Federal Land Management: Use of Stewardship Contracting Is Increasing, but Agencies Could Benefit from Better Data and Contracting Strategies
Published: 2008-11-13T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Department of Agriculture's Forest Service and the Department of the Interior's Bureau of Land Management (BLM) have stewardship contracting authority, which allows the agencies to trade goods--such as timber--for services (e.g., thinning forests or rangelands) that the agencies would otherwise pay for with appropriated dollars, and to enter into stewardship contracts lasting up to 10 years. The authority is set to expire in 2013. GAO was asked to determine, among other things, (1) the extent to which the agencies are using stewardship contracting and (2) what successes and challenges the agencies have experienced in using it. In doing so, GAO assessed agency data, reviewed project files, and visited projects in numerous locations.
section_title: What GAO Found
paragraphs: From fiscal years 2003 through 2007, the Forest Service and BLM awarded a combined total of 535 stewardship contracts, with the number increasing each year--from 38 in fiscal year 2003 to 172 in fiscal year 2007. However, for certain aspects of stewardship contracting, such as the acres involved or the value of the services exchanged for goods, reliable data were not available for the full 5-year fiscal period because neither agency has had a comprehensive database of its stewardship contracting activity since 2003. The agencies did not begin to maintain nationwide stewardship data until recently, primarily because of difficulties in adapting their systems to account for all aspects of stewardship contracting. Further, these data are not complete, and reside in myriad systems, not all of which interface with one another. These deficiencies keep the agencies and Congress from accurately assessing the costs and value of stewardship contracting. The agencies credit stewardship contracting with allowing them to accomplish more work--by allowing them to trade goods for services, thereby extending their budgets for thinning and other services--and spurring collaboration with members of the community and environmental groups. But stewardship contracting has its challenges too, including some resistance to its use (e.g., by contractors unfamiliar with it) and a paucity of markets for the small trees typically removed in stewardship projects. Also, although agency officials view long-term multiyear contracts as crucial to market development, these contracts can involve financial challenges. These contracts are attractive because they offer contractors and industry operators some certainty of supply, enabling them to obtain loans for equipment or processing facilities, which can then spur demand for materials resulting from stewardship projects. But such contracts can require a substantial up-front obligation of funds--to protect the contractor's investment if the government later cancels the contract--that may exceed the budget of a field unit (e.g., a national forest). Also, funding the annual work specified in the contract can force a unit to scale back its other programs if the value of the timber removed is not sufficient to pay for that work. Yet neither agency has developed a strategy for using such contracts, a step that could help field units determine which projects are appropriate for these long-term contracts and how they would be funded.

section_title: Letter
paragraphs: Recent severe wildland fire seasons have focused attention on the state of  the nation’s forests. Many of these forests have become dense with small,  tightly spaced trees and thick brush, which—combined with drought,  wind, insect damage, and other adverse conditions—have fueled extensive  wildland fires in recent years. In response, both the Department of  Agriculture’s Forest Service and the Department of the Interior’s Bureau of  Land Management (BLM) have placed substantial emphasis on thinning  forests and rangelands to help reduce the buildup of potentially hazardous  fuels. The Forest Service and BLM, which together manage a total of about  450 million acres of federal land, have frequently cited the importance of  one tool—stewardship contracting—in their efforts to reduce hazardous  fuels and restore forest health. This tool was designed to help the agencies  conduct land management projects—such as thinning forests, installing  culverts, harvesting timber, and the like—more efficiently, by allowing  them to use any of several innovative contracting approaches. For  example, through stewardship contracting, the agencies can trade goods— such as timber—for fuel reduction or forest restoration services that the  agencies would otherwise pay for with appropriated dollars.
In conducting stewardship projects—i.e., projects carried out through  stewardship contracting authorities—the agencies use various types of  stewardship contracts, as well as agreements, in which partner  organizations contribute resources toward project accomplishment. Some  types of contracts are large “umbrella contracts” under which individual  task orders are issued for discrete projects or portions of a project. In  some cases, a single large stewardship contract, task order, or agreement  may encompass multiple projects; in other cases, a single stewardship  project may involve multiple contracts, task orders, or agreements. In this  report, references to stewardship contracts generally include task orders  and agreements as well.
The stewardship contracting authorities were first authorized for use by  the Forest Service on a pilot basis in October 1998, when the Omnibus  Consolidated and Emergency Supplemental Appropriations Act for 1999  established stewardship contracting authority to achieve national forest  land management goals that meet local and rural community needs.  Prominent among the stewardship contracting authorities is the ability to  trade goods for contract services—that is, to use the value of forest  products sold to offset the cost of the contracted services, thereby  allowing the accomplishment of more work within existing appropriations.  Under such goods-for-services contracts, the Forest Service could, for  example, pay for some or all of needed thinning operations by using the  proceeds from any commercial timber sold as part of the project. Other  prominent stewardship contracting authorities include the ability to (1)  retain for use in future stewardship projects any receipts generated  through selling forest products such as timber, rather than returning the  receipts to the Department of the Treasury’s general fund, as required with  traditional timber sales—thereby providing additional funds for local land  management units to conduct restoration work, and (2) implement long- term contracts of up to 10 years—thereby providing contractors some  assurance that they can obtain a steady supply of material, an important  consideration when contemplating investment in equipment or facilities  that can use the material removed through stewardship projects.
The 1998 law stated that the land management objectives of stewardship  projects were to include road and trail maintenance, watershed  restoration, prescribed burning, and noncommercial tree removal to  improve forest health. Although stewardship contracting was initially  established as a demonstration program that involved a limited number of  projects within the Forest Service and was to end in 2002, the  Consolidated Appropriations Resolution of 2003, among other things,  extended the use of stewardship contracting authority to 2013, eliminated  the limit on the number of projects, authorized commercial tree removal  for forest health purposes as a project objective, and extended the use of  stewardship authority to BLM. In 2004, we reported on the projects  undertaken by the Forest Service under the initial stewardship contracting  authority.
The Forest Service and BLM are now about halfway through the extended  authority period, and stewardship contracting is increasingly seen as a  way for the agencies to implement long-term large projects. In this  context, you asked us to determine (1) the extent to which, and for what  purposes, the agencies are using stewardship contracting; (2) what  processes the agencies use in planning, implementing, and monitoring  stewardship projects to manage resources; and (3) what successes and  challenges the agencies have experienced in using stewardship  contracting.
In conducting our review, we reviewed Forest Service and BLM  documents and guidance related to stewardship contracting; analyzed  reports from systems that track stewardship project information, including  information on the volume and value of goods traded for services; and met  with agency headquarters officials. We also visited one or more  stewardship contracting projects in seven of the nine Forest Service  regions and in most of the western states in which BLM manages land. At  the locations visited, we reviewed project financial and contracting files  and met with agency officials (and, at some sites, with project contractors  and local citizens) to obtain information about project planning,  implementation, and monitoring, including community involvement in the  projects. We also obtained agency officials’ views on the successes and  challenges they have experienced in using stewardship contracting.  Although the information derived from our discussions and site visits  cannot be generalized nationwide, the projects we selected represent a  mix of stewardship contracting projects by virtue of their geographic  diversity and the variety of project objectives, activities, and  accomplishments. Appendix I contains details on the objectives, scope,  and methodology of our review, which included an assessment of data  reliability and internal controls. We conducted this performance audit  from August 2007 through October 2008 in accordance with generally  accepted government auditing standards. Those standards require that we  plan and perform the audit to obtain sufficient, appropriate evidence to  provide a reasonable basis for our findings and conclusions based on our  audit objectives. We believe that the evidence obtained provides a  reasonable basis for our findings and conclusions based on our audit  objectives.
subsections: section_title: Background
paragraphs: 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 for 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 the 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  sold as part of the project.
In addition to authorizing contracts, the act authorized the use of  agreements to carry out stewardship projects. According to Forest Service  and BLM guidance, the decision on whether to use contracts or  agreements should be based on the principal purpose of the award,  including its intended primary beneficiary.
Contracts. The primary beneficiary of a contract is the federal  government. Contracts are used for the purchase of goods and services for  the direct benefit of the government or for the sale of government property  such as timber. A contract is a mutually binding legal relationship  obligating the seller to furnish supplies or services and the buyer to pay for  them. Agency guidance directs that contracts rather than agreements be  used for projects that are highly complex or financially risky.
Agreements. Agreements are typically used to transfer a thing of value to a  state or local government, or other recipient, to carry out a public purpose.  According to the agencies, agreements are often used for projects that are  for the mutual interest and benefit of the government and a cooperating  organization—often a nonprofit organization or a state or local  government. Under such agreements, both the government and the  cooperating organization share the costs of the project, with the  cooperator contributing funding, personnel, or equipment.
A variety of agreements, including those entered into under the Wyden  Amendment, may be used to implement stewardship contracting projects.  Under the Wyden Amendment, the Forest Service and BLM may enter into  cooperative agreements with landowners for the protection, restoration,  and enhancement of fish and wildlife habitat and other resources on  public or private land, as long as the agreement benefits the fish, wildlife,  and other resources on national forest and BLM lands within the  watershed.
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 agency might require  that all ponderosa pine less than 10 inches in diameter be harvested.  Ordinarily, cutting any standing tree before an agency 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 for the Forest Service.)
Retention of receipts allows the agency to retain receipts generated from  the sale of commercial products sold through stewardship contracts,  rather than returning the funds to the Department of the Treasury’s  general fund. The receipts are available for expenditure, without further  appropriation, on other stewardship contracting projects.
Exception to advertising 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.
Supervision of marking and harvesting of timber sales exempts the  agency from the requirement that only federal agency employees supervise  the harvesting of trees on agency-managed lands. This authority has  allowed the agencies to use certain state agencies 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 1999 law authorized 28 stewardship contracts by the Forest Service;  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 quality;  noncommercially cutting or removing trees or other activities to promote  healthy forest stands, reduce fire hazards, or achieve other noncommercial  objectives; and restoring and maintaining wildlife and fish habitat. The law  also required that the Forest Service establish a multiparty monitoring and  evaluation process to assess each stewardship contract.
Subsequent laws modified the requirements of the initial stewardship  contracting authority. For example, the Consolidated Appropriations Act  of 2000 changed the requirement from 28 stewardship contracts to 28  stewardship projects, allowing for the possibility that individual projects  might involve more than one contract. Subsequent legislation in the  following 2 years increased the number of authorized projects and  changed the end date of the demonstration period 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, 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  designated a stewardship contracting coordinator to facilitate stewardship  contracting activities. These nine regions oversee 155 national forests; the  forests, in turn, oversee more than 600 ranger districts. Within BLM,  authority for administering stewardship contracts resides within its  Division of Forests and Woodlands. Each of BLM’s 12 state offices also has  a stewardship contracting coordinator. The state offices oversee the  activities of field-level units, including 144 district and field offices that  carry out the on-the-ground activities. References to “field units” in this  report include the Forest Service’s national forests and ranger districts and  BLM’s district and field offices.
