Allegations Regarding the Small Business Set-Aside Program for Federal Timber Sales

CED-79-8: Published: Apr 5, 1979. Publicly Released: Apr 19, 1979.

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The small business set-aside program for sales of federal timber is administered jointly by the Small Business Administration (SBA), the Forest Service, and the Bureau of Land Management (BLM). Various allegations concerning the set-aside program were reviewed to determine their validity.

The current timber size standard used to determine eligibility to participate in the set-aside program has no factual basis and is not justified. The current size standard allows firms to grow to a significant economic size and still remain eligible for set-aside assistance. Firms which are close to the 500 employee ceiling make special efforts to keep employment below 500 and so remain eligible for set-aside sales. The procedures for calculating the small business share of federal timber sales do not accurately reflect the demand for timber by the large and small firms. Several market areas where major changes in the industry structure had occurred were analyzed. Set-aside sales, although of higher quality, returned less revenue than open sales. In addition, the volume of timber allocated to the exclusive bidding of small firms is far greater than the relative demand for timber would be in absence of the set-aside program. Consequently, local small firms have bid much less aggressively among themselves for set-aside sales. The allegation that the set-aside program adversely affects certain communities dependent upon lumber mills owned by large companies was not found to be true in the two communities examined. Although both were declining, there were factors other than the set-aside program responsible for their decline. Some small owners who wish to sell their businesses have difficulty obtaining maximum value because of the allocation of the timber supply by the set-aside program.

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