Skewed Bidding Presents Costly Problems for the Forest Service Timber Sales Program

RCED-83-37: Published: Feb 9, 1983. Publicly Released: Feb 15, 1983.

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GAO was requested to examine the use of skewed bids on Forest Service timber sales. Skewed bidding occurs when a bidder in a multispecies sale loads most of the bid value on a single tree species and offers the minimum price for the other species. GAO reviewed timber sales in the Forest Service's three western regions where multispecies sales are common and skewed bidding occurs.

GAO found that the use of skewed bidding is causing costly problems for the Forest Service timber sales program. During fiscal years 1980 and 1981, about $1.9 million in sales revenues was foregone on timber sales closed on 11 of the Forest Service's western national forests, and the Service must devote administrative resources to deal with the harvest management problems caused by skewed bidding. Timber harvesting on a species-by-species basis on skewed bid sales compounds the sale management problems. Species logging permits the purchaser to harvest the high-value trees on the sale last, thus delaying the receipt of sale revenues. Species logging also increases the risk that high-value trees will not be harvested and efforts to resell the timber may be unsuccessful in recouping the loss. Although skewed bidding affects the Forest Service's three western regions, most Forest Service efforts to control the practice have occurred at the individual region or forest levels rather than programwide. The three western regions have restricted bidding on minor species by setting various minimum volume bidding criteria. GAO found that restricting bidding to species with more than 10 percent of the sale volume had limited effect.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Department of Agriculture-revised regulations to control skewed bidding were published in the Federal Register on November 6, 1987, requesting comments by January 5, 1988. The Forest Service issued final regulations on July 7, 1988.

    Recommendation: The Secretary of Agriculture should direct the Forest Service to control the use of skewed bids on future timber sales. In the short term, the Forest Service could adopt a bid premium distribution procedure, whereby the total bid premium on a timber sale would be spread among the species offered for sale in proportion to the volumes and values of the individual species. In the long term, the Forest Service could require adoption of the fixed-price, lump-sum, tree measurement sales method once industry's concerns about this method are resolved to the Forest Service's satisfaction.

    Agency Affected: Department of Agriculture

  2. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Agriculture should require the Forest Service to prohibit logging on a species-by-species basis on skewed bid sales to reduce the adverse effects of past skewed sales.

    Agency Affected: Department of Agriculture

 

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