Both agencies generally consider stewardship contracting to be a tool,  rather than a program, because it has no associated budget or official  accomplishment targets. Instead, the agencies must use existing  appropriations to plan and administer their stewardship contracting  activities. The Forest Service primarily relies on its fuel reduction and  vegetation and watershed management funds to carry out stewardship  contracting activities; BLM primarily relies on its forestry and fuel  reduction funds. When the agencies use agreements to carry out  stewardship projects, the partner organizations typically contribute  resources such as funding, volunteer labor, or equipment.
section_title: Use of Stewardship Contracting Is Increasing, but Agency Data Are Incomplete
paragraphs: The agencies awarded increasing numbers of stewardship contracts  during fiscal years 2003 through 2007; however, details about their overall  use of stewardship contracting are incomplete because the agencies did  not begin to collect nationwide data until recently, and even these data are  not complete or consistent across agencies. As a result, certain data are  available only for more recent years or are not tracked at all, limiting the  agencies’ ability to evaluate their implementation of stewardship  contracting and provide information on its use to Congress and other  interested parties. From fiscal years 2003 through 2007, the number of  stewardship contracts that the agencies awarded increased each year. For  the Forest Service, the number of contract awards increased from 36 in  fiscal year 2003 to 121 in fiscal year 2007, for a total of 352; for BLM, the  number increased from 2 to 51 during the same period, for a total of 183  contracts awarded through fiscal year 2007. For other aspects of  stewardship projects, however, reliable data were available only for more  limited periods of time. For example, complete and comparable data on  the volume of timber sold (i.e., sold for cash or exchanged for services)  were available only for fiscal years 2005 through 2007. During that period,  Forest Service stewardship projects sold about 130 million cubic feet of  timber; BLM projects sold about 8 million cubic feet. During the same 3- year fiscal period, Forest Service projects treated about 172,500 acres;  BLM did not maintain data on acres treated through stewardship  contracts. And during fiscal years 2006 and 2007, the Forest Service sold at  least $8.2 million worth of timber through stewardship contracts, while  BLM sold about $5.9 million. During the same 2-year fiscal period, BLM  procured services valued at about $10.5 million through stewardship  contracts; comparable data were not available for the Forest Service. The  agencies’ stewardship projects generally involved removing timber or  other vegetation to reduce hazardous fuels or to otherwise improve forest  health; the projects also encompassed various activities that benefited  communities or met other restoration objectives, such as controlling  disease or improving wildlife habitat.
subsections: section_title: The Forest Service and BLM Recently Began Collecting Nationwide Stewardship Data, but Neither Agency Collects Complete or Consistent Data
paragraphs: Neither the Forest Service nor BLM maintains data that provide a  complete national view of stewardship projects. The agencies did not  begin maintaining nationwide data on stewardship contracting projects  until recently—primarily because of difficulties in adapting their systems  to account for all aspects of stewardship projects. The agencies have  adopted ways of collecting and reporting data specific to their respective  needs and current capabilities, but the agencies must assemble data from  various automated and manual sources to capture a complete picture of  their stewardship contracting projects and accomplishments. Further,  neither agency has a system that separately tracks data on stewardship  agreements.
The Forest Service has modified its existing Timber Sale Accounting  (TSA) system to incorporate information on stewardship projects,  including the collection and distribution of revenues stemming from  stewardship contracts. But the Forest Service did not begin consistently  distinguishing stewardship contracts (and their associated service credits)  from conventional timber sale contracts in TSA until the beginning of  fiscal year 2007. This approach tracks actual dollar values within TSA but  has been challenging because the barterlike aspect of stewardship  contracting makes it difficult to account for using traditional accounting  systems like TSA. TSA was designed to account only for the value of  timber sold and the cash received for it, and it was difficult for the Forest  Service to adapt the system to account for the value of services received in  exchange for timber. Additionally, when entering data, regions vary in  whether they assign one number for an entire contract or a number for  each task order within a contract. Other nonmonetary information about  stewardship projects, such as the number of acres treated, is collected by  the national stewardship contracting coordinator through a variety of  other sources, including direct contact with regional and forest staff.  Information on the value of services over $3,000 purchased as part of  certain stewardship projects is maintained in the Federal Procurement  Data System—Next Generation (FPDS-NG). However, the system contains  information on only some stewardship contracts—those in which the  value of services exceeds the value of the timber. Further, these contracts  are not consistently distinguished from other types of contracts (i.e.,  standard procurement contracts) in this system, so complete information  specific to stewardship projects cannot be extracted.
The Forest Service does not maintain national data on stewardship  activities conducted through agreements rather than contracts. The Forest  Service has not yet determined how to modify its systems to incorporate  data from agreements under which, as with contracts, forest products may  be exchanged for services. The expectation is that stewardship  agreements will go through the same accounting measures as contracts  do, but it is unclear how forests are to keep track of the services  performed under stewardship agreements. This is made more complicated  by the fact that partnership agreements are no longer the simple  instruments they have traditionally been. Now, for example, timber might  be harvested under stewardship agreements, whereas it was traditionally  harvested under contracts. In fact, lacking data on agreements, Forest  Service officials were not certain whether timber has yet been sold under  an agreement or by what means it would be tracked in agency databases if  it were.
In contrast to the Forest Service’s approach, BLM developed a dedicated  stewardship contracting tracking system that BLM staff began using  during calendar year 2005, but not all data in this system are validated, and  the system does not interface with any other BLM system. Prior to the  availability of this tracking system, staff in the field offices generated and  maintained their own spreadsheets to track the stewardship project data  they found useful. When the agencywide tracking system was developed,  according to the system manager, the agency did not impose standards to  guide the range and format of data entries or ensure consistency of data  elements, such as contract award dates or the format of numerical values.  The system contains data on the value of timber sold and services  purchased; these data are reconciled manually with BLM’s accounting  system rather than being directly tied to the system to allow automated  reconciliation. Other information about stewardship contracts, such as the  volume of products harvested, is collected by BLM’s stewardship  contracting data manager through a variety of other sources, including  direct contact with field staff. Also, unlike the Forest Service, which does  not track agreements in its system, BLM includes agreements in its data  system but cannot readily distinguish them from contracts. However, BLM  has an effort under way to upgrade its system to improve data consistency  and bring the system into compliance with accounting standards; the  upgrade is expected to be completed in October 2008. Once completed,  this upgraded system is intended to allow BLM to standardize data  definitions, as well as to aggregate multiple contracts associated with a  single project, in order to better track costs and accomplishments. It is  unclear, however, whether the upgraded system will be able to accurately  account for the values of products and services procured through  stewardship agreements.
The lack of complete data hampers the agencies’ ability to evaluate their  use of stewardship contracting and to provide details on its use to  Congress and other interested parties, including the public. Without such  data, for example, the agencies cannot compare the costs and  accomplishments of stewardship contracting projects with those of other  projects that have similar goals, nor can the agencies accurately track  year-to-year trends in the costs and accomplishments associated with  stewardship contracting. Likewise, without a complete picture of the  agencies’ use of stewardship contracting, Congress cannot fully assess the  merits of this tool or its role in the agency’s larger land management  efforts. The agencies’ inability to fully account for the values of products  sold and services procured through agreements further clouds the picture  of stewardship projects and potentially hampers congressional oversight.  As we have previously reported, barterlike transactions are not reflected  in the budget because no federal government cash flows are involved. As  a result, congressional budget decision makers do not have an opportunity  to consider whether the value of the exchanged property should be  reallocated to other competing resource needs.
section_title: During Fiscal Years 2003 through 2007, the Agencies Awarded Increasing Numbers of Stewardship Contracts
paragraphs: From fiscal years 2003 through 2007, the Forest Service and BLM awarded  a total of 535 stewardship contracts. The Forest Service, the first to  receive the stewardship contracting authority, awarded 352 contracts, or  over 65 percent of the total for the period; BLM awarded 183 contracts.  While the Forest Service’s contract awards generally increased each year  throughout the 5-year fiscal period, BLM’s followed a more inconsistent  pattern, as shown in figure 1.
Our count of contracts awarded includes both contracts and task orders  because one stewardship project may encompass multiple contracts, and  one large contract or “contract action” (e.g., a task order), may be used for  several projects. Because the agencies’ tracking systems maintain data by  contract or task order, the number of stewardship contracts may not  match up with historical information on the number of projects. For BLM,  our count also includes the four cooperative agreements that the agency  had entered into with nonfederal partners between fiscal years 2003 and  2007, although these make up only a small portion of the total.
Although field units in all Forest Service regions and BLM state offices  have used stewardship contracts, the extent of their use varied widely  among regions and state offices. For example, while almost 70 percent (16  of 23) of the national forests in the Forest Service’s Pacific Northwest  Region had awarded stewardship contracts at the time of our review, less  than half (17 of 37) of the forests in the Southern Region had used this  tool. Data below the state office level were not available for BLM. Figures  2 and 3 show the distribution of contract awards by Forest Service regions  and BLM state offices through the end of fiscal year 2007, as well as the  extent to which these have been completed.
The number of contracts alone is not necessarily an accurate indicator of  stewardship activity; the duration of the contracts must also be  considered. If some locations use multiple-year instead of single-year  contracts, the number of contracts may decrease, even though the overall  use of stewardship contracting is increasing. This also holds true for  completion rates: Locations that use longer-term contracts for projects,  such as BLM’s Oregon/Washington State Office, for example, may show  lower completion rates despite making substantial progress on the  projects. Of the total 535 contracts awarded for both agencies, the Forest  Service currently has awarded 2 10-year contracts, in Arizona and  southern Oregon, while BLM has awarded 30 10-year contracts: 25 in  Oregon, 3 in Wyoming, and 2 in California. The types of long-term  contracts used by the two agencies differ, however. Whereas each of the  Forest Service’s long-term contracts is with a single contractor, the BLM  contracts are umbrella contracts within which individual task orders are  issued, sometimes to different contractors, to accomplish specific tasks.  Under this type of contract, BLM issues task orders to meet specific needs  as they arise.
The Forest Service reported treating or planning to treat, through  stewardship contracts, about 227,000 acres from fiscal years 2003 through  2007. The Pacific Northwest Region reported treating the most acres,  while the Alaska Region reported the fewest (with 0 acres accomplished  during those years). BLM does not maintain data on stewardship project  treatment acreage separately from its other activities, so overall figures for  BLM’s acres treated through stewardship contracts were not available.
section_title: Timber Sold through Forest Service Stewardship Projects Increased from Fiscal Years 2005 through 2007, while BLM Saw a Decrease over the Same Period
paragraphs: The Forest Service sold (i.e., sold for cash or exchanged for services) an  increasing amount of timber as part of its stewardship projects from fiscal  years 2005 through 2007. 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. In 2005, stewardship projects sold almost  200,000 ccf of timber; by 2007, that amount had grown to about 650,000  ccf. The timber sold during this period represented 8.5 percent of the total  timber volume the Forest Service sold during those years. BLM’s figures  are much smaller, and decline from year to year: In 2005, BLM stewardship  projects sold about 38,000 ccf of timber; by 2007 that amount had shrunk  to about 17,000 ccf, altogether representing about 7.4 percent of the  agency’s total timber volume sold during those 3 years. Table 1 compares  the volume of timber sold through stewardship contracting as a  percentage of the total timber volume sold under each agency’s  conventional timber program.
A BLM official said that a number of factors could have influenced the  decline in the percentage of stewardship timber volume relative to total  timber volume over the period. Likely the most important factor is that  during this period, stewardship projects increasingly produced lower- value forest materials-—including small trees, limbs, and brush, often  referred to as woody biomass—rather than commercial timber, a trend the  official attributed to a poor timber market. Additionally, he said, BLM has  stopped assigning specific targets for field units to achieve on the use of  stewardship projects, which may have led to some field units’ reducing  their use of the tool. In addition, this official noted that some states have  focused on issuing smaller contracts to try to build a contractor base.
section_title: In Fiscal Years 2006 and 2007, the Agencies Sold about $14 Million in Timber through Stewardship Contracting and Retained about $5 Million in Receipts
paragraphs: The Forest Service reports that through stewardship contracts, products  worth at least $8.2 million were sold (i.e., sold for cash or exchanged for  services) during fiscal years 2006 and 2007—representing about 2 percent  of the agency’s total timber value sold (including timber sold through  traditional timber sales) during those years. This includes timber large  enough to be milled into lumber as well as other products, such as  firewood and wood for posts and poles. The Forest Service began  collecting these data only in fiscal year 2006, when it developed an accrual  accounting method to report the value of forest products sold through  stewardship contracts. The $8.2 million figure likely understates the actual  value of products sold through stewardship contracting, according to  Forest Service officials, because stewardship contracts were not always  properly distinguished from conventional timber contracts in the agency’s  systems. During the same 2 fiscal years, BLM estimated that the agency  sold, through stewardship contracts, products valued at about $5.9 million  dollars, representing about 7 percent of BLM’s overall timber value sold  during that period.
