GAO-09-23, Federal Land Management: Use of Stewardship Contracting Is Increasing, but Agencies Could Benefit from Better Data and Contracting Strategies


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Increasing, but Agencies Could Benefit from Better Data and Contracting 
Strategies' which was released on November 13, 2008. 

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Report to Congressional Requesters: 

United States Government Accountability Office: 

GAO: 

November 2008: 

Federal Land Management: 

Use of Stewardship Contracting Is Increasing, but Agencies Could 
Benefit from Better Data and Contracting Strategies: 

Use of Stewardship Contracting: 

GAO-09-23: 

GAO Highlights: 

Highlights of GAO-09-23, a report to congressional requesters. 

Why GAO Did This Study: 

The Department of Agriculture’s Forest Service and the Department of 
the Interior’s Bureau of Land Management (BLM) have stewardship 
contracting authority, which allows the agencies to trade goods—such as 
timber—for services (e.g., thinning forests or rangelands) that the 
agencies would otherwise pay for with appropriated dollars, and to 
enter into stewardship contracts lasting up to 10 years. The authority 
is set to expire in 2013. GAO was asked to determine, among other 
things, (1) the extent to which the agencies are using stewardship 
contracting and (2) what successes and challenges the agencies have 
experienced in using it. In doing so, GAO assessed agency data, 
reviewed project files, and visited projects in numerous locations. 

What GAO Found: 

From fiscal years 2003 through 2007, the Forest Service and BLM awarded 
a combined total of 535 stewardship contracts, with the number 
increasing each year—from 38 in fiscal year 2003 to 172 in fiscal year 
2007. However, for certain aspects of stewardship contracting, such as 
the acres involved or the value of the services exchanged for goods, 
reliable data were not available for the full 5-year fiscal period 
because neither agency has had a comprehensive database of its 
stewardship contracting activity since 2003. The agencies did not begin 
to maintain nationwide stewardship data until recently, primarily 
because of difficulties in adapting their systems to account for all 
aspects of stewardship contracting. Further, these data are not 
complete, and reside in myriad systems, not all of which interface with 
one another. These deficiencies keep the agencies and Congress from 
accurately assessing the costs and value of stewardship contracting. 

The agencies credit stewardship contracting with allowing them to 
accomplish more work—by allowing them to trade goods for services, 
thereby extending their budgets for thinning and other services—and 
spurring collaboration with members of the community and environmental 
groups. But stewardship contracting has its challenges too, including 
some resistance to its use (e.g., by contractors unfamiliar with it) 
and a paucity of markets for the small trees typically removed in 
stewardship projects. Also, although agency officials view long-term 
multiyear contracts as crucial to market development, these contracts 
can involve financial challenges. These contracts are attractive 
because they offer contractors and industry operators some certainty of 
supply, enabling them to obtain loans for equipment or processing 
facilities, which can then spur demand for materials resulting from 
stewardship projects. But such contracts can require a substantial up-
front obligation of funds—to protect the contractor’s investment if the 
government later cancels the contract—that may exceed the budget of a 
field unit (e.g., a national forest). Also, funding the annual work 
specified in the contract can force a unit to scale back its other 
programs if the value of the timber removed is not sufficient to pay 
for that work. Yet neither agency has developed a strategy for using 
such contracts, a step that could help field units determine which 
projects are appropriate. 

Figure: Goods for services: One project exchanged pine logs for a 
tribal ceremonial roundhouse (under construction at left) for service 
work that included installing a culvert (right): 

This figure is a combination of two photographs describing the above. 

Source: Frontier Builders, Inc. 

[See PDF for image] 

Source: GAO. 

[End of figure] 

What GAO Recommends: 

GAO recommends that the Secretaries of Agriculture and the Interior (1) 
develop a strategy for the use of long-term contracts, including 
criteria on when such contracts are appropriate and potential options 
for funding them, and (2) improve their data collection systems to 
ensure that accurate and complete data are maintained. In commenting on 
a draft of this report, the Forest Service and BLM generally agreed 
with its findings and recommendations. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-09-23]. For more 
information, contact Robin M. Nazzaro at (202) 512-3841 or 
nazzaror@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Use of Stewardship Contracting Is Increasing, but Agency Data Are 
Incomplete: 

The Agencies Have Similar Processes for Planning and Monitoring 
Stewardship Projects but Different Approaches to Implementing Them: 

Despite the Benefits of Stewardship Contracting, Challenges Persist, 
Especially in the Use of Long-Term Multiyear Contracts, for which the 
Agencies Lack a Strategy: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Comments from the Forest Service: 

Appendix III: Comments from the Department of the Interior: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Volume of Timber Sold through Stewardship Contracting as a 
Percentage of Total Timber Volume, by Agency, Fiscal Years 2005 through 
2007: 

Table 2: Forest Service Stewardship Projects Included in GAO's Review: 

Table 3: BLM Stewardship Projects Included in GAO's Review: 

Figures: 

Figure 1: Stewardship Contracts Awarded, by Agency and Fiscal Year: 

Figure 2: Completion Status of Stewardship Contracts Awarded in Fiscal 
Years 2003 through 2007, by Forest Service Region: 

Figure 3: Completion Status of Stewardship Contracts Awarded in Fiscal 
Years 2003 through 2007, by BLM State Office: 

Figure 4: Commercial Thinning on National Forest Land: 

Figure 5: An Idaho Stream, Restored to Improve Fish Habitat: 

Figure 6: Red-Cockaded Woodpecker Habitat Improvement Area on the 
Francis Marion and Sumter National Forests: 

Figure 7: Construction of a Ceremonial Roundhouse; Culvert Installed in 
Exchange for Timber: 

Figure 8: Treatment Costs per Acre, by Task Order, for the White 
Mountain Project: 

Abbreviations: 

BLM: Bureau of Land Management: 

ccf: hundred cubic feet: 

FAR: Federal Acquisition Regulation: 

FPDS-NG: Federal Procurement Data System--Next Generation: 

IDIQ: indefinite delivery/indefinite quantity: 

IRSC: integrated resource service contract: 

IRTC: integrated resource timber contract: 

K-V: Knutson-Vandenberg: 

MOU: memorandum of understanding: 

O&C: Oregon and California: 

TSA: Timber Sale Accounting: 

WUI: wildland-urban interface: 

United States Government Accountability Office: 

Washington, DC 20548: 

November 13, 2008: 

The Honorable Jeff Bingaman: 
Chairman: 
Committee on Energy and Natural Resources: United States Senate: 

The Honorable Ron Wyden: 
Chairman: 
Subcommittee on Public Lands and Forests: Committee on Energy and 
Natural Resources: United States Senate: 

Recent severe wildland fire seasons have focused attention on the state 
of the nation's forests. Many of these forests have become dense with 
small, tightly spaced trees and thick brush, which--combined with 
drought, wind, insect damage, and other adverse conditions--have fueled 
extensive wildland fires in recent years. In response, both the 
Department of Agriculture's Forest Service and the Department of the 
Interior's Bureau of Land Management (BLM) have placed substantial 
emphasis on thinning forests and rangelands to help reduce the buildup 
of potentially hazardous fuels. The Forest Service and BLM, which 
together manage a total of about 450 million acres of federal land, 
have frequently cited the importance of one tool--stewardship 
contracting--in their efforts to reduce hazardous fuels and restore 
forest health. This tool was designed to help the agencies conduct land 
management projects--such as thinning forests, installing culverts, 
harvesting timber, and the like--more efficiently, by allowing them to 
use any of several innovative contracting approaches. For example, 
through stewardship contracting, the agencies can trade goods--such as 
timber--for fuel reduction or forest restoration services that the 
agencies would otherwise pay for with appropriated dollars. 

In conducting stewardship projects--i.e., projects carried out through 
stewardship contracting authorities--the agencies use various types of 
stewardship contracts, as well as agreements, in which partner 
organizations contribute resources toward project accomplishment. Some 
types of contracts are large "umbrella contracts" under which 
individual task orders are issued for discrete projects or portions of 
a project.[Footnote 1] In some cases, a single large stewardship 
contract, task order, or agreement may encompass multiple projects; in 
other cases, a single stewardship project may involve multiple 
contracts, task orders, or agreements. In this report, references to 
stewardship contracts generally include task orders and agreements as 
well. 

The stewardship contracting authorities were first authorized for use 
by the Forest Service on a pilot basis in October 1998, when the 
Omnibus Consolidated and Emergency Supplemental Appropriations Act for 
1999 established stewardship contracting authority to achieve national 
forest land management goals that meet local and rural community 
needs.[Footnote 2] Prominent among the stewardship contracting 
authorities is the ability to trade goods for contract services--that 
is, to use the value of forest products sold to offset the cost of the 
contracted services, thereby allowing the accomplishment of more work 
within existing appropriations. Under such goods-for-services 
contracts, the Forest Service could, for example, pay for some or all 
of needed thinning operations by using the proceeds from any commercial 
timber sold as part of the project. Other prominent stewardship 
contracting authorities include the ability to (1) retain for use in 
future stewardship projects any receipts generated through selling 
forest products such as timber,[Footnote 3] rather than returning the 
receipts to the Department of the Treasury's general fund, as required 
with traditional timber sales--thereby providing additional funds for 
local land management units to conduct restoration work, and (2) 
implement long-term contracts of up to 10 years--thereby providing 
contractors some assurance that they can obtain a steady supply of 
material, an important consideration when contemplating investment in 
equipment or facilities that can use the material removed through 
stewardship projects. 

The 1998 law stated that the land management objectives of stewardship 
projects were to include road and trail maintenance, watershed 
restoration, prescribed burning, and noncommercial tree removal to 
improve forest health. Although stewardship contracting was initially 
established as a demonstration program that involved a limited number 
of projects within the Forest Service and was to end in 2002, the 
Consolidated Appropriations Resolution of 2003, among other things, 
extended the use of stewardship contracting authority to 2013, 
eliminated the limit on the number of projects, authorized commercial 
tree removal for forest health purposes as a project objective, and 
extended the use of stewardship authority to BLM.[Footnote 4] In 2004, 
we reported on the projects undertaken by the Forest Service under the 
initial stewardship contracting authority.[Footnote 5] 

The Forest Service and BLM are now about halfway through the extended 
authority period, and stewardship contracting is increasingly seen as a 
way for the agencies to implement long-term large projects. In this 
context, you asked us to determine (1) the extent to which, and for 
what purposes, the agencies are using stewardship contracting; (2) what 
processes the agencies use in planning, implementing, and monitoring 
stewardship projects to manage resources; and (3) what successes and 
challenges the agencies have experienced in using stewardship 
contracting. 

In conducting our review, we reviewed Forest Service and BLM documents 
and guidance related to stewardship contracting; analyzed reports from 
systems that track stewardship project information, including 
information on the volume and value of goods traded for services; and 
met with agency headquarters officials. We also visited one or more 
stewardship contracting projects in seven of the nine Forest Service 
regions and in most of the western states in which BLM manages 
land.[Footnote 6] At the locations visited, we reviewed project 
financial and contracting files and met with agency officials (and, at 
some sites, with project contractors and local citizens) to obtain 
information about project planning, implementation, and monitoring, 
including community involvement in the projects. We also obtained 
agency officials' views on the successes and challenges they have 
experienced in using stewardship contracting. Although the information 
derived from our discussions and site visits cannot be generalized 
nationwide, the projects we selected represent a mix of stewardship 
contracting projects by virtue of their geographic diversity and the 
variety of project objectives, activities, and accomplishments. 
Appendix I contains details on the objectives, scope, and methodology 
of our review, which included an assessment of data reliability and 
internal controls. We conducted this performance audit from August 2007 
through October 2008 in accordance with generally accepted government 
auditing standards. Those standards require that we plan and perform 
the audit to obtain sufficient, appropriate evidence to provide a 
reasonable basis for our findings and conclusions based on our audit 
objectives. We believe that the evidence obtained provides a reasonable 
basis for our findings and conclusions based on our audit objectives. 

Results in Brief: 

Although the Forest Service and BLM have awarded increasing numbers of 
stewardship contracts since fiscal year 2003, neither agency maintains 
a database that allows a complete and comprehensive picture of its 
stewardship contracting projects during this time. The agencies did not 
begin maintaining nationwide data until recently, but even these data 
are incomplete and inconsistent--some data are not tracked at all, 
while other data are available only for recent years or only on a 
cumulative basis rather than by fiscal year. Further, in each agency, 
stewardship data reside in more than one system, not all of which 
interface with one another, thereby preventing the agencies from 
efficiently and accurately reporting on their stewardship activities, 
although both agencies are taking steps to improve their data systems. 
Despite these limitations, reliable data were available to show that 
over the 5-year fiscal period 2003 through 2007, the two agencies 
awarded a combined total of 535 stewardship contracts, with the number 
awarded increasing each year--from 38 in fiscal year 2003 to 172 in 
fiscal year 2007. For other aspects of stewardship, however, reliable 
data were not available for the entire 5-year fiscal period. Data on 
the volume of timber sold (i.e., sold for cash or exchanged for 
services) were available for both agencies for only the 3-year fiscal 
period 2005 through 2007, during which the Forest Service sold about 
130 million cubic feet of timber and BLM sold about 8 million cubic 
feet. During that same period, the Forest Service treated (e.g., 
thinned, cleared of brush, or burned) about 172,500 acres through 
stewardship projects, but comparable data were not available for BLM, 
which maintained only initial estimates of acres to be treated. For the 
2-year fiscal period 2006 through 2007, the value of timber sold 
through stewardship projects was about $8.2 million for the Forest 
Service and about $5.9 million for BLM. For that same 2-year fiscal 
period, the value of services procured through stewardship contracts 
was about $10.5 million for BLM, but comparable data were not available 
for the Forest Service. In both agencies, stewardship projects 
typically involved removing timber or other vegetation to reduce 
hazardous fuels or to otherwise improve forest health. Other activities 
included restoring streams to improve fish habitat and creating and 
preserving nesting sites for birds. To enhance the agencies' ability to 
track and report on their stewardship projects, we are recommending 
that the agencies consider, in their ongoing efforts to improve their 
data systems, actions that will ensure the collection of complete, 
consistent, and integrated data. 

Overall, the agencies use similar processes for planning and monitoring 
stewardship projects but have different approaches to implementing 
them. Both agencies' planning and monitoring processes focus on working 
with stakeholders (e.g., community members and interest groups) to 
identify suitable projects and to monitor those projects to ensure that 
they achieve the intended restoration goals. In some cases, the 
monitoring efforts also assessed other outcomes, such as a project's 
effects on the local economy. The level of community involvement in 
planning and monitoring varied by project, however, depending in part 
on the local community's interest. Regarding project implementation, 
the agencies differ in the types of contracts typically used and in the 
type of contractor they work with. The Forest Service relies heavily on 
timber-type stewardship contracts, in which the value of the timber 
sold exceeds the value of the services procured, with the Forest 
Service receiving the difference in cash--which it then uses to pay for 
service work on other stewardship projects. On the other hand, BLM 
relies primarily on service-type contracts, in which the value of the 
services procured usually exceeds the value of the timber sold, with 
BLM paying the difference in cash. And while the Forest Service awards 
most of its stewardship contracts through full and open competition, 
BLM generally sets aside its stewardship contracts for competition by 
small businesses only. In addition to contracts, both agencies also 
have in place some cooperative stewardship agreements, through which 
partners (e.g., the National Wild Turkey Federation) contribute 
funding, personnel, or equipment with which to carry out restoration 
goals. 

The Forest Service and BLM credit stewardship contracting with helping 
them accomplish more work and build collaborative partnerships, but 
they also note that using it poses some challenges. The agencies can 
accomplish more work "on the ground" because they can trade forest 
products for some of the services received rather than paying for the 
services with appropriated funds, thereby freeing those funds for 
additional work. Also, the agencies have developed collaborative 
partnerships by bringing together individuals who represent diverse 
interests from within and outside the agencies to discuss what work 
should be done and in what way. Stewardship contracting is not without 
challenges, however. First, the Forest Service and BLM have faced some 
resistance to using stewardship contracting--in part from agency staff 
and contractors unfamiliar with its use. Second, market uncertainties 
can pose challenges. In many areas of the country, according to agency 
officials, the paucity of markets for small-diameter forest products 
prevents contractors from selling the products they remove under 
stewardship contracts. Without marketable products, the agencies have 
nothing to trade for the services received, and so must use 
appropriated funds instead to pay for those services. And third, as 
happened with the one long-term (i.e., 10-year) multiyear contract that 
had been implemented at the time of our review, the agencies may face 
challenges in providing sufficient funds to award and implement long- 
term multiyear contracts, particularly while continuing to fund other 
agency activities. A contractor entering into a multiyear contract may 
want a substantial cancellation ceiling--the amount an agency obligates 
at the inception of a multiyear contract to protect the contractor's 
investment and the government's interest in case the government later 
cancels the contract. Faced with this up-front obligation requirement, 
a field unit (e.g., a national forest or district office) might be 
reluctant to enter into a multiyear contract that involves a large 
cancellation ceiling, thereby forgoing an opportunity to stimulate the 
market for small-diameter materials. Another difficulty in using 
multiyear contracts is that funding the annual service work included in 
a multiyear contract can cost more than anticipated, and thus can 
consume a substantial portion of a field unit's annual budget, 
requiring the unit to curtail other programs to pay for the ongoing 
multiyear contract. Although the agencies have taken steps to address 
the first two challenges, such as conducting training courses and 
workshops to help overcome resistance to the tool's use and supporting 
efforts by entrepreneurs and researchers to find cost-effective uses 
for forest products, they have not developed strategies for the 
nationwide use of long-term stewardship contracts. In particular, 
neither agency has established a strategy defining the role that long- 
term multiyear contracts should play in stimulating the market for 
small-diameter materials or how the associated cancellation ceilings 
will be funded. Accordingly, we are recommending that the agencies 
develop strategies to guide their use of long-term multiyear 
stewardship contracts in stimulating markets for small-diameter 
materials and to inform units' decisions about implementing such 
contracts. In commenting on a draft of this report, the Forest Service 
and BLM generally agreed with its findings and recommendations. 

