DENIED IN PART:  February 27, 2015
CBCA 3725
HEARTHSTONE, INC.,
Appellant,
v.
DEPARTMENT OF AGRICULTURE,
Respondent.
Jason S. Randolph, Dandridge, TN, counsel for Appellant.
Jay McWhirter, Office of the General Counsel, Department of Agriculture, Atlanta,
GA, counsel for Respondent.
Before Board Judges SOMERS, McCANN, and SULLIVAN.  
SULLIVAN, Board Judge.
Hearthstone, Inc. appeals the decision of the contracting officer for the Department
of Agriculture, Forest Service, terminating Hearthstone’s timber sale contract for default and
assessing reprocurement costs as damages.  The parties have submitted the appeal for a
decision on the record, pursuant to Rule 19 of the Rules of the Civilian Board of Contract
Appeals.  48 CFR 6101.19 (2013).  For the reasons that follow, the Board denies in part
Hearthstone’s appeal and seeks further evidence and briefing from the parties regarding the
demand for reprocurement costs.  


CBCA 3725 2
Background
I. Contract Terms
Hearthstone was awarded the contract for the White Bull timber sale on September
26, 2006, Appeal File, Exhibit 141, with the highest bid of $349,427.29.  Exhibit 7 at 79. 
Hearthstone, in its bid, matched the advertised rate for each species except for eastern white
pine, for which it bid double the advertised rate.  Id. at 74.  The Forest Service estimated that
eastern white pine would account for three quarters of the timber to be harvested in the sale. 
Exhibit 19 at 116.  At the time of contract award, Hearthstone paid a bid deposit of $18,600
and a down payment of $32,700 and put up a performance bond of $35,000.  Exhibits 10-12. 
The original contract termination date was May 31, 2010, and the original date for the
initial payment on the contract was July 26, 2008.  Exhibit 19 at 120, 122.  The contract
contained several provisions by which these dates could be extended.  Clause BT8.212,
Market-Related Contract Term Addition, permitted these dates to be adjusted when “a drastic
reduction in wood product prices has occurred.”  Exhibit 20 at 148.  Changes in the producer
price index listed in the contract would be analyzed to determine if a drastic reduction had
occurred.  36 CFR 223.52 (2004).  If the conditions were triggered, the contract termination
date could be extended by up to three years and the dates for periodic payments would be
extended by one month for each month the contract term was extended.  Exhibit 20 at 149. 
The contract also permitted Hearthstone to request a rate redetermination during the original
term of the contract if the producer price index declined by twenty-five percent or more.  Id.
at 133 (Clause BT3.34, Emergency Rate Redetermination).  
During the pendency of the contract, the Food, Conservation, and Energy Act of 2008
(2008 Farm Bill) was enacted.  Pub. L. No. 110-246, 122 Stat. 1651 (June 18, 2008).  Section
8401(b) of the statute provided that a contractor with a qualifying timber sale contract could
request, within ninety days of the enactment of the act, cancellation of the contract, a rate
redetermination, or the substitution of the producer price index used on the contract to more
accurately reflect market conditions.  Section 8401(c) permitted the Forest Service to extend
the contract termination date, through the Market-Related Contract Term Addition clause,
by four years, instead of three allowed by regulation.        
1 All exhibits are found in the appeal file, unless otherwise noted.  The pages
numbers cited are the Bates numbers indicated on the exhibits.  

