Modification of Timber Sale Contracts

An advance decision was requested concerning proposed extensions by the Forest Service of a number of timber sales contracts due to extremely unfavorable economic conditions in the timber industry. It appeared that the contractors would be unable to perform within the contract terms and would face default terminations if the contracts were not extended. The extensions were made under statutory authority, which permitted extensions when substantial overriding public interest justified the extensions. The agency modified the payment provision of the contract to benefit the Government. After the extension, the contracts contained a clause requiring monthly payments to be made during the first operating season so that all timber would be paid for by the last day of the season, whether or not timber was actually cut. When the first payments were due, economic conditions had not improved in the timber industry. Consequently, the agency proposed a further modification of the payment terms of the contract to essentially waive the monthly payment requirements and return to the previous system of payment just prior to timber cutting. In return, the Forest Service proposed to require the contractors to pay interest on the deferred payments until payment was actually made. GAO held that modification of timber sale contracts to permit contractors to defer required monthly payments was permissible where the contractors agreed to pay interest for the deferred payment period. Accordingly, there was no legal objection to this proposed modification.