B-173551, AUG 4, 1971

B-173551: Aug 4, 1971

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WHILE IT WAS HELD IN B-168544. MODIFICATION IS FOR THE BENEFIT OF THE GOVERNMENT. COWDEN: REFERENCE IS MADE TO YOUR LETTER OF JULY 9. YOU ADVISE THAT THE CONTRACT WAS AWARDED ON MARCH 13. THAT THE SALE WILL TERMINATE ON OCTOBER 1. WHILE THE CONTRACT WAS AWARDED AT A PRICE WHICH EXCEEDED THE ADVERTISED SALE VALUE BY $1.2 MILLION. YOU ADVISE THAT PRACTICES WHICH MAY RESULT IN SUCH DAMAGE ARE NOT PERMITTED ON TIMBER SALES PRESENTLY BEING DESIGNED UNDER CRITERIA AIMED AT HIGH QUALITY MANAGEMENT OF THE NATIONAL FORESTS. THE REDUCTION IN VOLUME AND CHANGE IN CUTTING METHODS WILL INCREASE THE OPERATING COSTS TO THE CONTRACTOR. YOU POINT OUT THAT A REDUCTION IN STUMPAGE RATES IS CONTRARY TO THE WELL ESTABLISHED RULE OF YOUR DEPARTMENT THAT TIMBER SALE CONTRACTS SHOULD NOT BE MODIFIED TO THE FINANCIAL DISADVANTAGE OF THE GOVERNMENT.

B-173551, AUG 4, 1971

CONTRACTS - MODIFICATION - INTANGIBLE BENEFITS DECISION THAT A TIMBER SALE CONTRACT WITH PLUM CREEK LUMBER COMPANY MAY BE MODIFIED TO INCLUDE ADEQUATE ENVIRONMENTAL SAFEGUARDS TO PROTECT THE VALUES OF THE NATIONAL FORESTS. WHILE IT WAS HELD IN B-168544, MARCH 12, 1970 THAT THERE MUST BE A TANGIBLE BENEFIT, AMOUNTING TO ADEQUATE CONSIDERATION, ACCRUING TO THE GOVERNMENT IN ORDER TO SUPPORT MODIFICATION OF A SALE CONTRACT FOR THE BENEFIT OF THE PURCHASER, IN THE PRESENT CASE, MODIFICATION IS FOR THE BENEFIT OF THE GOVERNMENT, AND ALTHOUGH INTANGIBLE, MAY PROPERLY CONSTITUTE LEGAL CONSIDERATION FOR THE MODIFICATION.

TO MR. COWDEN:

REFERENCE IS MADE TO YOUR LETTER OF JULY 9, 1971, REQUESTING AN ADVANCE DECISION ON THE PROPRIETY OF MODIFYING A TIMBER SALE CONTRACT EXECUTED WITH PLUM CREEK LUMBER COMPANY FOR CERTAIN TIMBER LOCATED IN THE BUNKER CREEK AREA OF THE FLATHEAD NATIONAL FOREST IN MONTANA.

YOU ADVISE THAT THE CONTRACT WAS AWARDED ON MARCH 13, 1969, AND THAT THE SALE WILL TERMINATE ON OCTOBER 1, 1975. WHILE THE CONTRACT WAS AWARDED AT A PRICE WHICH EXCEEDED THE ADVERTISED SALE VALUE BY $1.2 MILLION, YOU ADVISE THAT A SUBSEQUENT REVIEW OF THIS CONTRACT, AND OTHER TIMBER SALES CONTRACTS IN THIS REGION, INDICATES THAT THE CONTRACTS DO NOT INCLUDE ADEQUATE ENVIRONMENTAL SAFEGUARDS TO PROTECT THE VALUES OF THE NATIONAL FORESTS. TO ILLUSTRATE, YOU INCLUDE A COPY OF A REPORT ENTITLED "MANAGEMENT PRACTICES ON THE BITTERROOT NATIONAL FOREST," WHICH DETAILS A NUMBER OF DEFICIENCIES FOUND BY A TASK FORCE OF SCIENTISTS AND LAND MANAGERS IN THAT NATIONAL FOREST. SUCH DEFICIENCIES INCLUDE PRACTICES KNOWN AS "CLEAR-CUTTING," AND "TERRACING" FOR RESTOCKING PURPOSES.

