B-171505, JAN 13, 1971

B-171505, JAN 13, 1971

TIMBER SALE - RATE REDETERMINATION DECISION CONCERNING CORRECT PRICE FOREST SERVICE SHOULD CHARGE STEED LOGGING COMPANY UNDER A TIMBER SALES CONTRACT FOLLOWING A RATE REDETERMINATION. SINCE THE RATE REDETERMINATION WAS INCREASED AS OF JUNE 30, 1969, BUT PURCHASER, STEED LOGGING COMPANY WAS NOT NOTIFIED OF THE RATE INCREASE UNTIL JULY 8, 1969, AND THE FOREST SERVICE DID NOT FOLLOW ITS USUAL PROCEDURE OF ADVISING THE PURCHASER OF THE REDETERMINATION RATES PRIOR TO THEIR EFFECTIVE DATE (FOREST SERVICE MANUAL 2424.12 AND 2424.4) AND BECAUSE THE RATE INCREASE WAS UNUSUALLY LARGE, ANY TIMBER CUT BETWEEN JUNE 30, AND JULY 7, 1969, SHOULD BE CHARGED AT RATES IN EFFECT PRIOR TO THE REDETERMINATION.

TO MR. SECRETARY:

REFERENCE IS MADE TO A LETTER DATED DECEMBER 10, 1970, FROM THE DEPUTY CHIEF, U.S. DEPARTMENT OF AGRICULTURE FOREST SERVICE, REFERENCE 2450, REQUESTING OUR DECISION WITH REGARD TO RATES TO BE PAID UNDER A FOREST SERVICE TIMBER SALE CONTRACT WITH STEED LOGGING COMPANY OF ESCALANTE, UTAH.

THE SUBJECT CONTRACT (NO. 07-62), FOR THE SALE OF TIMBER AT CANAAN MOUNTAIN, WAS AWARDED JUNE 28, 1966. IT IS REPORTED THAT, PURSUANT TO CONTRACT PARAGRAPH A7, SCHEDULED RATE REDETERMINATION, STUMPAGE RATES WERE INCREASED AS OF JUNE 30, 1969. THE RATES IN EFFECT PRIOR TO THE SCHEDULED RATE REDETERMINATION WERE: PONDEROSA PINE SAWTIMBER $3.00 PER MBF; DOUGLAS -FIR SAWTIMBER $2.00 PER MBF; WHITE FIR SAWTIMBER $1.00 PER MBF; OLDER DEAD SAWTIMBER $1.00 PER MBF. THE REDETERMINED RATES THAT RESULTED FROM THE SCHEDULED RATE REDETERMINATION WERE AS FOLLOWS: PONDEROSA PINE SAWTIMBER $32.55 PER MBF; DOUGLAS-FIR SAWTIMBER $45.01 PER MBF; WHITE FIR SAWTIMBER $41.64 PER MBF; AND OLDER DEAD SAWTIMBER $1.00 PER MBF.

YOU STATE THAT THE PURCHASER KNEW THAT A SCHEDULED RATE REDETERMINATION WAS IN PROCESS AND WOULD TAKE EFFECT ON JUNE 30, 1969. DUE TO AN OVERSIGHT, HOWEVER, THE FOREST SERVICE FAILED TO NOTIFY THE PURCHASER OF THE RATE INCREASE UNTIL JULY 8, 1969. YOU STATE FURTHER THAT THE PURCHASER HAD NO KNOWLEDGE THAT THE REDETERMINED RATES WOULD BE SO HIGH, AND, THEREFORE, FELT HE COULD AFFORD TO CONTINUE HIS LOGGING OPERATIONS ON THE SALE. CONSEQUENTLY, ON JULY 2, 1969, AND JULY 3, 1969, THE PURCHASER HAULED 94,300 BOARD FEET OF TIMBER FROM THE CANAAN MOUNTAIN TIMBER SALE. UPON RECEIPT OF THE FOREST SERVICE LETTER OF JULY 8, THE PURCHASER IMMEDIATELY SUSPENDED HAULING OPERATIONS.

YOU RECOMMEND THAT, SINCE THE FOREST SERVICE DID NOT FOLLOW ITS USUAL PROCEDURES IN ADVISING THE PURCHASER OF THE REDETERMINED RATES PRIOR TO THEIR EFFECTIVE DATE, IT BE ALLOWED TO CHARGE THE PURCHASER FOR THE TIMBER CUT BETWEEN JUNE 30 AND JULY 7, 1969, AT RATES IN EFFECT PRIOR TO JUNE 30, 1969.

