Background

In managing federal lands, the Forest Service and BLM often contract for  services such as road maintenance, forest thinning, and other activities.  They also frequently contract to sell forest resources such as timber or  firewood. Traditionally, these contracts have been executed separately— service contracts have generally been funded with appropriated funds from  the agencies’ budgets, while timber has been sold through contracts with  private purchasers. The Omnibus Consolidated and Emergency  Supplemental Appropriations Act of 1999 authorized the Forest Service to  combine these contracting mechanisms by entering into “stewardship end  result contracts,” under which the agency could use the value of forest  products sold to offset the cost of contracted services. Under such goods- for-services contracts, the Forest Service could, for example, pay for  thinning operations by using the proceeds from any commercial timber  removed as part of the project. Additional contracting authorities were also  included in the legislation; the full list of authorities follows. (Stewardship  contracting authority was initially granted only to the Forest Service; in  2003 it was extended to BLM.)
Goods for services allows the agency to use the value of commercial  products, such as timber, to offset the cost of services received, such as  thinning, stream improvement, and other activities.
Designation by description or prescription allows the agency to  conduct a timber harvest by providing the contractor with a description  of the desired end result of the harvest. For example, the Forest Service  might require that all ponderosa pine less than 10 inches in diameter be  harvested. Ordinarily, cutting any standing tree before a Forest Service  employee has marked or otherwise designated it for cutting is  prohibited.
Multiyear contracting allows the agency to enter into stewardship  contracts of up to 10 years in length. (Standard service contracts are  limited to 5 years, although timber sale contracts of up to 10 years were  already authorized.)
Retention of receipts allows the agency to retain receipts generated  from the sale of commercial products removed through stewardship  contracts, rather than returning the funds to the Treasury. Receipts are  to be applied only to stewardship contracting projects.
Less than full and open competition exempts the agency from the  requirement under the National Forest Management Act that all sales of  timber having an appraised value of $10,000 or more be advertised.   This allows the Forest Service to favor local contractors when soliciting  contract bids.
Supervision of marking and harvesting of timber sales exempts the  agency from the requirement that USDA employees supervise the  harvesting of trees on Forest Service lands. This has allowed the Forest  Service to use one state agency to assist in stewardship contracting.
Best-value contracting requires the agency to consider other factors— such as past performance or work quality—in addition to price when  making stewardship contract award decisions.
The law authorized 28 stewardship contracts by the Forest Service, of  which 9 were to be in the Forest Service’s Northern Region. The authority  of the Forest Service to enter into these contracts was to end on September  30, 2002. Contracts were to “achieve land management goals for the  national forests that meet local and rural community needs.”  The goals  listed in the legislation included, but were not limited to,  maintaining or obliterating roads and trails to restore or maintain water   maintaining soil productivity, habitat for wildlife and fisheries, or other   setting prescribed fires to improve the composition, structure,  condition, and health of stands or to improve wildlife habitat;  noncommercially cutting or removing trees or other activities to  promote healthy forest stands, reduce fire hazards, or achieve other  noncommercial objectives;  restoring and maintaining watersheds;  restoring and maintaining wildlife and fish habitat; and  controlling noxious and exotic weeds and reestablishing native plant  species.
The law also required that the Forest Service establish a multiparty  monitoring and evaluation process to assess each stewardship contract.
Several subsequent laws modified the requirements of the initial  stewardship contracting authority. The Consolidated Appropriations Act of  2000 changed the requirement from 28 stewardship contracts to 28  stewardship projects, allowing for the possibility that individual projects  may involve more than one contract. The following year, the Department  of the Interior and Related Agencies Appropriations Act of 2001 doubled  the number of authorized projects for a total of 56, requiring that at least 9  of the newly authorized projects be in the Forest Service’s Northern Region  and at least 3 in the agency’s Pacific Northwest Region. Similarly, a year  later, the Department of the Interior and Related Agencies Appropriations  Act of 2002 authorized an additional 28 projects (for a total of 84), again  requiring that at least 9 of the newly authorized projects be in the Northern  Region and at least 3 in the Pacific Northwest Region. This law also  changed the end date of the demonstration project from 2002 to 2004. Most  recently, the Consolidated Appropriations Resolution of 2003 extended the  authority to enter into stewardship contracts to 2013, extended  stewardship contracting authority to BLM, removed the restriction on the  number of projects that could be implemented under this authority,  removed the emphasis on noncommercial activities among the land  management goals listed, and replaced the requirement for multiparty  monitoring and evaluation of each project with a requirement to monitor  and evaluate the overall use of stewardship contracting.
Stewardship contracting projects are subject to environmental and  resource management laws—such as the National Environmental Policy  Act (NEPA), the Endangered Species Act, and others—that also apply to  nonstewardship projects. Responsibility for administering stewardship  contracting authority at the Forest Service lies within two agency offices:   the Forest and Rangeland Management Group and the Acquisition  Management Group. Each of the nine Forest Service regions has  established a stewardship contracting coordinator to facilitate stewardship  contracting activities within each region. Within BLM, authority for  administering stewardship contracting authority resides with its Forest and  Woodland Management Group. Each of BLM’s 12 state offices also has a  stewardship contracting coordinator.

	Most Pilot Projects Are Ongoing and Include Removal of Timber or Other Vegetation to Improve Forest Health

As of September 30, 2003, the Forest Service had completed 9 pilot  projects, and another 68 were ongoing, with project completion dates  scheduled through 2014. Most projects included the removal of timber  and other vegetation to reduce fuels or promote forest health, while other  activities included trail construction, wildlife pond restoration, and public  toilet installation. The projects had treated about 13,800 acres and were  expected to treat about 158,000 additional acres. Expected project costs  and forest product values varied widely: Projects were expected to cost  from $1,000 to $5.7 million, and the estimated value of forest products to be  removed as part of the projects varied from $124 to $6.3 million.

		Sixty-eight of 77 Forest Service Pilot Projects Are Still Ongoing; Projects Commonly Have Focused on Removing Vegetation

Forest Service staff reported that as of September 30, 2003, 9 pilot projects  had been completed—i.e., all contracts associated with these projects were  completed and closed—and an additional 68 projects were ongoing. Pilot  projects were distributed throughout the Forest Service regions, except for  the Alaska Region, which had none. As expected, given the requirements of  the initial legislation, the Northern Region had the most pilot projects.  Figure 1 shows the distribution of pilot projects by Forest Service region.  (Appendix III provides a list of all 77 projects and related project details,  including project acres and expected completion date.)
The earliest reported completion date for a pilot project was May 2001,  while the latest reported completion date is expected to be 2014. Figure 2  shows the number of pilot projects expected to be completed each year  from 2004 until 2014.
The pilot projects encompassed a variety of activities. For example, one  project we visited—the Baker City Watershed Rehabilitation project— involved thinning trees on Forest Service land that served as the watershed  for an Oregon town. The water provided by the watershed was so pure that  the town did not need a filtration facility, according to project and town  officials. However, the watershed was at high risk for fire, which officials  told us would degrade the watershed to the extent that a multimillion- dollar treatment facility would be required. The watershed was thinned to  reduce the density of fuels and thus the risk of fire, with the cost of logging  partially offset by the value of timber removed. Logging was done by  helicopter to avoid degrading the watershed by building roads. Figure 3  shows a helicopter using a cable to lift and transport trees that were cut by  workers on the ground.
Another project we visited—the Burns Creek project in southwestern  Virginia—involved cutting timber on Forest Service land and using an  elevated cable harvesting system to transport the cut logs across a steep  ravine to a sorting area, where they were stacked and sold. Forest Service  officials decided against using a traditional logging approach because of  the risk of environmental damage to the stream and drainage system in the  ravine. After the timber was removed, the cable system was used to  transport limestone to the creek at the bottom of the ravine to reduce the  creek’s acidity. Project officials told us that without the cable system, the  Forest Service would have had to spend considerably more money to  transport the limestone to the creek by helicopter. Figure 4 shows the cable  system used to transport timber and limestone on this project.
Across all stewardship contracting pilot projects, the most common  activities were removing timber to improve forest health or reduce fuels  and cutting slash, while other frequently cited activities included road  maintenance and prescribed burning. Less commonly cited activities varied  considerably and included culvert removal or installation; trail  construction, maintenance, or obliteration; tree planting; wildlife pond  restoration; and public toilet installation on national forest lands to protect  water quality. Figures 5, 6, and 7 show additional examples of the types of  activities undertaken as part of stewardship contracting projects.
In addition to these activities, several projects cited road construction,  maintenance, or obliteration among their activities. In all, about 19 miles of  permanent road are expected to be constructed as part of the pilot projects  and another 292 miles reconstructed; conversely, 320 miles of permanent  road are expected to be decommissioned (that is, closed and stabilized)  and another 89 obliterated.
The stewardship contracting legislation enumerated seven land  management goals. The goal most commonly cited by Forest Service  project managers was removing vegetation or other activities to promote  healthy forest stands, reduce fire hazards, or achieve other land  management objectives; 59 projects reported addressing this goal to a great or very great extent. Figure 8 shows the number of respondents reporting  that their projects addressed the land management goals to a great or very  great extent.
The stewardship contracting authority most commonly used to address  these land management goals was goods for services, reported by 54  projects. Least commonly used was supervision of marking and harvesting  of timber sales, reported by only one project in Colorado, where the  Colorado State Forest Service is administering the project contract. Figure  9 shows the number of projects reporting the use of each authority.

