Claim for Unamortized Road Construction Costs

A purchaser of timber-removing rights made a claim against the Forest Service to make up a deficit in road credit conversion which resulted from a 39-percent discrepancy between the Forest Service estimate and the actual yield of the area covered by the contract. Under Forest Service contracts, purchasers earn credits for construction of logging roads. The credits are set off against the sums owed the Forest Service for timber removed from the sale site. In this case, the value in credits of the roads exceeded the value of the timber removed, leaving the purchaser with unused credits. The purchaser alleged that the Forest Service estimate failed to include any factor for hidden defect and breakage. The Forest Service provided a prospectus indicating the estimated quantity of timber and a 35-percent estimated stand defect, but warned purchasers against reliance on the estimates and pointed out that the estimates were not part of the contract. The purchaser reported that, prior to the sale, it conducted its own examination of the site to verify construction costs, timber yield, and other factors relating to the feasibility of the operation, and concluded that the actual volume on the ground was less than the Forest Service had indicated, but within the normal deviation that purchasers would anticipate. The purchaser offered three legal contentions to support its claim: (1) the Forest Service negligently failed to use the best information available in preparing the volume estimate; (2) a limited warranty existed that the purchaser would fully amortize the cost of road construction; and (3) the volume estimate was so far off as to constitute gross error and justify reformation of the contract. GAO denied the purchaser's claim on the following grounds. With regard to the Forest Service estimate, there was no evidence to indicate negligence or disregard of available information. The purchaser's second contention disregards the Forest Service's warning that its estimate should not be relied upon, the contractual disclaimer of the estimate, and the fact that no such warranty was made or implied in any phase of the contract arrangement. Finally, it was revealed that discrepancies between estimated and actual yield of the size involved here are not uncommon in such operations and could not form the basis for reformation of the contract, particularly in light of the fact that the purchaser paid only for the timber actually removed.