Background: 

In managing federal lands, the Forest Service and BLM often contract 
for services such as road maintenance, forest thinning, and other 
activities. They also frequently contract to sell forest resources such 
as timber or firewood. Traditionally, these contracts have been 
executed separately--service contracts have generally been funded with 
appropriated funds from the agencies' budgets, while timber has been 
sold through contracts with private purchasers. The Omnibus 
Consolidated and Emergency Supplemental Appropriations Act for 1999 
authorized the Forest Service to combine these contracting mechanisms 
by entering into "stewardship end result contracts," under which the 
agency could use the value of forest products sold to offset the cost 
of the contracted services. Under such goods-for-services contracts, 
the Forest Service could, for example, pay for thinning operations by 
using the proceeds from any commercial timber sold as part of the 
project. 

In addition to authorizing contracts, the act authorized the use of 
agreements to carry out stewardship projects. According to Forest 
Service and BLM guidance, the decision on whether to use contracts or 
agreements should be based on the principal purpose of the award, 
including its intended primary beneficiary. 

* Contracts. The primary beneficiary of a contract is the federal 
government. Contracts are used for the purchase of goods and services 
for the direct benefit of the government or for the sale of government 
property such as timber. A contract is a mutually binding legal 
relationship obligating the seller to furnish supplies or services and 
the buyer to pay for them. Agency guidance directs that contracts 
rather than agreements be used for projects that are highly complex or 
financially risky. 

* Agreements. Agreements are typically used to transfer a thing of 
value to a state or local government, or other recipient, to carry out 
a public purpose. According to the agencies, agreements are often used 
for projects that are for the mutual interest and benefit of the 
government and a cooperating organization--often a nonprofit 
organization or a state or local government. Under such agreements, 
both the government and the cooperating organization share the costs of 
the project, with the cooperator contributing funding, personnel, or 
equipment. 

A variety of agreements, including those entered into under the Wyden 
Amendment, may be used to implement stewardship contracting projects. 
Under the Wyden Amendment, the Forest Service and BLM may enter into 
cooperative agreements with landowners for the protection, restoration, 
and enhancement of fish and wildlife habitat and other resources on 
public or private land, as long as the agreement benefits the fish, 
wildlife, and other resources on national forest and BLM lands within 
the watershed. 

Additional contracting authorities were also included in the 
legislation; the full list of authorities follows. (Stewardship 
contracting authority was initially granted only to the Forest Service; 
in 2003 it was extended to BLM.) 

* Goods for services allows the agency to use the value of commercial 
products, such as timber, to offset the cost of services received, such 
as thinning, stream improvement, and other activities. 

* Designation by description or prescription allows the agency to 
conduct a timber harvest by providing the contractor with a description 
of the desired end result of the harvest. For example, the agency might 
require that all ponderosa pine less than 10 inches in diameter be 
harvested. Ordinarily, cutting any standing tree before an agency 
employee has marked or otherwise designated it for cutting is 
prohibited. 

* Multiyear contracting allows the agency to enter into stewardship 
contracts of up to 10 years in length. (Standard service contracts are 
limited to 5 years, although timber sale contracts of up to 10 years 
were already authorized for the Forest Service.) 

* Retention of receipts allows the agency to retain receipts generated 
from the sale of commercial products sold through stewardship 
contracts, rather than returning the funds to the Department of the 
Treasury's general fund. The receipts are available for expenditure, 
without further appropriation, on other stewardship contracting 
projects. 

* Exception to advertising exempts the agency from the requirement 
under the National Forest Management Act that all sales of timber 
having an appraised value of $10,000 or more be advertised.[Footnote 7] 

* Supervision of marking and harvesting of timber sales exempts the 
agency from the requirement that only federal agency employees 
supervise the harvesting of trees on agency-managed lands. This 
authority has allowed the agencies to use certain state agencies to 
assist in stewardship contracting.[Footnote 8] 

* Best-value contracting requires the agency to consider other factors-
-such as past performance or work quality--in addition to price when 
making stewardship contract award decisions.[Footnote 9] 

The 1999 law authorized 28 stewardship contracts by the Forest Service; 
the authority of the Forest Service to enter into these contracts was 
to end on September 30, 2002. Contracts were to "achieve land 
management goals for the national forests that meet local and rural 
community needs." The goals listed in the legislation included, but 
were not limited to, maintaining or obliterating roads and trails to 
restore or maintain water quality; noncommercially cutting or removing 
trees or other activities to promote healthy forest stands, reduce fire 
hazards, or achieve other noncommercial objectives; and restoring and 
maintaining wildlife and fish habitat. The law also required that the 
Forest Service establish a multiparty monitoring and evaluation process 
to assess each stewardship contract. 

Subsequent laws modified the requirements of the initial stewardship 
contracting authority. For example, the Consolidated Appropriations Act 
of 2000 changed the requirement from 28 stewardship contracts to 28 
stewardship projects, allowing for the possibility that individual 
projects might involve more than one contract.[Footnote 10] Subsequent 
legislation in the following 2 years increased the number of authorized 
projects and changed the end date of the demonstration period from 2002 
to 2004.[Footnote 11] Most recently, the Consolidated Appropriations 
Resolution of 2003 extended the authority to enter into stewardship 
contracts to 2013, extended stewardship contracting authority to BLM, 
removed the restriction on the number of projects that could be 
implemented under this authority, removed the emphasis on noncommercial 
activities among the land management goals listed, and replaced the 
requirement for multiparty monitoring and evaluation of each project 
with a requirement to monitor and evaluate the overall use of 
stewardship contracting. 

Stewardship contracting projects are subject to environmental and 
resource management laws--such as the National Environmental Policy 
Act, the Endangered Species Act, and others--that also apply to 
nonstewardship projects. Responsibility for administering stewardship 
contracting authority at the Forest Service lies within two agency 
offices: the Forest and Rangeland Management Group and the Acquisition 
Management Group. Each of the nine Forest Service regions has 
designated a stewardship contracting coordinator to facilitate 
stewardship contracting activities. These nine regions oversee 155 
national forests; the forests, in turn, oversee more than 600 ranger 
districts. Within BLM, authority for administering stewardship 
contracts resides within its Division of Forests and Woodlands. Each of 
BLM's 12 state offices also has a stewardship contracting coordinator. 
The state offices oversee the activities of field-level units, 
including 144 district and field offices that carry out the on-the- 
ground activities. References to "field units" in this report include 
the Forest Service's national forests and ranger districts and BLM's 
district and field offices. 

Both agencies generally consider stewardship contracting to be a tool, 
rather than a program, because it has no associated budget or official 
accomplishment targets. Instead, the agencies must use existing 
appropriations to plan and administer their stewardship contracting 
activities. The Forest Service primarily relies on its fuel reduction 
and vegetation and watershed management funds to carry out stewardship 
contracting activities; BLM primarily relies on its forestry and fuel 
reduction funds. When the agencies use agreements to carry out 
stewardship projects, the partner organizations typically contribute 
resources such as funding, volunteer labor, or equipment. 

Use of Stewardship Contracting Is Increasing, but Agency Data Are 
Incomplete: 

The agencies awarded increasing numbers of stewardship contracts during 
fiscal years 2003 through 2007; however, details about their overall 
use of stewardship contracting are incomplete because the agencies did 
not begin to collect nationwide data until recently, and even these 
data are not complete or consistent across agencies. As a result, 
certain data are available only for more recent years or are not 
tracked at all, limiting the agencies' ability to evaluate their 
implementation of stewardship contracting and provide information on 
its use to Congress and other interested parties. From fiscal years 
2003 through 2007, the number of stewardship contracts that the 
agencies awarded increased each year. For the Forest Service, the 
number of contract awards increased from 36 in fiscal year 2003 to 121 
in fiscal year 2007, for a total of 352; for BLM, the number increased 
from 2 to 51 during the same period, for a total of 183 contracts 
awarded through fiscal year 2007.[Footnote 12] For other aspects of 
stewardship projects, however, reliable data were available only for 
more limited periods of time. For example, complete and comparable data 
on the volume of timber sold (i.e., sold for cash or exchanged for 
services) were available only for fiscal years 2005 through 2007. 
During that period, Forest Service stewardship projects sold about 130 
million cubic feet of timber; BLM projects sold about 8 million cubic 
feet. During the same 3-year fiscal period, Forest Service projects 
treated about 172,500 acres; BLM did not maintain data on acres treated 
through stewardship contracts. And during fiscal years 2006 and 2007, 
the Forest Service sold at least $8.2 million worth of timber through 
stewardship contracts, while BLM sold about $5.9 million. During the 
same 2-year fiscal period, BLM procured services valued at about $10.5 
million through stewardship contracts; comparable data were not 
available for the Forest Service. The agencies' stewardship projects 
generally involved removing timber or other vegetation to reduce 
hazardous fuels or to otherwise improve forest health; the projects 
also encompassed various activities that benefited communities or met 
other restoration objectives, such as controlling disease or improving 
wildlife habitat. 

The Forest Service and BLM Recently Began Collecting Nationwide 
Stewardship Data, but Neither Agency Collects Complete or Consistent 
Data: 

Neither the Forest Service nor BLM maintains data that provide a 
complete national view of stewardship projects. The agencies did not 
begin maintaining nationwide data on stewardship contracting projects 
until recently--primarily because of difficulties in adapting their 
systems to account for all aspects of stewardship projects. The 
agencies have adopted ways of collecting and reporting data specific to 
their respective needs and current capabilities, but the agencies must 
assemble data from various automated and manual sources to capture a 
complete picture of their stewardship contracting projects and 
accomplishments. Further, neither agency has a system that separately 
tracks data on stewardship agreements. 

The Forest Service has modified its existing Timber Sale Accounting 
(TSA) system to incorporate information on stewardship projects, 
including the collection and distribution of revenues stemming from 
stewardship contracts. But the Forest Service did not begin 
consistently distinguishing stewardship contracts (and their associated 
service credits) from conventional timber sale contracts in TSA until 
the beginning of fiscal year 2007. This approach tracks actual dollar 
values within TSA but has been challenging because the barterlike 
aspect of stewardship contracting makes it difficult to account for 
using traditional accounting systems like TSA. TSA was designed to 
account only for the value of timber sold and the cash received for it, 
and it was difficult for the Forest Service to adapt the system to 
account for the value of services received in exchange for timber. 
Additionally, when entering data, regions vary in whether they assign 
one number for an entire contract or a number for each task order 
within a contract. Other nonmonetary information about stewardship 
projects, such as the number of acres treated, is collected by the 
national stewardship contracting coordinator through a variety of other 
sources, including direct contact with regional and forest staff. 
Information on the value of services over $3,000 purchased as part of 
certain stewardship projects is maintained in the Federal Procurement 
Data System--Next Generation (FPDS-NG). However, the system contains 
information on only some stewardship contracts--those in which the 
value of services exceeds the value of the timber. Further, these 
contracts are not consistently distinguished from other types of 
contracts (i.e., standard procurement contracts) in this system, so 
complete information specific to stewardship projects cannot be 
extracted. 

The Forest Service does not maintain national data on stewardship 
activities conducted through agreements rather than contracts. The 
Forest Service has not yet determined how to modify its systems to 
incorporate data from agreements under which, as with contracts, forest 
products may be exchanged for services. The expectation is that 
stewardship agreements will go through the same accounting measures as 
contracts do, but it is unclear how forests are to keep track of the 
services performed under stewardship agreements. This is made more 
complicated by the fact that partnership agreements are no longer the 
simple instruments they have traditionally been. Now, for example, 
timber might be harvested under stewardship agreements, whereas it was 
traditionally harvested under contracts. In fact, lacking data on 
agreements, Forest Service officials were not certain whether timber 
has yet been sold under an agreement or by what means it would be 
tracked in agency databases if it were. 

In contrast to the Forest Service's approach, BLM developed a dedicated 
stewardship contracting tracking system that BLM staff began using 
during calendar year 2005, but not all data in this system are 
validated, and the system does not interface with any other BLM system. 
Prior to the availability of this tracking system, staff in the field 
offices generated and maintained their own spreadsheets to track the 
stewardship project data they found useful. When the agencywide 
tracking system was developed, according to the system manager, the 
agency did not impose standards to guide the range and format of data 
entries or ensure consistency of data elements, such as contract award 
dates or the format of numerical values. The system contains data on 
the value of timber sold and services purchased; these data are 
reconciled manually with BLM's accounting system rather than being 
directly tied to the system to allow automated reconciliation. Other 
information about stewardship contracts, such as the volume of products 
harvested, is collected by BLM's stewardship contracting data manager 
through a variety of other sources, including direct contact with field 
staff. Also, unlike the Forest Service, which does not track agreements 
in its system, BLM includes agreements in its data system but cannot 
readily distinguish them from contracts. However, BLM has an effort 
under way to upgrade its system to improve data consistency and bring 
the system into compliance with accounting standards; the upgrade is 
expected to be completed in October 2008. Once completed, this upgraded 
system is intended to allow BLM to standardize data definitions, as 
well as to aggregate multiple contracts associated with a single 
project, in order to better track costs and accomplishments. It is 
unclear, however, whether the upgraded system will be able to 
accurately account for the values of products and services procured 
through stewardship agreements. 

The lack of complete data hampers the agencies' ability to evaluate 
their use of stewardship contracting and to provide details on its use 
to Congress and other interested parties, including the public. Without 
such data, for example, the agencies cannot compare the costs and 
accomplishments of stewardship contracting projects with those of other 
projects that have similar goals, nor can the agencies accurately track 
year-to-year trends in the costs and accomplishments associated with 
stewardship contracting. Likewise, without a complete picture of the 
agencies' use of stewardship contracting, Congress cannot fully assess 
the merits of this tool or its role in the agency's larger land 
management efforts. The agencies' inability to fully account for the 
values of products sold and services procured through agreements 
further clouds the picture of stewardship projects and potentially 
hampers congressional oversight. As we have previously reported, 
barterlike transactions are not reflected in the budget because no 
federal government cash flows are involved.[Footnote 13] As a result, 
congressional budget decision makers do not have an opportunity to 
consider whether the value of the exchanged property should be 
reallocated to other competing resource needs. 

During Fiscal Years 2003 through 2007, the Agencies Awarded Increasing 
Numbers of Stewardship Contracts: 

From fiscal years 2003 through 2007, the Forest Service and BLM awarded 
a total of 535 stewardship contracts. The Forest Service, the first to 
receive the stewardship contracting authority, awarded 352 contracts, 
or over 65 percent of the total for the period; BLM awarded 183 
contracts. While the Forest Service's contract awards generally 
increased each year throughout the 5-year fiscal period, BLM's followed 
a more inconsistent pattern, as shown in figure 1. 

Figure 1: Stewardship Contracts Awarded, by Agency and Fiscal Year: 

This figure is a combination line graph showing stewardship contracts 
awarded, by agency and fiscal year. The X axis represents the fiscal 
year, and the Y axis represents the number of stewardship contracts 
awarded. 

Fiscal year: 2003; 
Forest Service: 36; 
BLM: 2. 

Fiscal year: 2004; 
Forest Service: 55; 
BLM: 22. 

Fiscal year: 2005; 
Forest Service: 47; 
BLM: 59. 

Fiscal year: 2006; 
Forest Service: 93; 
BLM: 49. 

Fiscal year: 2007; 
Forest Service: 121; 
BLM: 51. 

[See PDF for image] 

Sources: Forest Service and BLM. 

[End of figure] 

Our count of contracts awarded includes both contracts and task orders 
because one stewardship project may encompass multiple contracts, and 
one large contract or "contract action" (e.g., a task order), may be 
used for several projects. Because the agencies' tracking systems 
maintain data by contract or task order, the number of stewardship 
contracts may not match up with historical information on the number of 
projects. For BLM, our count also includes the four cooperative 
agreements that the agency had entered into with nonfederal partners 
between fiscal years 2003 and 2007, although these make up only a small 
portion of the total. 