		Pilot Projects Have Treated about 13,800 Acres and Are Expected to Treat about 172,000 Acres in Total

The sizes of the pilot projects (measured by the number of acres expected  to be treated as part of each project) varied considerably, with the smallest  project reported at 3.6 acres and the largest at 20,000 acres. The total  reported acreage was about 172,000, with a mean project size of about  2,600 acres. As figure 10 shows, slightly more than half of the projects  involved less than 1,000 acres, while about 10 percent of the projects  exceeded 10,000 acres.
But not all pilot projects had begun activities on the ground. Of the 77  ongoing and completed pilot projects, 31 reported that some treatments  had taken place. Only about 13,800 of the 172,000 acres expected to be  treated under the pilot projects had been treated by the time of our survey.  Among projects reporting some activity, the number of acres treated  ranged from 8 to 3,224, with a mean of about 445 acres treated per project.

		Reported Project Costs, Revenues, and Products Varied Widely

The expected costs of the projects differed markedly. The lowest reported  total project cost was estimated at $1,000, while the highest was about $5.7  million. The mean reported pilot project cost estimate was about $850,000.  The portion of these costs attributed to contracts (that is, the amount paid  to a contractor to perform services) also varied—from about $1,000 to $4  million.
Similar variation was evident in the expected value of products removed as  part of the projects—primarily timber, but also firewood, wood chips,  Christmas trees, and other products. The lowest estimate was $124, while  the highest was about $6.3 million. These figures reflect the estimated value  of material to be removed, without considering the contract costs required  for its removal. The mean estimate of product value was about $480,000 per  pilot project.
Slightly more than half of the projects reporting both value and costs  expected that contract costs would exceed product value—in other words,  that the cost to pay a contractor to perform services would exceed the  value of the materials to be removed. Of the 45 projects reporting both  expected product values and expected contract costs, 24 (about 53  percent) reported that expected contract costs would exceed expected  product values. (The Forest Service may use appropriated dollars to pay  contract costs not covered by product values.)  The remaining 21 projects  reported that expected revenues would equal or exceed expected contract  costs. Overall, net revenue estimates (estimated product values minus  estimated contract costs) ranged from a negative $3.27 million to $2.47  million.
Similarly, the amount of products to be removed varied among projects.  The Forest Service’s standard unit of measure for wood products is 100  cubic feet, or ccf. Thus, 100 cubic feet of wood would be measured as 1 ccf.  Estimates of the volume of sawlogs (timber large enough to be milled into  lumber) to be removed as part of stewardship contracting projects ranged  from 0.7 ccf to 49,000 ccf. About 70 percent of the reporting projects are  expected to remove less than 5,000 ccf, and about one fourth are expected  to remove less than 500 ccf. Estimates of other products (such as firewood  and wood for posts and poles) varied from 4.2 ccf to about 67,000 ccf. Many  projects also anticipated removing material of no commercial value, such  as brush or small-diameter trees. Estimates of such noncommercial  material ranged from 50 ccf to 144,000 ccf. Figures 11, 12, and 13 show  examples of the material removed as part of stewardship projects.

	Despite Limited Initial Guidance, Forest Service Has Incorporated Contracting and Financial Controls in Eight of Its Projects, and Both Forest Service and BLM Have Included Such Controls in Their Recent Guidance

The Forest Service limited the amount of initial contracting and financial  guidance it provided to stewardship contracting pilot project officials to  allow them to experiment with different approaches to managing the  projects. Despite the limited guidance, the eight projects we visited had  contracting and financial controls in place, including both preaward and  postaward activities and controls to provide accountability in managing the  projects (see fig. 14 for the projects’ names and locations). Since the  enactment of the 2003 legislation expanding stewardship contracting  authority, the Forest Service and BLM have developed more specific  guidance on designing and implementing future projects and on accounting  for project costs and revenues.

		Initial Forest Service Contracting and Financial Guidance Was Limited, Slowing Implementation of Some Projects

The Forest Service provided limited initial contracting and financial  guidance on stewardship contracting to allow project managers to  experiment with different implementation approaches, according to an  official with the Forest Service’s Forest and Rangeland Management  Group. The Forest Service provided a “Desk Guide for Contracting under  Existing Authorities for Service Contracts with Product Removal,”  intended to provide guidance to field staff on conducting pilot projects,  although the desk guide focused primarily on contracting authorities other  than those in the stewardship legislation. Other guidance was provided by  the Pinchot Institute for Conservation—with which the Forest Service  had contracted to review stewardship contracting implementation,  including the design and management of monitoring, evaluation, and  reporting processes. For example, the Pinchot Institute facilitated  stewardship contracting workshops at Forest Service headquarters and  several field locations to explain the nature of the stewardship contracting  authority. The Pinchot Institute also provided technical assistance and  general program guidance through its three subcontracted partners.  Because of the limited guidance available to them, some project managers  also sought project design assistance from staff in the Forest Service’s  Northern Region, which had the greatest number of pilot projects and  which had experience in and knowledge of stewardship contracting  techniques.
Because of the lack of specific centrally issued guidance, some projects  were slow to begin. Project managers attributed this delay to the need to  independently determine how to design and implement their projects using  their understanding of stewardship contracting and the need to coordinate  the efforts of timber sale and acquisition contracting officers in developing  a single contract. Under traditional contracts, timber sales are handled by  timber sale contracting officers, while service acquisitions are handled by  acquisition contracting officers. With the exchange of goods for services  under stewardship contracting, only one contracting officer is needed for  both activities; but close cooperation and coordination between the timber  sale and acquisition offices are needed, which can be difficult and time  consuming. For example, one contracting officer at the Antelope  stewardship project said developing a contract combining a timber sale  with various services took approximately 6 months, in contrast to the  approximately 2 to 3 months that this official said were required for a  standard timber sale or service contract. This official told us the delay  occurred primarily because of the lack of direction on how to achieve the  necessary coordination between the timber sale and acquisition  contracting offices.

		Projects We Visited Incorporated Both Preaward and Postaward Contracting Controls

The eight projects we visited generally included the preaward and  postaward contracting activities and safeguards we believe are necessary  for effectively awarding and administering stewardship contracts.  Preaward controls we looked for included widely distributed contract  solicitations, the use of pre-established criteria for evaluating bids, and  meetings with potential contractors to clarify project activities and Forest  Service expectations. Postaward controls we looked for included the use of  payment or performance bonds, appropriate techniques for valuing forest  products, and provisions for on-the-ground inspections of contractor work.  See appendix II for more information about our selection of these criteria.

			Projects Used Various Preaward Controls

The project managers for the projects we reviewed undertook preaward  solicitation and advertisement activities to seek contract bids and  proposals. These efforts included solicitations in the form of mailings to  potential contractors, advertisements in local newspapers, and national  announcements in the Commerce Business Daily and on the Federal  Business Opportunities Web site. Such solicitations are intended to  maximize the number of potential contractors aware of the project, and  thus the pool of potential bidders. When solicitations did not result in any  bidders, the solicitations were sometimes expanded to include a broader  geographic area. The project managers also held conferences with  potential contractors before they submitted bids or proposals, and  sometimes potential contractors made trips to the proposed project sites.  These “scoping” sessions served to clarify project objectives and contract  terms and schedules, as well as to solicit ideas from contractors and to  increase local awareness of projects. Project managers and other agency  staff also conducted bid reviews using predefined criteria to ensure  thoroughness and objectivity in evaluating each bid and awarding the  contracts. The evaluation criteria included such factors as bidders’ past  performance and experience, proposed work schedules and technical  approaches, and cost or price factors. The Forest Service evaluation teams  generally were composed of experienced contracting officers, project  managers, and other key Forest Service staff.

