Revision of Timber Sale Contract Forms FS-2400-6 and FS-2400-6T, 43096-43098 [E6-12177]

Agencies

• DEPARTMENT OF AGRICULTURE
• Forest Service

[Federal Register Volume 71, Number 146 (Monday, July 31, 2006)]
[Notices]
[Pages 43096-43098]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-12177]


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DEPARTMENT OF AGRICULTURE

Forest Service


Revision of Timber Sale Contract Forms FS-2400-6 and FS-2400-6T

AGENCY: Forest Service, USDA.

ACTION: Notice of Availability; revised standard timber sale contracts.

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SUMMARY: By this notice, the Forest Service is putting into use revised 
versions of its standard timber sale contracts, Form FS-2400-6, for 
scaled sale procedures, and Form FS-2400-6T, for tree measurement 
timber sale procedures. After the Forest Service issued substantially 
revised versions of these contracts on May 6, 2004, the agency 
continued to receive comments from industry stakeholders. In response 
to these comments, the Forest Service engaged a consultant to evaluate 
the contracts with regard to allocation of risk between the timber 
Purchaser and the agency. The present revisions reflect the agency's 
further analysis of the contracts in light of the stakeholders' 
comments and the consultant's conclusions. A side-by-side comparison of 
the revised contracts and the previous versions is available as 
provided in the ADDRESSES section of this notice.

DATES: The contract revisions will be implemented for contracts 
advertised after August 30, 2006.

ADDRESSES: These timber sale contract forms are available for public 
review on the Forest Service worldwide Web/Internet site at https://
www.fs.fed.us/forestmanagement/infocenter/newcontracts/index.shtml. 
Alternatively, the contracts can be reviewed in the office of the 
Director of Forest Management, Third Floor, Northwest Wing, Yates 
Building, 201 14th Street, SW., Washington, DC. Visitors are encouraged 
to call ahead to (202) 205-0893 to facilitate entry into the building.

FOR FURTHER INFORMATION CONTACT: Lathrop Smith, Forest Management 
Staff, (202) 205-0858.

SUPPLEMENTARY INFORMATION:

Background

    The Forest Service uses standard contracts for all large, complex 
sales of timber from National Forest System lands. The agency uses 
timber sale contract Form FS-2400-6 when timber

[[Page 43097]]