As for data on the value of contractor services received under stewardship  contracts, no Forest Service data were available on a fiscal year basis.  Although service values specific to stewardship contracting have been  captured in TSA since the beginning of fiscal year 2007, the values are  cumulative, by contract, and so cannot be identified by a specific fiscal  year. Service values prior to that time are recorded in FPDS-NG, but only  for certain stewardship contracts—those in which the value of the services  exceeds the value of the timber. Further, the system does not distinguish  these contracts from other contracts (e.g., standard procurement  contracts), so the system cannot generate data specific to stewardship  contracts. For BLM, the value of services purchased under stewardship  contracts during fiscal years 2006 and 2007 totaled about $10.5 million.
Both agencies maintain data on the amount of receipts retained from  stewardship contracts once the contracts have been closed. The  stewardship contracting authority allows the agencies to retain for use on  future stewardship projects any money received under a contract or  agreement. Although the agencies are not required to return these  receipts to the Department of the Treasury’s (Treasury) general fund, the  agencies report their net amounts to the Treasury. In fiscal year 2005, both  agencies reported that they had no net retained receipts from stewardship  contracting. The Forest Service reported about $3.6 million in retained  receipts in fiscal year 2006 and about $1.2 million in fiscal year 2007, with  the Pacific Northwest and Southern Regions generating the most receipts.  BLM reported about $31,000 in retained receipts in fiscal year 2006 and  about $107,000 in fiscal year 2007, with the California State Office  generating the most receipts.
Although the agencies report their retained receipts, they do not track how  the receipts are subsequently spent. The Forest Service’s TSA system  tracks the amount of receipts collected and retained at the closure of each  contract, but it does not track the subsequent expenditure of the receipts.  And as we reported in 2007, the Forest Service’s elimination of project- level tracking makes it impossible to determine which specific accounting  codes (including the one that designates retained receipts) were used to  fund a particular project. BLM tracks the amount of stewardship receipts  collected and retained using its Collections and Billing System and, like  the Forest Service, reports the amounts annually to the Treasury, but it too  does not track the expenditure of retained receipts by project.
section_title: Both Agencies’ Stewardship Projects Addressed a Variety of Land Management Objectives, with Hazardous Fuel Reduction Being the Most Common
paragraphs: The most common objective of stewardship projects, according to  information we gathered during our site visits and agency officials’  statements, is to reduce potentially hazardous fuels by removing timber  and other vegetation. Removing timber and vegetation can also promote  forest health, another important objective. The agencies generally reduce  fuel using either mechanical treatments, in which equipment—such as  chain saws, chippers, bulldozers, or mowers—is used to cut vegetation, or  prescribed burning, in which fires are deliberately set by land managers to  restore or maintain desired vegetation conditions. Figure 4 depicts  commercial thinning projects—in which the trees removed are large  enough to have some commercial value—on national forest land using a  delimber (left) and a grapple skidder (right).
Although many projects were designed to protect areas in the wildland- urban interface (WUI)—that is, the area where structures and other  human development meet or intermingle with undeveloped wildland— other projects included activities such as improving wildlife or fish habitat,  reducing exotic and invasive plant species, and studying heritage fruit  trees. In fiscal year 2007, for example, the Forest Service reported treating  over 34,000 acres of WUI land, restoring 87 miles of streams,  decommissioning 29 miles of road, and improving 35 miles of road for the  use of passenger cars. BLM does not gather equivalent information at the  field level, but its projects also included a variety of activities intended to  reduce fuels, create wildlife habitat, restore streamside habitat, or control  invasive plants—in one case, using goats to curtail the spread of the  blackberry. We visited two stewardship projects in Idaho where both BLM  and the Forest Service worked to improve and protect fish habitat. BLM  installed culverts and improved roads to protect fish habitat, while the  Forest Service restored a stream channel to create habitat for native fish  species, including the endangered bull trout, by placing timber products  generated from the stewardship contract in the stream to provide  protective cover for the fish. This project area is shown in figure 5.
During our site visits, we encountered other wildlife improvement projects  benefiting, among other species, elk, wild turkeys, and the red-cockaded  woodpecker. For example, we visited a project in South Carolina in which  the Forest Service created and preserved nesting habitat for the red- cockaded woodpecker, which is a “keystone species” for longleaf pine  forests, according to the Forest Service. The birds excavate cavities in  longleaf pine trees, typically in mature trees suffering from a fungus that  softens the tree’s interior. At one project we visited, the Forest Service  was harvesting less desirable trees and using the resulting receipts to pay a  contractor to cut the remaining stands into a clustered pattern of longleaf  pines with nesting cavities. This project area is shown in figure 6.
section_title: The Agencies Have Similar Processes for Planning and Monitoring Stewardship Projects but Different Approaches to Implementing Them
paragraphs: The Forest Service and BLM have similar processes for planning  stewardship projects—including processes for identifying suitable  projects, preparing and approving project proposals, and soliciting and  evaluating bids. Both agencies involved stakeholders in planning and  monitoring stewardship projects, although the extent of this involvement  varied. The agencies differ in their approaches to implementing the  projects, however, both in the contract types they generally use and in  their efforts to involve small, local businesses.
subsections: section_title: In Planning and Monitoring, Agency Processes Are Similar, although the Extent of Collaboration with Stakeholders Varies from Project to Project
paragraphs: The Forest Service and BLM have similar processes for planning  stewardship projects, including identifying suitable projects, preparing  stewardship contract packages, and soliciting and evaluating bids for  contracts; they also have similar processes for monitoring the projects. In  both agencies, it is generally the field unit staff (e.g., foresters) who initiate  stewardship projects, often working with stakeholder groups, and prepare  the contract packages. In the Forest Service, the field unit staff generally  work as part of an interdisciplinary team—made up of specialists from  various disciplines such as engineering, fish biology, and wildlife biology— to identify stewardship projects that need to be done. In BLM, similarly,  field unit staff work with other specialists to identify projects that align  with the field unit’s resource plan.
Projects were typically identified in areas that needed restoration—such  as thinning overgrown stands of trees, installing culverts, or obliterating  roads—and had enough timber value to cover at least a portion of the cost  of the restoration services. For example, one Forest Service project in  Montana was considered a good candidate for a stewardship project  because it would accomplish needed fuel reduction work in a WUI and  was located in an area with sufficient timber value to cover the cost of the  service work. The forest did not have sufficient funding for the total  volume of fuel reduction work needed in the area. As another example, a  BLM project in Oregon was originally planned as several small, individual  service contracts for thinning an overstocked pine plantation—taking out  all but the biggest trees. But demand had increased for small-diameter  wood (for use as posts and poles) and for wood chips that could be sold as  biomass. When BLM officials realized they could sell material that had  previously been nonmerchantable, they decided to accomplish the  thinning through a stewardship contract.
Officials in both agencies noted that the impetus for planning their first  stewardship projects sometimes came from headquarters or from regional  or state offices, which directed field units to implement a certain number  of projects each year. Headquarters and regional or state office officials  said they had done so because field units might otherwise be reluctant to  experiment with this unfamiliar tool. In fact, when BLM received the  stewardship authority, it provided its field units with a “budgeting carrot”  to encourage use of the authority, providing units with extra funding for  the accomplishment of stewardship projects.
In some cases, project proposals were not initiated by the agency, but  instead were brought to the agency by community groups or organizations.  For example, the Forest Service’s Crooked River project—in Idaho  County, Idaho—was brought forward by the nearby community of Elk  City, which is surrounded by forest and was concerned about fire risk. The  project included watershed improvement activities in addition to  hazardous fuel reduction and timber harvesting activities. As another  example, in Michigan, a Forest Service stewardship project grew out of a  request from a Native American tribe that wanted to obtain pine logs with  which to construct a traditional ceremonial roundhouse. When the tribe  asked the Forest Service for help acquiring logs for its roundhouse, the  Forest Service agreed to develop a stewardship project in which two  stands of trees were reserved from acreage already being thinned as part  of a larger project. In exchange for about 150 pine logs from those stands,  the tribe performed service work, including thinning and removing aspen  and balsam fir, making road improvements, and installing a culvert to  improve water quality. This project was done through a contract that the  Forest Service negotiated with the tribe, as allowed under the Tribal  Forest Protection Act of 2004. Figure 7 shows the roundhouse under  construction and the culvert installed as part of the service work  conducted in exchange for the roundhouse timber.
The agencies’ processes for preparing and approving project proposals are  similar as well. In both agencies, field unit staff develop a written project  proposal, which contains information on the project’s purpose, scope, and  acreage, and the type, volume, and value of products and services  involved. The proposals also contain information on the type and extent of  outreach and collaboration with stakeholders such as community  members, environmental groups, and industry representatives. Officials of  both agencies said they generally hold public outreach meetings, which  they advertise via newspaper and radio ads, Web site notices, or other  means. At these meetings, agency personnel discuss project ideas and  goals and inform the public about stewardship contracting’s requirements.  In the Forest Service, project proposals are submitted to the forest  supervisor and then to the regional forester for review and approval. In  BLM, proposals are submitted to the state stewardship coordinator for  review and then to the state director for approval.
Both agencies use established methods to estimate the value of the timber  and the value of the services. Agency staff estimate the timber value using  the standard appraisal system that they use as part of ordinary timber sale  contracts. This system employs a transaction evidence appraisal method,  which involves “cruising” the timber to estimate its volume and then using  evidence from recent timber sales in the area to estimate its value. To  determine the value of the services, both agencies prepare a government  estimate, which is developed by resource specialists (e.g., engineers,  silviculturists, and fuel specialists). As part of this process, the agencies  conduct market surveys by reviewing online contractor information and  examining historical contract award information for the state.
Processes for soliciting bids on stewardship contracts are similar as well.  For contracts that primarily involve the sale of timber, the agencies issue a  prospectus, with bid forms, and have a sample contract available at the  field unit for review by prospective bidders. For contracts that  predominantly feature the acquisition of services, the agencies advertise  the contract in FedBizOpps—the Web-based database of federal  contracting opportunities—and then issue solicitations for bid. The  agencies also hold “show me” trips or preproposal or prebid meetings to  discuss project specifications with potential bidders, and may amend  project requirements based on the comments received at these meetings.
Once they receive bids, both agencies use the best-value process for  evaluating the technical proposals submitted by potential bidders for  stewardship projects. This process entails having a group—composed of  individuals with the requisite skills—evaluate each technical proposal and  assess its strength in each evaluation category. The categories typically  include factors such as experience, past performance, strength of the  technical approach, type of equipment available, planned use of local  workers, and planned use of forest products by local mills or companies.  In some cases, the evaluation group assigns numerical scores to the  various factors; in other cases, the group uses adjectival ratings (e.g.,  exceptional, acceptable, marginal, and unacceptable). As an illustration of  the factors considered during this process, one Forest Service project in  Idaho entailed emplacing more than 100 in-stream structures (e.g., large  boulders and trees) to improve bull trout habitat over about 4 miles of  stream. A “big plus” in the winning bidder’s technical proposal, according  to Forest Service officials, was the plan to have a hydrologist design an on- the-ground survey before the contract package was put together, an act  that officials believed would eliminate the need for many contract  modifications as the work progressed.
