B-168544, MAR. 12, 1970

B-168544, MAR. 12, 1970

TIMBER SALES--RATE REDETERMINATION--RELIEF DENIED NOTWITHSTANDING FS FAVORS MODIFYING TIMBER SALE CONTRACT TO PROVIDE, AT ORIGINAL BID STUMPAGE RATE, ADDITIONAL LOGGING TIME EQUIVALENT TO THAT LOST THROUGH FS'S STOP ORDER, ON BASIS OF ADVANTAGE TO GOVT; IN THAT FS BELIEVES PURCHASER COULD ESTABLISH RIGHT IN COURT TO DAMAGE AWARD SUBSTANTIALLY EXCEEDING LOSS TO GOVT. UNDER REQUESTED MODIFICATION, RELIEF SOUGHT IS DENIED BECAUSE IT IS BEYOND TERMS OF CONTRACT, WHICH REQUIRE APPLICATION OF STUMPAGE RATE IN EFFECT IMMEDIATELY PRIOR TO ADJUSTMENT PERIOD WHEN CONTRACT TERMINATION DATE IS BEING ADJUSTED, AND IT IS NOT BELIEVED SUGGESTED ADVANTAGE TO GOVT. PROVIDES LEGAL BASIS TO MODIFY CONTRACT FOR CONTRACTOR'S BENEFIT WITHOUT TANGIBLE BENEFITS, AMOUNTING TO ADEQUATE CONSIDERATION, ACCRUING TO GOVT. SEE COMP. GEN. DECS. CITED.

TO MR. SECRETARY:

REFERENCE IS MADE TO LETTERS (2450) DATED DECEMBER 3, 1969, AND JANUARY 6, 1970, FROM THE CHIEF, FOREST SERVICE, REQUESTING OUR DECISION ON A PROPOSED MODIFICATION OF TIMBER SALE CONTRACT NO. 03-319 WITH THE STAR VALLEY LUMBER COMPANY, AFTON, WYOMING.

THE TIMBER SALE CONTRACT COVERING APPROXIMATELY 14,555,000 BOARD FEET OF TIMBER WAS AWARDED TO THE STAR VALLEY LUMBER COMPANY ON JUNE 9, 1966, WITH JUNE 30, 1971, AS THE CONTRACT TERMINATION DATE. THE CONTRACT INCLUDED A PROVISION FOR REDETERMINATION OF STUMPAGE RATES ON JUNE 30, 1969. IT IS REPORTED THAT THE RATES HAVE BEEN REDETERMINED AS OF JULY 1, 1969, RESULTING IN AN INCREASE FROM THE PURCHASER'S ORIGINAL BID RATES, WHICH WERE APPROXIMATELY $1.79 PER THOUSAND BOARD FEET, TO $39.40 PER THOUSAND BOARD FEET.

THE CONTRACT ALSO PROVIDED IN SECTION A7 THAT AT LEAST 8,730 THOUSAND BOARD FEET MUST BE CUT AND SCALED BEFORE LOWER RATES DEVELOPED FROM SCHEDULED RATE REDETERMINATION CAN BECOME EFFECTIVE. IT IS REPORTED THAT ON SEPTEMBER 12, 1966, THE FOREST SERVICE ORDERED THE PURCHASER TO STAY OFF SHEEP CREEK ROAD WHICH ROAD WAS THE ACCESS ROUTE NEEDED TO REACH THE TRACT COVERING THE TIMBER SALE. THIS ACTION WAS NECESSITATED BY A SEPARATE ROAD CONSTRUCTION CONTRACT AND THE PURCHASER WAS PRECLUDED FROM USING THE ROAD UNTIL CONSTRUCTION WAS COMPLETE. SUCH ROAD CONSTRUCTION WAS NOT COMPLETED AND ACCEPTED BY THE FOREST SERVICE UNTIL EARLY OCTOBER 1968, ABOUT 25 MONTHS LATER. THE PURCHASER, THEREFORE, WAS STOPPED FROM LOGGING FOR MORE THAN 2 YEARS. PRIOR TO BEING ORDERED TO STAY OFF THE SHEEP CREEK ROAD, THE PURCHASER HAD CUT APPROXIMATELY 1,700 THOUSAND BOARD FEET.