Although field units in all Forest Service regions and BLM state 
offices have used stewardship contracts, the extent of their use varied 
widely among regions and state offices. For example, while almost 70 
percent (16 of 23) of the national forests in the Forest Service's 
Pacific Northwest Region had awarded stewardship contracts at the time 
of our review, less than half (17 of 37) of the forests in the Southern 
Region had used this tool.[Footnote 14] Data below the state office 
level were not available for BLM. Figures 2 and 3 show the distribution 
of contract awards by Forest Service regions and BLM state offices 
through the end of fiscal year 2007, as well as the extent to which 
these have been completed. 

Figure 2: Completion Status of Stewardship Contracts Awarded in Fiscal 
Years 2003 through 2007, by Forest Service Region: 

This figure is a combination bar graph showing completion status of 
stewardship contracts awarded in fiscal years 2003 and 2007, by Forest 
Service Region. The X axis represents region, and the Y axis represents 
number of contracts awarded and completed. One bar represents the 
ongoing, and compeleted. 

Region: Alaska: 
Completed: 0; 
Ongoing: 1. 

Region: Eastern; 
Completed: 15; 
Ongoing: 14. 

Region: Intermountain; 
Completed: 8; 
Ongoing: 22. 

Region: Northern; 
Completed: 32; 
Ongoing: 15. 

Region: Pacific; 
Completed: 45; 
Ongoing: 34. 

Region: Pacific; 
Completed: 14; 
Ongoing: 30. 

Region: Rocky; 
Completed: 31; 
Ongoing: 23. 

Region: Southern; 
Completed: 18; 
Ongoing: 23. 

Region: Southwestern; 
Completed: 8; 
Ongoing: 19. 

[See PDF for image] 

Source: Forest Service. 

[End of figure] 

Figure 3: Completion Status of Stewardship Contracts Awarded in Fiscal 
Years 2003 through 2007, by BLM State Office: 

This figure is a combination bar graph showing completion status of 
stewardship contracts awarded in fiscal years 2003 through 2007, by BLM 
state office. THe X axis represents state office, and the Y axis 
represents the number of contracts awarded and completed. 

State office: Alaska; 
Completed: 3; 
Ongoing: 0. 

State office: Arizona; 
Completed: 0; 
Ongoing: 1. 

State office: California; 
Completed: 12; 
Ongoing: 12. 

State office: Colorado; 
Completed: 8; 
Ongoing: 4. 

State office: Idaho; 
Completed: 5; 
Ongoing: 6. 

State office: Montana; 
Completed: 8; 
Ongoing: 10. 

State office: Nevada; 
Completed: 8; 
Ongoing: 2. 

State office: New Mexico; 
Completed: 10; 
Ongoing: 3. 

State office: Oregon; 
Completed: 48; 
Ongoing: 25. 

State office: Utah; 
Completed: 8; 
Ongoing: 3. 

State office: Wyoming; 
Completed: 4; 
Ongoing: 3. 

[See PDF for image] 

Source: BLM. 

[End of figure] 

The number of contracts alone is not necessarily an accurate indicator 
of stewardship activity; the duration of the contracts must also be 
considered. If some locations use multiple-year instead of single-year 
contracts, the number of contracts may decrease, even though the 
overall use of stewardship contracting is increasing. This also holds 
true for completion rates: Locations that use longer-term contracts for 
projects, such as BLM's Oregon/Washington State Office, for example, 
may show lower completion rates despite making substantial progress on 
the projects. Of the total 535 contracts awarded for both agencies, the 
Forest Service currently has awarded 2 10-year contracts, in Arizona 
and southern Oregon, while BLM has awarded 30 10-year contracts: 25 in 
Oregon, 3 in Wyoming, and 2 in California. The types of long-term 
contracts used by the two agencies differ, however. Whereas each of the 
Forest Service's long-term contracts is with a single contractor, the 
BLM contracts are umbrella contracts within which individual task 
orders are issued, sometimes to different contractors, to accomplish 
specific tasks.[Footnote 15] Under this type of contract, BLM issues 
task orders to meet specific needs as they arise. 

The Forest Service reported treating or planning to treat, through 
stewardship contracts, about 227,000 acres from fiscal years 2003 
through 2007. The Pacific Northwest Region reported treating the most 
acres, while the Alaska Region reported the fewest (with 0 acres 
accomplished during those years). BLM does not maintain data on 
stewardship project treatment acreage separately from its other 
activities, so overall figures for BLM's acres treated through 
stewardship contracts were not available. 

Timber Sold through Forest Service Stewardship Projects Increased from 
Fiscal Years 2005 through 2007, while BLM Saw a Decrease over the Same 
Period: 

The Forest Service sold (i.e., sold for cash or exchanged for services) 
an increasing amount of timber as part of its stewardship projects from 
fiscal years 2005 through 2007. The Forest Service's standard unit of 
measure for wood products is 100 cubic feet, or ccf. Thus, 100 cubic 
feet of wood would be measured as 1 ccf. In 2005, stewardship projects 
sold almost 200,000 ccf of timber; by 2007, that amount had grown to 
about 650,000 ccf. The timber sold during this period represented 8.5 
percent of the total timber volume the Forest Service sold during those 
years. BLM's figures are much smaller, and decline from year to year: 
In 2005, BLM stewardship projects sold about 38,000 ccf of timber; by 
2007 that amount had shrunk to about 17,000 ccf,[Footnote 16] 
altogether representing about 7.4 percent of the agency's total timber 
volume sold during those 3 years. Table 1 compares the volume of timber 
sold through stewardship contracting as a percentage of the total 
timber volume sold under each agency's conventional timber program. 

Table 1: Volume of Timber Sold through Stewardship Contracting as a 
Percentage of Total Timber Volume, by Agency, Fiscal Years 2005 through 
2007: 

Agency: Forest Service: Timber volume sold (in ccf); 
Fiscal year: 2005: 196,079; 
Fiscal year: 2006: 471,996; 
Fiscal year: 2007: 655,072. 

Agency: Forest Service: Percentage of all Forest Service timber sold; 
Fiscal year: 2005: 4; 
Fiscal year: 2006: 8; 
Fiscal year: 2007: 13. 

Agency: BLM: Timber volume sold (in ccf); 
Fiscal year: 2005: 37,739; 
Fiscal year: 2006: 26,603; 
Fiscal year: 2007: 16,680. 

Agency: BLM: Percentage of all BLM timber sold; 
Fiscal year: 2005: 10; 
Fiscal year: 2006: 8; 
Fiscal year: 2007: 4. 

Source: Forest Service data derived from TSA; BLM data based on 
episodic field unit reports to headquarters. 

[End of table] 

A BLM official said that a number of factors could have influenced the 
decline in the percentage of stewardship timber volume relative to 
total timber volume over the period. Likely the most important factor 
is that during this period, stewardship projects increasingly produced 
lower-value forest materials---including small trees, limbs, and brush, 
often referred to as woody biomass--rather than commercial timber, a 
trend the official attributed to a poor timber market. Additionally, he 
said, BLM has stopped assigning specific targets for field units to 
achieve on the use of stewardship projects, which may have led to some 
field units' reducing their use of the tool. In addition, this official 
noted that some states have focused on issuing smaller contracts to try 
to build a contractor base. 

In Fiscal Years 2006 and 2007, the Agencies Sold about $14 Million in 
Timber through Stewardship Contracting and Retained about $5 Million in 
Receipts: 

The Forest Service reports that through stewardship contracts, products 
worth at least $8.2 million were sold (i.e., sold for cash or exchanged 
for services) during fiscal years 2006 and 2007--representing about 2 
percent of the agency's total timber value sold (including timber sold 
through traditional timber sales) during those years. This includes 
timber large enough to be milled into lumber as well as other products, 
such as firewood and wood for posts and poles. The Forest Service began 
collecting these data only in fiscal year 2006, when it developed an 
accrual accounting method to report the value of forest products sold 
through stewardship contracts. The $8.2 million figure likely 
understates the actual value of products sold through stewardship 
contracting, according to Forest Service officials, because stewardship 
contracts were not always properly distinguished from conventional 
timber contracts in the agency's systems. During the same 2 fiscal 
years, BLM estimated that the agency sold, through stewardship 
contracts, products valued at about $5.9 million dollars, representing 
about 7 percent of BLM's overall timber value sold during that period. 

As for data on the value of contractor services received under 
stewardship contracts, no Forest Service data were available on a 
fiscal year basis. Although service values specific to stewardship 
contracting have been captured in TSA since the beginning of fiscal 
year 2007, the values are cumulative, by contract, and so cannot be 
identified by a specific fiscal year. Service values prior to that time 
are recorded in FPDS-NG, but only for certain stewardship contracts-- 
those in which the value of the services exceeds the value of the 
timber. Further, the system does not distinguish these contracts from 
other contracts (e.g., standard procurement contracts), so the system 
cannot generate data specific to stewardship contracts. For BLM, the 
value of services purchased under stewardship contracts during fiscal 
years 2006 and 2007 totaled about $10.5 million.[Footnote 17] 

Both agencies maintain data on the amount of receipts retained from 
stewardship contracts once the contracts have been closed. The 
stewardship contracting authority allows the agencies to retain for use 
on future stewardship projects any money received under a contract or 
agreement.[Footnote 18] Although the agencies are not required to 
return these receipts to the Department of the Treasury's (Treasury) 
general fund, the agencies report their net amounts to the Treasury. In 
fiscal year 2005, both agencies reported that they had no net retained 
receipts from stewardship contracting. The Forest Service reported 
about $3.6 million in retained receipts in fiscal year 2006 and about 
$1.2 million in fiscal year 2007, with the Pacific Northwest and 
Southern Regions generating the most receipts. BLM reported about 
$31,000 in retained receipts in fiscal year 2006 and about $107,000 in 
fiscal year 2007, with the California State Office generating the most 
receipts. 

Although the agencies report their retained receipts, they do not track 
how the receipts are subsequently spent. The Forest Service's TSA 
system tracks the amount of receipts collected and retained at the 
closure of each contract, but it does not track the subsequent 
expenditure of the receipts. And as we reported in 2007, the Forest 
Service's elimination of project-level tracking makes it impossible to 
determine which specific accounting codes (including the one that 
designates retained receipts) were used to fund a particular 
project.[Footnote 19] BLM tracks the amount of stewardship receipts 
collected and retained using its Collections and Billing System and, 
like the Forest Service, reports the amounts annually to the Treasury, 
but it too does not track the expenditure of retained receipts by 
project. 

Both Agencies' Stewardship Projects Addressed a Variety of Land 
Management Objectives, with Hazardous Fuel Reduction Being the Most 
Common: 

The most common objective of stewardship projects, according to 
information we gathered during our site visits and agency officials' 
statements, is to reduce potentially hazardous fuels by removing timber 
and other vegetation. Removing timber and vegetation can also promote 
forest health, another important objective. The agencies generally 
reduce fuel using either mechanical treatments, in which equipment-- 
such as chain saws, chippers, bulldozers, or mowers--is used to cut 
vegetation, or prescribed burning, in which fires are deliberately set 
by land managers to restore or maintain desired vegetation conditions. 
Figure 4 depicts commercial thinning projects--in which the trees 
removed are large enough to have some commercial value--on national 
forest land using a delimber (left) and a grapple skidder (right). 

Figure 4: Commercial Thinning on National Forest Land: 

This figure is a combination of photos of commercial thinning on 
national forest land. 

[See PDF for image] 

Source: GAO. 

[End of figure] 

Although many projects were designed to protect areas in the wildland- 
urban interface (WUI)--that is, the area where structures and other 
human development meet or intermingle with undeveloped wildland--other 
projects included activities such as improving wildlife or fish 
habitat, reducing exotic and invasive plant species, and studying 
heritage fruit trees. In fiscal year 2007, for example, the Forest 
Service reported treating over 34,000 acres of WUI land, restoring 87 
miles of streams, decommissioning 29 miles of road, and improving 35 
miles of road for the use of passenger cars. BLM does not gather 
equivalent information at the field level, but its projects also 
included a variety of activities intended to reduce fuels, create 
wildlife habitat, restore streamside habitat, or control invasive 
plants--in one case, using goats to curtail the spread of the 
blackberry. We visited two stewardship projects in Idaho where both BLM 
and the Forest Service worked to improve and protect fish habitat. BLM 
installed culverts and improved roads to protect fish habitat, while 
the Forest Service restored a stream channel to create habitat for 
native fish species, including the endangered bull trout, by placing 
timber products generated from the stewardship contract in the stream 
to provide protective cover for the fish. This project area is shown in 
figure 5. 

Figure 5: An Idaho Stream, Restored to Improve Fish Habitat: 

This figure is a picture of an Idaho stream, restored to improve fish 
habitat. 

[See PDF for image] 

Source: GAO. 

[End of figure] 

During our site visits, we encountered other wildlife improvement 
projects benefiting, among other species, elk, wild turkeys, and the 
red-cockaded woodpecker. For example, we visited a project in South 
Carolina in which the Forest Service created and preserved nesting 
habitat for the red-cockaded woodpecker, which is a "keystone species" 
for longleaf pine forests, according to the Forest Service.[Footnote 
20] The birds excavate cavities in longleaf pine trees, typically in 
mature trees suffering from a fungus that softens the tree's interior. 
At one project we visited, the Forest Service was harvesting less 
desirable trees and using the resulting receipts to pay a contractor to 
cut the remaining stands into a clustered pattern of longleaf pines 
with nesting cavities. This project area is shown in figure 6. 

Figure 6: Red-Cockaded Woodpecker Habitat Improvement Area on the 
Francis Marion and Sumter National Forests: 

This figure is a picture of red-cockaded woodpecker habitat improvement 
area on the Francis Marion and Sumter National Forests. 

[See PDF for image] 

Source: GAO. 

[End of figure] 

The Agencies Have Similar Processes for Planning and Monitoring 
Stewardship Projects but Different Approaches to Implementing Them: 

The Forest Service and BLM have similar processes for planning 
stewardship projects--including processes for identifying suitable 
projects, preparing and approving project proposals, and soliciting and 
evaluating bids. Both agencies involved stakeholders in planning and 
monitoring stewardship projects, although the extent of this 
involvement varied. The agencies differ in their approaches to 
implementing the projects, however, both in the contract types they 
generally use and in their efforts to involve small, local businesses. 

In Planning and Monitoring, Agency Processes Are Similar, although the 
Extent of Collaboration with Stakeholders Varies from Project to 
Project: 

The Forest Service and BLM have similar processes for planning 
stewardship projects, including identifying suitable projects, 
preparing stewardship contract packages, and soliciting and evaluating 
bids for contracts; they also have similar processes for monitoring the 
projects. In both agencies, it is generally the field unit staff (e.g., 
foresters) who initiate stewardship projects, often working with 
stakeholder groups, and prepare the contract packages. In the Forest 
Service, the field unit staff generally work as part of an 
interdisciplinary team--made up of specialists from various disciplines 
such as engineering, fish biology, and wildlife biology--to identify 
stewardship projects that need to be done. In BLM, similarly, field 
unit staff work with other specialists to identify projects that align 
with the field unit's resource plan. 

Projects were typically identified in areas that needed restoration-- 
such as thinning overgrown stands of trees, installing culverts, or 
obliterating roads--and had enough timber value to cover at least a 
portion of the cost of the restoration services. For example, one 
Forest Service project in Montana was considered a good candidate for a 
stewardship project because it would accomplish needed fuel reduction 
work in a WUI and was located in an area with sufficient timber value 
to cover the cost of the service work. The forest did not have 
sufficient funding for the total volume of fuel reduction work needed 
in the area. As another example, a BLM project in Oregon was originally 
planned as several small, individual service contracts for thinning an 
overstocked pine plantation--taking out all but the biggest trees. But 
demand had increased for small-diameter wood (for use as posts and 
poles) and for wood chips that could be sold as biomass. When BLM 
officials realized they could sell material that had previously been 
nonmerchantable, they decided to accomplish the thinning through a 
stewardship contract. 

Officials in both agencies noted that the impetus for planning their 
first stewardship projects sometimes came from headquarters or from 
regional or state offices, which directed field units to implement a 
certain number of projects each year. Headquarters and regional or 
state office officials said they had done so because field units might 
otherwise be reluctant to experiment with this unfamiliar tool. In 
fact, when BLM received the stewardship authority, it provided its 
field units with a "budgeting carrot" to encourage use of the 
authority, providing units with extra funding for the accomplishment of 
stewardship projects. 