CBCA 3725 3
II. Events Leading to Contract Default Termination
Hearthstone manufactures log homes and planned to use the eastern white pine that
it would harvest in the manufacture of those homes.  Exhibits 86 at 337-38, 90 at 354.  After
the contract was awarded, the economy suffered a significant downturn, which resulted in
declines in the producer price index used on the contract.  Exhibit 86 at 338.  Based upon
these declines, the Forest Service notified Hearthstone on seven separate occasions between
August 2007 and July 2009 that Hearthstone could request an extension of the contract term
due to market conditions as permitted by clause BT8.212.  Exhibits 24, 26, 31, 44, 47, 53,
57.  The Forest Service also advised Hearthstone of the relief available to it under the 2008
Farm Bill.  Exhibits 34, 37.  It appears from the record that Hearthstone requested and the
Forest Service granted each of these extensions with a commensurate extension of the date
by which Hearthstone had to pay the initial payment.  Exhibits 27, 28, 33, 35, 40, 41, 55, 60,
75.  As a result, the contract termination date was extended to May 31, 2014, and the date by
which Hearthstone would have to make its initial payment was pushed to August 23, 2012. 
Exhibit 76.      
Because of the economic declines in the producer price index for the contract, the
contracting officer also notified Hearthstone that it could seek a rate redetermination,
pursuant to clause BT3.34.  Exhibit 30.  After Hearthstone requested the rate
redetermination, the Forest Service reappraised the value of the sale and reduced the contract
price by $6550.55.  Exhibit 39.  The contracting officer also advised Hearthstone that it could
reduce temporarily the amount of the down payment and change its performance bond to
obtain a refund of some of the bond fees.  Exhibits 62, 66.  Finally, the contracting officer
attempted to obtain a subcontractor for Hearthstone that could begin performance of the
contract, but apparently these efforts did not succeed.  Exhibits 73, 86.       
Despite the relief provided by the terms of the contract and the 2008 Farm Bill, 
Hearthstone never commenced harvesting the timber and failed to pay the initial progress
payment on August 23, 2012.  Exhibit 86.  Hearthstone explains that, because the log home
business was depressed, it did not have the funds necessary to perform the contract. 
Appellant’s Reply to Respondent’s Case Submission Brief.  After Hearthstone failed to make
the initial payment, the Forest Service suspended the contract and gave Hearthstone thirty
days to make the payment.  Exhibit 85.  When Hearthstone still failed to make the initial
payment, the contracting officer obtained the concurrence of the regional forester and
terminated the sale contract by letter dated January 22, 2013.  Exhibit 88. 
By letter dated November 13, 2013, the contracting officer sought the payment of
damages from Hearthstone, as permitted by clause BT9.4 of the contract.  Exhibit 89 at 344-
45.  The Forest Service put the sale out for re-bid and awarded the contract to another

CBCA 3725 4
contractor at a price of $237,132.10.  Id. at 346.  The Forest Service reports that this
contractor was able to harvest the timber.  Answer ¶ 6.  The Forest Service sought the
difference between the bid price Hearthstone offered, as adjusted through the rate
redetermination ($342,876.74), and the highest bid price on the re-sale ($237,132.10), which
totaled $105,744.64.  The contracting officer also sought the administrative costs of resale
($1826) and interest on the delayed stumpage payments ($7714.73).  After deducting the
amounts Hearthstone had on deposit, the Forest Service issued a demand for damages in the
amount of $79,259.37.  Exhibit 89 at 349.  
Discussion
Burdens of Proof
Hearthstone appeals the contracting officer’s decision seeking reprocurement costs
and the underlying termination of the timber sale contract for default.  See C-Shore
International, Inc. v. Department of Agriculture, CBCA 1697, 10-1 BCA ¶ 34,380, at
169,745 (contractors permitted to challenge underlying default termination when appealing
contracting officer’s decision on reprocurement costs).2  Termination for default is a drastic
sanction.  J.D. Hedin Construction Co. v. United States, 408 F.2d 424, 431 (Ct. Cl 1969). 
On appeal, the Government bears the burden of proving the propriety of the termination for
default and the contractor bears the burden of establishing that its failure to perform should
be excused.  CDA, Inc. v. Social Security Administration, CBCA 1558, 12-1 BCA ¶ 34,990,
at 171,971.  The Government also bears the burden to prove its claim for reprocurement
costs.  Cascade Pacific International v. United States, 773 F.2d 287, 293 (Fed. Cir. 1985);
CDA, Inc., 12-1 BCA at 171,972. 
2 As noted in C-Shore International, this practice of allowing the contractor to
wait until the contracting officer assesses reprocurement costs to challenge the underlying
default termination is known as the Fulford doctrine, arising from the decision in Fulford
Manufacturing Co., ASBCA 2143, et al., 1955 WL 808 (May 20, 1955).  Although the
United States Court of Appeals for the Federal Circuit has not yet endorsed this practice, the
Board continues to employ the practice as an efficient means of resolving all of the issues
arising from a termination for default.  C-Shore International, 10-1 BCA at 169,745 (citing
Deep Joint Venture v. General Services Administration, GSBCA 14511, 02-2 BCA
¶ 31,914, at 157,674-75).    