YOU INCLUDE IN YOUR STATEMENT OF FACTS THE FOLLOWING SUMMARY OF THE RATES AND VARIOUS DIFFERENCES INVOLVED:

"I. RATE IN EFFECT ON AND PRIOR TO JUNE 30, 1969, AND VALUE OF TIMBER REMOVED BETWEEN 7/1/69 TO 7/8/69 AT THESE RATES. THIS IS THE RATE WE PROPOSE TO BE PERMITTED TO CHARGE THE PURCHASER.

STUMPAGE QUANTITY

SPECIES RATES/MBF REMOVED TIMBER VALUE

PONDEROSA PINE $3.00 45.69 MBF $137.07

DOUGLAS-FIR $2.00 4.03 MBF $ 8.06

WHITE FIR $1.00 43.63 MBF$ 43.63

OLDER DEAD $1.00 .95 MBF $ .95

TOTAL TIMBER VALUE $189.71

94.30 MBF

"II. RATE REDETERMINATION IN EFFECT ON AND AFTER JULY 1, 1969, AND THE VALUE OF TIMBER REMOVED BETWEEN 7/1/69 TO 7/8/69 AT THESE RATES. THIS IS THE RATE WE HAVE CHARGED THE PURCHASER BECAUSE OF THE SCHEDULED RATE REDETERMINATION.

STUMPAGE QUANTITY

SPECIES RATES/MBF REMOVED TIMBER VALUE

PONDEROSA PINE $32.55 45.69 MBF $1,487.21

DOUGLAS-FIR $45.01 4.03 MBF $ 181.39

WHITE FIR $41.64 43.63 MBF $1,816.75

OLDER DEAD $ 1.00 .95 MBF $ .95

94.30 MBF

TOTAL TIMBER VALUE$3,486.30

"III. DIFFERENCE IN STUMPAGE VALUE BETWEEN ORIGINAL CONTRACT RATES AND RATES IN EFFECT AFTER SCHEDULED RATE REDETERMINATION:

TOTAL VALUE TOTAL VALUE

REDETERMINED RATES - ORIGINAL RATES - DIFFERENCE

$3,486.30 $189.71 $3,296.59"

ALTHOUGH THE CONTRACT DOES NOT SPECIFICALLY REQUIRE THE FOREST SERVICE TO NOTIFY THE PURCHASER OF THE RATE REDETERMINATION PRIOR TO THE EFFECTIVE DATE, YOU STATE THAT THE FOREST SERVICE MANUAL DOES MAKE TWO STATEMENTS IN THIS REGARD:

"1. FSM 2424.12, ESTABLISHMENT OF REDETERMINED RATES, PARAGRAPH 1 READS AS FOLLOWS: 'EXCEPT IN CASES WHERE A PURCHASER EXECUTES A DOCUMENT SUCH AS FORM 2400-10 WHICH INDICATES HIS KNOWLEDGE OF REDETERMINED RATES AND HIS ACCEPTANCE OF THEM, PURCHASERS WILL BE NOTIFIED OF THE ESTABLISHMENT OF REDETERMINED RATES BY LETTER SENT BY CERTIFIED MAIL - RETURN RECEIPT REQUESTED.' IN THIS PARTICULAR CASE, THE PURCHASER DID NOT EXECUTE ANY DOCUMENTS AND, THEREFORE, HAD NO KNOWLEDGE OF THE RATE REDETERMINATION.

"2. THE FOREST SERVICE MANUAL FURTHER STATES IN FSM 2424.4, RATE REDETERMINATION TIMING: 'RATE REDETERMINATION SHOULD BE COMPLETED AND APPROVED THIRTY DAYS PRIOR TO THE RATE REDETERMINATION DATE IN ORDER TO PROVIDE ADEQUATE TIME FOR DISCUSSION OF PROPOSED RATES WITH THE PURCHASER.' IT IS THE PURCHASER'S CONTENTION THAT HAD HE BEEN NOTIFIED OF THE RATE REDETERMINATION ON JUNE 30, 1969, HE WOULD HAVE SUSPENDED HAULING IMMEDIATELY."

THE FAILURE OF THE FOREST SERVICE TO NOTIFY THE CONTRACTOR OF THE RATE REDETERMINATIONS PRIOR TO THEIR EFFECTIVE DATE, IN ACCORDANCE WITH PROCEDURES SET FORTH IN THE FOREST SERVICE MANUAL, - AND THERE IS NO INDICATION THAT THE CONTRACTOR HAD ANY ADVANCE KNOWLEDGE OF THE INCREASES - COUPLED WITH THE UNUSUALLY LARGE RISE IN RATES MIGHT WELL BE REGARDED AS RENDERING THE ADDITIONAL CHARGES UNCONSCIONABLE. ACCORDINGLY, TIMBER CUT BETWEEN JUNE 30 AND JULY 7, 1969, SHOULD BE CHARGED AT RATES IN EFFECT PRIOR TO JUNE 30, 1969.