In some cases, project proposals were not initiated by the agency, but 
instead were brought to the agency by community groups or 
organizations. For example, the Forest Service's Crooked River project-
-in Idaho County, Idaho--was brought forward by the nearby community of 
Elk City, which is surrounded by forest and was concerned about fire 
risk. The project included watershed improvement activities in addition 
to hazardous fuel reduction and timber harvesting activities. As 
another example, in Michigan, a Forest Service stewardship project grew 
out of a request from a Native American tribe that wanted to obtain 
pine logs with which to construct a traditional ceremonial roundhouse. 
When the tribe asked the Forest Service for help acquiring logs for its 
roundhouse, the Forest Service agreed to develop a stewardship project 
in which two stands of trees were reserved from acreage already being 
thinned as part of a larger project. In exchange for about 150 pine 
logs from those stands, the tribe performed service work, including 
thinning and removing aspen and balsam fir, making road improvements, 
and installing a culvert to improve water quality. This project was 
done through a contract that the Forest Service negotiated with the 
tribe, as allowed under the Tribal Forest Protection Act of 
2004.[Footnote 21] Figure 7 shows the roundhouse under construction and 
the culvert installed as part of the service work conducted in exchange 
for the roundhouse timber. 

Figure 7: Construction of a Ceremonial Roundhouse; Culvert Installed in 
Exchange for Timber: 

This figuew ia a combination of two photographs, one of construction of 
a ceremonial roadhouse, and the other a culvert installed in exchange 
for timber. 

[See PDF for image] 

Source: Frontier Builders, Inc. 

Source: GAO. 

[End of figure] 

The agencies' processes for preparing and approving project proposals 
are similar as well. In both agencies, field unit staff develop a 
written project proposal, which contains information on the project's 
purpose, scope, and acreage, and the type, volume, and value of 
products and services involved. The proposals also contain information 
on the type and extent of outreach and collaboration with stakeholders 
such as community members, environmental groups, and industry 
representatives. Officials of both agencies said they generally hold 
public outreach meetings, which they advertise via newspaper and radio 
ads, Web site notices, or other means. At these meetings, agency 
personnel discuss project ideas and goals and inform the public about 
stewardship contracting's requirements. In the Forest Service, project 
proposals are submitted to the forest supervisor and then to the 
regional forester for review and approval. In BLM, proposals are 
submitted to the state stewardship coordinator for review and then to 
the state director for approval. 

Both agencies use established methods to estimate the value of the 
timber and the value of the services. Agency staff estimate the timber 
value using the standard appraisal system that they use as part of 
ordinary timber sale contracts. This system employs a transaction 
evidence appraisal method, which involves "cruising" the timber to 
estimate its volume and then using evidence from recent timber sales in 
the area to estimate its value. To determine the value of the services, 
both agencies prepare a government estimate, which is developed by 
resource specialists (e.g., engineers, silviculturists, and fuel 
specialists). As part of this process, the agencies conduct market 
surveys by reviewing online contractor information and examining 
historical contract award information for the state. 

Processes for soliciting bids on stewardship contracts are similar as 
well. For contracts that primarily involve the sale of timber, the 
agencies issue a prospectus, with bid forms, and have a sample contract 
available at the field unit for review by prospective bidders. For 
contracts that predominantly feature the acquisition of services, the 
agencies advertise the contract in FedBizOpps--the Web-based database 
of federal contracting opportunities--and then issue solicitations for 
bid. The agencies also hold "show me" trips or preproposal or prebid 
meetings to discuss project specifications with potential bidders, and 
may amend project requirements based on the comments received at these 
meetings. 

Once they receive bids, both agencies use the best-value process for 
evaluating the technical proposals submitted by potential bidders for 
stewardship projects. This process entails having a group--composed of 
individuals with the requisite skills--evaluate each technical proposal 
and assess its strength in each evaluation category. The categories 
typically include factors such as experience, past performance, 
strength of the technical approach, type of equipment available, 
planned use of local workers, and planned use of forest products by 
local mills or companies. In some cases, the evaluation group assigns 
numerical scores to the various factors; in other cases, the group uses 
adjectival ratings (e.g., exceptional, acceptable, marginal, and 
unacceptable). As an illustration of the factors considered during this 
process, one Forest Service project in Idaho entailed emplacing more 
than 100 in-stream structures (e.g., large boulders and trees) to 
improve bull trout habitat over about 4 miles of stream. A "big plus" 
in the winning bidder's technical proposal, according to Forest Service 
officials, was the plan to have a hydrologist design an on-the-ground 
survey before the contract package was put together, an act that 
officials believed would eliminate the need for many contract 
modifications as the work progressed. 

Typically, price is evaluated separately from the other factors. 
According to the Forest Service's national stewardship contracting 
coordinator, forests have different opinions about whether price is 
equal to or of lesser or greater importance than other factors in 
determining best value, and forests vary in the weight they assign 
price. He believes that price should be 50 percent of the determination 
and that all the other factors should make up the other 50 percent. 
However, in several locations, agency officials said that over time, as 
contractors gained experience in completing technical proposals, the 
differences between proposals had become more and more narrow, until 
ultimately, price became the de facto deciding factor in contract 
award. 

The extent to which stakeholders have been involved in planning 
stewardship projects varied. For some projects, public interest has 
been keen, and the agencies have collaborated with large and diverse 
groups, which in some cases predate the stewardship authority. For 
BLM's Weaverville community forest project in California, a diverse 
group of individuals--representing the community, industry, and 
environmental groups--was involved in project planning. Similarly, for 
the White Mountain stewardship project on the Apache-Sitgreaves 
National Forests in Arizona, a large and diverse group was involved in 
planning the project; the group includes representatives of 
environmental and wildlife advocacy groups, state and local 
governments, industries, a university, and communities. On the Lakeview 
Sustained Yield Unit in southern Oregon, the Forest Service and BLM 
have worked with a group that dates back to the 1950s, when it was a 
community group that oversaw and reported on the unit's 
production.[Footnote 22] Today, this group--which includes 
representatives of several environmental groups as well as industry-- 
works with the agencies to sustain and restore a healthy forest 
ecosystem that can accommodate human and natural disturbances. 

Fear of wildland fire is often the impetus for collaboration. 
Communities that have experienced large fires are often interested in 
fuel reduction, whether accomplished through stewardship projects or 
other means, and increasing numbers of communities around the country 
are identifying areas needing fuel reduction to reduce the risk of 
fire. In one area in Montana, for example, that had experienced a large 
fire in the past, the Forest Service held public meetings about a 
proposed stewardship project involving fuel reduction and notified 
interested parties about the meetings through newspaper notices and 
telephone calls. The Forest Service collaborated with the local rural 
fire department as well as with community members and environmental 
groups. According to the district ranger, the public was interested in 
this project for its fuel reduction benefits, and a prominent 
environmental group was also in favor of the project. The White 
Mountain project in Arizona likewise benefited from increased 
collaboration in the wake of the nearly 500,000-acre Rodeo-Chediski 
fire. Not surprisingly, individuals who collaborate on stewardship 
projects are often the same ones who have been involved in developing 
community wildfire protection plans. In California, for example, BLM 
worked with community fire safe councils to plan stewardship projects 
in the WUI. 

Although public interest in some projects is intense, for other 
projects, agency officials said there was little public interest, 
despite agency efforts to involve community members. For example, a 
Forest Service official in Colorado said that while the region gets a 
lot of community interest in some projects, most of the region's 
stewardship projects are "standard, run of the mill" projects (e.g., 
small thinning projects) that are not of interest to the community. 
With these types of projects, this official said, community members 
sometimes come to meetings but typically have little further 
involvement. 

As for monitoring, both the Forest Service and BLM systematically 
involve stakeholders in programmatic monitoring, but stakeholder 
involvement in project-level monitoring varies. As noted earlier, the 
2003 stewardship authority replaced the requirement for multiparty 
monitoring and evaluation of each project with a requirement to monitor 
and evaluate the overall use of stewardship contracting. Accordingly, 
the Forest Service and BLM jointly contracted with the Pinchot 
Institute for Conservation to conduct "multiparty programmatic 
monitoring" of stewardship contracting--that is, nationwide monitoring 
of the overall use of the stewardship authority.[Footnote 23] The 
institute conducts this monitoring primarily through subcontracts with 
four regional partnership organizations that survey agency staff and 
project stakeholders (e.g., contractors and community members) about 
the extent to which local communities were involved in developing 
stewardship projects. The institute worked with the Forest Service and 
BLM to develop the survey instrument. 

In fiscal years 2006 and 2007, the institute's regional partners 
conducted telephone surveys with individuals involved in a sample of 
Forest Service and BLM stewardship projects. The fiscal year 2007 
programmatic monitoring survey included 58 Forest Service stewardship 
projects and 38 BLM projects. For each of these projects, three 
individuals were identified for interviews: the agency project manager 
and two randomly selected external participants, such as community 
members or contractors. For the Forest Service projects, more than 70 
percent of the 67 external (nonagency) survey respondents believed that 
the development of the stewardship project in which they were involved 
was "very collaborative" (39 percent) or "somewhat collaborative" (33 
percent). Only 6 percent characterized the development as "not at all 
collaborative." Similarly, for BLM projects, more than 80 percent of 
the 37 external survey respondents believed that the development of the 
stewardship project in which they were involved was "very 
collaborative" (24 percent) or "somewhat collaborative" (57 percent). 
Only 5 percent characterized the development as "not at all 
collaborative." (For both agencies, the remainder of the respondents 
said they did not know.) 

Although both agencies also monitor the effects of individual projects 
over time, the extent to which the agencies involve stakeholders in 
project-level monitoring activities varies. In some locations the 
agencies have undertaken extensive and innovative approaches to 
involving stakeholders in project-level monitoring. For example, at one 
project in southern Colorado, BLM works with graduate students from the 
University of Kansas to establish and monitor treatment plots to 
measure the project's effect on soils, vegetation, tree stand diversity 
and health, and wildlife use. And at a project in northern California, 
the Forest Service included in the stewardship contract, as a service 
item, a requirement that the contractor compile and submit data on the 
use of machinery--such as harvesting and hauling equipment--on the 
project. These data are then used by a nonprofit organization to study 
the carbon offsets on projects. As another example, at the Forest 
Service's White Mountain stewardship project, a stewardship board 
monitors the project's social, ecological, and economic effects. 

In other locations, the agencies have not have involved stakeholder 
groups substantially in project-level monitoring. In one region, 
officials noted that most of the field units manage collaboration as 
part of the environmental assessment activities required by the 
National Environmental Policy Act; in other areas, officials noted that 
there has not been much local interest in engaging in multiparty 
monitoring. 

Both the Forest Service handbook and BLM guidance state that 
stewardship receipts may be used to defray the direct costs of the 
local collaborative process--for example, by paying for meeting rooms, 
facilitation, and travel for stakeholders involved in the monitoring 
process. Also, the Forest Service handbook allows stewardship receipts 
to be used to pay for the development of monitoring protocols and items 
to be monitored, as agreed on within a collaborative group and 
recommended to the line officer. Both agencies also allow the use of 
stewardship receipts for project-level monitoring in certain 
circumstances, such as where there is interest and support from local 
collaborative partners. However, Forest Service guidance specifies that 
stewardship receipts may not be used for environmental monitoring--that 
is, monitoring of a project's effects on air, soil, or water quality-- 
at the project level. 

Some collaborators see the prohibition on using stewardship receipts 
for project-level environmental monitoring as a shortcoming. For 
example, in a letter to the Forest Service's Washington Office, one 
group of stakeholders expressed its dissatisfaction with the 
restriction on the use of receipts for project-level monitoring. The 
group was concerned that the lack of funding would hobble its efforts 
to collect information demonstrating the effective implementation and 
results of projects, thereby preventing the demonstration of ecological 
and economic benefits to the watershed. The Forest Service responded 
that it is required by its land and resource management plans to 
conduct environmental monitoring of its activities and that it will 
continue to do so with funds other than stewardship receipts, thereby 
allowing stewardship receipts to go toward accomplishing work on the 
ground. Other stakeholders we met with noted their concern that without 
rigorous project-level monitoring, it will likely be difficult to 
assess the effects of individual stewardship projects and of 
stewardship contracting authority as a whole. 

In Implementing Projects, the Agencies Differ in the Contract Types 
They Use and in Their Approaches to Involving Small Businesses: 

Both agencies use contracts with a mix of timber sale and acquisition 
provisions, although the Forest Service typically uses contracts 
emphasizing timber to be sold, while BLM typically uses contracts 
emphasizing services to be procured. The Forest Service generally uses 
one of two basic types of stewardship contracts: integrated resource 
timber contracts (IRTC) and integrated resource service contracts 
(IRSC). The selection of the contract type to be used depends on the 
type and merchantability of the product to be sold (generally timber). 
IRTCs are generally used when the estimated value of the timber to be 
sold under the contract exceeds the estimated value of the services to 
be performed. IRSCs are generally used when the ratio is inverted--when 
the estimated value of the services exceeds that of the timber. In both 
cases, the difference in value is balanced with an appropriate cash 
payment. 

Several field unit staff said they would prefer to have a single 
stewardship contract, for ease of use, rather than separate ones (i.e., 
IRTCs and IRSCs), but Forest Service officials in the agency's 
acquisition management and forest management programs explained that 
the contracts are different because they are governed by different 
legal requirements. On the timber side, the Forest Service's authority 
to sell timber is governed by, among other laws, the National Forest 
Management Act of 1976, as amended.[Footnote 24] Acquisitions of goods 
and services are governed primarily by the Federal Acquisition 
Regulation (FAR). Administering contracts under these two different 
authorities requires different training, experience, and workforces. On 
the timber side, for example, contracting officers are familiar with 
the requirements for planning and administering timber sales, but 
generally lack the certification required to authorize them to obligate 
government funds for the acquisition of services. And on the 
acquisition side, contracting officers may be familiar with procurement 
requirements but generally do not have much experience with timber 
sales, and the Forest Service has not had the resources to train them. 
Having a single contract form would require staff expertise and 
training in both areas. Accordingly, the Forest Service resorted to 
having two separate types of contracts, each with its own rules and 
provisions. Forest Service officials also told us that the Forest 
Service designed the IRTC so as to minimize the differences between 
timber sale contracts and stewardship contracts, because purchasers 
were familiar with timber sale contracts, and the Forest Service 
expected those same purchasers to play a large role in stewardship 
contracting. 

The Forest Service predominantly uses IRTCs rather than IRSCs. 
Particularly in timber-rich parts of the country, such as parts of the 
Northeast and the Northwest, most stewardship projects are done under 
IRTCs because timber is the main source of revenue to pay for the 
service work. When it uses IRTCs, the Forest Service often has receipts 
remaining when the contract has been closed. In Montana, for example, a 
Forest Service official said that generating retained receipts is a 
"key aspect" of stewardship contracting because the Forest Service can 
retain these receipts and use them to accomplish subsequent stewardship 
work. The Forest Service generally uses retained receipts to pay for 
services acquired through another stewardship contract--usually a 
service contract--within the same forest, and typically within the same 
ranger district, from which the receipts originated. Although retained 
receipts could be used in another forest or ranger district, the 
community stakeholders that helped plan and monitor a stewardship 
project might object to retained receipts being directed elsewhere, 
according to a Forest Service official. 

The Forest Service tends to use IRSCs in parts of the country that have 
low-value timber. In the Rocky Mountain and the Intermountain 
regions,[Footnote 25] for example, many of the stewardship contracts 
are IRSCs (primarily for fuel reduction), because the timber is 
typically low in value. Accordingly, the regions require substantial 
appropriated dollars to supplement the value of the timber and pay for 
the necessary services such as hazardous fuel reduction. 

In contrast to the Forest Service, BLM predominantly uses acquisition 
contracts (i.e., service contracts) to carry out its stewardship 
projects. BLM officials typically refer to their stewardship contracts 
as "service contracts with embedded products." Because the value of the 
services acquired typically exceeds the value of the product sold (as 
with Forest Service IRSCs), BLM generally uses fuel reduction or forest 
management funds to pay for a portion of the service work. In many 
cases, these contracts take the form of indefinite delivery/indefinite 
quantity (IDIQ) contracts--umbrella contracts under which the agency 
can issue numerous task orders. 

Although BLM also has a stewardship contract type that can be used for 
projects that primarily involve the removal of timber, BLM has 
generally avoided using stewardship contracting to carry out timber 
sales. According to several BLM field officials, for example, the 
general direction from the Washington Office has been that if a project 
"looks like a timber sale and feels like a timber sale," then it should 
be offered it as a regular timber sale, using standard timber sale 
procedures. This is particularly the case for the heavily timbered 
lands in western Oregon. In fact, agency guidance allows timber-type 
stewardship contracts to be used only when the total volume of timber 
to be sold is less than 250,000 board feet. This restriction, according 
to a BLM official, effectively prevents the use of timber-type 
stewardship contracts on even small stewardship projects; instead, a 
project must either be altered to include services with a value in 
excess of the timber value or simply offered as a regular timber sale. 

Also unlike the Forest Service, BLM has typically not retained receipts 
at the end of stewardship projects. Of course, in many areas of the 
West, BLM-managed land lacks valuable timber that could generate such 
receipts. In Arizona, for example, BLM-managed lands primarily have 
piñon pine and juniper, which have little market value and are 
typically used for firewood. As one BLM official explained, stewardship 
contracting is a restorative activity that may not have a commercial 
value. If it does, that value is used to offset part of the cost of the 
service work. 