CBCA 3725 5
Contract Performance Cannot Be Excused As Commercially Impracticable
The Forest Service terminated Hearthstone’s contract when it failed to make the
required initial payment and failed to initiate any work to harvest the timber.  Exhibit 88. 
Termination for default is proper when a contractor fails to meet contract requirements and
the contracting officer has a reasonable basis for believing that the contractor will be unable
to complete the contract in a timely manner.  Lisbon Contractors, Inc. v. United States, 828
F.2d 759, 765 (Fed. Cir. 1987); CDA, Inc., 12-1 BCA at 171,971-72.  The record documents
the contracting officer’s efforts to obtain assurances from Hearthstone that it would begin
performance of the contract as well as the contracting officer’s efforts to obtain a
subcontractor to begin that effort.  Based upon this record, the Forest Service has met its
burden of establishing that the termination for default was proper.  
Hearthstone does not dispute its failure to perform the contract.  Instead, Hearthstone
asserts that its failure to perform should be excused due to the financial condition in which
it found itself as a result of the economic recession that began in 2008.  Exhibit 90 at 354-55;
Appellant’s Reply.  The Board understands Hearthstone’s defense to be one of commercial
impracticability.  
A contractor’s non-performance of a contract may be excused pursuant to the doctrine
of commercial impractibility if certain criteria are met: “[w]here, after a contract is made, a
party’s performance is made impracticable without his fault by the occurrence of an event
the non-occurrence of which was a basic assumption on which the contract was made, his
duty to render that performance is discharged.”  Seaboard Lumber Co. v. United States, 308
F.3d 1283, 1294 (Fed. Cir. 2002) (citing Restatement (Second) of Contracts § 261 (1981)). 
To avail itself of this defense, Hearthstone must show that (1) a supervening event made
performance impracticable; (2) the non-occurrence of the event was a basic assumption upon
which the contract was based; (3) the occurrence of the event was not Hearthstone’s fault;
and (4) Hearthstone did not assume the risk of the occurrence of the supervening event.  Id.
at 1294-95 (citing United States v. Winstar Corp., 518 U.S. 839, 904-10 (1996)). 
Hearthstone cannot establish two of the four prongs of this test.  Hearthstone alleges
that the economic recession was the supervening event that led to the depressed housing
market and decline in timber prices.  Exhibit 90 at 354.  Clearly, the recession and the
resulting timber price declines were not Hearthstone’s fault.  But the terms of the contract
indicate that the parties anticipated the possibility of a decline in timber prices.  Clause
BT8.212 allowed Hearthstone to extend the termination date for the contract when “the
market declines as shown by a twenty-five percent decline in the producer price index.” 
Exhibit 20 at 148.  Clause BT3.34 permitted Hearthstone to request a rate redetermination
following market declines such as those Hearthstone experienced on its contract.  Id. at 133. 

CBCA 3725 6
“The continuation of existing market conditions and of the financial situation of the parties
are ordinarily not such assumptions [of a contract] so that mere market shifts or financial
inability do not usually effect discharge” under the doctrine of impracticability.  Restatement
(Second) of Contracts § 261 cmt. b.  Based upon these contract clauses, Hearthstone cannot
establish that the non-occurrence of a decline in timber prices was a basic assumption of the
parties, the second prong of the test for commercial impracticability.      
Hearthstone also cannot meet the fourth prong of the test because Hearthstone bore
the risk that timber prices would decline.  Although the contract contained provisions that
permitted the adjustment of the completion date and the bid prices based upon economic
declines, the parties’ contract remained a fixed-price contract by which Hearthstone bore the
risk of declining prices.  Tangfeldt Wood Products, Inc. v. United States, 733 F.2d 1574,
1577 (Fed. Cir. 1984) (purchaser on a fixed-price timber contract bears the risk of market
decline). 
Hearthstone argues that the economic recession of 2008 and the resulting declines in
the housing and timber market were greater than the economic conditions that the parties
anticipated and that the economic declines overwhelmed the mechanisms in the contract
designed to address such occurrences.  Exhibit 90 at 355.  “A mere change in the degree of
difficulty or expense due to such causes as increased wages, prices of raw materials, or costs
of construction, unless well beyond the normal range, does not amount to impracticability.” 
Restatement (Second) of Contracts § 261 cmt. d.  Despite the severity of the decline in the
housing market and timber prices experienced by Hearthstone, such declines in commodity
prices have not been held to be a basis for finding commercial impracticability.  See, e.g.,
Seaboard Lumber Co. v. United States, 41 Fed. Cl. 401, 416 (1998), aff’d, Seaboard Lumber,
308 F.3d at 1294-95 (government policies that reduced demand for housing and lumber and
led to “dramatically lower” timber prices did not render performance of contract
impracticable); HLI Lordship Industries, Inc., VABCA 1785, 86-3 BCA ¶ 19,182, at 97,025
(1985) (“unusually severe increase” in cost of gold by 210% over period of contract
performance found not to render contract impracticable); Nedlog Company, ASBCA 26034,
82-1 BCA ¶ 15,519, at 76,986 (1981) (doubling in price of sugar did not render contract
impracticable).  Moreover, Congress provided additional relief through the 2008 Farm Bill
to address the unprecedented conditions caused by the recession about which Hearthstone
complains.  This relief included the opportunity to cancel the sale with payment of thirty
percent of the value of the original contract.  2008 Farm Bill, § 8401(b)(1)(A).  Hearthstone
chose not to avail itself of this option.  The Board is not in a position to provide greater relief
than that provided by Congress to address the effects of the recession.  
Hearthstone highlights an “unprecedented drop” in eastern white pine timber prices,
Exhibit 90 at 354, which is shown by the change in the advertised rates for white pine