Typically, price is evaluated separately from the other factors. According  to the Forest Service’s national stewardship contracting coordinator,  forests have different opinions about whether price is equal to or of lesser  or greater importance than other factors in determining best value, and  forests vary in the weight they assign price. He believes that price should  be 50 percent of the determination and that all the other factors should  make up the other 50 percent. However, in several locations, agency  officials said that over time, as contractors gained experience in  completing technical proposals, the differences between proposals had  become more and more narrow, until ultimately, price became the de facto  deciding factor in contract award.
The extent to which stakeholders have been involved in planning  stewardship projects varied. For some projects, public interest has been  keen, and the agencies have collaborated with large and diverse groups,  which in some cases predate the stewardship authority. For BLM’s  Weaverville community forest project in California, a diverse group of  individuals—representing the community, industry, and environmental  groups—was involved in project planning. Similarly, for the White  Mountain stewardship project on the Apache-Sitgreaves National Forests  in Arizona, a large and diverse group was involved in planning the project;  the group includes representatives of environmental and wildlife advocacy  groups, state and local governments, industries, a university, and  communities. On the Lakeview Sustained Yield Unit in southern Oregon,  the Forest Service and BLM have worked with a group that dates back to  the 1950s, when it was a community group that oversaw and reported on  the unit’s production. Today, this group—which includes representatives  of several environmental groups as well as industry—works with the  agencies to sustain and restore a healthy forest ecosystem that can  accommodate human and natural disturbances.
Fear of wildland fire is often the impetus for collaboration. Communities  that have experienced large fires are often interested in fuel reduction,  whether accomplished through stewardship projects or other means, and  increasing numbers of communities around the country are identifying  areas needing fuel reduction to reduce the risk of fire. In one area in  Montana, for example, that had experienced a large fire in the past, the  Forest Service held public meetings about a proposed stewardship project  involving fuel reduction and notified interested parties about the meetings  through newspaper notices and telephone calls. The Forest Service  collaborated with the local rural fire department as well as with  community members and environmental groups. According to the district  ranger, the public was interested in this project for its fuel reduction  benefits, and a prominent environmental group was also in favor of the  project. The White Mountain project in Arizona likewise benefited from  increased collaboration in the wake of the nearly 500,000-acre Rodeo- Chediski fire. Not surprisingly, individuals who collaborate on stewardship  projects are often the same ones who have been involved in developing  community wildfire protection plans. In California, for example, BLM  worked with community fire safe councils to plan stewardship projects in  the WUI.
Although public interest in some projects is intense, for other projects,  agency officials said there was little public interest, despite agency efforts  to involve community members. For example, a Forest Service official in  Colorado said that while the region gets a lot of community interest in  some projects, most of the region’s stewardship projects are “standard,  run of the mill” projects (e.g., small thinning projects) that are not of  interest to the community. With these types of projects, this official said,  community members sometimes come to meetings but typically have little  further involvement.
As for monitoring, both the Forest Service and BLM systematically involve  stakeholders in programmatic monitoring, but stakeholder involvement in  project-level monitoring varies. As noted earlier, the 2003 stewardship  authority replaced the requirement for multiparty monitoring and  evaluation of each project with a requirement to monitor and evaluate the  overall use of stewardship contracting. Accordingly, the Forest Service  and BLM jointly contracted with the Pinchot Institute for Conservation to  conduct “multiparty programmatic monitoring” of stewardship  contracting—that is, nationwide monitoring of the overall use of the  stewardship authority. The institute conducts this monitoring primarily  through subcontracts with four regional partnership organizations that  survey agency staff and project stakeholders (e.g., contractors and  community members) about the extent to which local communities were  involved in developing stewardship projects. The institute worked with the  Forest Service and BLM to develop the survey instrument.
In fiscal years 2006 and 2007, the institute’s regional partners conducted  telephone surveys with individuals involved in a sample of Forest Service  and BLM stewardship projects. The fiscal year 2007 programmatic  monitoring survey included 58 Forest Service stewardship projects and 38  BLM projects. For each of these projects, three individuals were identified  for interviews: the agency project manager and two randomly selected  external participants, such as community members or contractors. For the  Forest Service projects, more than 70 percent of the 67 external  (nonagency) survey respondents believed that the development of the  stewardship project in which they were involved was “very collaborative”  (39 percent) or “somewhat collaborative” (33 percent). Only 6 percent  characterized the development as “not at all collaborative.” Similarly, for  BLM projects, more than 80 percent of the 37 external survey respondents  believed that the development of the stewardship project in which they  were involved was “very collaborative” (24 percent) or “somewhat  collaborative” (57 percent). Only 5 percent characterized the development  as “not at all collaborative.” (For both agencies, the remainder of the  respondents said they did not know.)
Although both agencies also monitor the effects of individual projects over  time, the extent to which the agencies involve stakeholders in project-level  monitoring activities varies. In some locations the agencies have  undertaken extensive and innovative approaches to involving stakeholders  in project-level monitoring. For example, at one project in southern  Colorado, BLM works with graduate students from the University of  Kansas to establish and monitor treatment plots to measure the project’s  effect on soils, vegetation, tree stand diversity and health, and wildlife use.  And at a project in northern California, the Forest Service included in the  stewardship contract, as a service item, a requirement that the contractor  compile and submit data on the use of machinery—such as harvesting and  hauling equipment—on the project. These data are then used by a  nonprofit organization to study the carbon offsets on projects. As another  example, at the Forest Service’s White Mountain stewardship project, a  stewardship board monitors the project’s social, ecological, and economic  effects.
In other locations, the agencies have not have involved stakeholder groups  substantially in project-level monitoring. In one region, officials noted that  most of the field units manage collaboration as part of the environmental  assessment activities required by the National Environmental Policy Act;  in other areas, officials noted that there has not been much local interest  in engaging in multiparty monitoring.
Both the Forest Service handbook and BLM guidance state that  stewardship receipts may be used to defray the direct costs of the local  collaborative process—for example, by paying for meeting rooms,  facilitation, and travel for stakeholders involved in the monitoring process.  Also, the Forest Service handbook allows stewardship receipts to be used  to pay for the development of monitoring protocols and items to be  monitored, as agreed on within a collaborative group and recommended to  the line officer. Both agencies also allow the use of stewardship receipts  for project-level monitoring in certain circumstances, such as where there  is interest and support from local collaborative partners. However, Forest  Service guidance specifies that stewardship receipts may not be used for  environmental monitoring—that is, monitoring of a project’s effects on air,  soil, or water quality—at the project level.
Some collaborators see the prohibition on using stewardship receipts for  project-level environmental monitoring as a shortcoming. For example, in  a letter to the Forest Service’s Washington Office, one group of  stakeholders expressed its dissatisfaction with the restriction on the use of  receipts for project-level monitoring. The group was concerned that the  lack of funding would hobble its efforts to collect information  demonstrating the effective implementation and results of projects,  thereby preventing the demonstration of ecological and economic benefits  to the watershed. The Forest Service responded that it is required by its  land and resource management plans to conduct environmental  monitoring of its activities and that it will continue to do so with funds  other than stewardship receipts, thereby allowing stewardship receipts to  go toward accomplishing work on the ground. Other stakeholders we met  with noted their concern that without rigorous project-level monitoring, it  will likely be difficult to assess the effects of individual stewardship  projects and of stewardship contracting authority as a whole.
section_title: In Implementing Projects, the Agencies Differ in the Contract Types They Use and in Their Approaches to Involving Small Businesses
paragraphs: Both agencies use contracts with a mix of timber sale and acquisition  provisions, although the Forest Service typically uses contracts  emphasizing timber to be sold, while BLM typically uses contracts  emphasizing services to be procured. The Forest Service generally uses  one of two basic types of stewardship contracts: integrated resource  timber contracts (IRTC) and integrated resource service contracts (IRSC).  The selection of the contract type to be used depends on the type and  merchantability of the product to be sold (generally timber). IRTCs are  generally used when the estimated value of the timber to be sold under the  contract exceeds the estimated value of the services to be performed.  IRSCs are generally used when the ratio is inverted—when the estimated  value of the services exceeds that of the timber. In both cases, the  difference in value is balanced with an appropriate cash payment.
Several field unit staff said they would prefer to have a single stewardship  contract, for ease of use, rather than separate ones (i.e., IRTCs and IRSCs),  but Forest Service officials in the agency’s acquisition management and  forest management programs explained that the contracts are different  because they are governed by different legal requirements. On the timber  side, the Forest Service’s authority to sell timber is governed by, among  other laws, the National Forest Management Act of 1976, as amended.  Acquisitions of goods and services are governed primarily by the Federal  Acquisition Regulation (FAR). Administering contracts under these two  different authorities requires different training, experience, and  workforces. On the timber side, for example, contracting officers are  familiar with the requirements for planning and administering timber sales,  but generally lack the certification required to authorize them to obligate  government funds for the acquisition of services. And on the acquisition  side, contracting officers may be familiar with procurement requirements  but generally do not have much experience with timber sales, and the  Forest Service has not had the resources to train them. Having a single  contract form would require staff expertise and training in both areas.  Accordingly, the Forest Service resorted to having two separate types of  contracts, each with its own rules and provisions. Forest Service officials  also told us that the Forest Service designed the IRTC so as to minimize  the differences between timber sale contracts and stewardship contracts,  because purchasers were familiar with timber sale contracts, and the  Forest Service expected those same purchasers to play a large role in  stewardship contracting.
The Forest Service predominantly uses IRTCs rather than IRSCs.  Particularly in timber-rich parts of the country, such as parts of the  Northeast and the Northwest, most stewardship projects are done under  IRTCs because timber is the main source of revenue to pay for the service  work. When it uses IRTCs, the Forest Service often has receipts remaining  when the contract has been closed. In Montana, for example, a Forest  Service official said that generating retained receipts is a “key aspect” of  stewardship contracting because the Forest Service can retain these  receipts and use them to accomplish subsequent stewardship work. The  Forest Service generally uses retained receipts to pay for services acquired  through another stewardship contract—usually a service contract—within  the same forest, and typically within the same ranger district, from which  the receipts originated. Although retained receipts could be used in  another forest or ranger district, the community stakeholders that helped  plan and monitor a stewardship project might object to retained receipts  being directed elsewhere, according to a Forest Service official.
The Forest Service tends to use IRSCs in parts of the country that have  low-value timber. In the Rocky Mountain and the Intermountain regions,  for example, many of the stewardship contracts are IRSCs (primarily for  fuel reduction), because the timber is typically low in value. Accordingly,  the regions require substantial appropriated dollars to supplement the  value of the timber and pay for the necessary services such as hazardous  fuel reduction.
In contrast to the Forest Service, BLM predominantly uses acquisition  contracts (i.e., service contracts) to carry out its stewardship projects.  BLM officials typically refer to their stewardship contracts as “service  contracts with embedded products.” Because the value of the services  acquired typically exceeds the value of the product sold (as with Forest  Service IRSCs), BLM generally uses fuel reduction or forest management  funds to pay for a portion of the service work. In many cases, these  contracts take the form of indefinite delivery/indefinite quantity (IDIQ)  contracts—umbrella contracts under which the agency can issue  numerous task orders.
Although BLM also has a stewardship contract type that can be used for  projects that primarily involve the removal of timber, BLM has generally  avoided using stewardship contracting to carry out timber sales.  According to several BLM field officials, for example, the general direction  from the Washington Office has been that if a project “looks like a timber  sale and feels like a timber sale,” then it should be offered it as a regular  timber sale, using standard timber sale procedures. This is particularly the  case for the heavily timbered lands in western Oregon. In fact, agency  guidance allows timber-type stewardship contracts to be used only when  the total volume of timber to be sold is less than 250,000 board feet. This  restriction, according to a BLM official, effectively prevents the use of  timber-type stewardship contracts on even small stewardship projects;  instead, a project must either be altered to include services with a value in  excess of the timber value or simply offered as a regular timber sale.