When retained receipts are generated by BLM projects, typically through 
projects conducted in California, Oregon, and Washington, their 
distribution is decided by the BLM state office. Generally, according 
to BLM officials, the receipts would be directed first toward the 
project that generated them (if needed), then to the same local area, 
then to the state, then to other states that need them. In some 
locations, where the timber has a high enough value, BLM officials said 
they want to begin generating more retained receipts. This would allow 
them to use those receipts on stewardship projects in other areas where 
the timber values are lower. 

Stewardship agreements are another vehicle occasionally used by the 
agencies. As discussed earlier, the Forest Service had entered into 12 
agreements between fiscal years 2003 and 2007; BLM had entered into 4 
agreements. The agreements in place are typically cost-share agreements 
or participating agreements, in which both the agency and the partner 
derive a mutual benefit. Most of these agreements are for 10 years, and 
while some are small, others cover an entire region. The Forest 
Service's Pacific Northwest Region, for example, issued two regionwide 
agreements--one with the National Wild Turkey Federation and one with 
the Rocky Mountain Elk Foundation. These regional agreements are 
essentially "umbrella agreements" that are similar to the IDIQ 
contracts BLM uses. That is, the regional agreements establish the 
framework within which a number of projects can be completed through 
supplemental agreements, similar to the task orders issued under an 
IDIQ contract. 

Agency officials provided several reasons why they sometimes prefer to 
use agreements rather than contracts to carry out stewardship 
activities. First, they find agreements to be simpler and more flexible 
than stewardship contracts. That is, whereas contracts can be a hundred 
pages or more in length, agreements are generally much shorter--perhaps 
a dozen pages. Also, changes can be made to agreements more quickly and 
simply--the partners agree on what changes are needed, write up the 
changes, and initial them. Second, agreements need not contain all of 
the many clauses required by contracts (e.g., clauses associated with 
the calculation of timber rates or the costs of constructing roads). 
And third, unlike contracts, agreements sometimes bring in matching 
funds from partnership organizations, thereby allowing the agency to 
"get more bang for its buck," as one official said. That is, when 
partners contribute resources such as volunteer labor, equipment, or 
funding, work can be accomplished at less cost to the agency. In one 
stewardship agreement, for example, the Forest Service and a partner (a 
nonprofit organization) agreed to share the cost (about $114,000) of a 
stewardship project designed to reduce hazardous fuels. The Forest 
Service's share was 56 percent; the partner's was 44 percent. The 
partner's contribution included services and supplies, as well as 
$36,000 from a grant it had received from another nonprofit 
organization. Agency officials cautioned, though, that agreements do 
have drawbacks. For example, in some cases a partner organization may 
not have the skills or experience to perform all the work, so agency 
staff may need to spend considerable time overseeing the work to ensure 
it is done properly. Also, according to agency officials, potentially 
interested contractors may feel unfairly excluded if a project is 
awarded to a partner organization through an agreement, rather than 
being offered for competitive bid. Finally, some agency officials 
expressed uncertainty about the options available to them in case a 
partner did not comply with the provisions of an agreement. 

One type of agreement that has not been widely used in stewardship 
projects is the Wyden Amendment agreement, which allows the agency to 
conduct restoration work on private lands, as long as the work achieves 
public land management goals. According to Forest Service officials, 
only one national forest--the Siuslaw, in Oregon--has used a Wyden 
Amendment agreement to include the treatment of private lands in a 
stewardship project. Headquarters officials did not know why forests 
had not made greater use of the Wyden Amendment, but they surmised that 
forest officials were either unaware of the Wyden authority or had 
placed a higher priority on getting work done on federal land rather 
than private land. This is a decision, according to headquarters 
officials, that forest supervisors must make in determining the best 
use of limited agency resources. 

In addition to using different contract types, the agencies differ in 
how they approach the objective of involving small local businesses in 
stewardship contracts. Whereas the Forest Service invites full and open 
competition on most of its stewardship contracts, both IRTCs and IRSCs, 
BLM generally sets aside its stewardship contracts for small 
businesses. Forest Service officials explained that they invite full 
and open competition on all IRTCs because, like traditional timber sale 
contracts, IRTCs are exempt from the requirements governing small 
business set-asides. However, the large timber companies that typically 
bid on IRTCs often subcontract with small local businesses to do the 
service work with which the timber contractors are less familiar. In 
this way, IRTCs help stimulate the local economy, albeit somewhat 
indirectly. The Forest Service's IRSCs, on the other hand, are subject 
to the requirements governing small business set-asides. According to 
the FAR,[Footnote 26] acquisitions of services within a specified range 
of value (generally from $3,000 to $100,000) shall be "reserved 
exclusively for small business concerns and shall be set aside for 
small business unless the contracting officer determines there is not a 
reasonable expectation of obtaining offers from two or more responsible 
small business concerns that are competitive in terms of market prices, 
quality, and delivery." Nevertheless, Forest Service officials believe 
that most of the agency's IRSCs are not set aside for small business, 
largely because of the dearth of small logging companies in many parts 
of the country. However, the Forest Service does not maintain data on 
the number of IRSCs that are set aside for small business, and so 
cannot gauge its success in involving small businesses. 

BLM, in contrast, generally sets aside all of its stewardship contracts 
(which are typically service-oriented contracts) for small businesses, 
according to agency officials. A contracting officer from BLM's Oregon 
office said that there have consistently been at least two responsible 
small business firms that were interested in BLM stewardship projects 
and from which BLM could expect to receive reasonable prices. 
Accordingly, BLM projects have been set aside for small businesses. 
Although BLM's stewardship contracting guidance makes an exception to 
the set-aside policy in cases where "non-traditional entities (e.g., 
local governments, nongovernmental entities, and nonprofit 
organizations) have expressed an interest" in a project, BLM 
contracting officials told us they set aside all stewardship contracts 
regardless, because, in their words, "the FAR trumps BLM guidance." 

Despite the Benefits of Stewardship Contracting, Challenges Persist, 
Especially in the Use of Long-Term Multiyear Contracts, for which the 
Agencies Lack a Strategy: 

The agencies cited as key benefits of stewardship contracting the 
ability to accomplish more work on the ground and to build 
collaborative partnerships. The primary challenges cited by the 
agencies are (1) overcoming internal and external resistance to using 
stewardship contracting, (2) dealing with market uncertainties, and (3) 
understanding and dealing with the ramifications of using long-term 
multiyear contracts. The agencies have numerous efforts under way to 
overcome some of the challenges they face, including conducting 
training courses and workshops and supporting innovative efforts by 
entrepreneurs and researchers, but they have not developed strategies 
to guide the nationwide use of long-term multiyear stewardship 
contracts and to inform offices' decisions about the use of such 
instruments. 

The Agencies Cited an Increased Ability to Accomplish Needed Work, 
along with Increased Collaboration, as Key Benefits of Stewardship 
Contracting: 

Agency officials frequently cited the ability to get more work done on 
the ground as a measure of stewardship contracting's success. 
"Stewardship contracting is the most valuable tool the Congress has 
given us in 30 years," said a Forest Service official in southern 
Oregon. In particular, according to agency officials, the ability to 
use product value to offset service costs has enabled them to 
accomplish work that otherwise would not get done, given current 
funding constraints. A Forest Service district ranger in Montana, for 
example, said that stewardship contracting enabled the district to 
perform nearly $1 million of service work for which the district did 
not have appropriated funds--an amount equivalent to about 40 percent 
of the district's entire annual budget. This work included removing 49 
stream crossings--roads that crossed streams and thus contributed to 
stream sedimentation--to help meet state water quality goals. 
Similarly, a Forest Service official in Wisconsin noted that through 
stewardship contracting, the forest unit could accomplish some work-- 
including planting large trees and grinding stumps--that it would not 
have been able to afford to do otherwise. As another example, 
stewardship contracting is expected to play a big part in helping the 
Forest Service deal with the problem of trees killed by the mountain 
pine beetle in Colorado. The Forest Service plans to use stewardship 
contracting for the removal of dead and dying trees, using the value of 
the trees to offset a portion of the associated costs. Several 
environmental group representatives we spoke with likewise praised 
stewardship contracting for helping the agencies accomplish more needed 
work. 

Forest Service officials also stated that stewardship contracting is 
financially advantageous in other ways. First, although the agencies 
often use monies from the Knutson-Vandenberg (K-V) fund to conduct 
reforestation, using the stewardship authority to conduct these 
activities allows field units to avoid the overhead charges that the 
Washington Office assesses on the use of K-V (and other) 
funds.[Footnote 27] Additionally, retained receipts are subject to 
fewer limitations on use than K-V funds. Field officials also stated 
that stewardship contracting enhances their productivity because the 
revenues stay within the field unit rather than being returned to the 
Treasury. As a Forest Service official in Wisconsin said, "Anything we 
get under stewardship contracting is better than a traditional timber 
sale because the revenues stay here rather than going to the Treasury." 

Agency officials also pointed out the savings from implementing one 
contract for a particular project rather than two or more. According to 
a forester in a BLM field unit in California, for example, the net cost 
per acre is reduced because BLM staff spend less time developing, 
advertising, and implementing a single stewardship contract than they 
would on multiple traditional contracts. Similarly, a Forest Service 
official noted that prior to receiving the stewardship contracting 
authority, the Forest Service had to go through a two-step process: 
first conducting a timber sale to remove merchantable timber and then 
issuing a separate service contract to remove the remaining material. 
The official stated that by law, the Forest Service could not mix the 
two steps. Stewardship contracting has relieved the Forest Service of 
that burden by having a single contractor do all the work, thereby 
saving the agency the time and associated cost of preparing two 
separate contracts. 

Agencies also cited the collaborative partnerships they have built 
through stewardship contracting. These collaborative partnerships have 
resulted in community support for stewardship projects and allowed the 
agencies to move forward with projects without the litigation costs and 
delays that have often confronted typical timber sales and even some 
hazardous fuel reduction projects. A Forest Service official in 
Montana, for example, said that the community has become very 
supportive of stewardship contracting, as have local environmental 
groups. Another official added that this support is in itself a big 
success. At first, according to this official, some environmental 
groups refused to accept stewardship contracting, saying that it was 
just an excuse to cut more timber. But now, she said, she is hearing 
less opposition. Similarly, a headquarters Forest Service official said 
that when stewardship contracting first started, many--including the 
Forest Service and environmental groups--had concerns that stewardship 
projects would just be disguised timber sales. But after the Forest 
Service reached out to stakeholders, including environmental groups, 
these concerns diminished over time, and stakeholders began to see the 
value of stewardship contracts in performing needed work. 

Several agency officials also credited the collaborative process with 
building community support for forest restoration projects and allowing 
the projects to go forward without protest. For example, according to 
the national stewardship contracting coordinator, comments from 
national forest officials across the country indicate that the use of 
stewardship contracting and the collaboration associated with its use 
have led to fewer appeals and less litigation at the project level. 
Several field unit officials reported similar impressions. On one 
forest in California, for example, 3 of the forest's 22 stewardship 
projects have been appealed, but none has been litigated. Another field 
unit, similarly, reported having few or no appeals or litigation 
associated with their stewardship projects. 

Many stakeholders agreed. For example, one member of a project- 
monitoring group told us he had forestalled litigation by his 
environmental organization on several occasions because of the trust 
that the monitoring group had developed with the agency. In fact, some 
community groups have produced guides to help businesses understand the 
stewardship contracting process. 

Nevertheless, collaboration has its drawbacks, according to agency 
officials and others. One drawback is the time it takes to build and 
sustain a truly collaborative group. For example, members of the 
monitoring board for the Forest Service's White Mountain project, in 
Arizona, said they worked together for years to develop mutual trust 
and respect and to build consensus. Similarly, members of BLM's 
community forest project in Weaverville, California, said they worked 
for years before developing a level of trust that allowed the work to 
proceed without protest. Ongoing collaboration takes time as well. 
Officials of the Forest Service's Southern Region noted that, in one 
state, a forest working with community groups was on its third 
iteration of an environmental assessment for a stewardship project, 
having redone the assessment to accommodate the group's wishes. In 
several locations, officials raised the question of how much community 
collaboration should be expected, especially when projects or 
communities are small. 

Another drawback, according to Forest Service officials, is that 
collaboration can dilute the effectiveness of a project. Forest Service 
officials at several project locations noted that community involvement 
ended up watering down the impact of the stewardship projects because 
the Forest Service limited the amount of work it did at the request of 
stakeholders. On one hand, these officials said, the Forest Service was 
being responsive to community desires in altering its projects, but on 
the other hand, the projects may not have been as effective as they 
could have been because they were not appropriately designed. For 
example, on one project in southern Utah, Forest Service officials and 
the contractor thought that the compromise reached with an 
environmental group prevented the project from accomplishing its 
objective. The project was designed to protect the trees between a 
wilderness area and a popular campground by thinning them to discourage 
damage by pine beetles. After the environmental group appealed the 
project, the Forest Service agreed to remove fewer trees. As a result, 
according to these officials, the area will remain susceptible to pine 
beetles, which officials believe will kill all the trees. Officials 
added that although the Forest Service achieved some political goodwill 
by compromising with the environmental group, it accomplished little in 
terms of resource management. We have previously reported on the 
advantages and disadvantages of collaboration.[Footnote 28] 

Challenges Associated with Stewardship Contracting Include Resistance 
to Its Use, Market Uncertainties, and Potential Consequences of 
Multiyear Contracts: 

From the outset of stewardship contracting, both agencies encountered 
resistance to using stewardship contracting, from both inside and 
outside the agencies. Within the agencies, unfamiliarity with 
stewardship contracts made some officials reluctant to use them. One 
Forest Service official said, for example, that he was familiar with 
timber contracts but not with all the nuances of acquisition contracts. 
In general, timber staff were not familiar with acquisition procedures 
and regulations, while acquisition staff were similarly unfamiliar with 
selling timber--making both types of staff reluctant to use this new 
tool. As one Forest Service official explained, the challenge is to get 
the timber staff and the acquisition staff working together--to bridge 
the gap between the two different cultures. 

Officials' unfamiliarity with the use of the new tool was compounded by 
the lack of a centrally located source of expertise to which agency 
staff could turn for assistance or advice. Officials of both agencies 
remarked on the importance of sharing lessons learned among their 
respective units. Agency officials noted that the sharing of these 
lessons need not come in the form of guidance or direction from the 
Washington Office, however. For example, since BLM's Oregon State 
Office was designated the "center of excellence" for stewardship 
contracting, the contracting officers in that office said they have 
learned many valuable lessons, and staff in other offices have begun 
turning to these contracting officers for advice and assistance on 
stewardship contracting issues. Turnover in stewardship coordinator 
positions, particularly at the national level, has also hampered 
understanding because institutional knowledge is especially important 
for helping field staff use new or complex programs or tools. At BLM, 
the constant turnover in the stewardship coordinator position at 
headquarters--with four different staff successively filling that 
position between July 2007 and July 2008--has made that office ill 
equipped to deal with questions from the field. Turnover in the Forest 
Service's headquarters stewardship coordinator position also 
occasionally hampered field officials' attempts to gain insights and 
assistance as they used the tool, albeit to a lesser degree. 

In other cases, some field units were reluctant to use stewardship 
contracts because the units were located in areas with high timber 
values and healthy markets and had sufficient K-V funds (which are 
generated through timber sales) to carry out needed service work. A 
Forest Service official in Wisconsin, for example, said that the timber 
economy has been stable in Wisconsin, giving his ranger district little 
incentive to use stewardship contracting. 

Outside the agencies, resistance has come primarily from contractors 
and local community officials. As with the agency officials, the 
learning curve for bidders not acquainted with stewardship contracting 
was steep. For example, preparing the required technical proposals 
describing how the contractor would perform the service work was 
intimidating and time consuming; one contractor likened it to preparing 
a résumé. Stewardship contracts also called for contractors to do work 
that they may not have done before, which made some contractors 
uncomfortable. Several officials told us that contractors were 
uncertain how to bid on some aspects of service work and, in some 
cases, did not have the set of skills or the equipment needed to 
perform it. In Wisconsin, for example, the contractor on a stewardship 
project to curb the spread of oak wilt said he was leery of bidding on 
the project at first, as he had no experience or equipment with which 
to pull stumps--a task crucial to the control of the disease. He 
ultimately bid on--and won--the contract after agreeing to subcontract 
the stump-pulling work to a road contractor with whom he had previously 
worked. Although many contractors overcame their reluctance and bid on 
projects, bidders' lack of experience with subcontracting led to higher 
prices, according to a Forest Service official, because bidders felt 
greater risk in bidding on unfamiliar work and priced their bids 
accordingly. 