THESE PRACTICES RESULT IN UNACCEPTABLE AESTHETIC DAMAGE, AND MAY ALSO RESULT IN STREAM SILTATION AND EROSION CAUSED BY LOGGING DEBRIS AND/OR CLEANUP OF DEBRIS. YOU ADVISE THAT PRACTICES WHICH MAY RESULT IN SUCH DAMAGE ARE NOT PERMITTED ON TIMBER SALES PRESENTLY BEING DESIGNED UNDER CRITERIA AIMED AT HIGH QUALITY MANAGEMENT OF THE NATIONAL FORESTS. YOU THEREFORE PROPOSE TO MODIFY THE BUNKER CREEK SALE CONTRACT TO MINIMIZE SUCH DAMAGE. BASICALLY, SUCH MODIFICATION WOULD REDUCE THE AMOUNT OF PERMISSIBLE CLEAR-CUTTING, WHILE INCREASING THE AMOUNTS OF MODIFIED CLEAR- CUT, OVERSTORY REMOVAL, SHELTER WOOD, AND INDIVIDUAL TREE SELECTION. SUCH MODIFICATION WOULD REDUCE VOLUME OF THE SALE FROM 31,000 M TO 24,320 M, AND THUS REDUCE OVERALL REVENUE FROM THE SALE. ADDITIONALLY, THE REDUCTION IN VOLUME AND CHANGE IN CUTTING METHODS WILL INCREASE THE OPERATING COSTS TO THE CONTRACTOR, AND THE CONTRACTOR MAY THEREFORE BE EXPECTED TO REQUEST REDUCED STUMPAGE RATES TO COMPENSATE FOR SUCH INCREASED OPERATING COSTS.

YOU POINT OUT THAT A REDUCTION IN STUMPAGE RATES IS CONTRARY TO THE WELL ESTABLISHED RULE OF YOUR DEPARTMENT THAT TIMBER SALE CONTRACTS SHOULD NOT BE MODIFIED TO THE FINANCIAL DISADVANTAGE OF THE GOVERNMENT. HOWEVER, IN THIS CASE YOU BELIEVE THE MONETARY LOSS TO BE MORE THAN OFFSET BY REDUCTIONS IN RESOURCE AND ENVIRONMENTAL DAMAGE, EVEN THOUGH SUCH REDUCTIONS CANNOT BE QUANTIFIED. YOU THEREFORE REQUEST OUR OPINION AS TO WHETHER SUCH INTANGIBLE BENEFITS TO THE GOVERNMENT, IN THIS AND POSSIBLY IN OTHER SIMILAR CONTRACTS, CAN BE CONSIDERED AS ADEQUATE COMPENSATION TO SUPPORT THE DECREASE IN REVENUE RESULTING FROM THE PROPOSED MODIFICATIONS IN CUTTING AND RESTOCKING PROCEDURES.

YOUR DOUBT AS TO THE PROPRIETY OF SUCH MODIFICATION APPARENTLY ARISES, AT LEAST IN PART, FROM PREVIOUS DECISIONS OF THIS OFFICE (E.G., B-168544, MARCH 12, 1970) ADVISING THAT THERE MUST BE A TANGIBLE BENEFIT, AMOUNTING TO ADEQUATE CONSIDERATION, ACCRUING TO THE GOVERNMENT IN ORDER TO SUPPORT MODIFICATION OF A SALE CONTRACT FOR THE BENEFIT OF THE PURCHASER. IN THE INSTANT CASE, HOWEVER, IT IS APPARENT THAT MODIFICATION OF THE CONTRACT IS, IN THE FIRST INSTANCE, FOR THE BENEFIT OF THE GOVERNMENT, RATHER THAN FOR THE BENEFIT OF THE CONTRACTOR. UNDER SUCH CIRCUMSTANCES, IT IS OUR OPINION THAT THE BENEFIT TO THE GOVERNMENT, WHETHER IT BE TANGIBLE OR INTANGIBLE, MAY PROPERLY CONSTITUTE LEGAL CONSIDERATION FOR THE MODIFICATION.