THE PURCHASER WAS ENTITLED UNDER THE CONTRACT TO LOG THE SALE DURING ALL OF THE OPERATING MONTHS OF 1966, 1967 AND 1968 AT HIS BID RATES OF APPROXIMATELY $1.79 PER THOUSAND BOARD FEET. IT IS REPORTED THAT THE 25- MONTH DELAY CAUSED BY INSTRUCTIONS OF THE FOREST SERVICE COVERED A TOTAL OF 8 1/2 OPERATING MONTHS DURING WHICH THE PURCHASER WAS PRECLUDED FROM PERFORMING LOGGING OPERATIONS UNDER THE CONTRACT.

IN CONNECTION WITH THE FOREGOING, SECTION B8.22 OF THE CONTRACT PROVIDES THAT IF THE CONTRACTOR EXPERIENCES AN ABNORMAL DELAY OR INTERRUPTION OF 10 OR MORE CONSECUTIVE DAYS DURING A NORMAL OPERATING SEASON DUE TO CAUSES BEYOND HIS CONTROL, HE IS ENTITLED TO AN EQUIVALENT NUMBER OF OPERATING DAYS IN THE APPLICABLE OPERATING SEASON BUT THAT THE CONTRACT RATES SHALL BE THOSE SPECIFIED IN SECTION B3.14. THAT SECTION PROVIDES THAT WHEN THE CONTRACT TERMINATION DATE IS ADJUSTED UNDER SECTION B8.22, CURRENT CONTRACT RATES SHALL BE DETERMINED IN THE SAME MANNER AS PRIOR TO THE ADJUSTMENT PERIOD.

IT IS STATED THAT SUCH AN ADJUSTMENT OF THE TERMINATION DATE HAS BEEN GRANTED, BUT THE ADJUSTMENT (8 1/2 OPERATING MONTHS) COMES AT THE END OF THE SALE PERIOD AND DOES NOT GIVE THE PURCHASER EQUIVALENT ADDITIONAL CUTTING TIME AT HIS ORIGINAL BID RATES.

WE ARE ADVISED THAT THE 1969 RATE REDETERMINATION WAS BASED ON EXTREMELY HIGH LUMBER MARKET PRICES THAT PREVAILED IN EARLY 1969. SINCE THAT TIME, THERE HAS OCCURRED A MARKET BREAK, AND TIMBER PRICES HAVE FALLEN TO MUCH LOWER LEVELS. WHILE THE CONTRACT PROVIDES AT SECTION B3.34 FOR EMERGENCY RATE REDETERMINATIONS UNDER SUCH CIRCUMSTANCES, SUCH REDETERMINATION CANNOT BECOME EFFECTIVE UNTIL AT LEAST 8,730 THOUSAND BOARD FEET AS PRESCRIBED IN SECTION A7 HAVE BEEN CUT AND SCALED. THEREFORE, THE PURCHASER WOULD HAVE TO PAY FOR OVER 7,000 THOUSAND BOARD FEET AT THE $39.40 RATE BEFORE A NEW EMERGENCY REDETERMINED RATE COULD BECOME EFFECTIVE. WITHOUT MODIFICATION TO THE CONTRACT AS ADMINISTRATIVELY RECOMMENDED, THE PURCHASER WOULD SUFFER A LOSS THROUGH NO FAULT OF HIS OWN.