			Awarded Contracts Generally Included Bond, Valuation, and Inspection Requirements to Provide Accountability in Project Management

Contracts for the eight projects we visited generally incorporated  safeguards such as bond, valuation, inspection, and default requirements.  The contracts we reviewed contained clear definitions of contract  requirements, including work-site locations, access points, and the size of  work units. The contracts also generally defined the roles of the various  Forest Service staff, including those responsible for oversight activities,  such as the contracting officers and the contracting officers’  representatives. Before commencing work under the contract, Forest  Service project managers generally held orientations with the contractors  to clarify contract terms, work performance requirements, and work  progress schedules. These meetings sometimes resulted in amendments to  the solicitations and clearer contract language.
Nearly all of the stewardship contracts we reviewed included payment and  performance bond clauses to ensure the satisfactory performance of  contract requirements. These bonds are written instruments executed by  the contractor to ensure fulfillment of its obligations. If the obligations are  not met, the bonds ensure payment, to the extent stipulated, of any loss  sustained. In particular, payment bonds, also known as advance deposits or  cash deposits, ensure that the government receives payment for timber  harvested. In the event that a contractor harvests timber but then defaults  on the contract or goes out of business before paying for it, the agency can  keep the cash value of the bond as payment for the timber. Similarly,  performance bonds ensure that, in the event the government is required to  conduct work to remediate damage done by the contractor, the agency can  use the value of the performance bond to finance remediation activities.  Although most contracts included bonds, some did not. The Winiger Ridge  Restoration project, for example, did not include payment or performance  bonds. The project manager told us that she believed such bonds were too  onerous for small contractors, and agency officials wanted to make the  project as attractive as possible to small local contractors. Additionally,  according to the project  manager, there was little incentive for the  contractor to cut commercially valuable timber and then default on the  remainder of the services because there was very little valuable timber  included in the project. This manager characterized the contract as  “$190,000 worth of services and $500 worth of timber.”  Another project— Antelope—did not require a performance bond because of the expense and  burden it would place on the contractor, according to the project manager.
The stewardship contracts also included valuation clauses to establish the  volume and value of the forest materials to be removed and the services to  be provided. Volume is determined by a “cruise” of the project area, which  involves staff examining the area in different locations to estimate the  timber that is to be removed. Forest Service managers at the projects we  examined established the value of timber through government cost  estimates or appraisals. Government cost estimates are simply indications  of what the timber will bring on the market based on previous sales,  according to Forest Service staff. Appraisals, on the other hand, involve  calculations of not only what the timber will bring on the market but also  the cost of cutting and hauling the timber, constructing or improving roads,  and so forth, and are thus more detailed, time consuming, and expensive.  According to staff, government cost estimates are appropriate when the  value of the material is known to be low, because in such cases the cost of a  full appraisal can exceed the value of the material. Of the eight projects we  reviewed, five conducted full appraisals while three used government cost  estimates.
The stewardship contracts we examined also included provisions for on- the-ground inspections of contracted work to ensure that the work was  conducted in accordance with contract requirements and Forest Service  expectations. At the projects we reviewed, the contracting officers and the  designated contracting officers’ representatives who served as on-the- ground administrators documented their observations on inspection forms  and contract daily logs, which we examined. These logs included  information on whether the work was performed in an acceptable manner,  and the measures necessary to correct any deficiencies.
Additional effort was sometimes required to ensure that contractors  performed according to Forest Service expectations. For example, the  Winiger Ridge Restoration stewardship project contracting officer told us  that the project’s initial contract had to be revised to make the designation  by description specifications clearer to the contractor, after it became  evident that the specifications as written did not lead to the expected  results. (Designation by description allows the agency to conduct a timber  harvest by providing the contractor with a description of the trees to be cut  or the desired end result of the harvest, rather than by marking individual  trees.)  At this project, the initial description directed the contractor to,  among other things, cut all trees with a certain level of dwarf mistletoe  infestation. However, project officials realized that it was impossible to  verify that the contractor had cut only infected trees, and contract  provisions regarding mistletoe infestation were eliminated. Similarly,  contracting officers and contractors at other locations also told us that the  contractors sometimes had difficulty interpreting the language in  designation by description contracts, or that the language was not specific  enough to ensure that Forest Service expectations were met. This unclear  language sometimes required additional project oversight to ensure that  contractors were meeting contract requirements. At the Clearwater  stewardship project, for example, the project manager told us that although  they had planned periodic project inspections, the use of designation by  description authority required them to have inspectors on site virtually  every day for several weeks.
Finally, the stewardship contracts we reviewed also included breach or  default and dispute resolution clauses. These mechanisms allow the Forest  Service to address any issues or problems by issuing default notices and  stop work orders. However, aside from work delays, which generally  resulted from uncontrollable events such as excessive snow or fire  seasons, there were no significant problems with the contracts we  examined. In fact, several Forest Service contracting officers we  interviewed praised the relative ease of administering the contracts once  they were developed and awarded. Similarly, the contractors conducting  the work told us that, although the stewardship contracts and the  contracting process were somewhat new and time consuming to them,  implementation of the contracts themselves was relatively straightforward.

		We Observed Established Financial Procedures at the Projects We Visited

During our project site visits, we observed evidence of established  procedures in place for accounting for project funds, including procedures  for receiving and tracking timber payments and tracking retained receipts  and expenditures, as well as other steps taken to provide financial  accountability. Our review of selected items included an examination of  payment vouchers, receipts, and other expenditure-related documentation  to assess whether retained receipts and other project funds had been spent  on stewardship-related activities. We did not review all financial controls  for stewardship contracting.
The Forest Service uses two data collection systems—the Timber Sale  Accounting (TSA) system and the Foundation Financial Information  System (FFIS)—to track project financial activities. The TSA tracks data  such as the name of the purchaser and the quantity and species of timber to  be harvested, and is the principal system for recording revenues related to  timber sales. However, the TSA reflects only a portion of stewardship  contracting activity. While the TSA includes timber-specific information  such as species, it does not reflect the services contracted for as part of  stewardship contracting projects; instead, these services are recorded and  tracked at the local forest or regional office. The FFIS, which incorporates  some TSA data, is the system of record supporting Forest Service billing  and collection functions. As with traditional timber sale contracts, actual  payments are received and processed through an independent  “lockbox”  system in San Francisco. The payment receipts are recorded by job code  in a specified distribution account within the FFIS.
At each location, we observed adequate separation of duties and  supervisory review responsibilities being handled by officials in the timber  and financial groups. For example, a project official at each location was  responsible for verifying the accuracy of all the charges to the project  account, and the financial group manager was responsible for monitoring  the project account balances. At the end of each month, timber and  accounting clerks completed reconciliations between the timber and  financial system data and their detailed local records. When discrepancies  were identified, the problems were researched and corrected in a timely  manner. For those projects we looked at, several monthly reports were  generated by the TSA and FFIS systems, which managers in each group  used to track project activities and to review and verify the accuracy of the  charges against project funds.
Two projects we visited, the Clearwater and Fernow Experimental Forest  projects, had expended retained receipts on additional stewardship  contracting activities. At these projects, we examined payment vouchers,  receipts, and other expenditure-related documentation to ensure that  retained funds had been spent on stewardship-related activities, as  required, and the funds appeared to have been spent appropriately. Another  project we visited, the Burns Creek project, passed all retained receipts on  to another stewardship project, the Wayah Contract Logging project, in the  same region; however, the Wayah Contract Logging project (which we also  visited) did not need to use the funds because receipts and appropriated  funds associated with that project were sufficient to cover project  expenditures. As a result, the retained receipts were being passed on yet  again to a third stewardship project, the Sand Mountain project, also in the  same region. At the time of our review, a portion of these funds had been  obligated to cover the cost of a contract for work on this project, but had  not yet been expended.
Forest Service staff at the locations we visited took additional steps to  provide financial accountability. For example, we noted procedures in  place to prevent timber harvesting activities from significantly exceeding  service activities under goods for services contracts. To this end, two  projects (the Clearwater and Warm Ridge/Glide projects) established “land  management credits” to record service activities completed. Once the  contractor earned such credits, they were then applied to the value of the  timber being harvested. At these projects, contractors were not permitted  to harvest timber until they had earned the required credits through service  work—thus preventing contractors from harvesting commercially valuable  timber and then failing to perform needed restoration activities.

		Forest Service and BLM Recently Developed Stewardship Contracting Guidance That Includes Contracting and Financial Controls