Also unlike the Forest Service, BLM has typically not retained receipts at  the end of stewardship projects. Of course, in many areas of the West,  BLM-managed land lacks valuable timber that could generate such  receipts. In Arizona, for example, BLM-managed lands primarily have  piñon pine and juniper, which have little market value and are typically  used for firewood. As one BLM official explained, stewardship contracting  is a restorative activity that may not have a commercial value. If it does,  that value is used to offset part of the cost of the service work.
When retained receipts are generated by BLM projects, typically through  projects conducted in California, Oregon, and Washington, their  distribution is decided by the BLM state office. Generally, according to  BLM officials, the receipts would be directed first toward the project that  generated them (if needed), then to the same local area, then to the state,  then to other states that need them. In some locations, where the timber  has a high enough value, BLM officials said they want to begin generating  more retained receipts. This would allow them to use those receipts on  stewardship projects in other areas where the timber values are lower.
Stewardship agreements are another vehicle occasionally used by the  agencies. As discussed earlier, the Forest Service had entered into 12  agreements between fiscal years 2003 and 2007; BLM had entered into 4  agreements. The agreements in place are typically cost-share agreements  or participating agreements, in which both the agency and the partner  derive a mutual benefit. Most of these agreements are for 10 years, and  while some are small, others cover an entire region. The Forest Service’s  Pacific Northwest Region, for example, issued two regionwide  agreements—one with the National Wild Turkey Federation and one with  the Rocky Mountain Elk Foundation. These regional agreements are  essentially “umbrella agreements” that are similar to the IDIQ contracts  BLM uses. That is, the regional agreements establish the framework within  which a number of projects can be completed through supplemental  agreements, similar to the task orders issued under an IDIQ contract.
Agency officials provided several reasons why they sometimes prefer to  use agreements rather than contracts to carry out stewardship activities.  First, they find agreements to be simpler and more flexible than  stewardship contracts. That is, whereas contracts can be a hundred pages  or more in length, agreements are generally much shorter—perhaps a  dozen pages. Also, changes can be made to agreements more quickly and  simply—the partners agree on what changes are needed, write up the  changes, and initial them. Second, agreements need not contain all of the  many clauses required by contracts (e.g., clauses associated with the  calculation of timber rates or the costs of constructing roads). And third,  unlike contracts, agreements sometimes bring in matching funds from  partnership organizations, thereby allowing the agency to “get more bang  for its buck,” as one official said. That is, when partners contribute  resources such as volunteer labor, equipment, or funding, work can be  accomplished at less cost to the agency. In one stewardship agreement, for  example, the Forest Service and a partner (a nonprofit organization)  agreed to share the cost (about $114,000) of a stewardship project  designed to reduce hazardous fuels. The Forest Service’s share was 56  percent; the partner’s was 44 percent. The partner’s contribution included  services and supplies, as well as $36,000 from a grant it had received from  another nonprofit organization. Agency officials cautioned, though, that  agreements do have drawbacks. For example, in some cases a partner  organization may not have the skills or experience to perform all the work,  so agency staff may need to spend considerable time overseeing the work  to ensure it is done properly. Also, according to agency officials,  potentially interested contractors may feel unfairly excluded if a project is  awarded to a partner organization through an agreement, rather than being  offered for competitive bid. Finally, some agency officials expressed  uncertainty about the options available to them in case a partner did not  comply with the provisions of an agreement.
One type of agreement that has not been widely used in stewardship  projects is the Wyden Amendment agreement, which allows the agency to  conduct restoration work on private lands, as long as the work achieves  public land management goals. According to Forest Service officials, only  one national forest—the Siuslaw, in Oregon—has used a Wyden  Amendment agreement to include the treatment of private lands in a  stewardship project. Headquarters officials did not know why forests had  not made greater use of the Wyden Amendment, but they surmised that  forest officials were either unaware of the Wyden authority or had placed  a higher priority on getting work done on federal land rather than private  land. This is a decision, according to headquarters officials, that forest  supervisors must make in determining the best use of limited agency  resources.
In addition to using different contract types, the agencies differ in how  they approach the objective of involving small local businesses in  stewardship contracts. Whereas the Forest Service invites full and open  competition on most of its stewardship contracts, both IRTCs and IRSCs,  BLM generally sets aside its stewardship contracts for small businesses.  Forest Service officials explained that they invite full and open  competition on all IRTCs because, like traditional timber sale contracts,  IRTCs are exempt from the requirements governing small business set- asides. However, the large timber companies that typically bid on IRTCs  often subcontract with small local businesses to do the service work with  which the timber contractors are less familiar. In this way, IRTCs help  stimulate the local economy, albeit somewhat indirectly. The Forest  Service’s IRSCs, on the other hand, are subject to the requirements  governing small business set-asides. According to the FAR, acquisitions  of services within a specified range of value (generally from $3,000 to  $100,000) shall be “reserved exclusively for small business concerns and  shall be set aside for small business unless the contracting officer  determines there is not a reasonable expectation of obtaining offers from  two or more responsible small business concerns that are competitive in  terms of market prices, quality, and delivery.” Nevertheless, Forest Service  officials believe that most of the agency’s IRSCs are not set aside for small  business, largely because of the dearth of small logging companies in many  parts of the country. However, the Forest Service does not maintain data  on the number of IRSCs that are set aside for small business, and so  cannot gauge its success in involving small businesses.
BLM, in contrast, generally sets aside all of its stewardship contracts  (which are typically service-oriented contracts) for small businesses,  according to agency officials. A contracting officer from BLM’s Oregon  office said that there have consistently been at least two responsible small  business firms that were interested in BLM stewardship projects and from  which BLM could expect to receive reasonable prices. Accordingly, BLM  projects have been set aside for small businesses. Although BLM’s  stewardship contracting guidance makes an exception to the set-aside  policy in cases where “non-traditional entities (e.g., local governments,  nongovernmental entities, and nonprofit organizations) have expressed an  interest” in a project, BLM contracting officials told us they set aside all  stewardship contracts regardless, because, in their words, “the FAR  trumps BLM guidance.”
section_title: Despite the Benefits of Stewardship Contracting, Challenges Persist, Especially in the Use of Long-Term Multiyear Contracts, for which the Agencies Lack a Strategy
paragraphs: The agencies cited as key benefits of stewardship contracting the ability to  accomplish more work on the ground and to build collaborative  partnerships. The primary challenges cited by the agencies are (1)  overcoming internal and external resistance to using stewardship  contracting, (2) dealing with market uncertainties, and (3) understanding  and dealing with the ramifications of using long-term multiyear contracts.  The agencies have numerous efforts under way to overcome some of the  challenges they face, including conducting training courses and  workshops and supporting innovative efforts by entrepreneurs and  researchers, but they have not developed strategies to guide the  nationwide use of long-term multiyear stewardship contracts and to  inform offices’ decisions about the use of such instruments.
subsections: section_title: The Agencies Cited an Increased Ability to Accomplish Needed Work, along with Increased Collaboration, as Key Benefits of Stewardship Contracting
paragraphs: Agency officials frequently cited the ability to get more work done on the  ground as a measure of stewardship contracting’s success. “Stewardship  contracting is the most valuable tool the Congress has given us in 30  years,” said a Forest Service official in southern Oregon. In particular,  according to agency officials, the ability to use product value to offset  service costs has enabled them to accomplish work that otherwise would  not get done, given current funding constraints. A Forest Service district  ranger in Montana, for example, said that stewardship contracting enabled  the district to perform nearly $1 million of service work for which the  district did not have appropriated funds—an amount equivalent to about  40 percent of the district’s entire annual budget. This work included  removing 49 stream crossings—roads that crossed streams and thus  contributed to stream sedimentation—to help meet state water quality  goals. Similarly, a Forest Service official in Wisconsin noted that through  stewardship contracting, the forest unit could accomplish some work— including planting large trees and grinding stumps—that it would not have  been able to afford to do otherwise. As another example, stewardship  contracting is expected to play a big part in helping the Forest Service deal  with the problem of trees killed by the mountain pine beetle in Colorado.  The Forest Service plans to use stewardship contracting for the removal of  dead and dying trees, using the value of the trees to offset a portion of the  associated costs. Several environmental group representatives we spoke  with likewise praised stewardship contracting for helping the agencies  accomplish more needed work.
Forest Service officials also stated that stewardship contracting is  financially advantageous in other ways. First, although the agencies often  use monies from the Knutson-Vandenberg (K-V) fund to conduct  reforestation, using the stewardship authority to conduct these activities  allows field units to avoid the overhead charges that the Washington  Office assesses on the use of K-V (and other) funds. Additionally, retained  receipts are subject to fewer limitations on use than K-V funds. Field  officials also stated that stewardship contracting enhances their  productivity because the revenues stay within the field unit rather than  being returned to the Treasury. As a Forest Service official in Wisconsin  said, “Anything we get under stewardship contracting is better than a  traditional timber sale because the revenues stay here rather than going to  the Treasury.”
Agency officials also pointed out the savings from implementing one  contract for a particular project rather than two or more. According to a  forester in a BLM field unit in California, for example, the net cost per acre  is reduced because BLM staff spend less time developing, advertising, and  implementing a single stewardship contract than they would on multiple  traditional contracts. Similarly, a Forest Service official noted that prior to  receiving the stewardship contracting authority, the Forest Service had to  go through a two-step process: first conducting a timber sale to remove  merchantable timber and then issuing a separate service contract to  remove the remaining material. The official stated that by law, the Forest  Service could not mix the two steps. Stewardship contracting has relieved  the Forest Service of that burden by having a single contractor do all the  work, thereby saving the agency the time and associated cost of preparing  two separate contracts.
Agencies also cited the collaborative partnerships they have built through  stewardship contracting. These collaborative partnerships have resulted in  community support for stewardship projects and allowed the agencies to  move forward with projects without the litigation costs and delays that  have often confronted typical timber sales and even some hazardous fuel  reduction projects. A Forest Service official in Montana, for example, said  that the community has become very supportive of stewardship  contracting, as have local environmental groups. Another official added  that this support is in itself a big success. At first, according to this official,  some environmental groups refused to accept stewardship contracting,  saying that it was just an excuse to cut more timber. But now, she said, she  is hearing less opposition. Similarly, a headquarters Forest Service official  said that when stewardship contracting first started, many—including the  Forest Service and environmental groups—had concerns that stewardship  projects would just be disguised timber sales. But after the Forest Service  reached out to stakeholders, including environmental groups, these  concerns diminished over time, and stakeholders began to see the value of  stewardship contracts in performing needed work.
Several agency officials also credited the collaborative process with  building community support for forest restoration projects and allowing  the projects to go forward without protest. For example, according to the  national stewardship contracting coordinator, comments from national  forest officials across the country indicate that the use of stewardship  contracting and the collaboration associated with its use have led to fewer  appeals and less litigation at the project level. Several field unit officials  reported similar impressions. On one forest in California, for example, 3 of  the forest’s 22 stewardship projects have been appealed, but none has  been litigated. Another field unit, similarly, reported having few or no  appeals or litigation associated with their stewardship projects.
Many stakeholders agreed. For example, one member of a project- monitoring group told us he had forestalled litigation by his environmental  organization on several occasions because of the trust that the monitoring  group had developed with the agency. In fact, some community groups  have produced guides to help businesses understand the stewardship  contracting process.
Nevertheless, collaboration has its drawbacks, according to agency  officials and others. One drawback is the time it takes to build and sustain  a truly collaborative group. For example, members of the monitoring  board for the Forest Service’s White Mountain project, in Arizona, said  they worked together for years to develop mutual trust and respect and to  build consensus. Similarly, members of BLM’s community forest project in  Weaverville, California, said they worked for years before developing a  level of trust that allowed the work to proceed without protest. Ongoing  collaboration takes time as well. Officials of the Forest Service’s Southern  Region noted that, in one state, a forest working with community groups  was on its third iteration of an environmental assessment for a  stewardship project, having redone the assessment to accommodate the  group’s wishes. In several locations, officials raised the question of how  much community collaboration should be expected, especially when  projects or communities are small.