is measured for payment after it is harvested; it uses timber sale 
contract Form FS-2400-6T when the basis for payment is measurement 
prior to sale. These instruments are comprehensive in scope and are 
designed to fully set forth the respective rights and obligations of 
the Forest Service and the timber Purchaser.
    The Forest Service first put the standard timber sale contracts 
into use in the early 1970s, after extensive discussions with 
representatives of the timber industry. Based upon its initial 
experience with the contracts, which included feedback from 
stakeholders, and because of certain policy changes, the Forest Service 
retooled the contracts in late 1973. The agency did not revise the 
contracts again until 2001, when it updated them to reflect changes in 
law and agency policy and to incorporate certain special provisions 
that, over time, had become applicable to most timber sales. These 
changes did not materially alter the rights and obligations of the 
Purchaser and the Forest Service.
    On May 6, 2004, after notice and comment, the Forest Service 
released substantially revised versions of its FS-2400-6 and FS-2400-6T 
contracts. As a general matter, the agency sought to make the contracts 
more consistent with government contracts law and policy. In 
particular, the agency attempted to address many of the complicated 
issues that arise when the Forest Service must suspend, modify, or 
terminate a timber sale contract because of environmental 
considerations. In this regard, the agency sought to clarify and 
simplify existing contract remedies, and to establish new remedies for 
certain situations, such as liquidated damages and rate 
redetermination. The agency also sought to allow the Purchaser to 
protect its interests by giving it the right to terminate the contract 
under certain circumstances. Through these modifications, the Forest 
Service attempted to allocate risk fairly between itself and the 
Purchaser.
    After the release of the revised contracts, some timber industry 
stakeholders continued to provide feedback to the Forest Service on an 
ad-hoc basis. Although comments varied, some industry stakeholders 
expressed concerns over the contracts' allocation of risk, including 
the provisions on delay, suspension, or termination of operations. In 
particular, some stakeholders suggested that the 2004 contracts did not 
provide fair compensation to the Purchaser for delay, suspension, and 
termination, and thus exposed the Purchaser to substantial risk. To 
explore these concerns, the Forest Service decided to engage an outside 
consultant to review the contracts and to issue a report on the 
allocation of risk between the Purchaser and the agency.
    The consultant's report generally concluded that the revised timber 
sale contracts allocated risk to the detriment of the Purchaser. In 
reaching this conclusion, the report focused upon provisions giving the 
Forest Service the unilateral right to delay, suspend, modify, or 
terminate the contracts. The consultant asserted that these provisions 
forced the Purchaser to accept too much uncertainty and, at the same 
time, failed to provide adequate compensation. However, the report also 
noted several key provisions that favored the Purchaser, including 
making liquidated damages available under certain circumstances and 
allowing for an emergency rate redetermination for severe decline in 
the timber market.
    After evaluating the outside consultant's report and considering 
the feedback that it received from industry stakeholders, the Forest 
Service decided to revise certain provisions of the contracts to 
achieve a more equitable distribution of risk. In making these changes, 
the agency did not simply adopt the recommendations of the consultant 
or the comments of certain industry representatives. Rather, the agency 
used this information to broaden its frame of reference in dealing with 
some of the more complicated aspects of the timber sale contracts, 
while keeping in mind its fundamental obligations to protect the public 
interest and, under the Multiple-Use Sustained-Yield Act, to manage to 
National Forest System lands ``in the combination that will best meet 
the needs of the American people.'' 16 U.S.C. 531. Considering the 
foregoing, the Forest Service has revised the contracts to balance risk 
fairly between the agency, as the steward of the Nation's forest lands, 
and the Purchaser, as a competitive enterprise.

Contract Revisions and Explanation

    1. B4.22 Temporary Reduction of Downpayment. The timber sale 
contracts require the Purchaser to make a downpayment before commencing 
harvesting operations and to maintain it until completion of 
operations. The downpayment covers 10 percent of the advertised value 
of the timber sale plus 20 percent of the value of the bid premium to 
discourage speculative bidding. For larger timber sales, the amount of 
the downpayment can be substantial. The previous iteration of this 
provision required the Purchaser to wait 90 days, from the beginning of 
any delay or interruption ordered by the agency, before the downpayment 
could be reduced and refunded or transferred to another account. After 
considering stakeholders' concern that the 90 day period unfairly froze 
the Purchaser's financial resources, the Forest Service has reduced the 
waiting period to 30 days.
    2. B.5.27 Temporary Credit for Unamortized Specified Road 
Construction Cost. For the same rationale identified in Item 1, above, 
the Forest Service has reduced the applicable waiting period before 
credit can be issued to the Purchaser for the unamortized cost of 
specified roads. The period is reduced from 90 days to 30 days.
    3. B6.24 Protection Measures Needed for Plants, Animals, Cultural 
Resources, and Cave Resources. This provision has been revised to 
clarify the respective responsibilities of the Forest Service and the 
Purchaser with regard to areas within the Sale Area needing special 
measures for the protection of plants, animals, cultural resources, 
and/or cave resources. The previous iteration of the contract placed an 
affirmative duty on the Purchaser to protect known and identified 
resources. To eliminate stakeholders' uncertainty as to the extent of 
the Purchaser's duty and to diminish potential liability, the Forest 
Service has revised this provision to contain a simple, negative duty 
not to damage or disturb designated areas.
    Additionally, this provision retains the disclaimer applicable to 
the Forest Service's identification of protected areas. Because the 
agency cannot control environmental conditions affecting a sale, which 
are inherently subject to natural change, and because of its various 
obligations to protect the environment, which exist under federal law, 
the agency cannot warrant that specified protective measures will 
remain adequate over the life of a sale. Instead, the Forest Service 
must include a disclaimer to avoid exposure to liability.
    4. B6.35 Equipment Cleaning. This provision has been revised 
primarily to clarify the circumstances that trigger the Purchaser's 
obligation to clean Off-Road Equipment to protect against the spread of 
invasive species of concern. If this provision materially increases the 
purchaser's operating costs, then the increased operating costs would 
be factored into the appraised value for the timber sale.
    5. B8.33 Contract Suspension and Modification. This provision has 
been revised to clarify the remedies that are available to the 
Purchaser in the event that the Contracting Officer must delay, 
suspend, or modify contract operations.

