Forest Service Timber Sales Program:

Questionable Need for Contract Term Extensions and Status of Efforts to Reduce Costs

T-RCED-92-58: Published: Apr 28, 1992. Publicly Released: Apr 28, 1992.

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GAO discussed the Forest Service timber sales program, focusing on: (1) a regulation allowing for timber sales contract extensions in the event of drastic price reductions for wood products; and (2) the Service's efforts to reduce the program's costs. GAO noted that: (1) the Service did not adequately evaluate the costs and benefits of allowing contract extensions; (2) the regulation is inconsistent with other federal agencies' and states' regulations on timber sales contract extensions; (3) in implementing the regulation, the Service used a formula that included data that were not adjusted to account for seasonal price fluctuations; (4) the Service allowed contracts that already reflected falling prices to be eligible for extension; and (5) the Service established two task forces to review timber sales program costs and make recommendations to reduce program costs.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Forest Service has reexamined the regulation along the lines suggested by GAO and has determined that, while the regulation is needed, it should be modified as recommended by GAO.

    Recommendation: The Secretary of Agriculture should direct the Chief, Forest Service, to reexamine the need for this regulation. The reexamination should evaluate the costs and benefits to the government of granting the current extensions. The evaluation should also consider the availability of the contract provision providing for automatic timber price reductions in the event of sharp drops in wood product prices.

    Agency Affected: Department of Agriculture

  2. Status: Closed - Implemented

    Comments: The Forest Service agreed with the recommendation and on May 1, 1998, published a final rule in the Federal Register that amended 36 CFR Part 223, relating to Market-Related Contract Term Additions, to include the changes recommended in the report.

    Recommendation: If the Forest Service, in its reexamination, finds that the regulation is justified, the Secretary of Agriculture should direct the Chief, Forest Service, to: (1) stop using the Bureau of Labor Statistics' unadjusted indexes in reaching determinations that wood product prices have drastically declined; and (2) make eligible only those contracts that do not already reflect falling prices.

    Agency Affected: Department of Agriculture


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