Another drawback, according to Forest Service officials, is that  collaboration can dilute the effectiveness of a project. Forest Service  officials at several project locations noted that community involvement  ended up watering down the impact of the stewardship projects because  the Forest Service limited the amount of work it did at the request of  stakeholders. On one hand, these officials said, the Forest Service was  being responsive to community desires in altering its projects, but on the  other hand, the projects may not have been as effective as they could have  been because they were not appropriately designed. For example, on one  project in southern Utah, Forest Service officials and the contractor  thought that the compromise reached with an environmental group  prevented the project from accomplishing its objective. The project was  designed to protect the trees between a wilderness area and a popular  campground by thinning them to discourage damage by pine beetles. After  the environmental group appealed the project, the Forest Service agreed  to remove fewer trees. As a result, according to these officials, the area  will remain susceptible to pine beetles, which officials believe will kill all  the trees. Officials added that although the Forest Service achieved some  political goodwill by compromising with the environmental group, it  accomplished little in terms of resource management. We have previously  reported on the advantages and disadvantages of collaboration.
section_title: Challenges Associated with Stewardship Contracting Include Resistance to Its Use, Market Uncertainties, and Potential Consequences of Multiyear Contracts
paragraphs: From the outset of stewardship contracting, both agencies encountered  resistance to using stewardship contracting, from both inside and outside  the agencies. Within the agencies, unfamiliarity with stewardship contracts  made some officials reluctant to use them. One Forest Service official said,  for example, that he was familiar with timber contracts but not with all the  nuances of acquisition contracts. In general, timber staff were not familiar  with acquisition procedures and regulations, while acquisition staff were  similarly unfamiliar with selling timber—making both types of staff  reluctant to use this new tool. As one Forest Service official explained, the  challenge is to get the timber staff and the acquisition staff working  together—to bridge the gap between the two different cultures.
Officials’ unfamiliarity with the use of the new tool was compounded by  the lack of a centrally located source of expertise to which agency staff  could turn for assistance or advice. Officials of both agencies remarked on  the importance of sharing lessons learned among their respective units.  Agency officials noted that the sharing of these lessons need not come in  the form of guidance or direction from the Washington Office, however.  For example, since BLM’s Oregon State Office was designated the “center  of excellence” for stewardship contracting, the contracting officers in that  office said they have learned many valuable lessons, and staff in other  offices have begun turning to these contracting officers for advice and  assistance on stewardship contracting issues. Turnover in stewardship  coordinator positions, particularly at the national level, has also hampered  understanding because institutional knowledge is especially important for  helping field staff use new or complex programs or tools. At BLM, the  constant turnover in the stewardship coordinator position at  headquarters—with four different staff successively filling that position  between July 2007 and July 2008—has made that office ill equipped to deal  with questions from the field. Turnover in the Forest Service’s  headquarters stewardship coordinator position also occasionally  hampered field officials’ attempts to gain insights and assistance as they  used the tool, albeit to a lesser degree.
In other cases, some field units were reluctant to use stewardship  contracts because the units were located in areas with high timber values  and healthy markets and had sufficient K-V funds (which are generated  through timber sales) to carry out needed service work. A Forest Service  official in Wisconsin, for example, said that the timber economy has been  stable in Wisconsin, giving his ranger district little incentive to use  stewardship contracting.
Outside the agencies, resistance has come primarily from contractors and  local community officials. As with the agency officials, the learning curve  for bidders not acquainted with stewardship contracting was steep. For  example, preparing the required technical proposals describing how the  contractor would perform the service work was intimidating and time  consuming; one contractor likened it to preparing a résumé. Stewardship  contracts also called for contractors to do work that they may not have  done before, which made some contractors uncomfortable. Several  officials told us that contractors were uncertain how to bid on some  aspects of service work and, in some cases, did not have the set of skills or  the equipment needed to perform it. In Wisconsin, for example, the  contractor on a stewardship project to curb the spread of oak wilt said he  was leery of bidding on the project at first, as he had no experience or  equipment with which to pull stumps—a task crucial to the control of the  disease. He ultimately bid on—and won—the contract after agreeing to  subcontract the stump-pulling work to a road contractor with whom he  had previously worked. Although many contractors overcame their  reluctance and bid on projects, bidders’ lack of experience with  subcontracting led to higher prices, according to a Forest Service official,  because bidders felt greater risk in bidding on unfamiliar work and priced  their bids accordingly.
In many cases, county commissioners and other local officials were  opposed to stewardship contracting projects because receipts from  stewardship projects were not factored into the calculation of timber  receipts (and other qualifying receipts) from which the counties received a  share. For years, many counties across the country depended heavily on  their share (typically 25 percent) of timber sale and other qualifying  receipts, but these receipts dwindled substantially with the decline in  federal timber sales in the late 1980s. The Secure Rural Schools and  Community Self-Determination Act of 2000 was enacted, in part, to  address the decline in federal payments by stabilizing payments to  counties that depended on revenues from timber sales on Forest Service  and certain BLM lands. Under the act, each county could continue to  receive a portion of the revenues generated from these lands or could  choose instead to receive annual payments equal to the average of the  three highest annual revenue payments to the county from fiscal year 1986  through fiscal year 1999. Payments under the act ceased in December  2007, but the act was reauthorized in October 2008, with payments to  continue through fiscal year 2011.
During our review (before the October 2008 reauthorization), agency  officials told us that, regardless of the option that counties had chosen  under the Secure Rural Schools Act, county commissioners and other local  officials had expressed concerns about stewardship contracting’s effect on  county revenues—whether immediate or potential. That is, counties that  had elected to continue receiving 25 percent of timber and other qualifying  receipts were concerned because stewardship receipts were not included  in the calculation of timber receipts and thus were perceived to have an  immediate detrimental effect on county revenues. And counties that had  elected to receive an average of prior-year receipts were also concerned  because they thought that if the Secure Rural Schools Act were  reauthorized, the formula for calculating payments to counties might be  changed to include years in which stewardship projects were conducted in  the counties. If so, the counties’ portion of receipts would be diminished,  again in part because stewardship receipts would not be included in the  total from which the counties’ share would be calculated. According to a  Forest Service official in Montana, there was not a county commissioner in  the state who was not concerned about the county’s share of receipts  diminishing as a result of stewardship contracting. In the Great Lakes  forests, similarly, some counties were in favor of the concept of  stewardship contracting, according to Forest Service officials, but also  wanted to maximize receipts from timber. In Wisconsin, for example, the  Forest Service was planning a stewardship project that the community  favored because of concerns about fire risk, but a Forest Service official  noted that the county has not embraced stewardship contracting because  of its effect on payments to the county. Forest Service officials were  worried about how they were going to get the county’s support.
Although the agencies are not legally required to obtain the approval of  local officials to conduct stewardship projects, these concerns have made  some agency staff more cautious about using the tool more widely. In  Oregon, BLM officials noted that resistance from county officials has  caused BLM to take a conservative approach to developing stewardship  contracting in certain areas. For example, one BLM district will not  approve a project unless the project has the written support of the county  commissioners. Counties’ concerns about nine proposed stewardship  projects in the district were conveyed to the district manager in a letter  from the Association of O&C Counties. According to the letter, the  association’s board of directors had decided to support the nine projects  but expressed deep concern about stewardship projects in general  because they generate no receipts to be shared with counties.
Market uncertainties posed another set of challenges. Market prices for  timber have been volatile, especially lately, with the slump in the housing  market; this has made it very difficult to get bids on timber sales in some  areas, and this difficulty has spilled over into stewardship projects as well.  One stewardship contract on the Superior National Forest in Minnesota,  for example, was offered three times, each time at lower timber prices,  before it was awarded; another stewardship contract on the same forest  was offered twice before being awarded. Forest Service officials  expressed hope that once the housing market turns around, the value of  timber will increase and make timber sales—and stewardship projects— more attractive to loggers.
Markets for other materials removed through stewardship contracting— primarily biomass and small-diameter trees—are uneven as well. In some  areas, particularly near pulp or paper mills, the market for biomass and  small-diameter wood is strong. This was the case in several eastern forests  we visited and, according to agency officials, is also true of parts of  California and Oregon. In other areas, however, facilities that can accept  and process biomass are scarce, and markets for the material are  correspondingly weak. In Montana, for example, officials said there is little  market for the small-diameter wood and biomass generated from  stewardship projects, so these materials are typically burned. Similarly, on  many BLM lands, where the value of the wood is low and the distance to  biomass markets long, BLM may find it more cost-effective to burn the  wood than to use it. In such cases, the paucity of markets for small- diameter materials keeps the cost of the service work high, because  contractors cannot defray their costs by selling the resulting materials. We  have previously reported that the high costs of harvesting and transporting  woody biomass, combined with uncertainties about supply, have hindered  market development.
Finally, although long-term contracts offer certain benefits to the agencies,  field units can find it challenging to provide sufficient funds to award and  implement such contracts, particularly while funding other agency  activities. Agency officials have touted long-term contracts as providing  contractors with some assurance of a long-term supply of materials, thus  encouraging investment in equipment or facilities that can economically  use small-diameter wood and biomass—products that often have had little  or no commercial value. According to the Forest Service handbook, for  example, “The use of multi-year contracts is encouraged to provide  incentives to potential contractors to invest in long-term landscape  improvement projects.” BLM, similarly, stated in a fiscal year 2007  stewardship contracting review that long-term contracts would encourage  business development for biomass utilization. Without a long-term  contract, an investor can find it difficult to secure the financing necessary  to retool or build facilities that can process small-diameter wood or  biomass. A contractor in Oregon noted, for example, that constant supply  (i.e., through a long-term contract) is the key to encourage investment in  equipment. He explained that a single machine can cost more than $1  million, and a contractor will not invest—nor will a bank lend—such a  large amount without a reasonable assurance that there will be sufficient  ongoing demand for the machine.
Contractors still face risk when entering into a long-term contract with the  government, however, because unforeseen budget shortfalls could prevent  an agency from funding the contract. Without some additional protection  against risk, contractors may be reluctant to make sizable investments in  equipment or infrastructure for fear that the government will cancel the  contract, thus making the investment unprofitable. Contractors may thus  decline to bid on long-term contracts unless the contracts include a  cancellation ceiling—that is, an amount the government will pay the  contractor if it cancels the contract. The FAR authorizes such ceilings to  protect the contractor’s investment, with the amount of the ceiling to be  agreed on by the government and the contractor before the contract is  signed. To ensure that this money is available if needed—and to prevent  agencies from making financial commitments beyond the funding  Congress has provided—the FAR generally requires that, should an agency  include a cancellation ceiling in a contract, the agency must obligate the  entire amount of the ceiling at the inception of the contract.
Depending on the size of the contractor’s potential investment, however,  this ceiling could be millions of dollars—far exceeding the budget of an  individual field unit. Rather than develop a contract that would require a  cancellation ceiling beyond its available resources, a field unit would  instead have little recourse but to develop a contract with a much lower  ceiling—one it could afford—thereby forgoing its hope of attracting  significant investment in equipment or infrastructure.