The Forest Service and BLM issued jointly developed guidance in January  2004 to provide direction in implementing stewardship contracts. The  Forest Service’s new handbook and BLM’s new guidance address the use of  contracting controls, such as appraisals, and the use of two authorities— designation by description and less than full and open competition; include  contract templates for field staff; provide guidance on financial  accountability; and outline the responsibilities of agency staff. According to  an official with the Forest Service’s Forest and Rangeland Management  Group, their handbook is intended to be a working document that will  change as necessary. For example, if the results of ongoing monitoring of  stewardship contracting show a need for changes, the handbook will be  revised accordingly.
The agencies’ guidance includes some of the same elements we examined  during our site visits to provide project accountability. For example, both  agencies’ guidance includes provisions requiring appropriate valuation of  service work to be performed and timber to be harvested. To this end, the  Forest Service handbook states, “The appraisal for timber and other forest  products shall be conducted using appraisal methods as specified in the  Timber Sale Preparation Handbook . . . and Regional guidelines.” Both  agencies also provide guidance on required bonding. For example, the BLM  guidance states that “payment protection in the form of payment bonds  should be used to protect the value of the byproduct to be removed when  the product will be removed prior to cash payment or the contractor’s  earning of conservation credits.” BLM’s guidance further states that  “contracting officers are encouraged to strive toward the concept of a  single bond to cover ‘performance,’ which would include the product value  (payment) and the service work rolled into one bond.”
The agencies’ guidance also provides expanded discussions on the use of  two additional authorities—designation by description and less than full  and open competition. Regarding designation by description, the guidance  specifies that the amount of material removed from the forest must be  verifiable and accountable. For example, the Forest Service handbook  generally requires that for commercial material (such as sawtimber), trees  to be removed must be identified based on characteristics that can be  verified after removal—for example, the contractor might be required to  remove all lodgepole pine less than a specified stump diameter. Agency  personnel could subsequently measure remaining stumps to verify that  contract provisions were met. For noncommercial material, the handbook  allows less specific designations setting forth the desired end result of  treatment (sometimes referred to as designation by prescription)—for  example, the contractor might simply be required to leave a certain number  of trees on each acre, with an average spacing between them.
Regarding less than full and open competition, which exempts the agency  from the requirement that all sales of timber having an appraised value of  $10,000 or more be advertised, the Forest Service handbook specifies that  forest supervisors must document and submit to regional foresters the  reasons for the selection process used. Documentation must include the  level of competition to be used in the contracting process.
As part of their guidance, the agencies also are developing contract  templates that field staff can use as examples when developing their own  contracts—potentially improving the efficiency and applicability of  stewardship contracts. These are standard contract formats that  incorporate timber sale and service components. The Forest Service has  also conducted additional training sessions, and staff from both agencies  told us they plan to expand their intranet sites to provide more ongoing  stewardship contracting project information, including details about  successful stewardship contracting projects that can serve as models for  staff who are developing projects.
The agencies’ guidance also contains direction on financial accountability.  According to the Forest Service handbook, the proper use and  management of stewardship contracting receipts must be assessed as a  normal part of regional- and forest-level renewable resource program and  activity reviews. Through the guidance, both agencies have assigned  responsibility for various financial activities, including providing technical  advice, reviewing and approving retention of project receipts, and ensuring  that associated financial data are accurate and reconciled to the financial  statements. In addition to specifying responsibility for various activities,  the agencies’ guidance notes the approved funding source for project- related activities. For example, stewardship contracting preparation,  overhead, and project-level monitoring costs normally are to be funded  through appropriated funds. According to the guidance, stewardship  contracting retained receipts shall not be used for overhead,  administrative, or indirect costs or for the completion of environmental  studies. The guidance indicates these retained receipts can be used for  another stewardship project or to fund national programmatic multiparty  monitoring. Although both agencies’ guidance states that multiparty  monitoring of individual projects is encouraged, the Forest Service  handbook states that it is inappropriate to conduct project monitoring with  revenues received from a stewardship contract.
Finally, both agencies’ guidance outlines the responsibilities of the various  headquarters, regional, and state office officials in the implementation,  monitoring, and evaluation of stewardship contracting projects. The  agencies also have appointed stewardship contracting coordinators at each  Forest Service regional office and at each BLM state office. These staff  serve as resources for all projects under the respective Forest Service  regional offices and BLM state offices and are expected to enhance  communication between the agencies’ headquarters and the field. Their  specific responsibilities include clarifying stewardship contracting  guidance, monitoring project status and soliciting feedback, and making  recommendations on how to improve the effectiveness of stewardship  contracting.

	The Agencies Have Not Provided Substantial Guidance on Community Involvement, and Efforts to Involve Communities Varied among Projects

Despite the stewardship contracting legislation’s emphasis on meeting  community needs, the Forest Service initially provided little guidance on  incorporating community involvement in stewardship contracting pilot  projects; as a result, the type and extent of field staffs’ efforts to involve  communities in projects varied considerably among the projects we  reviewed. Some project managers actively sought community involvement  in planning or implementing their projects, while other managers took a  less active approach—potentially leading to missed opportunities for  meeting local community needs. Although the majority of the project  managers we spoke with touted the potential benefits of community  involvement in stewardship contracting projects and expressed their desire  for additional guidance in this area, neither the Forest Service nor BLM  included such guidance in their January 2004 stewardship contracting  guidance documents.

		Because the Forest Service Initially Provided Little Guidance on Community Involvement, the Type and Extent of Community Involvement Varied Significantly among Projects

Although the stewardship contracting legislation explicitly stated that  stewardship projects are “to achieve land management goals for the  national forests that meet local and rural community needs,” the Forest  Service initially provided only minimal guidance on soliciting and  incorporating community involvement in stewardship contracting projects,  and most managers we spoke with articulated their frustration with the  overall lack of guidance on community involvement. Managers told us that  little or no formal training on involving the community had been provided,  and in some cases reported that the only guidance they had received was in  the form of a brief discussion of the topic during a meeting. The most  frequently identified source of community involvement guidance was in the  form of advice from the Pinchot Institute for Conservation’s regional  subcontractors, which reportedly provided some consultation on  community involvement efforts. The managers’ desire for guidance or  training resulted primarily from two concerns:  first, that they were wasting  time “reinventing the wheel” because they were unaware of effective or  innovative community involvement strategies developed by managers of  other projects, and second, that they were potentially violating the Federal  Advisory Committee Act (FACA) by incorporating community involvement  into their projects.
Because of the lack of guidance, the steps taken by Forest Service  managers to involve communities varied widely. Most of the community  involvement we learned about was incorporated through multiparty  monitoring teams, which were required by the stewardship contracting  legislation. However, the legislation did not specify, and the Forest Service  provided little guidance on, the teams’ roles and responsibilities, leading to  uncertainty among field staff about what was expected and how to  proceed. Some projects simply did not have monitoring teams, and some  managers told us they did not realize such teams were required. The  project managers who assembled monitoring teams did so using very  different approaches. For example, some managers formed teams of  primarily Forest Service employees, while others sought to involve a cross  section of the community. The Yaak project manager in Montana even  transferred the responsibility for assembling the project monitoring team  and completing an annual report on the project to the contractor, by  making these efforts a requirement in the contract. Some managers formed  small teams composed of a few interested local individuals, while the  manager at the Priest-Pend Orielle project in Idaho formed a large  monitoring team consisting of about 30 members organized into several  specialized subcommittees focusing on specific issues such as roads,  watershed, wildlife, and noxious weeds. This project manager also  coordinated with the team to ensure that a Forest Service specialist was  available to consult with each of the subcommittees as needed.
The project monitoring teams also played varying roles and undertook  varying activities. Team members included university professors, local  government officials, environmental advocates, industry representatives,  and other interested citizens, and the composition of the team often helped  to determine the level and type of work the team undertook. For example,  several project managers noted that their teams focused on assessing the  effectiveness of specific ecological work or evaluating the project’s impact  on the local economy, while other teams focused on assessing the  stewardship contracting process, believing that their assessment of the tool  would help the Congress evaluate the pilot program. The monitoring teams  conducted such activities as inspecting project sites, testing soils and  water, establishing photo points, and gathering and analyzing economic  information. Figure 15 shows a multiparty monitoring team meeting at a  project site.
In a few instances we noted other forms of community involvement. Some  managers took steps such as meeting with local contractors and  environmentalists to hear their concerns and answer questions, or setting  up demonstration areas that would show local residents how the project  site would look once the work was done. However, such steps were not  common, and in fact some managers told us that the NEPA process alone  allows for sufficient public participation in their projects. They said that  as a result—and without guidance to the contrary—they did not feel that  additional efforts to involve communities were necessary or justified. In  fact, one Forest Service official at the Burns Creek project site in Virginia  told us that management of the forest might be better left to forestry  professionals than to a collaborative group of well-meaning—but  untrained—community members.

		Many Agency Officials Believe Collaboration Enhances Project Effectiveness and Provides Other Benefits

Some project managers may be missing opportunities to improve their  projects, as the majority of the project managers we spoke with touted the  benefits of involving the community in stewardship contracting projects.  Although some project managers noted that community involvement  activities require an additional investment of time and effort upfront,  several believe that this effort will pay off in the end.
Project managers cited a variety of benefits from community involvement,  including improved project design and implementation, better lines of  communication with the public, and enhanced public trust in the agencies.  Several project managers indicated that they valued the project monitoring  teams’ expertise and input, and some noted improvements to their projects  as a result of team and other community input. For example, the manager  of the Upper Blue project in Colorado told us that public involvement in  her project led to the development of more stringent criteria for protecting  water quality during project activities. The Main Boulder project manager  in Montana told us that public involvement in his fuels reduction project  led to improved relations with the public, which in turn persuaded a  neighboring landowner to offer the agency access across his land to an  isolated parcel of public land needing fuel reduction. This allowed the  manager to add an additional 40 acres to the project’s planned fuel  reduction activities.
Some managers viewed their interaction with the project monitoring team  as an opportunity to get back in touch with the community and improve the  agency’s credibility, and some sought to involve a cross section of the  community—including environmentalists and loggers—on their monitoring  teams to improve the agency’s relationship with the community. The  manager of the Sheafman Restoration project in Montana said she wanted a  cross section of the community on her project’s team because she believes  “any time you can get people from different sides of an issue together to  talk, good things happen.”  The Priest-Pend Orielle project manager  observed that in his community—as in so many others—the Forest Service  had lost touch with the local community. He sees tremendous benefits in  the agency’s new collaboration process with the community, and suggested  the agency will have greater opportunities to build credibility with the  community on future projects because local individuals have seen the  agency responding to their input. The manager of the Red-Cockaded  Woodpecker Habitat project in Georgia told us that by attending the  meetings of other community organizations and taking an active interest in  what those groups are doing, she has improved communications with the  community—leading to increased public input on Forest Service projects,  which in turn helps the agency better focus its projects to meet community  needs.
However, benefits were often limited because most of the monitoring  teams were formed after the projects completed NEPA requirements,  meaning that these teams generally participated only during the  implementation phase of the projects rather than during project design.  Several project managers suggested that stewardship contracting projects  could be more effective if the community were brought to the table during  the earliest project discussions to assist in drafting proposals of needed  work.