[[Page 43098]]

References to termination contained in the previous iteration of this 
provision were confusing to stakeholders. Accordingly, the Forest 
Service has deleted these references and has substantially revised 
provisions B8.34 and B8.36 to address, among other things, the 
Purchaser's right to terminate the contract under various 
circumstances. The revised version of this provision also clarifies 
that out-of-pocket expenses, in addition to a rate redetermination, 
shall be available to the Purchaser when a delay or suspension 
accompanies a contract modification. Additionally, the subsection 
addressing the provision's applicability has been revised to affirm the 
Purchaser's ability to exercise its rights under the Contract Disputes 
Act. Ambiguity in the previous iteration caused some stakeholders to 
believe that the Forest Service had attempted to eliminate these 
rights.
    6. B8.34 Contract Termination. The Forest Service has divided the 
main provision governing contract termination into three separate parts 
to eliminate ambiguity that existed in the previous iteration, and, 
thereby, to remove stakeholders' uncertainty as to the Purchaser's 
rights and obligations. After the introductory part, separate parts 
address termination by the agency and termination by the Purchaser. In 
response to comments from stakeholders and after conducting its own 
analysis, the Forest Service has decided to make replacement timber 
volume and liquidated damages available as a remedy for termination and 
partial termination. The agency has qualified the availability of 
liquidated damages, allowing this remedy only if, after good faith 
negotiations, the parties cannot agree on the location or stumpage for 
the replacement volume. However, if replacement volume is less than the 
deleted volume, liquidated damages shall be applicable to the 
shortfall. The Forest Service believes that the availability of 
replacement volume and/or liquidated damages substantially improves the 
contracts' allocation of risk and ensures that the Purchaser shall be 
fairly compensated in instances of full or partial termination.
    7. B8.35 Out-of-Pocket Expenses. The revision responds to comments 
from stakeholders that the list of out-of-pocket expenses was too 
limited. The provision now specifically includes expenses for road 
maintenance, dust abatement, and certain authorized improvements. 
Additionally, in order to foster consistent application, the provision 
specifically lists items that do not qualify as out-of-pocket expenses. 
These items are disallowed because they are not directly related to the 
Purchaser's operations under the contract. To facilitate expeditious 
and accurate claims processing, the provision requires the Purchaser to 
submit documentation and supporting analysis for expenses that it has 
paid or that it has a legal obligation to pay.
    8. B8.36 Termination for Market Changes. This revision provides 
another set of circumstances under which the Purchaser may terminate 
the contract for market change during a delay or interruption under 
B8.33.
    9. B9.13 Temporary Bond Reduction. Consistent with the changes to 
B4.22 and B5.27, described above, the revision allows the Purchaser's 
performance bond to be temporarily reduced after 30 days during a delay 
or a suspension.
    A side-by-side comparison of the specific differences between the 
existing contracts and the proposed revised contracts is available 
electronically and in paper copy as provided in the ADDRESSES section 
of this notice.

    Dated: July 19, 2006.
Dale N. Bosworth,
Chief.
 [FR Doc. E6-12177 Filed 7-28-06; 8:45 am]
BILLING CODE 3410-11-P