Audit Reports

Objective

Our objective was to determine mailer compliance with Negotiated Service Agreement (NSA) provisions and evaluate the Postal Service’s oversight of NSA Contract [redacted]. We selected the NSA based on the mailer’s fiscal years (FY) 2019 and 2020 volume and revenue.

An NSA is a contractual agreement between the Postal Service and a mailer, whereby the mailer receives customized pricing in exchange for meeting volume and mail preparation requirements. The goal of using NSAs is to retain price sensitive customers and encourage additional mail volume and revenue. While only a small fraction of Postal Service commercial package customers has NSAs, 40 percent of the Postal Service’s 5.5 billion domestic package volume is mailed under these agreements.

The Postal Regulatory Commission (PRC) must approve all NSAs. The Postal Service filed Priority Mail — Non-Published Rates Contract [redacted], with the PRC during Quarter 3, FY 2019. This one-year NSA, renewable for two additional years, provides special pricing for the mailer’s Priority Mail weight/zone packages, Priority Mail Commercial Plus Cubic packages, Priority Mail Flat Rate Envelopes, and Priority Mail Small and Medium Flat Rate Boxes. In return, the mailer agreed to ship an agreed upon number of packages annually. The contract also requires the mailer use an approved manifest system for payment, as well as several other key provisions.

The agreement stipulates that the contract expires one year from the effective date unless renewed by mutual agreement. The Postal Service allowed the contract to expire at the end of year one due to non-performance. We reviewed mail volume and Postal Service oversight in year one of the NSA ([redacted].

Finding

The mailer was compliant with three of the four key agreement provisions we reviewed, including mail type, zone rates, and payment system. However, during the first year, the mailer did not comply with the annual volume commitment and shipped about [redacted] fewer packages than the required annual volume.

The Postal Service provided adequate oversight of the NSA, which included monthly meetings with the mailer to discuss contract performance and expectations. In addition, the Postal Service worked to resolve a service issue with the customer’s mail pick-up. During the contract period, the customer shifted mail volume to Postal Service competitors and subsequently requested a new contract with a lower volume commitment. However, the Postal Service determined the contract would not be viable at lower commitment rates, so they chose to let it expire. As such, we will not make a recommendation in this report.