IT IS WELL ESTABLISHED THAT NO OFFICER OR AGENT OF THE GOVERNMENT HAS AUTHORITY TO GIVE AWAY THE MONEY OR PROPERTY OF THE UNITED STATES EITHER DIRECTLY OR BY THE RELEASE OF VESTED CONTRACTUAL RIGHTS WITHOUT ADEQUATE LEGAL CONSIDERATION. SEE 40 COMP. GEN. 309, 311 (1960), AND CASES CITED THEREIN. IN THIS RESPECT, IT IS ADMINISTRATIVELY REPORTED THAT IN THE EVENT OF A COURT SUIT FOR DAMAGES BY THE PURCHASER, THE FOREST SERVICE WOULD HAVE TO ADMIT THAT IT DID, IN FACT, PREVENT THE PURCHASER FROM LOGGING DURING A 2-YEAR PERIOD WHEN HIS STUMPAGE RATES WERE APPROXIMATELY $1.79 PER THOUSAND BOARD FEET AND IN THE JUDGMENT OF THE FOREST SERVICE THE PURCHASER COULD ESTABLISH HIS RIGHT IN COURT TO A DAMAGE AWARD THAT MIGHT SUBSTANTIALLY EXCEED THE AMOUNT THE REQUESTED CONTRACT AMENDMENT WOULD PROVIDE. IT IS ALSO STATED THAT ANOTHER ADVANTAGE TO THE GOVERNMENT IS THAT THE PURCHASER WILL BE ABLE TO CUT AND PAY FOR THE TIMBER IF THE AMENDMENT IS PROCESSED, WHILE THE FOREST SERVICE'S CHANCES OF OBTAINING DAMAGES FOR FAILURE TO CUT (IN THE ABSENCE OF THE REQUESTED AMENDMENT) WOULD APPEAR TO BE QUESTIONABLE.

BASED ON THE FOREGOING, THE FOREST SERVICE FAVORS MODIFYING THE CONTRACT TO PROVIDE ADDITIONAL LOGGING TIME EQUIVALENT TO THAT WHICH WAS LOST BY THE PURCHASER AT THE ORDER OF THE FOREST SERVICE AT HIS ORIGINAL BID (FLAT) RATES. HOWEVER, WE DO NOT BELIEVE THAT THE ABOVE ADVANTAGES TO THE GOVERNMENT PROVIDE A LEGAL BASIS TO MODIFY THE CONTRACT FOR THE BENEFIT OF THE CONTRACTOR WITHOUT TANGIBLE BENEFITS, AMOUNTING TO ADEQUATE CONSIDERATION, ACCRUING TO THE GOVERNMENT. UNDER SECTION B8.22, THE TERMINATION DATE OF THE CONTRACT PROPERLY MAY BE ADJUSTED BUT, IN THAT EVENT, THE CONTRACT STUMPAGE RATES MUST BE THOSE SPECIFIED IN SECTION B3.14, THAT IS, THE CURRENT CONTRACT RATES AS "DETERMINED IN THE SAME MANNER AS IMMEDIATELY PRIOR TO THE ADJUSTMENT PERIOD." IN THIS REGARD, SEE B-165984 DATED FEBRUARY 7, 1969. IT WOULD SEEM THAT THE JULY 1, 1969, REDETERMINED RATES ARE THE ONLY APPLICABLE CONTRACT RATES THAT ARE IN EFFECT AT LEAST UNTIL JUNE 30, 1970. IN THAT CONNECTION, WE NOTE THAT SECTION A7, "SCHEDULED RATE REDETERMINATION, APPLICABLE TO B3.33," AUTHORIZES RATE REDETERMINATION AS OF JUNE 30, 1969, "AND EACH YEAR THEREAFTER DURING THE TERM OF THIS CONTRACT." IT THUS APPEARS THAT THE CONTRACTOR WILL BE ENTITLED TO A SCHEDULED RATE REDETERMINATION AS OF JUNE 30, 1970, WHICH, WE UNDERSTAND, WILL REFLECT RATES LOWER THAN THOSE REDETERMINED AS OF JUNE 30, 1969. THIS RATE REDETERMINATION, WE BELIEVE, WILL AFFORD SUBSTANTIAL RELIEF TO THE CONTRACTOR WITHIN THE TERMS OF THE CONTRACT, AS WILL SUBSEQUENT RATE DETERMINATIONS EFFECTED ANNUALLY DURING THE TERM OF THE CONTRACT AS EXTENDED.