In many cases, county commissioners and other local officials were 
opposed to stewardship contracting projects because receipts from 
stewardship projects were not factored into the calculation of timber 
receipts (and other qualifying receipts) from which the counties 
received a share. For years, many counties across the country depended 
heavily on their share (typically 25 percent) of timber sale and other 
qualifying receipts, but these receipts dwindled substantially with the 
decline in federal timber sales in the late 1980s. The Secure Rural 
Schools and Community Self-Determination Act of 2000 was enacted, in 
part, to address the decline in federal payments by stabilizing 
payments to counties that depended on revenues from timber sales on 
Forest Service and certain BLM lands.[Footnote 29] Under the act, each 
county could continue to receive a portion of the revenues generated 
from these lands or could choose instead to receive annual payments 
equal to the average of the three highest annual revenue payments to 
the county from fiscal year 1986 through fiscal year 1999.[Footnote 30] 
Payments under the act ceased in December 2007, but the act was 
reauthorized in October 2008, with payments to continue through fiscal 
year 2011.[Footnote 31] 

During our review (before the October 2008 reauthorization), agency 
officials told us that, regardless of the option that counties had 
chosen under the Secure Rural Schools Act, county commissioners and 
other local officials had expressed concerns about stewardship 
contracting's effect on county revenues--whether immediate or 
potential. That is, counties that had elected to continue receiving 25 
percent of timber and other qualifying receipts were concerned because 
stewardship receipts were not included in the calculation of timber 
receipts and thus were perceived to have an immediate detrimental 
effect on county revenues. And counties that had elected to receive an 
average of prior-year receipts were also concerned because they thought 
that if the Secure Rural Schools Act were reauthorized, the formula for 
calculating payments to counties might be changed to include years in 
which stewardship projects were conducted in the counties. If so, the 
counties' portion of receipts would be diminished, again in part 
because stewardship receipts would not be included in the total from 
which the counties' share would be calculated. According to a Forest 
Service official in Montana, there was not a county commissioner in the 
state who was not concerned about the county's share of receipts 
diminishing as a result of stewardship contracting. In the Great Lakes 
forests, similarly, some counties were in favor of the concept of 
stewardship contracting, according to Forest Service officials, but 
also wanted to maximize receipts from timber. In Wisconsin, for 
example, the Forest Service was planning a stewardship project that the 
community favored because of concerns about fire risk, but a Forest 
Service official noted that the county has not embraced stewardship 
contracting because of its effect on payments to the county. Forest 
Service officials were worried about how they were going to get the 
county's support. 

Although the agencies are not legally required to obtain the approval 
of local officials to conduct stewardship projects, these concerns have 
made some agency staff more cautious about using the tool more widely. 
In Oregon, BLM officials noted that resistance from county officials 
has caused BLM to take a conservative approach to developing 
stewardship contracting in certain areas. For example, one BLM district 
will not approve a project unless the project has the written support 
of the county commissioners. Counties' concerns about nine proposed 
stewardship projects in the district were conveyed to the district 
manager in a letter from the Association of O&C Counties.[Footnote 32] 
According to the letter, the association's board of directors had 
decided to support the nine projects but expressed deep concern about 
stewardship projects in general because they generate no receipts to be 
shared with counties. 

Market uncertainties posed another set of challenges. Market prices for 
timber have been volatile, especially lately, with the slump in the 
housing market; this has made it very difficult to get bids on timber 
sales in some areas, and this difficulty has spilled over into 
stewardship projects as well. One stewardship contract on the Superior 
National Forest in Minnesota, for example, was offered three times, 
each time at lower timber prices, before it was awarded; another 
stewardship contract on the same forest was offered twice before being 
awarded. Forest Service officials expressed hope that once the housing 
market turns around, the value of timber will increase and make timber 
sales--and stewardship projects--more attractive to loggers. 

Markets for other materials removed through stewardship contracting-- 
primarily biomass and small-diameter trees--are uneven as well. In some 
areas, particularly near pulp or paper mills, the market for biomass 
and small-diameter wood is strong. This was the case in several eastern 
forests we visited and, according to agency officials, is also true of 
parts of California and Oregon. In other areas, however, facilities 
that can accept and process biomass are scarce, and markets for the 
material are correspondingly weak. In Montana, for example, officials 
said there is little market for the small-diameter wood and biomass 
generated from stewardship projects, so these materials are typically 
burned. Similarly, on many BLM lands, where the value of the wood is 
low and the distance to biomass markets long, BLM may find it more cost-
effective to burn the wood than to use it. In such cases, the paucity 
of markets for small-diameter materials keeps the cost of the service 
work high, because contractors cannot defray their costs by selling the 
resulting materials. We have previously reported that the high costs of 
harvesting and transporting woody biomass, combined with uncertainties 
about supply, have hindered market development.[Footnote 33] 

Finally, although long-term contracts offer certain benefits to the 
agencies, field units can find it challenging to provide sufficient 
funds to award and implement such contracts, particularly while funding 
other agency activities. Agency officials have touted long-term 
contracts as providing contractors with some assurance of a long-term 
supply of materials, thus encouraging investment in equipment or 
facilities that can economically use small-diameter wood and biomass-- 
products that often have had little or no commercial value. According 
to the Forest Service handbook, for example, "The use of multi-year 
contracts is encouraged to provide incentives to potential contractors 
to invest in long-term landscape improvement projects." BLM, similarly, 
stated in a fiscal year 2007 stewardship contracting review that long- 
term contracts would encourage business development for biomass 
utilization. Without a long-term contract, an investor can find it 
difficult to secure the financing necessary to retool or build 
facilities that can process small-diameter wood or biomass. A 
contractor in Oregon noted, for example, that constant supply (i.e., 
through a long-term contract) is the key to encourage investment in 
equipment. He explained that a single machine can cost more than $1 
million, and a contractor will not invest--nor will a bank lend--such a 
large amount without a reasonable assurance that there will be 
sufficient ongoing demand for the machine. 

Contractors still face risk when entering into a long-term contract 
with the government, however, because unforeseen budget shortfalls 
could prevent an agency from funding the contract. Without some 
additional protection against risk, contractors may be reluctant to 
make sizable investments in equipment or infrastructure for fear that 
the government will cancel the contract, thus making the investment 
unprofitable. Contractors may thus decline to bid on long-term 
contracts unless the contracts include a cancellation ceiling--that is, 
an amount the government will pay the contractor if it cancels the 
contract.[Footnote 34] The FAR authorizes such ceilings to protect the 
contractor's investment, with the amount of the ceiling to be agreed on 
by the government and the contractor before the contract is signed. To 
ensure that this money is available if needed--and to prevent agencies 
from making financial commitments beyond the funding Congress has 
provided--the FAR generally requires that, should an agency include a 
cancellation ceiling in a contract, the agency must obligate the entire 
amount of the ceiling at the inception of the contract. 

Depending on the size of the contractor's potential investment, 
however, this ceiling could be millions of dollars--far exceeding the 
budget of an individual field unit. Rather than develop a contract that 
would require a cancellation ceiling beyond its available resources, a 
field unit would instead have little recourse but to develop a contract 
with a much lower ceiling--one it could afford--thereby forgoing its 
hope of attracting significant investment in equipment or 
infrastructure. 

In fact, two Forest Service units have had to make this choice. For the 
only long-term multiyear contract the agencies have had experience with 
to date, at the White Mountain stewardship project in Arizona, the 
cancellation ceiling had little to do with the contractor's actual 
investment; instead, it simply represented an amount the Forest Service 
thought it could afford and the contractor agreed was reasonable. In 
2004, the Forest Service hired a consulting firm to develop an estimate 
of the potential cancellation liability associated with a multiyear 
contract for the White Mountain project. The contracting officer for 
the project said he was shocked by the resulting estimates, which 
ranged from nearly $3 million to more than $7.5 million. Accordingly, 
the cancellation ceiling was set at $500,000. The contracting officer 
said that this lower amount did not reflect the potential liability 
estimate based on one of the three scenarios examined by the consulting 
firm because none of those scenarios materialized. Instead, the 
contractor used already existing equipment, but the contracting officer 
told us that he believed it was appropriate to have a cancellation 
ceiling anyway, to compensate the contractor for his risk in case of 
cancellation. 

Similarly, for a 10-year contract the Forest Service is preparing in 
order to address fire risk on the Front Range of Colorado, a Rocky 
Mountain Region official told us that an amount in the range of $6 
million to $10 million would be needed to attract large infrastructure 
such as a wood pellet plant--an amount far beyond the region's funding 
capability. Instead, the contract announcement will include a 
cancellation ceiling of $500,000--the amount the region thought it 
could afford.[Footnote 35] According to this official, the inability to 
fund a substantial cancellation ceiling (e.g., $6 million to $10 
million for construction of a pellet plant) changed the initial premise 
of the contract. That is, while the long-term contract was initially 
envisioned as a way to attract investment in industry or infrastructure 
to expand the use of material resulting from the project, it is now 
intended simply to treat the forests as cost-effectively as possible 
within the existing infrastructure. 

Other units were also contemplating the use of long-term contracts at 
the time of our review but were likewise concerned about the potential 
cancellation ceiling. For example, Forest Service officials in 
California were considering the use of a long-term multiyear contract 
but were concerned about how they would fund the cancellation ceiling. 

Some contractors may be willing to bid on contracts without 
cancellation ceilings if there is no substantial investment involved. 
In July 2008, the Forest Service issued a 10-year contract for the 
Lakeview stewardship project in southern Oregon. This contract includes 
a minimum dollar guarantee over the 10-year performance period. 
According to a Forest Service official, the Forest Service did not 
include a cancellation ceiling in the Lakeview contract because it was 
not seeking investment in infrastructure; that infrastructure already 
is in place. The Lakeview contract was issued in accordance with the 
terms of a November 2007 memorandum of understanding (MOU)--signed by 
the Forest Service, BLM, the State of Oregon, a county, and several 
cities and nongovernmental organizations--that provides a framework 
within which the signatory parties agree to work together to accomplish 
forest restoration projects, including fuel reduction projects. The MOU 
states that the Forest Service and BLM will each offer a minimum number 
of acres to be treated each year. BLM also plans to issue a long-term 
contract under the terms of the MOU, but the BLM contract will probably 
be an IDIQ contract, according to BLM officials. 

Other agencies also have the authority, under the FAR and agency- 
specific regulations, to use multiyear contracts, although these 
contracts typically may not exceed 5 years. Although the FAR requires 
all agencies to obligate sufficient funds to cover any potential 
cancellation costs of a multiyear contract, additional requirements 
apply to certain agencies. For example, according to the Department of 
Defense's acquisition regulation,[Footnote 36] if a contract contains a 
cancellation ceiling in excess of $100 million but the budget for that 
contract does not include proposed funding for the costs of contract 
cancellation up to that ceiling, then the head of the agency must 
provide written notification to the congressional defense committees 
and to the Office of Management and Budget before awarding the 
contract. This written notification must include, among other things, 
the extent to which cancellation costs are not included in the budget 
for the contract and an assessment of the financial risks of not 
budgeting for the potential costs of contract cancellation. 

Experience to date with the White Mountain project highlights another 
potential challenge related to the use of long-term contracts: the 
difficulty of balancing the need to devote substantial resources to the 
long-term project in order to furnish a sufficient and predictable 
supply of materials to the contractor and the need to fund the unit's 
other programs and activities--all within a limited budget. With this 
project, the forest committed to funding contractor treatments on at 
least 5,000 acres annually, in order to ensure the contractor a 
sufficient supply of material. Although per acre costs were initially 
high, at the time the contract was developed, the forest expected that 
within a few years these costs would decrease as growth occurred in the 
small-diameter wood and biomass industry--allowing the contractor to 
defray a greater portion of his costs as he found markets for the 
material. Instead, for the 29 task orders issued between September 2004 
and September 2007, these costs have not dropped significantly, as 
shown in figure 8. 

Figure 8: Treatment Costs per Acre, by Task Order, for the White 
Mountain Project: 

This figure is a line graph showing treatment costs per acre, by task 
order, for the White Mountain project. The X axis represents the task 
order and fiscal year, and the Y axis represents the cost per acre (in 
dollars). 

Fiscal year: 2004; 
Task order #1: 361; 
Task order #2: 	810; 
Task order #3: 	208; 
Task order #4: 	203; 
Task order #5: 	736; 
Task order #6: 	479; 
Task order #7: 	498; 
Task order #8: 	328. 

Fiscal year: 2005	
Task order #1: 646; 
Task order #2: 	420; 
Task order #3: 	508; 
Task order #4: 	169; 
Task order #5: 	350; 
Task order #6: 	474; 
Task order #7: 	362; 
Task order #8: 	924. 

Fiscal year: 2006	
Task order #1: 699; 
Task order #2: 	401; 
Task order #3: 	341; 
Task order #4: 	627; 
Task order #5: 	529; 
Task order #6: 	530. 

Fiscal year: 2007	
Task order #1: 864; 
Task order #2: 	683; 
Task order #3: 	418; 
Task order #4: 	366; 
Task order #5: 	492; 
Task order #6: 	434; 
Task order #1: 	461. 

[See PDF for image] 

Source: GAO analysis of Forest Service data. 

[End of figure] 

To live up to its commitment, the Forest Service has continued to fund 
5,000 acres of treatment annually--but at a much greater cost than 
expected, a cost that has taken a substantial toll on the forest's 
other programs. These other programs--such as range management, 
wildlife, hazardous fuels, and vegetation and watershed management-- 
have suffered because the forest has directed considerable funding 
toward the White Mountain project, leaving little available to carry 
out other projects that need to be done. In fact, in 2005, the forest 
received instruction from the region to direct 100 percent of its 
hazardous fuels and timber dollars toward the White Mountain project, 
along with 50 percent of its vegetation and watershed management 
dollars and 40 percent of its wildlife dollars. A forest budget 
official was particularly concerned about the effect on the range 
management program, for which she estimated funding was half of what it 
would have been if it had grown at the same rate as it did for other 
forests in the region. Another forest official expressed concern about 
the fuel reduction work that was not being completed on the forest 
because the funds for that program were being monopolized by the White 
Mountain project. In particular, this official noted that the forest's 
ranger districts that were not included in the White Mountain project 
area were at a particular disadvantage because they experienced no 
direct benefit from the project, whereas other districts had at least a 
portion of their lands being treated (those that fell within the 
project area). 

This project has had a similar effect on other forests within the 
region, according to forest and regional officials. As the region has 
redirected funds toward the White Mountain project, these other forests 
have become resentful of the disproportionate amount of funding the 
project has received. The Apache-Sitgreaves forest has "reached a 
crossroads," one official said, in terms of the White Mountain 
project's viability; if the per acre costs remain high, the forest will 
have to decide whether to continue funding the project, particularly in 
light of the effect it is having on other programs in the forest. 

Agencies Are Addressing Stewardship Challenges through Various Means, 
Including Training and Technology, but Have Not Developed a Strategy 
for the Use of Long-Term Contracts: 

The agencies have numerous efforts under way to overcome some of the 
challenges they face, including conducting training courses and 
workshops to help overcome resistance to the use of an unfamiliar tool 
and supporting innovative efforts to find cost-effective uses for small-
diameter materials. However, they do not have a strategy in place for 
the use of long-term contracts, in terms of where such contracts should 
be used and how they should be funded. As a result, field offices must 
make decisions about whether to enter into long-term contracts without 
fully understanding the inherent risks and trade- offs, thereby 
potentially jeopardizing the stability of their other programs or, on 
the other hand, forgoing an opportunity to achieve cost-effective 
restoration. 

To overcome resistance to stewardship contracting, the agencies have 
provided--jointly and individually--training for their staff and for 
contractors. For example, the two agencies jointly formed a cadre of 
officials that developed a training program that covered both 
acquisition and timber contracting and addressed both IRTCs and IRSCs. 
According to a Forest Service official, the staff who work on 
acquisition contracts and the staff who work on timber sale contracts 
usually do not work together, so it was refreshing to have both types 
of staff involved in discussions and learning about stewardship 
contracting. The Forest Service has posted the training materials on 
its Web site. 

Also, the Forest Service plans to address difficulties between the 
timber and acquisition sides by establishing centers of excellence that 
would provide advice and assistance to staff as needed. In the Forest 
Service, acquisition staff often have not been actively involved in 
stewardship contracts. Although an acquisition official said that the 
agency had planned to train some timber staff to act as acquisition 
contracting officers, with the requisite certification to obligate 
government funds, it has since abandoned that idea because of the 
expense and time it would take to provide the initial and recurrent 
training. The agency's new plan, according to this official, is to 
establish several centers of excellence, staffed with individuals who 
can provide advice and assistance on acquisition issues and can act as 
contracting officers when necessary. 

BLM already has in place such an arrangement: In 2007, the Washington 
Office designated the Oregon State Office as the agency's center of 
excellence for contracting. In this capacity, the Oregon office handles 
contracts for all of BLM's western states, including Alaska, that are 
valued at more than $100,000. The Oregon contracting officers put 
together stewardship contracting packages and review the final 
contracts; they also attend preproposal meetings and provide advice to 
contractors and BLM personnel. Nevertheless, the operational side of 
stewardship contracting (e.g., outreach, collaboration, design, and 
contract administration) is still performed by the field offices. 