		Neither Agency’s 2004 Guidance Clarifies How Community Involvement Should Be Incorporated

Despite the many project managers who told us they wanted additional  guidance on obtaining and incorporating community involvement, the  Forest Service’s recent stewardship contracting handbook does not contain  specific guidance in this area, and BLM’s guidance document is similarly  lacking. In commenting on a draft of this report, Forest Service officials  noted that the agency’s intent was to allow local agency officials the  flexibility to determine the appropriate level of collaboration for their  communities. Although the agencies’ 2004 guidance documents repeatedly  mention “community involvement” and “collaboration,” they do not specify  what these terms mean or how agency staff are to accomplish them. For  example, the Forest Service handbook indicates that forest supervisors  should ensure that all stewardship contracting projects are developed  “using collaboration with Tribal governments, local governments,  nongovernment organizations, individuals, and other groups, as  appropriate.” However, the handbook neither provides guidance on how to  effectively involve these various groups and individuals nor defines  “appropriate” collaboration. (In contrast, the handbook’s guidance on  contracting and financial activities includes defined lists of appropriate and  inappropriate activities.)  In fact, the closest either guidance document  comes to saying what form this collaboration should take is a statement  about what collaboration is not. According to the Forest Service handbook,  “The use of scoping letters alone does not meet the intent of collaborative efforts for stewardship contracting projects.” Moreover, while the  Consolidated Appropriations Resolution of 2003 eliminated the  requirement for multiparty monitoring teams to assess each project, it did  not specify what form of community involvement should take its place.
Project managers are concerned that without guidance on best practices  from other projects, they may be inefficiently developing community  involvement mechanisms independently. Guidance on the minimum  requirements for community involvement in each stewardship project,  including examples of best practices, could increase both the efficiency of  managers’ efforts and the extent of community involvement in the projects.  By providing more definitive guidance, the Forest Service and BLM could  reasonably expect to enhance the effectiveness of stewardship contracting  and more fully realize its potential.

	Both Agencies Have Additional Projects Planned and Intend to Assess the Effectiveness of Stewardship Contracting

Both the Forest Service and BLM plan to use stewardship contracting in the  future. The Forest Service expects to award at least 67 stewardship  contracts in fiscal year 2004. BLM, which was granted stewardship  authority only in 2003, has begun 2 projects and plans about 34 more in  fiscal year 2004. The agencies did not provide specific data for years  beyond 2004, but agency officials said they intend to continue expanding  the use of stewardship authority in the future. According to Forest Service  and BLM officials, both agencies plan to collect information on  stewardship contracting projects to assess the utility of stewardship  contracting relative to other contracting mechanisms.

		Both Agencies Plan Additional Use of Stewardship Authority in Fiscal Year 2004

According to an official with the Forest Service’s Forest and Rangeland  Management Group, the agency awarded 49 stewardship contracts in fiscal  year 2003 and 7 more as of March 2004, and expects that an additional 60 or  more contracts may be awarded during the remainder of fiscal year 2004.  However, the Forest Service does not track the authority under which it  awards stewardship contracts, and as a result the agency could not  determine how many of these contracts pertain to new projects and how  many pertain to the 77 pilot projects we analyzed.
BLM has begun two stewardship contracting projects, both in Oregon. One  project, in Applegate, is expected to be completed in 2004; the other, near  Baker City, does not yet have an estimated completion date. Two additional  projects—one in Idaho and one in Utah—are being developed, and two  more (one in California and one in Oregon) have been approved. BLM plans  to begin about 30 additional projects in fiscal year 2004.

		Both Agencies Plan to Assess the Use of Stewardship Contracting

Each agency’s recent guidance contains provisions for monitoring and  assessing the use of stewardship contracting, and agency officials told us  that monitoring and assessment serve two purposes—they enable the  agencies to provide information both to the Congress on stewardship  contracting and to field staff responsible for stewardship contracting  projects. BLM’s guidance states that “one objective of this monitoring effort  is to analyze the effectiveness of stewardship contracting relative to other  management tools.”  The Forest Service’s handbook states that “results  from the longer term programmatic monitoring generate information about  the utility of stewardship contracting authority.”
Officials with both agencies told us that the results of the monitoring will  be used to construct the agencies’ required annual reports to the Congress  on stewardship contracting. The agencies are required to report on the  status of development, execution, and administration of stewardship  contracts; the specific accomplishments that have resulted; and the role of  local communities in development of contract plans. Officials also told us  that the results of the monitoring will be provided to agency field staff to  assist staff in designing and implementing projects. For example, a Forest  Service official told us that information on both successful and problematic  projects would be shared with field staff to help them determine whether  certain types of projects are more suitable for stewardship contracting than  others, or whether certain stewardship contracting procedures are more  effective than others in certain situations.
To carry out their monitoring efforts, the agencies are jointly developing a  request for proposal for a contractor to develop and implement a  mechanism for monitoring and evaluating stewardship contracting  projects. Agency officials estimated that the request would be issued in  spring 2004 and expect to issue a single monitoring contract covering  stewardship contracting projects in both agencies.

	Conclusions

As the Forest Service and BLM undertake projects to achieve land  management objectives—particularly their efforts to reduce fuels under  the Healthy Forests Restoration Act—they are likely to rely increasingly on  stewardship contracting. This tool has the potential to help the agencies  achieve their objectives while meeting community needs. Community  involvement is a critical component of stewardship contracting: It enables  the agencies not only to construct projects that are targeted toward  community needs but also to develop community relationships, thereby  enhancing future efforts to collaborate with communities.
However, while we observed contracting and financial controls in place  that we believe will provide accountability in managing projects, we  believe that the agencies could do more to assist individual project  managers as they seek to incorporate public involvement in their projects.  Community involvement in the pilot projects most often took the form of  multiparty monitoring teams, but these teams are no longer required for  each stewardship project, and neither agency provides substantive  guidance on incorporating community involvement. Many Forest Service  project managers said they wanted more guidance in this area, but  managers looking to the agencies’ 2004 stewardship contracting guidance  for direction on community involvement will likely find little of use. Unless  the agencies establish a minimum requirement for community involvement  in stewardship projects (to replace the expired requirement for monitoring  teams) and provide project managers with examples of successful  community involvement practices other projects have used, the agencies  may fail to capitalize fully on the potential of stewardship contracting.

	Recommendation for Executive Action

To enhance the ability of stewardship contracting projects to meet local  needs and improve public trust in the agencies, we recommend that the  Secretaries of Agriculture and the Interior direct the agencies to issue  additional guidance on community involvement. Such guidance should  identify, and encourage the use of, best practices in seeking and  incorporating community input, and establish minimum requirements for  seeking community involvement on each stewardship contracting project.

	Agency Comments and Our Evaluation

We provided a draft of this report to the Secretaries of Agriculture and the  Interior for review and comment. The Forest Service generally agreed with  our report and provided technical suggestions that we incorporated, as  appropriate. The Forest Service’s comment letter is presented in appendix  IV. The Department of the Interior did not provide comments.
We are sending copies of this report to the Secretary of Agriculture, the  Secretary of the Interior, the Chief of the Forest Service, the Director of  BLM, and other interested parties. We will also make copies available to  others upon request. In addition, this report will be available at no charge  on GAO’s Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  at (202) 512-3841. Key contributors to this report are listed in appendix V.

Forest Service’s Responses to Environmentalists’ Concerns about Projects Identified as Problematic

As requested, we reviewed six stewardship contracting pilot projects  identified as problematic by members of various environmental groups: the  Buck, Hungry Hunter Ecosystem Restoration, and Sprinkle Restoration  projects in the Forest Service’s Pacific Northwest Region; the Meadow  Face and North Fork Big Game Habitat Restoration projects in the  Northern Region; and the Granite Watershed Protection and Enhancement  project in the Pacific Southwest Region. According to the environmental  group members, these projects either did not allow for sufficient public  involvement or adversely affected the environment in some way.
Four of the six projects were cited for insufficient public involvement,  which took the form of limited public input or lack of Forest Service  commitment and support, according to environmental group members we  spoke with. Ecological concerns were raised about several projects and  included impacts on wildlife habitat and water quality, high road densities,  and soil compaction, as well as the perceived failure of the Forest Service  to consider all costs and benefits in its project analyses, including impacts  on local communities and big-game habitat. The Forest Service project  managers we interviewed generally agreed that public involvement was  lacking at the four projects where this was cited as a concern. However,  their responses to environmental concerns varied.
In this appendix, we provide, for each of the six projects, a description of  the project, a discussion of the concerns expressed by environmentalists,  and the Forest Service’s responses to those concerns. We do not take a  position on the validity of the concerns or responses.

	Buck Pilot Project

The Buck project is located in Oregon’s Wallowa-Whitman National Forest  in the Forest Service’s Pacific Northwest Region. It was designed as a  timber sale in 1998 before the initial stewardship contracting legislation  was enacted. The project was subsequently altered to incorporate activities  to reduce wildfire risk and was completed in 2004.

		Environmental Group Concerns

According to a member of the Hell’s Canyon Preservation Council (HCPC),  a local environmental group, HCPC was generally concerned about the lack  of public input in the project’s design and implementation and about the  lack of restoration activities. Specifically, this HCPC member told us the  project was simply a repackaged timber sale that was not planned or  designed with up-front community involvement beyond that required as  part of the National Environmental Policy Act (NEPA) process, which the  member did not consider a substitute for true local collaboration. Further,  although the Forest Service created a monitoring team for the project, the  team was formed after the NEPA process was completed and the contract  awarded, minimizing the opportunity for public input. The HCPC member  added that the project was too narrowly focused on the sale of timber and  involved only limited restoration activities, such as culvert and road  replacement.

