B-136117, JUN. 6, 1958

B-136117, JUN. 6, 1958

TO THE SECRETARY OF THE INTERIOR:

REFERENCE IS MADE TO A LETTER DATED MAY 9, 1958, FROM THE ADMINISTRATIVE ASSISTANT SECRETARY, REQUESTING A DECISION AS TO THE RELIEF THAT MAY BE GRANTED TO THE ELLIS TIMBER COMPANY UNDER CONTRACT NO. 14-11-001/14/-268, DATED AUGUST 20, 1957, COVERING THE SALE OF AN ESTIMATED 535 THOUSAND BOARD FEET OF SALVAGE TIMBER.

IT APPEARS THAT THE BUREAU OF LAND MANAGEMENT ESTIMATED THE VOLUME OF SALVAGE TIMBER TO CUT FROM REVESTED OREGON AND CALIFORNIA RAILROAD GRANT LANDS AS 524 THOUSAND BOARD FEET OF DOUGLAS FIR AND 11 THOUSAND BOARD FEET OF WESTERN RED CEDAR. THE TOTAL APPRAISED VALUE WAS $4,602 BUT BY AUCTION SALE THE TIMBER WAS SOLD TO ELLIS FOR $7,118, OR ABOUT 55 PERCENT ABOVE THE APPRAISED VALUE. THE CONTRACTOR HAS MADE PAYMENTS TOTALLING $5,000 TO DATE UNDER THE CONTRACT, LEAVING THE FINAL INSTALLMENT OF $2,118 UNPAID.

AT THE COMPLETION OF CUTTING, ELLIS REPORTED THAT HE HAD RECOVERED ONLY ABOUT 20 PERCENT OF THE QUANTITY ESTIMATED BY THE BUREAU OF LAND MANAGEMENT. THE MAJOR REASON FOR THE ERROR IN ESTIMATION IS REPORTED AS FOLLOWS:

"* * * THE SALE CONSISTED OF BURNT TIMBER OR SNAGS WHICH WERE BELIEVED TO HAVE BEEN FIRE KILLED IN 1936. AFTER LOGGING BEGAN, IT WAS LEARNED THAT IN ADDITION TO THE 1936 BURN, THE TREES WERE ORIGINALLY KILLED BY AN 1896 FIRE, THUS PERMITTING AN ADDITIONAL 40 YEARS OF DECAY AND INSECT ATTACK. THIS COULD ONLY BE DETERMINED, EVEN BY EXPERIENCED CRUISERS, AFTER FELLING SEVERAL OF THE TREES IN THE AREA, BECAUSE TIMBER CRUISES ARE PRIMARILY BASED ON THE OUTWARD APPEARANCE OF TREES. WE UNDERSTAND THAT THE PURCHASER DID NOT VISIT THE AREA UNTIL AFTER HE CONTRACTED FOR THE SALE, WHICH IS NOT AN UNCOMMON PRACTICE AMONG LOGGERS WHEN BUYING FEDERAL TIMBER.'

WHILE THE CONTRACTOR HAS FILED A CLAIM IN THE AMOUNT OF $24,940.37 TO COMPENSATE HIM FOR HIS ALLEGED LOSSES ACCRUED BECAUSE OF THE CONTRACT OPERATIONS, THE AREA ADMINISTRATOR, BUREAU OF LAND MANAGEMENT, HAS RECOMMENDED THAT THE AMOUNT OF $9,728.10 BE PAID TO ELLIS AS REIMBURSEMENT FOR HIS CONTRACT LOSSES BASED ESSENTIALLY UPON THE "GROSS" ERROR MADE BY THE BUREAU OF LAND MANAGEMENT IN ORIGINALLY ESTIMATING THE MERCHANTABLE VOLUME OF TIMBER IN THE CONTRACT AREA.

SECTION 3 OF THE CONTRACT PROVIDES THAT THE PURCHASER SHALL BE LIABLE FOR THE TOTAL CONTRACT PURCHASE PRICE, EVEN THOUGH THE QUANTITY OF TIMBER IS MORE OR LESS THAN THE ESTIMATED QUANTITY. WHILE THE PRICE REAPPRAISAL PROVISIONS OF SECTION 4 (D) ARE NOT APPLICABLE HERE, THAT SUBSECTION PROVIDES THAT NO PRICE LESS THAN THE ORIGINAL CONTRACT PRICE SHALL BE ESTABLISHED BY REAPPRAISAL. IT IS THEREFORE CLEAR THAT THE ESTIMATE OF SALVAGE TIMBER WAS NOT IN THE NATURE OF A WARRANTY ON ACCOUNT OF WHICH THE GOVERNMENT COULD BE BOUND. CF. OAK INVESTMENT CO. V. UNITED STATES, 67 C.CLS. 177.

IN OUR OPINION, THE FACTS OF THIS CASE ARE NOT SUCH AS TO WARRANT THE CONCLUSION THAT THERE EXISTS ANY LEGAL OBLIGATION ON THE PART OF THE GOVERNMENT TO REIMBURSE THE CONTRACTOR FOR HIS LOSSES UNDER THIS CONTRACT. ON THE OTHER WE NOTE FROM THE RECORD SUBMITTED THAT THIS CONTRACT IS BELIEVED TO HAVE CONTAINED THE LARGEST PERCENTAGE OF ERROR EVER MADE IN THE GOVERNMENT'S ESTIMATE OF TIMBER TO BE SOLD BY THE BUREAU; THAT NORMALLY A VERY SMALL PERCENTAGE OF ERROR MAY BE EXPECTED IN SUCH AN ESTIMATE; THAT DESPITE THE MAGNITUDE OF THE UNDER-RUN ELLIS DILIGENTLY PERFORMED THE CONTRACT WORK TO COMPLETION; AND THAT THE CONTRACTOR'S FELLING OF UNMERCHANTABLE SNAGS WHILE PERFORMING THE CONTRACT WORK RESULTED IN MATERIAL BENEFITS OF SUBSTANTIAL VALUE TO THE GOVERNMENT. BECAUSE OF THESE EQUITIES IN FAVOR OF THE CONTRACTOR AND SINCE THERECORD SHOWS ALSO THAT THE BUREAU HAS ADOPTED A NEW PROCEDURE FOR CONDUCTING TIMBER SALES SO THAT THIS WILL NOT BE A PRECEDENT CASE, WE BELIEVE THE CLAIM PROPERLY MAY BE MADE THE SUBJECT OF THE SUBMISSION OF A SPECIAL REPORT TO THE CONGRESS BY US UNDER THE ACT OF APRIL 10, 1928, 31 U.S.C. 236. ACCORDINGLY, WE WOULD BE DISPOSED TO CONSIDER REPORTING THE CLAIM TO THE CONGRESS UNDER THE ACT OF APRIL 10, 1928, UPON RECEIPT OF YOUR RECOMMENDATION AS TO THE AMOUNT WHICH WOULD REASONABLY COMPENSATE THE CONTRACTOR FOR HIS LOSSES IN CONNECTION WITH THE CONTRACT, TOGETHER WITH A STATEMENT FROM THE CONTRACTOR THAT HE WOULD ACCEPT SUCH APPROVED AMOUNT IN FULL AND FINAL SETTLEMENT OF HIS CLAIM IN THE EVENT IT SHOULD BE SO REPORTED AND THE CONGRESS SHOULD AUTHORIZE SETTLEMENT ON THAT BASIS.

THE ENCLOSURES SUBMITTED WITH THE LETTER OF MAY 15, 1958, ARE RETURNED AS REQUESTED.