To help overcome resistance by contractors, agency officials said they 
provide training to contractors and work with them one on one to help 
them understand stewardship contracting. For example, procurement task 
assistance centers are located in several states; these centers work 
with contractors (at no charge) to help them understand contract 
formats and requirements. The biggest hurdle, according to a BLM 
official, is getting contractors to feel comfortable with preparing 
technical proposals. 

Forest Service officials also said they try to incorporate into 
stewardship contracts service work that is familiar to contractors, to 
encourage them to gain experience with this new tool. Some officials 
noted that "starting small" with stewardship projects can be a strategy 
to improve contractors' chances for success. An official of one forest, 
for example, said that keeping stewardship projects small--in acres and 
in value--has been a good way for both the forest and the contractors 
to gain experience. And on another forest, a contracting official said 
that bundling similar types of work in a contract has been a successful 
strategy. This strategy can benefit smaller companies that lack the 
equipment or financial resources to bid on a large project or a project 
that includes dissimilar tasks. 

As for county commissioners' concerns about the loss of county timber 
receipts, agency officials said they try to involve county officials in 
stewardship project planning efforts and talk to officials about the 
local benefits of stewardship projects. In Wisconsin, for example, 
Forest Service officials said they have talked with county officials 
about the benefits of stewardship contracting, such as the stable 
employment that stewardship contracting would bring to the counties 
despite the counties' not receiving any portion of the stewardship 
receipts. In some cases, county officials have been willing to support 
stewardship contracting. In Minnesota, for example, a Forest Service 
official described county officials as "cautious but willing" to 
support stewardship contracting because of the potential for an 
increase in employment and the associated multiplier effect of people 
spending their salaries in the local area. 

Also, the agencies are working to find cost-effective uses for small- 
diameter materials and biomass. To stimulate the market for small- 
diameter wood and biomass, and thereby reduce the amount that 
contractors must be paid to remove this material, the agencies are 
working with various contractors, entrepreneurs, universities, and 
other organizations to develop cost-effective and sometimes innovative 
uses for these materials. In some cases, agency officials have worked 
with stewardship contractors to find new markets for these materials, 
including nearby facilities that use wood chips for heat or power 
plants that can burn the materials--alone or mixed with coal. In 
another case, one national forest is working with an entrepreneur and a 
nearby university on the development of a process known as 
torrefaction, in which wood chips are slowly heated until the wood 
reaches a near-charcoal state, making it easier to store, transport, 
and use in certain applications. 

In some cases, the agencies have provided grants to spur investment in 
research or development of innovative uses for biomass. The Forest 
Products Laboratory, for example, provided a $250,000 biomass grant to 
support the construction of a pressure treatment facility that will 
treat material processed from the White Mountain stewardship project in 
Arizona.[Footnote 37] This facility uses a chemical product to preserve 
material for exterior use. 

Although numerous agency officials cited the potential of long-term 
multiyear stewardship contracts to help stimulate markets for wood 
products, neither agency has developed strategies for funding the 
associated cancellation ceiling--one of the two primary challenges 
associated with multiyear contracts. As noted earlier, the purpose of 
obligating the cancellation ceiling at the inception of the contract is 
to prevent agencies from making financial commitments beyond the 
funding Congress has provided. Yet rather than identifying strategies 
for funding these cancellation ceilings, several Forest Service 
officials told us they believe their agency should be exempt from 
having to obligate these funds at the outset of the contract. One 
official said that the cancellation ceiling is unnecessary altogether, 
because contracts already contain a standard clause allowing the 
contractor to be reimbursed if the government cancels the contract for 
its convenience. Other Forest Service officials disagreed that the 
standard clause offers sufficient protection, stating that the 
contractor needs the protection afforded by the cancellation ceiling-- 
but added that requiring the agency to obligate the funds at the 
inception of the contract needlessly ties up agency funds that could be 
used to conduct additional work. These officials believe that the 
agency should not have to obligate the funds unless and until it 
cancels the contract. The Forest Service has sought legislative relief 
from the up-front funding requirement, but none had been enacted as of 
October 2008. 

In the two instances in which a cancellation ceiling has been 
established for a long-term multiyear contract--for the White Mountain 
contract in Arizona and the proposed Front Range contract in Colorado-
-agency staff derived cancellation ceilings that reflected not the 
amount needed to attract significant investment in infrastructure, but 
rather the amount each unit believed it could afford. Without a 
national strategy on the use of long-term multiyear contracts, 
including a clear agency position on the need for appropriate 
cancellation ceilings and guidance on how to fund them, agency units 
may continue to establish such "affordable" levels--potentially driving 
away interested investors who are concerned that they do not have 
sufficient contractual protection--or may forgo the use of long-term 
contracts entirely.[Footnote 38] 

Forest Service officials also held different opinions about whether an 
agency could avoid the cancellation ceiling entirely by using options 
contracts, which do not require an up-front cancellation ceiling, while 
still stimulating infrastructure investment. A May 2007 opinion from 
the Department of Agriculture's Office of General Counsel held that it 
is unnecessary to use multiyear contracts at all; the opinion suggested 
that the agency use options contracts instead. However, others in the 
agency said that options contracts do not afford contractors enough 
assurance of a long-term supply and, as such, do not assist them in 
obtaining loans for equipment or plant construction--a fundamental 
objective of using long-term multiyear contracts. Accordingly, options 
contracts may be best suited for areas with existing infrastructure 
(e.g., lumber mills or pulp and paper mills). 

The other challenge associated with long-term contracts is maintaining 
sufficient funding to support an ongoing long-term project at levels 
sufficient to provide the contractor with a steady supply of material 
while at the same time funding other important activities. The 
implications of this challenge are also highlighted by the previously 
discussed experience of the White Mountain project. This is not to say 
the project has been unsuccessful; to the contrary, numerous agency 
officials as well as environmental and other stakeholders praised the 
quality of the work and the ecological results. Nevertheless, as a 
result of funding its commitment on the White Mountain project, the 
forest has struggled to adequately finance its other programs--a 
cautionary lesson for other agency units contemplating long-term 
stewardship contracts of their own. Certainly, other units may decide 
that the need for a particular long-term project is so great that they 
are willing to reduce funding for various other programs in order to 
pay for it. However, the agencies have not developed strategies for the 
use and funding of long-term multiyear contracts. Without such a 
strategy--based on a systematic analysis of lessons learned from long- 
term projects already undertaken and accompanied by guidance on 
selecting and implementing such projects--individual units may make 
choices about using long-term contracts without fully understanding 
their implications. 

Conclusions: 

Halfway through its currently authorized 10-year life span, stewardship 
contracting has shown promise in helping the Forest Service and BLM 
accomplish their land management objectives. The agencies have taken 
advantage of the ability to trade goods for services to defray the cost 
of needed thinning and other service work, and they have worked closely 
with community groups to design projects that meet community needs. 

One element of stewardship contracting has not been widely explored, 
however: the authority to enter into 10-year contracts. Although we 
frequently heard that this authority is essential in helping develop 
markets for timber, woody biomass, and other materials (by allowing the 
agencies to provide potential contractors and industry operators more 
certainty of supply), the suitability of long-term multiyear 
stewardship contracts to encourage investment in infrastructure has yet 
to be demonstrated. And the experience of the one forest that has 
implemented a long-term multiyear contract shows the potential pitfalls 
of this tool, as the forest has had to scale back its other programs in 
order to adequately fund the long-term project. The stakes are further 
raised by the need for a potentially sizable up-front obligation of 
funds to protect both the contractor's and the government's interests. 
Although two additional long-term multiyear contracts are in process 
and officials in several field units said they are contemplating the 
use of such contracts, the agencies have not developed national 
strategies that describe the role of long-term multiyear contracts and 
lay out the agencies' positions on issues such as when such contracts 
are appropriate, how many should be in place, where they should be 
located, and how they will be funded. Without such a strategy, the 
agencies may fail to capitalize fully on the potential of stewardship 
contracting. For example, field units may have little choice but to 
settle for affordable cancellation ceilings, rather than ceilings 
sufficient to encourage substantial investment in industry or 
infrastructure to use the products from the stewardship project. 

Regardless of the contracting mechanisms used or their duration, the 
agencies must maintain complete and reliable data if they are to 
effectively evaluate their use of stewardship contracting and provide 
details on its use to Congress and the public. Currently, the agencies' 
data reside in myriad automated and manual systems that are often not 
linked. Further, the agencies do not systematically capture nationwide 
information specific to agreements, nor does the Forest Service capture 
data on the number of contracts that are set aside for small 
businesses. Not only do such data deficiencies keep the agencies from 
assessing the true costs and accomplishments associated with 
stewardship contracting--especially in comparison with other tools that 
might achieve the same goals--but they also prevent Congress and the 
public from making informed judgments about the value of this land 
management tool, which will become increasingly critical as expiration 
of the stewardship authority draws closer and Congress evaluates its 
renewal. 

Recommendations for Executive Action: 

We are making three recommendations to improve the agencies' use of 
stewardship contracting. 

To ensure that the commitment of federal funds under long-term 
contracts is appropriately targeted, especially given the potential 
trade-offs involved, we recommend that the Secretaries of Agriculture 
and the Interior develop strategies for the use of long-term multiyear 
contracts that address, on a nationwide basis, the criteria agency 
officials can use to evaluate whether, in any given case, such a 
contract would be an appropriate mechanism to assist the agency in 
meeting its land management objectives. The strategy should address 
options for funding such contracts in a manner that considers trade- 
offs with respect to other land management activities and should be 
based on a systematic analysis of lessons learned from long-term 
projects already undertaken. 

Additionally, to ensure ease of reporting and accurate accounting of 
activities undertaken through stewardship contracts and agreements, we 
recommend that the Secretaries: 

* implement, as part of their efforts to improve their stewardship 
contracting databases, improvements that will increase data interfaces 
among the various systems that contain stewardship data and will ensure 
accuracy and completeness in the data maintained and, as part of these 
same efforts, 

* implement improvements that will accurately account for products sold 
and services received under stewardship agreements. 

Agency Comments: 

We provided the Departments of Agriculture and the Interior with a 
draft of this report for review and comment. The Forest Service and the 
Department of the Interior generally agreed with the findings and 
recommendations in the report. The Forest Service's and Interior's 
written comments are reproduced in appendixes II and III, respectively. 

We are sending copies of this report to interested congressional 
committees, the Secretaries of Agriculture and the Interior, the Chief 
of the Forest Service, the Director of the Bureau of Land Management, 
and other interested parties. We will also make copies available to 
others upon request. In addition, the report will be available at no 
charge on the GAO Web site at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-3841 or nazzaror@gao.gov. Contact points for 
our Offices of Public Affairs and Congressional Relations may be found 
on the last page of this report. GAO staff who made major contributions 
to this report are listed in appendix IV. 

Robin M. Nazzaro: 

Director, Natural Resources and Environment: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

Our objectives were to determine (1) the extent to which, and for what 
purposes, federal agencies are using stewardship contracting; (2) what 
processes the agencies use in planning, implementing, and monitoring 
stewardship projects to manage resources; and (3) what successes and 
challenges the agencies have experienced in using stewardship 
contracting. Our review was limited to the Forest Service and the 
Bureau of Land Management (BLM), the two agencies with stewardship 
contracting authority. 

To identify the extent and nature of the agencies' use of stewardship 
contracting authority, we obtained data from Forest Service and BLM 
officials on the number of such projects, as well as other project 
information such as project acreage, timber volume and value, and the 
value of contracted services. We also obtained data on retained 
receipts from the agencies' financial accounting systems. Neither the 
Forest Service nor BLM maintains comprehensive national data on all 
aspects of stewardship contracting; in some cases, reliable agency data 
were available for only certain years, and in other cases the agencies 
could provide only estimates. Further, because the agencies have 
adopted ways of collecting and reporting data independent of one 
another, equivalent data were not always available for both agencies 
during the same time period. 

We assessed the reliability of the data by conducting interviews with 
headquarters, regional, and state office officials who enter data into 
the systems, maintain them, and prepare reports using system data. We 
also obtained information on the standards, procedures, and internal 
controls in place for collecting, reporting, and verifying data, in 
order to assess their accuracy and completeness. In some cases, data 
are maintained in systems whose reliability GAO has previously 
assessed; in such cases, we relied on these earlier assessments in 
evaluating system reliability. For example, certain Forest Service data 
on acreage treated under stewardship contracts are reported through the 
National Fire Plan Operations and Reporting System; we reviewed a 2007 
GAO report that assessed this system and determined that it is 
sufficiently reliable for our purposes.[Footnote 39] Similarly, both 
agencies track some financial data on stewardship contracting through 
their departmental accounting systems--the Department of Agriculture's 
Foundation Financial Information System and BLM's Federal Financial 
System. We reviewed previous work done by GAO and an independent 
auditor and determined that the data produced from these systems are 
sufficiently reliable for our purposes.[Footnote 40] We did not perform 
any electronic testing of data. Ultimately, we determined that the 
various sources of agency data provided sufficiently reliable data for 
certain years, as well as for broad trends across years, but did not 
provide data sufficiently reliable to allow comparisons between the 
agencies in all areas, as noted in the body of the report. Finally, we 
interviewed Forest Service and BLM officials about their progress in 
designing or modifying systems to improve their data and better track 
information associated with stewardship contracting projects. 

Because neither agency maintains nationwide data that describe the 
objectives or characteristics of individual stewardship projects, we 
obtained information on project objectives and characteristics by 
interviewing headquarters and field officials and conducting site 
visits to projects in seven of the nine Forest Service regions and 7 of 
the 11 western states in which BLM has state offices. We reviewed 
(either by visiting in person or discussing with agency officials) a 
nonprobability sample of 26 Forest Service projects and 9 BLM 
projects.[Footnote 41] We selected projects to represent variety in 
geographic location, type of restoration work, size (in acreage as well 
as in value), and stage of implementation, as well as in the 
stewardship contracting authorities used. Table 2 shows the locations 
of the Forest Service projects we reviewed and the projects' 
objectives; table 3 shows similar information for the BLM projects we 
reviewed. 

Table 2: Forest Service Stewardship Projects Included in GAO's Review: 

Location: Northern Region: Bitterroot National Forest (Montana); 
Project name: Hayes Creek; 
Project objectives: Hazardous fuel reduction. 

Location: Northern Region: Lolo National Forest (Montana); 
Project name: Knox Brooks; 
Project objectives: Hazardous fuel reduction, road reconstruction, 
bridge and culvert replacement. 

Location: Northern Region: Nez Perce National Forest (Idaho); 
Project name: Crooked River; 
Project objectives: Stream restoration to benefit fish. 

Location: Southwestern Region: Apache-Sitgreaves National Forests 
(Arizona); 
Project name: White Mountain; 
Project objectives: Hazardous fuel reduction, community economic 
development. 

Location: Southwestern Region: Cibola National Forest (New Mexico); 
Project name: South Monighan Grande; 
Project objectives: Hazardous fuel reduction. 

Location: Southwestern Region: Cibola National Forest (New Mexico); 
Project name: South Monighan Pequeño; 
Project objectives: Hazardous fuel reduction. 

Location: Intermountain Region: Dixie National Forest (Utah); 
Project name: Upper Santa Clara; 
Project objectives: Hazardous fuel reduction, campground improvement. 

Location: Pacific Southwest Region: Eldorado National Forest 
(California); 
Project name: Grizzly Flats; 
Project objectives: Hazardous fuel reduction. 

Location: Pacific Southwest Region: Eldorado National Forest 
(California); 
Project name: Last Chance; 
Project objectives: Hazardous fuel reduction. 

Location: Pacific Southwest Region: Mendocino National Forest 
(California); 
Project name: Alder; 
Project objectives: Hazardous fuel reduction, carbon sequestration 
research. 

Location: Pacific Southwest Region: Shasta-Trinity National Forests 
(California); 
Project name: Post Mountain; 
Project objectives: Hazardous fuel reduction. 

Location: Pacific Northwest Region: Fremont-Winema National Forests 
(Oregon); 
Project name: Bull; 
Project objectives: Hazardous fuel reduction, road closures. 

Location: Pacific Northwest Region: Fremont-Winema National Forests 
(Oregon); 
Project name: Burnt Willow; 
Project objectives: Hazardous fuel reduction, community economic 
stability. 

Location: Pacific Northwest Region: Fremont-Winema National Forests 
(Oregon); 
Project name: Kava; 
Project objectives: Hazardous fuel reduction, riparian restoration, 
prescribed fire. 

Location: Pacific Northwest Region: Fremont-Winema National Forests 
(Oregon); 
Project name: Trail; 
Project objectives: Postfire restoration, road closures, stream 
rehabilitation. 

Location: Pacific Northwest Region: Siuslaw National Forest (Oregon); 
Project name: Siuslaw Basin Partnership; 
Project objectives: Watershed restoration across federal, state, and 
private lands. 

Location: Southern Region: Francis Marion and Sumter National Forests 
(South Carolina); 
Project name: Price's Bottom; 
Project objectives: Hazardous fuel reduction, wildlife habitat 
improvement, prescribed fire. 