		Forest Service Response

The Forest Service’s Buck project manager agreed that community  involvement was lacking on the project, noting that public involvement was  particularly limited during the project’s planning and design stages. He  emphasized that future projects will likely involve more public input,  especially during planning and design.
With respect to concerns that the project’s focus was too narrow and  involved limited restoration activities, the project manager noted that once  the NEPA process was completed, the Forest Service was limited in the  changes it could make to the project because significant alterations would  have required going through the NEPA process again. Given the project’s  initial focus as a timber sale, the amount of restoration activity that could  be added after NEPA was limited.

	Hungry Hunter Ecosystem Restoration Pilot Project

The Hungry Hunter Ecosystem Restoration project is in Washington’s  Okanogan and Wenatchee National Forests in the Forest Service’s Pacific  Northwest Region. The project was designed to remove small-diameter  trees, conduct prescribed burning, rehabilitate roads to improve habitat,  and reduce erosion. The Forest Service project manager told us he  expected the project to get under way in early 2004, following completion  of the NEPA process.

		Environmental Group Concerns

A board member of the Methow Forest Watch, a local grass roots  environmental group, expressed concerns about the Forest Service’s lack  of commitment to and support for the project, which has delayed project  implementation, as well as limited public involvement. Regarding the lack  of commitment and support, she said the Forest Service has paid more  attention to timber sale projects than to the Hungry Hunter project, citing a  local timber sale as an example of a project that is already under way while  the Hungry Hunter project is moving forward slowly. She stated that  although she understands that forest fires have contributed to project  delays, the Forest Service has not made the Hungry Hunter project a high  priority. Concerning limited public involvement, the board member noted  that although the Forest Service initially incorporated public involvement  on the project, this involvement was reduced after the Consolidated  Appropriations Resolution of 2003 eliminated the requirement for local  monitoring teams. She also noted that although the Forest Service initially  proposed 1.3 miles of road as part of the project, the agency currently  proposes constructing seven miles of new road, some of it in areas that are  currently roadless.

		Forest Service Response

The Hungry Hunter project manager disagreed with the contention that  there was a lack of commitment to the project. The manager noted that the  comparison to the local timber sale does not demonstrate lack of  commitment because the two projects did not start at the same time and,  further, that the timber sale will be about 3 years late when it is finally  completed. However, the project manager acknowledged the project’s  delays and stated that he understands public frustration over these delays.  He noted that in addition to severe fires that have directed Forest Service  resources elsewhere, lack of clear agency guidance on how to implement  the project has also contributed to delays. For example, he said the  permissible use of retained receipts was initially unclear, but the new  legislation and guidance clearly specifies what they can be used for. In  addition, he noted that time-consuming soils analyses required as part of  the project’s environmental assessment also caused delays.
The manager agreed that public involvement on the project has been  reduced in recent months. He attributed this reduction to several factors.  First, there was confusion over the requirements of the Consolidated  Appropriations Resolution of 2003, including the extent of public  involvement. Additionally, he was concerned about violating the Federal  Advisory Committee Act (FACA) by working too closely with the project’s  monitoring team; partly as a result, he reduced the team’s involvement.  Finally, a potential conflict of interest arising from monitoring team  members who were potential bidders on the project contract also  contributed to the project manager’s decision to curtail monitoring team  involvement. The manager emphasized, however, that once the  environmental assessment is finalized and the project is under way, more  direct and extensive public involvement will be resumed.
Regarding the concern about high road densities in the Hungry Hunter  project area, the project manager stated that no decision has yet been made  regarding the number of miles of road in the project. He noted that four  alternatives are outlined in the project’s environmental assessment, one of  which would involve no new road construction. Once the public comment  period is completed, he said, a decision will be made on which alternative  to select.

	Sprinkle Restoration Pilot Project

The Sprinkle Restoration project, like the Buck project, is in Oregon’s  Wallowa-Whitman National Forest in the Forest Service’s Pacific  Northwest Region. The project’s specific objectives are to provide long- term forest health, reduce the severity of future insect infestations, restore  the forest to historical conditions, and provide for wildlife habitat. A  contract for the project was awarded in July 2003, and the contractor began  working on the project in the spring of 2004.

		Environmental Group Concerns

A member of the Hell’s Canyon Preservation Council (the same member we  spoke with regarding the Buck project) told us the group is mainly  concerned about the lack of collaboration on the Sprinkle Restoration  Project, but also has concerns about the project’s narrow focus on timber  harvest activities to the detriment of restoration activities and the limited  use of receipts retained.
Regarding collaboration, the HCPC member told us that the local  monitoring team was formed only after the project had been through the  NEPA process and the contract had been signed and that community input  on the project through NEPA is insufficient. However, he noted that the  Forest Service is addressing some of the monitoring team’s concerns. For  example, the team had noticed that a road that was to be decommissioned  as part of the project required no action because the road area had  adequately restored and regenerated itself. When the team pointed out that  decommissioning the road would be unnecessary and would add sediment  to a nearby creek, the Forest Service accepted the team’s suggestion and  withdrew the plan to decommission the road. The HCPC member pointed  out that if the Forest Service had involved the community up front, this  oversight would not have occurred.
The HCPC member also told us that the project focused on timber harvest  activities and did not address the issue of high road density, which  jeopardizes wildlife security. More broadly, he told us that the project did  not contain sufficient restoration activities and noted that additional  activities (such as replacing culverts or decommissioning roads) could  have been added to the project to fully use the expected $300,000 in  retained receipts, which had not been used.

		Forest Service Response

The Sprinkle project manager told us he agrees that collaboration on the  project has been lacking and that NEPA had been completed and the  project designed before the monitoring team was formed. He stated that  the Forest Service is trying to improve collaboration on planning various  forest projects.
Concerning high road density, the project manager said that although road  removals were planned as part of the project, road density remains high,  contributing to reduced elk habitat. He noted, however, that the area is flat,  making vehicle use difficult to manage. If the Forest Service closes a road,  forest users are likely to simply take their vehicles off road to get where  they want to go. Because it may be more ecologically sound to leave the  roads in place and keep forest traffic on established roadways, there is  some reluctance on the part of the Forest Service to close roads.
Finally, regarding retained receipts, the project manager informed us that  the agency has consulted with the monitoring team on the use of the  receipts. He said the Forest Service plans to use the funds on nearby  stewardship projects as well as on the Sprinkle and adjacent watersheds.  For example, the agency plans to use the funds to replace culverts within  the Sprinkle area.

	Meadow Face Pilot Project

The Meadow Face project is located in Idaho’s Nez Perce National Forest in  the Forest Service’s Northern Region. The project objectives are to return  vegetation to its historical range; reduce fire risk, invasive plant species,  and sediment; and improve stream channel conditions and recreational  opportunities. No contract has been awarded on the project, and the  project manager did not provide an estimate of its completion date.

		Environmental Group Concerns

Members of Friends of the Clearwater and the Idaho Conservation League,  two local environmental groups, expressed concerns about insufficient  public involvement in the project, insufficient restoration activities,  overstatement of the results of project activities, and site-specific  amendments made to the 1987 forest plan that allow environmental  degradation. Regarding public involvement, the Idaho Conservation  League member said that the Stewards of the Nez Perce, an advisory group  composed of representatives of the timber industry, the Idaho Department  of Fish and Game, the Nez Perce tribe, environmentalists, and others,  presented the Forest Service with a project proposal that was unanimously  agreed upon by the group. However, the Forest Service ultimately ignored  the group’s recommendation and came up with its own project, and the  environmental group members do not believe the project will result in the  completion of all restoration elements that were proposed.
The Friends of the Clearwater member also commented on one element of  the service work—an attempt to reduce sedimentation into area  waterways—involving the stabilization of a slide area resulting from past  timber harvesting. The member argues that the Forest Service is double  counting the sediment savings resulting from this activity—that is,  representing the savings as the effect of mitigating the prior timber harvest  as well as the effect of the current Meadow Face project.
Finally, the environmental group member expressed concern over three  amendments that were made to the forest plan in order to allow project  activities. He told us his group is concerned over forest plan amendments  that will allow (1) higher levels of sedimentation in area waterways, (2)  increased soil compaction in the area, and (3) logging activities within old- growth timber stands.