In fact, two Forest Service units have had to make this choice. For the only  long-term multiyear contract the agencies have had experience with to  date, at the White Mountain stewardship project in Arizona, the  cancellation ceiling had little to do with the contractor’s actual investment;  instead, it simply represented an amount the Forest Service thought it  could afford and the contractor agreed was reasonable. In 2004, the Forest  Service hired a consulting firm to develop an estimate of the potential  cancellation liability associated with a multiyear contract for the White  Mountain project. The contracting officer for the project said he was  shocked by the resulting estimates, which ranged from nearly $3 million to  more than $7.5 million. Accordingly, the cancellation ceiling was set at  $500,000. The contracting officer said that this lower amount did not  reflect the potential liability estimate based on one of the three scenarios  examined by the consulting firm because none of those scenarios  materialized. Instead, the contractor used already existing equipment, but  the contracting officer told us that he believed it was appropriate to have a  cancellation ceiling anyway, to compensate the contractor for his risk in  case of cancellation.
Similarly, for a 10-year contract the Forest Service is preparing in order to  address fire risk on the Front Range of Colorado, a Rocky Mountain  Region official told us that an amount in the range of $6 million to $10  million would be needed to attract large infrastructure such as a wood  pellet plant—an amount far beyond the region’s funding capability.  Instead, the contract announcement will include a cancellation ceiling of  $500,000—the amount the region thought it could afford. According to  this official, the inability to fund a substantial cancellation ceiling (e.g., $6  million to $10 million for construction of a pellet plant) changed the initial  premise of the contract. That is, while the long-term contract was initially  envisioned as a way to attract investment in industry or infrastructure to  expand the use of material resulting from the project, it is now intended  simply to treat the forests as cost-effectively as possible within the  existing infrastructure.
Other units were also contemplating the use of long-term contracts at the  time of our review but were likewise concerned about the potential  cancellation ceiling. For example, Forest Service officials in California  were considering the use of a long-term multiyear contract but were  concerned about how they would fund the cancellation ceiling.
Some contractors may be willing to bid on contracts without cancellation  ceilings if there is no substantial investment involved. In July 2008, the  Forest Service issued a 10-year contract for the Lakeview stewardship  project in southern Oregon. This contract includes a minimum dollar  guarantee over the 10-year performance period. According to a Forest  Service official, the Forest Service did not include a cancellation ceiling in  the Lakeview contract because it was not seeking investment in  infrastructure; that infrastructure already is in place. The Lakeview  contract was issued in accordance with the terms of a November 2007  memorandum of understanding (MOU)—signed by the Forest Service,  BLM, the State of Oregon, a county, and several cities and  nongovernmental organizations—that provides a framework within which  the signatory parties agree to work together to accomplish forest  restoration projects, including fuel reduction projects. The MOU states  that the Forest Service and BLM will each offer a minimum number of  acres to be treated each year. BLM also plans to issue a long-term contract  under the terms of the MOU, but the BLM contract will probably be an  IDIQ contract, according to BLM officials.
Other agencies also have the authority, under the FAR and agency-specific  regulations, to use multiyear contracts, although these contracts typically  may not exceed 5 years. Although the FAR requires all agencies to obligate  sufficient funds to cover any potential cancellation costs of a multiyear  contract, additional requirements apply to certain agencies. For example,  according to the Department of Defense’s acquisition regulation, if a  contract contains a cancellation ceiling in excess of $100 million but the  budget for that contract does not include proposed funding for the costs of  contract cancellation up to that ceiling, then the head of the agency must  provide written notification to the congressional defense committees and  to the Office of Management and Budget before awarding the contract.  This written notification must include, among other things, the extent to  which cancellation costs are not included in the budget for the contract  and an assessment of the financial risks of not budgeting for the potential  costs of contract cancellation.
Experience to date with the White Mountain project highlights another  potential challenge related to the use of long-term contracts: the difficulty  of balancing the need to devote substantial resources to the long-term  project in order to furnish a sufficient and predictable supply of materials  to the contractor and the need to fund the unit’s other programs and  activities—all within a limited budget. With this project, the forest  committed to funding contractor treatments on at least 5,000 acres  annually, in order to ensure the contractor a sufficient supply of material.
Although per acre costs were initially high, at the time the contract was  developed, the forest expected that within a few years these costs would  decrease as growth occurred in the small-diameter wood and biomass  industry—allowing the contractor to defray a greater portion of his costs  as he found markets for the material. Instead, for the 29 task orders issued  between September 2004 and September 2007, these costs have not  dropped significantly, as shown in figure 8.
To live up to its commitment, the Forest Service has continued to fund  5,000 acres of treatment annually—but at a much greater cost than  expected, a cost that has taken a substantial toll on the forest’s other  programs. These other programs—such as range management, wildlife,  hazardous fuels, and vegetation and watershed management—have  suffered because the forest has directed considerable funding toward the  White Mountain project, leaving little available to carry out other projects  that need to be done. In fact, in 2005, the forest received instruction from  the region to direct 100 percent of its hazardous fuels and timber dollars  toward the White Mountain project, along with 50 percent of its vegetation  and watershed management dollars and 40 percent of its wildlife dollars. A  forest budget official was particularly concerned about the effect on the  range management program, for which she estimated funding was half of  what it would have been if it had grown at the same rate as it did for other  forests in the region. Another forest official expressed concern about the  fuel reduction work that was not being completed on the forest because  the funds for that program were being monopolized by the White Mountain  project. In particular, this official noted that the forest’s ranger districts  that were not included in the White Mountain project area were at a  particular disadvantage because they experienced no direct benefit from  the project, whereas other districts had at least a portion of their lands  being treated (those that fell within the project area).
This project has had a similar effect on other forests within the region,  according to forest and regional officials. As the region has redirected  funds toward the White Mountain project, these other forests have become  resentful of the disproportionate amount of funding the project has  received. The Apache-Sitgreaves forest has “reached a crossroads,” one  official said, in terms of the White Mountain project’s viability; if the per  acre costs remain high, the forest will have to decide whether to continue  funding the project, particularly in light of the effect it is having on other  programs in the forest.
section_title: Agencies Are Addressing Stewardship Challenges through Various Means, Including Training and Technology, but Have Not Developed a Strategy for the Use of Long-Term Contracts
paragraphs: The agencies have numerous efforts under way to overcome some of the  challenges they face, including conducting training courses and  workshops to help overcome resistance to the use of an unfamiliar tool  and supporting innovative efforts to find cost-effective uses for small- diameter materials. However, they do not have a strategy in place for the  use of long-term contracts, in terms of where such contracts should be  used and how they should be funded. As a result, field offices must make  decisions about whether to enter into long-term contracts without fully  understanding the inherent risks and trade-offs, thereby potentially  jeopardizing the stability of their other programs or, on the other hand,  forgoing an opportunity to achieve cost-effective restoration.
To overcome resistance to stewardship contracting, the agencies have  provided—jointly and individually—training for their staff and for  contractors. For example, the two agencies jointly formed a cadre of  officials that developed a training program that covered both acquisition  and timber contracting and addressed both IRTCs and IRSCs. According to  a Forest Service official, the staff who work on acquisition contracts and  the staff who work on timber sale contracts usually do not work together,  so it was refreshing to have both types of staff involved in discussions and  learning about stewardship contracting. The Forest Service has posted the  training materials on its Web site.
Also, the Forest Service plans to address difficulties between the timber  and acquisition sides by establishing centers of excellence that would  provide advice and assistance to staff as needed. In the Forest Service,  acquisition staff often have not been actively involved in stewardship  contracts. Although an acquisition official said that the agency had  planned to train some timber staff to act as acquisition contracting  officers, with the requisite certification to obligate government funds, it  has since abandoned that idea because of the expense and time it would  take to provide the initial and recurrent training. The agency’s new plan,  according to this official, is to establish several centers of excellence,  staffed with individuals who can provide advice and assistance on  acquisition issues and can act as contracting officers when necessary.
BLM already has in place such an arrangement: In 2007, the Washington  Office designated the Oregon State Office as the agency’s center of  excellence for contracting. In this capacity, the Oregon office handles  contracts for all of BLM’s western states, including Alaska, that are valued  at more than $100,000. The Oregon contracting officers put together  stewardship contracting packages and review the final contracts; they also  attend preproposal meetings and provide advice to contractors and BLM  personnel. Nevertheless, the operational side of stewardship contracting  (e.g., outreach, collaboration, design, and contract administration) is still  performed by the field offices.
To help overcome resistance by contractors, agency officials said they  provide training to contractors and work with them one on one to help  them understand stewardship contracting. For example, procurement task  assistance centers are located in several states; these centers work with  contractors (at no charge) to help them understand contract formats and  requirements. The biggest hurdle, according to a BLM official, is getting  contractors to feel comfortable with preparing technical proposals.
Forest Service officials also said they try to incorporate into stewardship  contracts service work that is familiar to contractors, to encourage them  to gain experience with this new tool. Some officials noted that “starting  small” with stewardship projects can be a strategy to improve contractors’  chances for success. An official of one forest, for example, said that  keeping stewardship projects small—in acres and in value—has been a  good way for both the forest and the contractors to gain experience. And  on another forest, a contracting official said that bundling similar types of  work in a contract has been a successful strategy. This strategy can benefit  smaller companies that lack the equipment or financial resources to bid on  a large project or a project that includes dissimilar tasks.
As for county commissioners’ concerns about the loss of county timber  receipts, agency officials said they try to involve county officials in  stewardship project planning efforts and talk to officials about the local  benefits of stewardship projects. In Wisconsin, for example, Forest Service  officials said they have talked with county officials about the benefits of  stewardship contracting, such as the stable employment that stewardship  contracting would bring to the counties despite the counties’ not receiving  any portion of the stewardship receipts. In some cases, county officials  have been willing to support stewardship contracting. In Minnesota, for  example, a Forest Service official described county officials as “cautious  but willing” to support stewardship contracting because of the potential  for an increase in employment and the associated multiplier effect of  people spending their salaries in the local area.
Also, the agencies are working to find cost-effective uses for small- diameter materials and biomass. To stimulate the market for small- diameter wood and biomass, and thereby reduce the amount that  contractors must be paid to remove this material, the agencies are working  with various contractors, entrepreneurs, universities, and other  organizations to develop cost-effective and sometimes innovative uses for  these materials. In some cases, agency officials have worked with  stewardship contractors to find new markets for these materials, including  nearby facilities that use wood chips for heat or power plants that can  burn the materials—alone or mixed with coal. In another case, one  national forest is working with an entrepreneur and a nearby university on  the development of a process known as torrefaction, in which wood chips  are slowly heated until the wood reaches a near-charcoal state, making it  easier to store, transport, and use in certain applications.
In some cases, the agencies have provided grants to spur investment in  research or development of innovative uses for biomass. The Forest  Products Laboratory, for example, provided a $250,000 biomass grant to  support the construction of a pressure treatment facility that will treat  material processed from the White Mountain stewardship project in  Arizona. This facility uses a chemical product to preserve material for  exterior use.
Although numerous agency officials cited the potential of long-term  multiyear stewardship contracts to help stimulate markets for wood  products, neither agency has developed strategies for funding the  associated cancellation ceiling—one of the two primary challenges  associated with multiyear contracts. As noted earlier, the purpose of  obligating the cancellation ceiling at the inception of the contract is to  prevent agencies from making financial commitments beyond the funding  Congress has provided. Yet rather than identifying strategies for funding  these cancellation ceilings, several Forest Service officials told us they  believe their agency should be exempt from having to obligate these funds  at the outset of the contract. One official said that the cancellation ceiling  is unnecessary altogether, because contracts already contain a standard  clause allowing the contractor to be reimbursed if the government cancels  the contract for its convenience. Other Forest Service officials disagreed  that the standard clause offers sufficient protection, stating that the  contractor needs the protection afforded by the cancellation ceiling—but  added that requiring the agency to obligate the funds at the inception of  the contract needlessly ties up agency funds that could be used to conduct  additional work. These officials believe that the agency should not have to  obligate the funds unless and until it cancels the contract. The Forest  Service has sought legislative relief from the up-front funding requirement,  but none had been enacted as of October 2008.