IN THIS CONNECTION, WE NOTE THAT THE STANDARD PROVISIONS OF THE CONTRACT PROVIDE, IN PERTINENT PART, AS FOLLOWS:

"B8.31 COMPLETENESS AND MODIFICATION. *** THIS CONTRACT CAN BE MODIFIED ONLY BY WRITTEN AGREEMENT OF THE PARTIES, EXCEPT AS PROVIDED UNDER B8.32. FOREST SERVICE AGREES THAT UPON REQUEST BY PURCHASER THIS CONTRACT SHALL BE MODIFIED TO PROVIDE FOR THE EXERCISE OF ANY AUTHORITY HEREAFTER GRANTED BY LAW, OR REGULATION OF THE SECRETARY OF AGRICULTURE IF SUCH AUTHORITY IS THEN GENERALLY BEING APPLIED TO FOREST SERVICE TIMBER SALE CONTRACTS. ANY OTHER CONTRACTUAL PROVISION IN GENERAL USE BY FOREST SERVICE, TOGETHER WITH COMPENSATING ADJUSTMENTS, MAY BE INSERTED HEREIN BY AGREEMENT.

"B8.32 MODIFICATION UPON RATE REDETERMINATION. IN SCHEDULED RATE REDETERMINATIONS, FOREST SERVICE MAY MAKE MODIFICATIONS IN MINIMUM SPECIFICATIONS FOR TREES OR PRODUCTS IN TABLE 1, FIRE PRECAUTIONARY MEASURES IN C7.21, SLASH DISPOSAL IN C6.7, LOGGING METHODS IN C6.4, AND ROAD MAINTENANCE REQUIREMENTS IN C5.4, IF SUCH CHANGES ARE REASONABLY NECESSARY TO PROTECT THE INTEREST OF THE UNITED STATES. SUCH MODIFICATION SHALL BE LIMITED TO REQUIREMENTS GENERALLY BEING MADE IN FOREST SERVICE TIMBER SALE CONTRACTS IN THE REGION AT THE TIME OF RATE REDETERMINATION AND WHICH CAN REASONABLY BE COMPLIED WITH BY PURCHASER. SUCH CHANGES SHALL BE REFLECTED IN THE PRODUCTION COSTS OF THE RATE REDETERMINATION."

UNDER THESE PROVISIONS, IT IS APPARENT THAT THE SUGGESTED MODIFICATION WOULD BE APPROPRIATE UNDER B8.32 AT THE TIME OF RATE REDETERMINATION, AND WE SEE NO REASON WHY, BY AGREEMENT OF THE PARTIES, THE SAME MODIFICATION SHOULD NOT BE ACCOMPLISHED UNDER B8.31 PRIOR TO RATE REDETERMINATION.

IN VIEW OF THE FOREGOING, WE CONCLUDE THAT THE CONTRACT MAY, BY MUTUAL AGREEMENT WITH THE PURCHASER, BE PROPERLY MODIFIED IN THE MANNER OUTLINED IN YOUR LETTER OF JULY 9. ANY SUCH MODIFICATION SHOULD BE COMPLETELY DOCUMENTED TO SHOW THAT CONCESSIONS BY THE GOVERNMENT ARE REASONABLY RELATED TO, AND JUSTIFIED BY, INCREASED COST OF OPERATION TO THE PURCHASER, AND A COPY OF THIS DECISION SHOULD BE ATTACHED TO THE MODIFICATION.