		Forest Service Response

Regarding the concern about ignoring the recommendations of the  Stewards of the Nez Perce, local Forest Service officials noted that about  90 percent of what was contained in the Stewards’ recommendations is  included among the activities the Forest Service intends to undertake and  that, in any case, the group was told repeatedly that its recommendations  would not necessarily be implemented without further adjustment or  review. Further, the Stewards’ recommendations were vague in certain  respects, making it difficult to determine exactly what activities the group  expected.
Project officials also noted that the stewardship project itself will  encompass only a portion of the activities the Forest Service intends to  undertake and that other contracting mechanisms—such as timber or  service contracts—may also be implemented. Thus, the omission of certain  activities from the stewardship project does not mean the restoration work  will not be completed; rather, it simply means the Forest Service will  complete the work using other means.
With respect to the Meadow Creek slide area, the project manager said that  the area is the result of ponds created by a homesteader, not the result of  past timber harvesting. The area was included in a timber sale in order to  remediate the slide area; the sediment savings resulting from this  remediation were to offset the increased sediment that would result from  logging activities. The timber sale is currently being implemented, but the  slide area has not yet been treated, so it was included in the Meadow Face  project. However, the official added that the Forest Service will not count  the slide area remediation toward any “sediment savings” in the Meadow  Face project.
Regarding the amendments to the 1987 forest plan, the project officials told  us that the water quality amendment actually tightens the water quality  requirements for two watersheds in the project area, meaning that less  sediment will be permitted to flow into those streams. In the case of a third  waterway, sediment restrictions were eased after forest staff determined  that the streambed can handle more sediment than was initially believed  when the forest plan was developed.
The soil compaction amendment allows greater flexibility in conducting  projects, according to project officials. The forest plan originally stated that  upon completion of any forest activity, the soil in the area must be less than  20 percent compacted, displaced, or puddled. However, many areas in the  forest had undergone significant logging or other activities in the past and  were already affected well beyond the 20 percent standard. Consequently,  those areas were, in effect, off limits to any additional activities—whether  timber harvesting or restoration activities—because remediating the soils  to below the 20 percent standard would be difficult when they were  substantially above the standard to begin with. The amendment to the 1987  forest plan states generally that the level of compaction, displacement, or  puddling after a project is completed must be lower than the level before  the project—which in turn would allow activities, as long as the soils are  left in better condition after the project than they were before it.
Finally, the officials told us that the old-growth logging amendment applies  to about 710 acres of old-growth forest and allows treatment of the stands  in order to maintain old-growth characteristics. The stands are becoming  dense with small trees and underbrush that could serve as ladder fuels and  possibly contribute to a stand-destroying fire. As a result of the  amendment, the Forest Service can thin the stands, benefiting old-growth  trees by reducing both ladder fuels and competition for water and  nutrients.

	North Fork Big Game Habitat Restoration Pilot Project

The North Fork Big Game Habitat Restoration project (also known as the  Middle Black project) is located in Idaho’s Clearwater National Forest in  the Forest Service’s Northern Region. The project will involve thinning on  about 640 acres, and the project manager expects it to be completed in  2009.

		Environmental Group Concerns

A member of Friends of the Clearwater (the same member we spoke with  regarding the Meadow Face project) told us that his organization is  concerned that the project focuses more on increasing the elk population  than on other environmental issues and will involve thinning trees and  brush in roadless areas.

		Forest Service Response

The project manager told us that, while the Forest Service is seeking to  restore the elk population, it is also engaged in restoration activities. He  acknowledged that the project began as a study undertaken at the request  of a local group called the Clearwater Elk Recovery Team (CERT), which  was concerned about declining elk numbers. However, he emphasized that  despite its origin, the project is being conducted as an ecosystem  restoration effort that will restore the forest to a more typical historical  condition and reduce the likelihood of fire. As evidence that the project has  not paid undue attention to the elk recovery issue, the project manager told  us that CERT members “complained vigorously” about the proposed plan  for the project, even filing an appeal, because the project did not  adequately address their concerns about elk habitat. The manager stated  that although thinning will take place in roadless areas, no new roads will  be built. Thinning will be conducted manually using chainsaws.

	Granite Watershed Protection and Enhancement Pilot Project

The Granite Watershed Protection and Enhancement project is located in  California’s Stanislaus National Forest in the Forest Service’s Pacific  Southwest Region. The project is designed to achieve several objectives,  including watershed and enhancement, spotted owl habitat improvement  and protection, noxious weed control, and reforestation. The project is  ongoing, and the project manager expects it to be completed in 2010.

		Environmental Group Concerns

Members of the Sierra Club and the Forest Conservation Council told us  that their overall concern about the project is the Forest Service’s failure to  account for all costs and benefits when designing the project. The members  told us that while the project will open or reconstruct 63 miles of road to  remove forest products, the Forest Service did not consider the project’s  impacts on other issues, such as sedimentation and big-game habitat, and  the financial and nonfinancial costs and benefits of these potential impacts.

		Forest Service Response

The Granite project manager agreed that there are many costs and benefits  associated with timber sales and other forest projects beyond those  assessed for the Granite project, but he stated that quantifying all costs and  benefits would be impossible. For example, he noted that timber harvests  might deter people from using forest lands for recreational purposes.  Although forest visitors may provide financial benefits such as gasoline  purchases from nearby communities, visitors also leave trash behind,  creating a nonmonetary cost by degrading the recreational experience of  others and potentially creating a monetary cost for cleanup expenses. In  addition, visitors’ vehicle use may also contribute to watershed damage by  increasing sedimentation. Given that project effects are so mixed and  involve so many elements that are impossible to quantify, according to the  project manager, it would be impossible to account for all costs and  benefits in a project analysis.
With respect to the specific impact on big-game habitat, the project  manager noted that the project, as designed, would add less than one mile  of road to existing roads in the forest. He added that if roads do, in fact,  reduce habitat, the one additional mile of road will have little impact on  this reduction. He said that the area is not known for big game; the only  such game are deer and bears, and neither population has been thriving  under existing conditions.

Objectives, Scope, and Methodology

Based on the congressional request letters of July 2002 and March 2003,  and subsequent discussions with your staffs, we agreed to determine (1)  the status of each stewardship project and the land management goals they  address; (2) the extent to which the agencies have contracting and financial  controls in place that ensure accountability in managing stewardship  projects; (3) the steps the agencies have taken to involve communities in  designing, implementing, and evaluating stewardship projects; (4) each  agency’s plans for future use of stewardship contracting; and (5) the Forest  Service’s response to concerns raised about 6 specific stewardship  projects.

	Stewardship Project Status and Land Management Goals

To identify ongoing and completed stewardship pilot projects, we  contacted officials at the Forest Service and BLM to obtain a list of such  projects. The Forest Service provided a list of 81 pilot projects; an official  with BLM’s Forest and Woodland Management Group stated that no  projects were ongoing.
To determine the status of these stewardship projects and their land  management goals, we conducted a Web-based survey of all ongoing and  completed stewardship projects. The survey asked respondents to provide  data on project activities, costs, time frames, size, and other information, as  well as the land management goals addressed by each project.
Because we surveyed all stewardship projects, no sampling error and  confidence intervals are associated with our work. However, the practical  difficulties of conducting any survey may introduce other types of errors,  commonly referred to as nonsampling errors. For example, differences in  how a particular question is interpreted, the sources of information  available to respondents, or the types of people who do not respond can  introduce unwanted variability into the survey results. We included steps in  both the data collection and data analysis stages for the purpose of  minimizing such nonsampling errors. We pretested the survey at three  project sites and conducted a fourth pretest by telephone. In addition, we  provided a draft version of the survey to Forest Service headquarters  officials familiar with the stewardship contracting program in order to  obtain their comments on the draft. We modified the survey as appropriate  to reflect the questions and comments we received during the pretests and  Forest Service headquarters review.
Project managers at 4 of the 81 projects identified by the Forest Service  told us that their projects had been terminated by the time of our survey or  were no longer being conducted under stewardship authority, leaving 77  projects. Of these 77 projects, 7 did not provide information in our survey.  The managers for 3 projects—Butte South, Midstory Removal in Red- Cockaded Woodpecker Habitat, and Red River—told us that their projects  were too preliminary to reasonably provide information. The manager of  the Grassy Flats project told us that she was required to serve on  firefighting duty and did not have time to complete our survey. The  manager of the West Glacier project told us that because of demands on his  time resulting from the 2003 wildfires in his state, he was faced with a  substantial backlog of work and would not be able to complete our survey.  Finally, the managers of the Grand Canyon and Yaak projects did not  respond to our requests to provide data.
We attempted to corroborate survey responses in two ways. First, to the  extent possible, we compared survey responses from the projects we  visited with information (such as contracts or other documents) we  collected during those visits. The survey data generally concurred with the  site visit documentation we gathered. When we encountered substantial  differences we could not reconcile, we used the more conservative figure.  Such discrepancies occurred in four instances, two involving the estimated  value of products removed, one involving the estimated volume of products  removed, and one involving estimated contract costs. We also identified  one source of data—the Forest Service’s Timber Sale Accounting (TSA)  system—that contains data about the volume of timber removed as part of  Forest Service timber sales. Because in our survey we asked about timber  volumes removed during stewardship projects, we attempted to  corroborate survey responses regarding timber volumes by comparing  them to TSA data. The comparison was not meaningful, however, because  of differences in the way the two sets of data (ours and TSA’s) were  collected, and because the preliminary nature of many of the stewardship  projects meant that, while they provided us with estimates of their timber  harvest volumes, such data were not yet entered into TSA.
However, based on our comparison of survey responses to project  documentation, we believe the data are sufficiently reliable to be used in  providing descriptive information on project size, activities, land  management goals, and the like.