In the two instances in which a cancellation ceiling has been established  for a long-term multiyear contract—for the White Mountain contract in  Arizona and the proposed Front Range contract in Colorado—agency staff  derived cancellation ceilings that reflected not the amount needed to  attract significant investment in infrastructure, but rather the amount each  unit believed it could afford. Without a national strategy on the use of  long-term multiyear contracts, including a clear agency position on the  need for appropriate cancellation ceilings and guidance on how to fund  them, agency units may continue to establish such “affordable” levels— potentially driving away interested investors who are concerned that they  do not have sufficient contractual protection—or may forgo the use of  long-term contracts entirely.
Forest Service officials also held different opinions about whether an  agency could avoid the cancellation ceiling entirely by using options  contracts, which do not require an up-front cancellation ceiling, while still  stimulating infrastructure investment. A May 2007 opinion from the  Department of Agriculture’s Office of General Counsel held that it is  unnecessary to use multiyear contracts at all; the opinion suggested that  the agency use options contracts instead. However, others in the agency  said that options contracts do not afford contractors enough assurance of  a long-term supply and, as such, do not assist them in obtaining loans for  equipment or plant construction—a fundamental objective of using long- term multiyear contracts. Accordingly, options contracts may be best  suited for areas with existing infrastructure (e.g., lumber mills or pulp and  paper mills).
The other challenge associated with long-term contracts is maintaining  sufficient funding to support an ongoing long-term project at levels  sufficient to provide the contractor with a steady supply of material while  at the same time funding other important activities. The implications of  this challenge are also highlighted by the previously discussed experience  of the White Mountain project. This is not to say the project has been  unsuccessful; to the contrary, numerous agency officials as well as  environmental and other stakeholders praised the quality of the work and  the ecological results. Nevertheless, as a result of funding its commitment  on the White Mountain project, the forest has struggled to adequately  finance its other programs—a cautionary lesson for other agency units  contemplating long-term stewardship contracts of their own. Certainly,  other units may decide that the need for a particular long-term project is  so great that they are willing to reduce funding for various other programs  in order to pay for it. However, the agencies have not developed strategies  for the use and funding of long-term multiyear contracts. Without such a  strategy—based on a systematic analysis of lessons learned from long- term projects already undertaken and accompanied by guidance on  selecting and implementing such projects—individual units may make  choices about using long-term contracts without fully understanding their  implications.
section_title: Conclusions
paragraphs: Halfway through its currently authorized 10-year life span, stewardship  contracting has shown promise in helping the Forest Service and BLM  accomplish their land management objectives. The agencies have taken  advantage of the ability to trade goods for services to defray the cost of  needed thinning and other service work, and they have worked closely  with community groups to design projects that meet community needs.
One element of stewardship contracting has not been widely explored,  however: the authority to enter into 10-year contracts. Although we  frequently heard that this authority is essential in helping develop markets  for timber, woody biomass, and other materials (by allowing the agencies  to provide potential contractors and industry operators more certainty of  supply), the suitability of long-term multiyear stewardship contracts to  encourage investment in infrastructure has yet to be demonstrated. And  the experience of the one forest that has implemented a long-term  multiyear contract shows the potential pitfalls of this tool, as the forest  has had to scale back its other programs in order to adequately fund the  long-term project. The stakes are further raised by the need for a  potentially sizable up-front obligation of funds to protect both the  contractor’s and the government’s interests. Although two additional long- term multiyear contracts are in process and officials in several field units  said they are contemplating the use of such contracts, the agencies have  not developed national strategies that describe the role of long-term  multiyear contracts and lay out the agencies’ positions on issues such as  when such contracts are appropriate, how many should be in place, where  they should be located, and how they will be funded. Without such a  strategy, the agencies may fail to capitalize fully on the potential of  stewardship contracting. For example, field units may have little choice  but to settle for affordable cancellation ceilings, rather than ceilings  sufficient to encourage substantial investment in industry or infrastructure  to use the products from the stewardship project.
Regardless of the contracting mechanisms used or their duration, the  agencies must maintain complete and reliable data if they are to effectively  evaluate their use of stewardship contracting and provide details on its use  to Congress and the public. Currently, the agencies’ data reside in myriad  automated and manual systems that are often not linked. Further, the  agencies do not systematically capture nationwide information specific to  agreements, nor does the Forest Service capture data on the number of  contracts that are set aside for small businesses. Not only do such data  deficiencies keep the agencies from assessing the true costs and  accomplishments associated with stewardship contracting—especially in  comparison with other tools that might achieve the same goals—but they  also prevent Congress and the public from making informed judgments  about the value of this land management tool, which will become  increasingly critical as expiration of the stewardship authority draws  closer and Congress evaluates its renewal.
section_title: Recommendations for Executive Action
paragraphs: We are making three recommendations to improve the agencies’ use of  stewardship contracting.
To ensure that the commitment of federal funds under long-term contracts  is appropriately targeted, especially given the potential trade-offs involved,  we recommend that the Secretaries of Agriculture and the Interior develop  strategies for the use of long-term multiyear contracts that address, on a  nationwide basis, the criteria agency officials can use to evaluate whether,  in any given case, such a contract would be an appropriate mechanism to  assist the agency in meeting its land management objectives. The strategy  should address options for funding such contracts in a manner that  considers trade-offs with respect to other land management activities and  should be based on a systematic analysis of lessons learned from long- term projects already undertaken.
Additionally, to ensure ease of reporting and accurate accounting of  activities undertaken through stewardship contracts and agreements, we  recommend that the Secretaries  implement, as part of their efforts to improve their stewardship  contracting databases, improvements that will increase data interfaces  among the various systems that contain stewardship data and will ensure  accuracy and completeness in the data maintained and, as part of these  same efforts,  implement improvements that will accurately account for products sold  and services received under stewardship agreements.
section_title: Agency Comments
paragraphs: We provided the Departments of Agriculture and the Interior with a draft  of this report for review and comment. The Forest Service and the  Department of the Interior generally agreed with the findings and  recommendations in the report. The Forest Service’s and Interior’s written  comments are reproduced in appendixes II and III, respectively.
We are sending copies of this report to interested congressional  committees, the Secretaries of Agriculture and the Interior, the Chief of  the Forest Service, the Director of the Bureau of Land Management, and  other interested parties. We will also make copies available to others upon  request. In addition, the report will be available at no charge on the GAO  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 or nazzaror@gao.gov. Contact points for our Offices of  Public Affairs and Congressional Relations may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix IV.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: Our objectives were to determine (1) the extent to which, and for what  purposes, federal agencies are using stewardship contracting; (2) what  processes the agencies use in planning, implementing, and monitoring  stewardship projects to manage resources; and (3) what successes and  challenges the agencies have experienced in using stewardship  contracting. Our review was limited to the Forest Service and the Bureau  of Land Management (BLM), the two agencies with stewardship  contracting authority.
To identify the extent and nature of the agencies’ use of stewardship  contracting authority, we obtained data from Forest Service and BLM  officials on the number of such projects, as well as other project  information such as project acreage, timber volume and value, and the  value of contracted services. We also obtained data on retained receipts  from the agencies’ financial accounting systems. Neither the Forest  Service nor BLM maintains comprehensive national data on all aspects of  stewardship contracting; in some cases, reliable agency data were  available for only certain years, and in other cases the agencies could  provide only estimates. Further, because the agencies have adopted ways  of collecting and reporting data independent of one another, equivalent  data were not always available for both agencies during the same time  period.
We assessed the reliability of the data by conducting interviews with  headquarters, regional, and state office officials who enter data into the  systems, maintain them, and prepare reports using system data. We also  obtained information on the standards, procedures, and internal controls  in place for collecting, reporting, and verifying data, in order to assess  their accuracy and completeness. In some cases, data are maintained in  systems whose reliability GAO has previously assessed; in such cases, we  relied on these earlier assessments in evaluating system reliability. For  example, certain Forest Service data on acreage treated under stewardship  contracts are reported through the National Fire Plan Operations and  Reporting System; we reviewed a 2007 GAO report that assessed this  system and determined that it is sufficiently reliable for our purposes.  Similarly, both agencies track some financial data on stewardship  contracting through their departmental accounting systems—the  Department of Agriculture’s Foundation Financial Information System and  BLM’s Federal Financial System. We reviewed previous work done by  GAO and an independent auditor and determined that the data produced  from these systems are sufficiently reliable for our purposes. We did not  perform any electronic testing of data. Ultimately, we determined that the  various sources of agency data provided sufficiently reliable data for  certain years, as well as for broad trends across years, but did not provide  data sufficiently reliable to allow comparisons between the agencies in all  areas, as noted in the body of the report. Finally, we interviewed Forest  Service and BLM officials about their progress in designing or modifying  systems to improve their data and better track information associated with  stewardship contracting projects.
Because neither agency maintains nationwide data that describe the  objectives or characteristics of individual stewardship projects, we  obtained information on project objectives and characteristics by  interviewing headquarters and field officials and conducting site visits to  projects in seven of the nine Forest Service regions and 7 of the 11 western  states in which BLM has state offices. We reviewed (either by visiting in  person or discussing with agency officials) a nonprobability sample of 26  Forest Service projects and 9 BLM projects. We selected projects to  represent variety in geographic location, type of restoration work, size (in  acreage as well as in value), and stage of implementation, as well as in the  stewardship contracting authorities used. Table 2 shows the locations of  the Forest Service projects we reviewed and the projects’ objectives; table  3 shows similar information for the BLM projects we reviewed.
To assess agency processes for planning, implementing, and monitoring  stewardship projects, we reviewed national guidance issued by each  agency, including guidance for such processes as conducting timber  appraisals, advertising and awarding contracts, and establishing and  maintaining monitoring processes. We also reviewed federal contracting  requirements, including those contained in the Federal Acquisition  Regulation. In addition, we interviewed national program officials with  each agency, as well as officials of the Pinchot Institute for Conservation,  the agencies’ contractor for the multiparty monitoring and evaluation  effort, to obtain information and opinions on agency processes for  conducting stewardship projects.
During our site visits, we selectively reviewed projects’ contracting and  financial files to obtain information on the planning, contracting, and  monitoring processes each agency uses, and interviewed Forest Service  and BLM project officials at each location, including regional stewardship  coordinators, project managers, timber sale contracting officers,  acquisition contracting officers, and others. At several sites we also met  with the contractors performing the stewardship activities in order to  obtain their perspectives on the projects, including the agency processes  they observed for advertising, awarding, and overseeing the projects. And  finally, at some locations we met with stakeholders, such as community  groups, researchers, local citizens, and representatives of timber industry  and environmental groups, in order to obtain their perspectives on the use  of stewardship contracting.
To identify the successes and challenges the agencies have experienced  using stewardship contracting, we interviewed agency officials,  contractors, and stakeholders at many projects we visited to obtain their  views on the successes and challenges associated with stewardship  contracting, including the factors they believe contributed to these  successes and challenges, and the measures taken to overcome the  challenges. We also reviewed selected project contracting and financial  files and stakeholder documents to assess the extent to which projects  offered examples of successes or challenges faced by the agency units in  using stewardship contracting. Finally, we reviewed national program  guidance and spoke with national program officials in each agency to  identify actions the agencies had taken to overcome the challenges we or  others had identified.
We conducted this performance audit from August 2007 through October  2008 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
section_title: Appendix II: Comments from the Forest Service
section_title: Appendix III: Comments from the Department of the Interior
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Steve Gaty, Assistant Director;  Sandra Davis; and Pam Tumler made key contributions to this report.  Mark Braza, Nancy Crothers, Carol Henn, Rich Johnson, Ty Mitchell, and  Bill Woods also made important contributions to this report.