Location: Southern Region: Francis Marion and Sumter National Forests 
(South Carolina); 
Project name: Wando River; 
Project objectives: Hazardous fuel reduction, wildlife nesting habitat. 

Location: Eastern Region: Chequamegon-Nicolet National Forests 
(Wisconsin); 
Project name: Argonne Old Growth; 
Project objectives: Old growth management, culvert replacement, dam 
replacement, noxious weed control. 

Location: Eastern Region: Chequamegon-Nicolet National Forests 
(Wisconsin); 
Project name: Day Lake; 
Project objectives: Hazardous fuel reduction near a wildland-urban 
interface. 

Location: Eastern Region: Chequamegon-Nicolet National Forests 
(Wisconsin); 
Project name: Oak Wilt; 
Project objectives: Disease and noxious weed control. 

Location: Eastern Region: Ottawa National Forest (Michigan); 
Project name: Cisco Camp/ Redlight Creek; 
Project objectives: Vegetation management, construction of traditional 
Native American roundhouse, culvert replacement. 

Location: Eastern Region: Superior National Forest (Minnesota); 
Project name: Karibou; 
Project objectives: Hazardous fuel reduction. 

Location: Eastern Region: Superior National Forest (Minnesota); 
Project name: Nira; 
Project objectives: Road decommissioning. 

Location: Eastern Region: Superior National Forest (Minnesota); 
Project name: Peeler; 
Project objectives: Hazardous fuel reduction, road decommissioning, 
noxious weed treatment. 

Location: Eastern Region: White Mountain National Forest (New 
Hampshire); 
Project name: Discovery Trail; 
Project objectives: Recreation trail construction, educational signage 
and materials. 

Source: GAO analysis of Forest Service data. 

[End of table] 

Table 3: BLM Stewardship Projects Included in GAO's Review: 

Location: California: Redding Field Office; 
Project name: Weaverville; 
Project objectives: Trail building, stream improvement, control of 
invasive species, study of heritage fruit trees. 

Location: Colorado: Royal Gorge Field Office; 
Project name: Arkansas Mountain; 
Project objectives: Hazardous fuel reduction. 

Location: Idaho: Cottonwood Field Office; 
Project name: Corridors; 
Project objectives: Hazardous fuel reduction. 

Location: Montana: Missoula Field Office; 
Project name: Hayes Restoration; 
Project objectives: Forest health improvement, prescribed burning. 

Location: New Mexico: Rio Puerco Field Office; 
Project name: Picnic; 
Project objectives: Hazardous fuel reduction, habitat restoration. 

Location: Oregon: Lakeview District; 
Project name: Gerber Stewardship; 
Project objectives: Hazardous fuel reduction, road improvements, 
habitat restoration. 

Location: Oregon: Medford District; 
Project name: Camp Stewardship; 
Project objectives: Forest health improvement, road decommissioning, 
spring protection. 

Location: Oregon: Medford District; 
Project name: Penny Stewardship; 
Project objectives: Hazardous fuel reduction, community development. 

Location: Utah: Kanab Field Office; 
Project name: Buckskin-Powerline; 
Project objectives: Hazardous fuel reduction. 

Source: GAO analysis of BLM data. 

[End of table] 

To assess agency processes for planning, implementing, and monitoring 
stewardship projects, we reviewed national guidance issued by each 
agency, including guidance for such processes as conducting timber 
appraisals, advertising and awarding contracts, and establishing and 
maintaining monitoring processes. We also reviewed federal contracting 
requirements, including those contained in the Federal Acquisition 
Regulation. In addition, we interviewed national program officials with 
each agency, as well as officials of the Pinchot Institute for 
Conservation, the agencies' contractor for the multiparty monitoring 
and evaluation effort, to obtain information and opinions on agency 
processes for conducting stewardship projects. 

During our site visits, we selectively reviewed projects' contracting 
and financial files to obtain information on the planning, contracting, 
and monitoring processes each agency uses, and interviewed Forest 
Service and BLM project officials at each location, including regional 
stewardship coordinators, project managers, timber sale contracting 
officers, acquisition contracting officers, and others. At several 
sites we also met with the contractors performing the stewardship 
activities in order to obtain their perspectives on the projects, 
including the agency processes they observed for advertising, awarding, 
and overseeing the projects. And finally, at some locations we met with 
stakeholders, such as community groups, researchers, local citizens, 
and representatives of timber industry and environmental groups, in 
order to obtain their perspectives on the use of stewardship 
contracting. 

To identify the successes and challenges the agencies have experienced 
using stewardship contracting, we interviewed agency officials, 
contractors, and stakeholders at many projects we visited to obtain 
their views on the successes and challenges associated with stewardship 
contracting, including the factors they believe contributed to these 
successes and challenges, and the measures taken to overcome the 
challenges. We also reviewed selected project contracting and financial 
files and stakeholder documents to assess the extent to which projects 
offered examples of successes or challenges faced by the agency units 
in using stewardship contracting. Finally, we reviewed national program 
guidance and spoke with national program officials in each agency to 
identify actions the agencies had taken to overcome the challenges we 
or others had identified. 

We conducted this performance audit from August 2007 through October 
2008 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Comments from the Forest Service: 

USDA: 
United States Department of Agriculture: 
Forest Service: 
Washington Office: 

Washington 1400 Independence Avenue, SW: 
Washington, DC 20250: 

File Code: 2400/1580/6320: 
Date: October 10, 2008: 

Robin M. Nazzaro: 
Director. Natural Resources and Environment: 
Government Accountability Office: 
441 G. Street, NW: 
Washington, DC 20548: 

Dear Ms. Nazzaro: 

Thank you for the opportunity to review and comment on the draft 
Government Accountability Office report GAO-09-23, "Federal Land 
Management: Use of Stewardship Contracting Is Increasing, but Agencies 
Could Benefit from Better Data and Contracting Strategies". The Forest 
Service generally agrees with the GAO findings and recommendations and 
has no additional comments on the report. If you have any questions, 
please contact Sandy T. Coleman, Assistant Director for GAO/OIG Audit 
Liaison Staff, at 703-605-4699. 

Sincerely,

Signed by: 

Abigail R. Kimbell: 
Chief: 

cc: Tom Peterson: 
Richard Fitzgerald: 
Sandy T Coleman: 
Jesse L King: 
Clarice Wesley: 
Ronald Hooper:

[End of section] 

Appendix III: Comments from the Department of the Interior: 

United States Department of the Interior: 
Office Of The Secretary: 
Washington, D.C. 20240: 

October 24, 2008: 

Ms. Robin M. Nazzaro: 
Director, Natural Resources and Environment: 
Government Accountability Office: 
441 G Street, N.W.: 
Washington. D.C. 20548-0001: 

Dear Ms. Nazzaro: 

Thank you for the opportunity to review and comment on the Government 
Accountability Office draft report entitled "Federal Land Management: 
Use of Stewardship Contracting Is Increasing hut Agencies Could Benefit 
from Better Data and Contracting Strategies, " (GAO-09-23). 

The Department of the Interior concurs with the findings and 
recommendations for executive action and believes these will help us 
improve how we administer the stewardship contracting authority. 

The enclosure provides technical comments on the draft report. 

If you have any questions, please contact Scott Lieurance, Chief, 
Division of Forests and Woodlands, at (202) 452-0316 or LaVanna 
Stevenson-Harris. BLM Audit Liaison Officer, at (202) 785-6580. 

Sincerely, 

Signed by: 

C. Stephen Allred: 
Assistant Secretary: 
Land and Minerals Management: 

Enclosure: 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Robin M. Nazzaro, (202) 512-3841 or nazzaror@gao.gov: 

Staff Acknowledgments: 

In addition to the individual named above, Steve Gaty, Assistant 
Director; Sandra Davis; and Pam Tumler made key contributions to this 
report. Mark Braza, Nancy Crothers, Carol Henn, Rich Johnson, Ty 
Mitchell, and Bill Woods also made important contributions to this 
report. 

[End of section] 

Footnotes: 

[1] Task order refers to an order for services placed against an 
established contract. 

[2] Pub. L. No. 105-277, § 347, 112 Stat. 2681-298 (1998). 

[3] These retained receipts may be used without further appropriation. 

[4] Pub. L. No. 108-7, § 323, 117 Stat. 275 (2003). 

[5] GAO, Federal Land Management: Additional Guidance on Community 
Involvement Could Enhance Effectiveness of Stewardship Contracting, GAO-
04-652 (Washington, D.C.: June 14, 2004). 

[6] Although there are 12 BLM state offices--11 in the West and 1 in 
the East--the vast majority of BLM-managed land and stewardship 
activity is in the West. Therefore, we did not include the Eastern 
States Office in our review. 

[7] Under the National Forest Management Act of 1976, the Forest 
Service develops land and resource management plans that guide all 
natural resource management activities on the national forests. The act 
includes provisions governing timber sales from national forest lands. 

[8] The Department of the Interior and Related Agencies Appropriations 
Act of 2001 authorized the Forest Service to permit the Colorado State 
Forest Service to conduct watershed restoration and protection services 
on national forest land in Colorado when the state agency is performing 
similar services on adjacent state or private land. Subsequently, the 
Consolidated Appropriations Act of 2005 provided similar authority to 
BLM regarding its lands in Colorado and authorized the Forest Service 
to permit the Utah State Forester to perform restoration services on 
national forest land in Utah. 

[9] In contrast to the other stewardship authorities, best-value 
contracting was not newly introduced in the stewardship legislation. 
The Forest Service and BLM had been permitted to procure services on a 
best-value basis prior to the legislation. Under the stewardship 
contracting legislation, however, the agencies are required--rather 
than simply permitted--to use best-value contracting when awarding 
stewardship contracts. 

[10] Pub. L. No. 106-113, 113 Stat. 1501A-201 (1999). 

[11] Pub. L. No. 106-291, 114 Stat. 998 (2000); Pub. L. No. 107-63, 115 
Stat. 471 (2001). 

[12] In addition to contracts, the BLM numbers include the four 
agreements BLM had entered into through fiscal year 2007, which are 
intermingled with contracts in BLM's tracking system. The Forest 
Service numbers do not include agreements because that agency does not 
track agreements nationally. Forest Service officials told us that from 
fiscal year 2003 through fiscal year 2007, the agency had entered into 
12 agreements with partner organizations, but data on these agreements-
-such as timber volume or acreage involved--are not captured in 
automated systems. 

[13] GAO, Budget Issues: Alternative Approaches to Finance Federal 
Capital, GAO-03-1011 (Washington, D.C.: Aug. 21, 2003). 

[14] These figures represent individual national forests in each 
region. Many of these forests are managed together as part of larger 
administrative units composed of two or more forests. 

[15] BLM's use of 10-year umbrella-type contracts with multiple task 
orders means that the number of contracts is greater than the number of 
projects carried out by these contracts. For example, in Oregon, one 
stewardship project is being carried out through 19 different task 
orders. Each task order is separately funded and has a specified 
performance period, commonly a year or less. 

[16] BLM reports its timber volume in board feet rather than cubic feet 
(1 board foot equals 12 inches by 12 inches by 1 inch). We converted 
BLM's reported volumes to ccf for comparability with Forest Service 
volumes; 500 board feet is approximately 1 ccf. 

[17] Approximately $170,000 of this total consists of estimated service 
values rather than actual values, because actual values were 
unavailable for a small number of contracts. 

[18] The retained receipts are available for expenditure without 
further appropriation. 

[19] GAO, Federal Timber Sales: Forest Service Could Improve Efficiency 
of Field-Level Timber Sales Management by Maintaining More Detailed 
Data, GAO-07-764 (Washington, D.C.: June 27, 2007). 

[20] According to the Forest Service, a keystone species is an organism 
that has a significant influence on the ecosystem it occupies--an 
influence disproportionately large compared with its abundance. The red-
cockaded woodpecker is also listed as endangered under the Endangered 
Species Act. 

[21] Pub. L. No. 108-278, § 2, 118 Stat. 868 (2004). 

[22] The Lakeview Sustained Yield Unit was established to promote the 
stability of nearby communities through steady supplies of forest 
products. 

[23] The Pinchot Institute for Conservation, a nonprofit organization, 
is a center for research and policy analysis supporting sustainable 
management and conservation of forests. 

[24] The National Forest Management Act of 1976, which extensively 
amended the Forest and Rangeland Renewable Resources Planning Act of 
1974, states that the Secretary of Agriculture is authorized to sell 
timber--at not less than appraised value--located on National Forest 
System lands for the purpose of achieving the policies set forth in the 
Multiple-Use Sustained-Yield Act of 1960 and the Forest and Rangeland 
Renewable Resources Planning Act of 1974. 

[25] The Rocky Mountain Region covers Colorado, Kansas, Nebraska, South 
Dakota, and most of Wyoming; the Intermountain Region covers Nevada, 
Utah, most of Idaho, and part of Wyoming. 

[26] FAR 19.502-2. 

[27] The K-V trust fund, established by the Knutson-Vandenberg Act of 
1930 (16 U.S.C. §§ 576-576b), was created to collect a portion of 
timber sales revenue to pay for the reforestation of areas from which 
timber is cut. The Washington Office annually takes a portion of each 
field unit's K-V funds and other funds, such as salvage sale and brush 
disposal funds, to help pay for headquarters and regional office 
overhead expenses (e.g., rent and utilities). 

[28] GAO, Natural Resource Management: Opportunities Exist to Enhance 
Federal Participation in Collaborative Efforts to Reduce Conflicts and 
Improve Natural Resource Conditions, GAO-08-262 (Washington, D.C.: Feb. 
12, 2008). 

[29] Pub. L. No. 106-393, 114 Stat. 1607 (2000). The act covers all 
National Forest System lands as well as certain BLM lands in Oregon. 

[30] For fiscal year 2007, the number of counties that opted to 
continue to receive a portion of timber revenues was 139, or 17 percent 
of the total. Another 679 counties (83 percent of the total) elected 
the second option. 

[31] Pub. L. No. 110-343, § 601 (2008). The reauthorization provided 
for a new calculation methodology based on factors such as the acreage 
of certain federally managed lands, previous payments, and per capita 
personal income. Payments will decrease each year until they are phased 
out completely by the end of fiscal year 2011. 

[32] This association is an interest group that represents the counties 
in western Oregon within which lie the revested Oregon and California 
(O&C) Railroad Grant Lands. Counties receive 75 percent of receipts 
from timber sales on O&C lands, as compared with the 25 percent that 
other counties typically receive. 

[33] GAO, Natural Resources: Federal Agencies Are Engaged in Various 
Efforts to Promote the Utilization of Woody Biomass, but Significant 
Obstacles to Its Use Remain, GAO-05-373 (Washington, D.C.: May 13, 
2005); Natural Resources: Woody Biomass Users' Experiences Offer 
Insights for Government Efforts Aimed at Promoting Its Use, GAO-06-336 
(Washington, D.C.: Mar. 22, 2006). 

[34] The cancellation ceiling applies only to long-term contracts known 
as multiyear contracts, which represent an agency commitment over 
several years; it does not apply to multiple-year "options" contracts, 
which give the agency the option to renew or recompete the contract 
after the first year. In general, according to Forest Service and 
nonagency officials, contractors prefer multiyear contracts when 
seeking assurance of a long-term supply. As of October 2008, the Forest 
Service had awarded two long-term multiyear contracts and had 
advertised a third; BLM had not awarded any long-term multiyear 
contracts. 

[35] The cancellation ceiling represents the maximum cancellation 
payment the government will include in the contract. 

[36] See Defense Federal Acquisition Regulation Supplement § 217.171. 

[37] Established in 1910 by the Forest Service, the Forest Products 
Laboratory provides grants for research on various aspects of wood use, 
such as pulp and paper products, housing and structural uses of wood, 
and wood preservation. 

[38] Recently proposed legislation would, if enacted, allow the Forest 
Service to use a newly authorized source to obligate funds covering a 
portion of the cancellation ceiling. Senate Bill 2593 would authorize 
the establishment of a fund--the Collaborative Forest Landscape 
Restoration Fund--to be used to pay up to half the cost of carrying out 
and monitoring ecological restoration treatments proposed on national 
forest land; these costs include the obligation of funds to cover 
cancellation costs associated with contracts carrying out such 
treatments. As of October 2008, the proposed legislation had not been 
enacted. 

[39] GAO, Wildland Fire Management: Better Information and a Systematic 
Process Could Improve Agencies' Approach to Allocating Fuel Reduction 
Funds and Selecting Projects, GAO-07-1168 (Washington, D.C.: Sept. 28, 
2007). 

[40] GAO, Federal Timber Sales: Forest Service Could Improve Efficiency 
of Field-Level Timber Sales Management by Maintaining More Detailed 
Data, GAO-07-764 (Washington, D.C.: June 27, 2007). 

[41] Results from nonprobability samples cannot be used to make 
inferences about a population. This is because in a nonprobability 
sample, some elements of the population being studied have no chance or 
an unknown chance of being selected as part of the sample. 

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