	Contracting and Financial Controls

To assess the contracting and financial controls in place at stewardship  projects, we conducted site visits to a nonprobability sample of 8 ongoing  or completed project locations—about 10 percent of the 81 projects  initially reported to us.2, 3 We used numerous criteria to select project  locations to visit. First, to respond to your interest in the Forest Service’s  use of retained funds and its controls over contractor activities, we  narrowed our scope to include only projects using receipt retention or  designation by description authorities. From such projects we selected all  of those that had been completed—a total of 4 projects. (One additional  project had been completed but did not use either receipt retention or  designation by description authority.)
To select the remaining 4 projects to visit, we first eliminated from our  consideration any remaining projects in the Forest Service regions where  the 4 completed projects were located, in order to obtain geographic  spread in our nonprobability sample and obtain information from various  Forest Service regions. We then focused on projects that were well under  way, in order to ensure that sufficient contracting and financial activities  had taken place for us to evaluate. Our application of these site selection  criteria yielded the site visit locations shown in table 1.
Results from nonprobability samples cannot be used to make inferences about a  population. This is because in a nonprobability sample, some elements of the population  being studied have no chance or an unknown chance of being selected as part of the sample.
We also visited stewardship projects near Flagstaff, Arizona, and Fort Collins, Colorado.  However, at these locations, we simply toured the project sites and did not apply our site  visit methodology.
At each site visit location, we reviewed the project’s contracting and  financial files and interviewed Forest Service officials associated with the  project, including project managers, timber sale contracting officers,  procurement contracting officers, contracting officers’ representatives,  supervisory accountants, and others, to determine whether appropriate  controls were in place to provide accountability in managing the projects.  We reviewed preaward and postaward contracting elements we identified  as important for providing management accountability in awarding and  administering stewardship contracts. Regarding preaward activities, we  looked for evidence of solicitations and advertisements for the projects to  provide public notice of work to be performed and to maximize the number  of potential bidders on project contracts. We also looked for  documentation of preestablished bid evaluation criteria to show that the  Forest Service selected contractors fairly and equitably. In addition, given  that stewardship projects may involve new ways of contracting to achieve  land management objectives, we looked for evidence of meetings with  prospective bidders to clarify project activities and Forest Service  expectations.
Regarding postaward controls, we reviewed contracts to determine  whether they contained clear definitions of contract requirements as well  as valuation, bond, oversight, and breach, default, and dispute resolution  clauses to provide accountability in managing the projects. Clear  definitions of contract requirements, accompanied by postaward  conferences with contractors, ensure that contractors fully understand the  Forest Service’s requirements and expectations. Appropriate valuation  techniques, such as appraisals and government estimates, ensure that the  government is fairly compensated for the timber or other products it is  selling. Payment and performance bonds ensure that the government  receives payment for timber harvested and that government funds are not  required to remediate damage caused by contractor activities. Oversight  activities assure the government that contractor activities are being  conducted appropriately and according to schedule. Finally, breach,  default, and dispute resolution clauses allow the Forest Service to address  problems by issuing default notices or stop work orders to prohibit further  activity on a project until the problems are resolved.
In addition, at 6 of the 8 sites we visited, we met with the contractor  performing the stewardship activities, in order to obtain the contractor’s  perspective on the project. Finally, we spoke with officials of the Forest  Service’s Forest and Rangeland Management Group, BLM’s Forest and  Woodland Management Group, and various agency field staff regarding the  contracting and financial guidance provided to staff implementing  stewardship projects.
Based on our reviews of agency files, discussions with agency staff, and  interviews of contractors outside the agency, we believe the data are  sufficiently reliable to be used in reporting on the contracting and financial  mechanisms employed by the Forest Service in implementing stewardship  projects.

	Community Involvement

To determine the measures taken by the agencies to involve communities  in designing, implementing, and evaluating stewardship projects, we  reviewed project contracting files and interviewed agency officials at each  of our 8 site visit locations. At 5 of the 8 locations, we also spoke with a  member of the local monitoring team to obtain additional information on  the monitoring team’s role in the project. The remaining 3 locations did not  have monitoring teams.
In addition to these 8 projects, we conducted structured telephone  interviews with officials at a nonprobability sample of an additional 25  randomly selected projects. In order to select these projects, we first  eliminated from consideration those projects that (1) indicated through our  survey they were no longer viable stewardship projects, (2) were included  among our 8 site visits, and (3) were among the 6 included in our  assessment of projects about which concerns had been raised. Of the  remaining 63 projects, 40 had completed NEPA, according to Forest  Service data, and 23 had not. From these 63 projects we randomly selected  a total of 25 projects to contact—15 that had completed NEPA and 10 that  had not. Our nonprobability sample of 25 projects was similar to our  universe of 63 projects in the percentage of projects that had and had not  completed NEPA. We then contacted officials at these 25 projects to ask a  set of questions regarding community involvement in the projects. Again,  we included steps to minimize nonsampling errors. In lieu of pretesting the  questions, we used the results of our site visits to ensure that the questions  we asked were understandable, balanced, and appropriate.
We also spoke with staff from the Pinchot Institute for Conservation (the  Forest Service contractor overseeing multiparty monitoring and  evaluation) regarding community involvement, and attended the spring  2003 meeting of the Pinchot Institute’s national stewardship monitoring  team.
Because we gathered complementary data from multiple sources, including  Forest Service project managers, Pinchot Institute staff, and local and  national monitoring team members, we believe the data we gathered are  sufficiently reliable to be used in reporting on the measures taken by the  agencies to involve communities in stewardship projects.

	Future Agency Activities

To obtain information on future agency stewardship activities, we reviewed  both the Forest Service’s and BLM’s January 2004 guidance on stewardship  contracting. We also obtained from Forest Service and BLM headquarters  officials the number of projects they currently had under way or had  planned in addition to the 77 pilot projects undertaken by the Forest  Service. Finally, we spoke with headquarters officials at both agencies to  obtain their views on future use of stewardship contracting authority and  their plans for future monitoring and assessment activities.

	Projects of Concern

To determine the Forest Service’s response to specific concerns raised  about 6 ongoing stewardship projects by environmental group  representatives, we first obtained the concerns of environmental group  representatives for each of the 6 projects. To do so, we telephoned the  environmental contacts listed by your staff to obtain information on their  concerns. We also requested documentation such as appeal documents  filed, correspondence with Forest Service officials, or other documentation  that could provide information on concerns regarding the projects.  Subsequently, we telephoned the Forest Service managers for each of these  6 projects to obtain their responses to the concerns that had been raised.  Based on our discussions with individuals concerned about specific  stewardship projects and Forest Service staff associated with the projects,  as well as our review of documentation regarding the projects, we believe  the data are sufficiently reliable to be used in reporting on concerns about  specific stewardship projects and the Forest Service’s response to those  concerns.
We conducted our work between April 2003 and April 2004 in accordance  with generally accepted government auditing standards.

Pilot Project Names, Locations, Acres Treated, and End Dates

Table 2 provides pilot project information as of September 30, 2003, as  reported by project officials.

Comments from the Department of Agriculture

GAO Contacts and Staff Acknowledgments

	GAO Contacts

	Staff Acknowledgments

In addition to those named above, Paul Caban, Nancy Crothers, Timothy  DiNapoli, James Espinoza, Steve Gaty, Kevin Jackson, Richard Johnson,  Diane Lund, Mary Mohiyuddin, Judy Pagano, and Alana Stanfield made key  contributions to this report.

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Summary:
Why GAO Did This Study

In their efforts to reduce hazardous fuels and the risk of wildfire on the nation's public lands, the Forest Service and the Bureau of Land Management (BLM) expect that stewardship contracting will play a major role. Stewardship contracting involves the use of contracting authorities--such as the exchange of goods for services--first authorized in 1998 and intended to help the agencies achieve land management goals that meet community needs. GAO was asked, among other things, to determine (1) the contracting and financial controls the agencies use to ensure accountability in managing stewardship contracting projects and (2) the steps the agencies have taken to involve communities in the projects.

What GAO Found

Although the Forest Service provided limited initial guidance on establishing contracting and financial controls, the eight stewardship projects GAO visited had incorporated such controls. (BLM was first granted stewardship authority in 2003 and had no projects under way at the time of GAO's review.) The projects generally used pre- and post-award controls, such as reviews of contractor bids using preestablished criteria, and performance and payment bonds to ensure completion of required activities. GAO's review of selected financial controls at the projects we visited showed that they appeared to have procedures in place to account for retained receipts, including tracking funds received and expended, and had incorporated procedures designed to ensure the completion of specific work tasks before contractors were paid. Both the Forest Service and BLM issued guidance in January 2004 containing such controls for future projects. The Forest Service initially provided minimal guidance on soliciting and incorporating public involvement in stewardship contracting projects and, as a result, the type and extent of efforts to involve communities varied considerably among the projects GAO reviewed. However, managers who did not incorporate public input may have missed valuable opportunities to strengthen their projects. For example, one project manager said that public involvement led to more stringent criteria for protecting water quality, and another reported that public involvement improved agency access to public lands needing fuel reduction. Although most managers GAO spoke with said they wanted additional guidance on public involvement, the Forest Service's recently issued stewardship contracting handbook does not contain specific guidance for obtaining community input--and BLM's recent guidance is similarly lacking. Without such guidance, each project manager must independently determine the type and extent of community involvement to solicit and then develop and implement community involvement procedures--an inefficient process that could lead to variation in community involvement across stewardship contracting projects in both agencies.