CBCA 3725 7
between the original sale and the re-offered sale ($57.08 versus $28.19).  Compare Exhibit
6 at 64 with Exhibit 89 at 346.  Although the almost fifty percent decrease in white pine
prices is significant, this decrease does not create a situation of “commercial senselessness”
that is required to find a contract impracticable to perform.  Raytheon Co. v. White, 305 F.3d
1354, 1368 (Fed. Cir. 2002) (declining to find commercial impracticability based upon a
fifty-seven percent cost increase).  When the market declined, the harvest became
unprofitable for Hearthstone and Hearthstone would have performed the contract at a loss,
given the premium that Hearthstone placed in its bid on the eastern white pine it expected to
harvest to use in its manufacture of log homes.  Unprofitability does not equate with
commercial impracticability because “the Government does not guarantee the contractor’s
profit.”  Natus Corp. v. United States, 371 F.2d 450, 458 (Ct. Cl. 1967).  In light of the
allocation of risk in the contract and the foreseeability of market declines, Hearthstone’s
performance cannot be excused as commercially impracticable.  Seaboard Lumber, 308 F.3d
at 1295.
Hearthstone also argues that the producer price index that the Forest Service used to
determine whether the contract dates should be extended did not adequately reflect the
decline and continued lower price of eastern white pine.  Exhibit 90 at 354.  According to
Hearthstone, because the price index did not accurately capture the value of white pine, the
price of eastern white pine remained low although the value of the index cycled upward. 
Based upon this asserted disconnect between the price of white pine and the softwood lumber
index, Hearthstone alleges that the “intent of the contract” could not be achieved.    
 
By “intent of the contract,” the Board understands Hearthstone to be arguing that it
could not obtain all of the relief under the contract that it should have received given the
lower market price of white pine.  Hearthstone’s argument is unavailing for two reasons. 
One, the 2008 Farm Bill permitted purchasers with qualifying contracts (which Hearthstone
had) to request the substitution of a producer price index that more accurately reflected the
products to be manufactured from the timber to be harvested.  § 8401(b)(2).  That request
had to be submitted within ninety days of the enactment of the 2008 Farm Bill, however. 
Id.  The record does not reflect that Hearthstone sought to change the index to be used when
advised of the relief available under the 2008 Farm Bill.   Having failed to seek the relief
provided by statute, Hearthstone cannot seek to challenge the index used or the composition
of that index in this appeal.  Two, even if Hearthstone could challenge the index to be used
on the contract, such a challenge would not result in greater relief to Hearthstone.  As noted
above, as the result of the declines in the value of the price index over consecutive quarters,
the Forest Service notified Hearthstone that the dates for the termination of the contract and
initial payment could be extended.  The termination date was extended by four years, the
maximum time period permitted by the 2008 Farm Bill.  Thus, even if a different index had
been used or the index had more accurately captured the continued lower price of white pine,

