will be changed to: ``All special 
studies developing information pertinent to the request completed since 
the recommendation of the existing agreement.''
    The third Postal Service suggestion proposes to add the phrase 
``rationale for revising the schedule of rates or fees'' to Sec.  
3001.198(a)(3) (modification request). It argues that there will be 
instances where a modification will involve this type of revision, for 
example, a request to modify a cap. Id. at 4.
    The Commission assumes that if the Postal Service and its co-
proponent request a modification, for example a modification of a stop-
loss cap value, they will do so because they need to correct for a 
technical defect, account for an unforeseen circumstance not apparent 
when the existing agreement was first recommended, or account for an 
intervening event since the recommendation of the existing agreement as 
specified in Sec.  3001.198(a). The technical defect, unforeseen 
circumstance, or intervening event provides the rationale for proposing 
the modification to the agreement. The above rationale might support a 
revision to the schedule of rates or fees; however, the desire to 
modify the schedule of rates or fees in itself is not a sufficient 
rationale to initiate a modification. Section 3001.198(a)(3) as 
proposed requires the Postal Service to describe the technical defect, 
unforeseen circumstance, or intervening event, which will focus the 
Commission's review on the rationale for proposing the modification. 
Including the Postal Service's proposed phrase ``rationale for revising 
the schedule of rates or fees'' in Sec.  3001.198(a)(3) could be 
misinterpreted to imply that revising the schedule of rates or fees in 
itself is somehow a rationale for a modification. The Commission will 
not adopt this proposal.
    Presentation of Spreadsheet Information. OCA comments that ``the 
use of identical spreadsheets in a renewal or modification case as were 
used in the original request greatly enhances the ability of 
participants to evaluate the financial effect of new proposals.'' OCA 
Comments at 1.
    DFS concurs that the use of similar spreadsheets makes sense, but 
does not concur that a specific requirement should be placed in the 
rules. DFS Reply Comments at 2. While the Postal Service acknowledges 
that it will often be helpful and expeditious to use parallel 
spreadsheets, it also believes there may be reasons not to do so. The 
Postal Service does not believe that this should be required by the 
rules. Postal Service Reply Comments at 5-6.
    Presenting information in a similar format to what was provided in 
the original request could benefit an expedited review of the new 
request. However, the Commission will not require the use of 
``identical'' spreadsheets. This is too restrictive and would not allow 
for change due to modifications in the agreement, or improvements in 
developing and presenting analyses. Also, the rules require that 
analyses be presented using the Commission's methodology, which may 
differ from what was presented in the original request. Use of the 
Commission's methodology is meant as a means for expediting the review 
process.
    Miscellaneous Issues. DFS stresses the importance of coming to the 
prehearing conference prepared to discuss the appropriate rule under 
which to proceed, whether or not a hearing is necessary, and the basis 
of any disputed fact that requires further consideration. DFS asserts 
that this can be possible if parties start discovery immediately after 
the filing and notice of a request for a proposed negotiated service 
agreement. DFS Comments at 6-7.
    The Commission concurs that it is critical for participants to come 
prepared to the prehearing conference. The information provided to the 
Commission either prior to or during the prehearing conference allows 
the Commission to decide the most appropriate, expeditious procedural 
path under the specific circumstances of the request. As soon as the 
Commission issues notice of a request and a participant files a notice 
of intervention, that participant may proceed with discovery to begin 
examining the issues. Nonetheless, potential participants may not be 
instantly aware of Postal Service requests, and time must be allowed to 
assure due process.
    DFS questions whether parallel rules are required for extensions 
and modifications, or whether one combined rule would be simpler. Id. 
at 7. The Commission considered combining the separate rules for 
extensions and modifications into one rule, but opted

[[Page 32497]]

for two parallel rules because of the clear signal that will be sent to 
potential participants as to the context of each proceeding. Separate 
rules also add flexibility to modifying one rule, but not the other.

III. Ordering Paragraphs

    It is ordered:
    1. Any suggestion for modification of the proposed rule not 
specifically addressed by this order is not accepted for incorporation 
into the final rule.
    2. The Commission hereby adopts the final amendments to rules 197 
and 198 that follow the Secretary's signature into the Commission's 
Rules of Practice and Procedure appearing in 39 CFR Part 3001.
    3. The Secretary shall arrange for publication of this Order 
Establishing Rules Applicable to Requests to Renew or Modify Previously 
Recommended Negotiated Service Agreements in the Federal Register. 
These changes will take effect 30 days after publication in the Federal 
Register.

    By the Commission.
Garry J. Sikora,
Acting Secretary.

List of Subjects in 39 CFR Part 3001

    Administrative practice and procedure, Postal service.


0
For the reasons discussed above, the Commission amends 39 CFR part 3001 
as follows:

PART 3001--RULES OF PRACTICE AND PROCEDURE

0
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.


0
2. Revise Sec.  3001.197 to read as follows:


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 paragraph (a)(2) of this section;
    (4) All special 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 prehearing 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 or Sec.  3001.196, as appears appropriate.
    (d) The Commission will treat requests to renew negotiated service 
agreements as subject to accelerated review consistent with procedural 
fairness. If the Commission determines that it is appropriate to 
proceed under Sec.  3001.197, a schedule will be established which 
allows a recommended decision to be issued not more than:
    (1) Forty-five (45) days after the determination is made to proceed 
under Sec.  3001.197, if no hearing is held; or
    (2) Ninety (90) days after the determination is made to proceed 
under Sec.  3001.197, if a hearing is scheduled.

0
3. Revise Sec.  3001.198 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:
    (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 since the recommendation of the 
existing agreement, to substantiate the modifications proposed in 
paragraph (a)(2) of this section;
    (4) All special 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

[[Page 32498]]

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 prehearing 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 or Sec.  3001.196, as appears appropriate.
    (d) The Commission will treat requests to modify negotiated service 
agreements as subject to accelerated review consistent with procedural 
fairness. If the Commission determines that it is appropriate to 
proceed under Sec.  3001.198, a schedule will be established which 
allows a recommended decision to be issued not more than:
    (1) Forty-five (45) days after the determination is made to proceed 
under Sec.  3001.198, if no hearing is held; or
    (2) Ninety (90) days after the determination is made to proceed 
under Sec.  3001.198, if a hearing is scheduled.

[FR Doc. 05-10913 Filed 6-2-05; 8:45 am]
BILLING CODE 7710-FW-P