Forest Service Needs to Improve Efforts to Protect the Government's Financial Interests and Reduce Below-Cost Timber Sales

T-RCED-91-42: Published: Apr 24, 1991. Publicly Released: Apr 24, 1991.

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GAO discussed the Forest Service's efforts to: (1) collect on defaulted timber sales contracts and reduce further defaults; and (2) reduce the number of below-cost timber sales. GAO noted that: (1) the Service collected about $35 million of the $302 million in damages that it assessed from defaulted contracts and was taking steps to improve its collection processes; (2) the Service's key contracting measures were similar to other timber sellers' measures, although the Service and one federal timber seller returned or credited down payments or deposits before contractors substantially completed the contracts; (3) such practices lessened the Service's security in terms of access to funds in the event of a default; (4) in fiscal year 1990, the Service incurred timber sale preparation and administration expenses of $35.6 million that it could not recover as a result of below-cost timber sales; and (5) preparation and administrative costs varied greatly by forest. GAO also noted that the Service issued a draft policy aimed at reducing losses caused by below-cost timber sales, but the policy left gaps in a comprehensive approach, since the Service: (1) would not subject many below-cost sales to review; (2) did not consider costs when setting minimum prices for advertised timber sales; and (3) did not evaluate on a timely basis whether the benefits of a below-cost sale justified the unrecoverable cost.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: Forest Service officials advised GAO that it does not plan to take action on this recommendation. Due to the age of the recommendation, GAO is closing out this recommendation.

    Recommendation: The Secretary of Agriculture should direct the Chief, Forest Service, to retain the downpayment until the contract is substantially complete.

    Agency Affected: Department of Agriculture

  2. Status: Closed - Not Implemented

    Comments: The Forest Service has studied the below-cost issue since the early 1990s and had a draft policy in late 1992. The administration did not pursue the draft policy and decreased the emphasis of the timber program, which not only dramatically reduced the size of the traditional program, but significantly changed the nature of the program from resource extraction to ecosystem management, forest health, and landscape management. In 1995, the Forest Service formed another task force that studied the issue of below-cost timber sales in relation to the new ecosystem management approach. In May 1997, the Forest Service developed proposed direction that addressed the role that timber harvesting would play in achieving the ecological, economic, and social objectives of the Forest Service, but did not address the below-cost issue. In view of the significant change in the nature of the timber program, and the lack of action by the Forest Service, GAO is closing the recommendation.

    Recommendation: The Secretary of Agriculture should direct the Chief, Forest Service, to expand the below-cost sales policy beyond forests as a whole, as presently proposed, to individual sales.

    Agency Affected: Department of Agriculture

  3. Status: Closed - Not Implemented

    Comments: The Forest Service has studied the below-cost issue since the early 1990's and had a draft policy in late 1992. The administration did not pursue the draft policy and decreased the emphasis of the timber program, which not only dramatically reduced the size of the traditional program, but significantly changed the nature of the program from resource extraction to ecosystem management, forest health, and landscape management. In 1995, the Forest Service formed another task force that studied the issue of below-cost timber sales in relation to the new ecosystem management approach. In May 1997, the Forest Service developed proposed direction that addressed the role that timber harvesting would play in achieving the ecological, economic, and social objectives of the Forest Service, but did not address the below-cost issue. In view of the significant change in the nature of the timber program, and the lack of action by the Forest Service, GAO is closing the recommendation.

    Recommendation: The Secretary of Agriculture should direct the Chief, Forest Service, to define the minimum rate for timber sale bids as the cost of timber sale preparation and administration, and ensure that the sale price recovers those costs.

    Agency Affected: Department of Agriculture

  4. Status: Closed - Not Implemented

    Comments: The Forest Service has studied the below-cost issue since the early 1990's and had a draft policy in late 1992. The administration did not pursue the draft policy and decreased the emphasis of the timber program, which not only dramatically reduced the size of the traditional program, but significantly changed the nature of the program from resource extraction to ecosystem management, forest health, and landscape management. In 1995, the Forest Service formed another task force that studied the issue of below-cost timber sales in relation to the new ecosystem management approach. In May 1997, the Forest Service developed proposed direction that addressed the role that timber harvesting would play in achieving the ecological, economic, and social objectives of the Forest Service, but did not address the below-cost issue. In view of the significant change in the nature of the timber program, and the lack of action by the Forest Service, GAO is closing the recommendation.

    Recommendation: The Secretary of Agriculture should direct the Chief, Forest Service, to amend the timber sale process to include a below-cost determination at the first decision point in the sale preparation process, so that, if the sale is not conducted, unnecessary preparation costs can be avoided. If a below-cost sale proceeds, the reasons should be documented.

    Agency Affected: Department of Agriculture

 

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