CBCA 3725 8
Hearthstone would not have been able to obtain any additional relief pursuant to the terms
of the contract and the 2008 Farm Bill.       
In its reply, Hearthstone also alleges that its performance should be excused because
the contract was impossible to perform.  The doctrine of impossibility does not apply to this
situation because Hearthstone has not alleged that it was physically impossible to perform,
only that it did not have the necessary financial resources to perform.  Although the
doctrines of impossibility and impracticability are often used interchangeably and analyzed
under the same structure, see, e.g., Singleton Enterprises v. Department of Agriculture,
CBCA 2136, 12-1 BCA ¶ 35,005, at 172,039 (using the test for impracticability set forth in
Seaboard Lumber to analyze claim of impossibility), the doctrine of impossibility is better
applied to cases in which actual impossibility of performance is at issue, such as cases
involving a defective specification.  In those cases, it is alleged that the contract was truly
impossible to perform because of the defect in the specification.  See, e.g., id. (citing
Ordnance Research, Inc. v. United States, 609 F.2d 462, 479 (Ct. Cl. 1979); Maxwell
Dynamometer Co. v. United States, 386 F.2d 855, 872 (Ct. Cl. 1967)).    
Moreover, to establish the defense of impossibility, Hearthstone would have to show
that performance was objectively impossible.  Seaboard Lumber, 308 F.3d at 1294 (citing
Jennie-O Foods, Inc. v. United States, 580 F.2d 400, 409 (Ct. Cl. 1978)).  Under this
standard, Hearthstone would have to show that other timber sale contractors also would have
been unable to perform the contract.  See Rowe Inc. v. General Services Administration,
GSBCA 14211, 01-2 BCA ¶ 31,630, at 156,276.  “The ability of other contractors to perform 
disputed work is persuasive evidence that the contract was not impossible to perform.” 
Singleton Enterprises, 12-1 BCA at 172,039 (citing Jennie-O Foods, 580 F.2d at 410). 
Hearthstone has not provided any evidence regarding the performance of other contractors
on this or other timber sales.  For these reasons, Hearthstone’s performance cannot be
excused under the doctrine of impossibility.       
Demand for Reprocurement Costs
As noted, Hearthstone’s appeal arises from the contracting officer’s decision assessing
reprocurement costs following the default termination.  Exhibit 89.  To recover
reprocurement costs from Hearthstone, the Forest Service must establish that (1) the follow-
on sale was substantially similar to the sale on which Hearthstone defaulted, (2) the
Government incurred costs as a result of the follow-on sale, and (3) the Government acted
reasonably to mitigate its damages.  Cascade International, 773 F.2d at 294.  The
Government must also show that the reprocurement was conducted within a reasonable time
after the default.  NEH Logging, AGBCA 76-187, 77-2 BCA ¶ 12,850, at 62,549. 

CBCA 3725 9
Neither party has addressed the Government’s reprocurement cost claim in the
submissions to date, leaving the Board unable to adjudicate the Government’s claim on the
current record.  Although Board Rule 4(a) requires the respondent agency to include “all
documents and other tangible things on which the contracting officer relied in making the
decision,” the Forest Service did not include any documents or other evidence underlying the
contracting officer’s decision regarding the calculation of reprocurement costs.  The appeal
file contains the contracting officer’s decision from which Hearthstone took the present
appeal, Exhibit 89, but does not contain any of the contracts, bills, or other information
necessary to evaluate the demand for reprocurement costs.   See, e.g., John S. Davis, AGBCA
78-185, 79-2 BCA ¶ 14,130 (board examined bids and other documents supporting the
computation of damages by contracting officer).  
While challenging the underlying termination, Hearthstone has failed to challenge the
composition or calculation of the contracting officer’s demand for damages.  Exhibit 90;
Appellant’s Reply.  If the Government had met its burden to establish the elements of its
reprocurement costs claim, Hearthstone’s failure to address the Government’s claim in its
briefing would be fatal to its appeal given the Board’s decision that the termination for
default was proper.  Pickett Enterprises, Inc., GSBCA 9472, et al., 92-1 BCA ¶ 24,668, at
123,095 (1991) (citing General Floorcraft, Inc., GSBCA 11112, 91-2 BCA ¶ 24,026, at
120,295) (“Once a contractor loses on the merits concerning the default termination decision
and fails to challenge the reprocurement specifically, a cost assessment will stand.”). 
However, since the Forest Service bears the initial burden to prove its claim, which it has not
met, Hearthstone should have another opportunity to address this issue.  
Rule 4(e) provides that the Board may, “at any time during the pendency of the appeal,
require any party to file other documents and tangible things as additional exhibits.”  To be
able to resolve this appeal, the Board exercises its authority under this rule and orders the
parties to submit evidence and briefing regarding the Government’s claim.  The schedule and
specific requirements for these submissions are set forth in a separate order issued today. 
Decision
Hearthstone’s appeal of the contracting officer’s termination for default is DENIED
IN PART.  The parties will submit further evidence and briefing on the Government’s claim
for reprocurement costs. 
_____________________________
MARIAN E. SULLIVAN
Board Judge

CBCA 3725 10
We concur:
______________________________ _____________________________
JERI KAYLENE SOMERS R. ANTHONY McCANN
Board Judge Board Judge