Mutual Cancellation of Existing Timber Sale Contracts
UNITED STATES DEPARTMENT OF THE INTERIOR
BUREAU OF LAND MANAGEMENT
WASHINGTON, D.C. 20240
October 14, 2009
In Reply Refer To:
5400 (270) P
EMS TRANSMISSION 10/14/2009
Instruction Memorandum No. 2010-003
Expires: 09/30/2011
To: State Directors
From: Assistant Director, Renewable Resources and Planning
Subject: Mutual Cancellation of Existing Timber Sale Contracts
Program Area: Sale of Forest Products.
Purpose: This Instruction Memorandum (IM) provides policy direction to timber sale contracting officers processing a mutually agreeable cancellation of timber sale contracts.
Policy/Action: The Bureau of Land Management (BLM) will extend to the holders of timber sale contracts sold, but not yet terminated, under the 43 CFR 5400 regulations on or before September 15, 2009, the opportunity to request cancellation of all or a remaining portion of the purchaser’s obligations to perform under the timber sale contract. Authorized contracting officers of BLM timber sale contracts will follow the procedures listed below to process a mutual cancellation of existing contracts.
No later than 30 days from issuance of this IM, the contracting officer will send each purchaser of an eligible timber sale contract a certified letter with return receipt required (Attachment 1) offering an opportunity to request mutual cancellation. The letter must include copies of the Secretary’s letter (Attachment 2) and this IM. The contracting officer must send one letter to the purchaser of each eligible timber sale. A purchaser may receive several letters, but will only receive one letter for each timber sale contract held by the purchaser. This opportunity to request mutual cancellation remains open for 60 days after a purchaser’s receipt of the certified letter from the contracting officer.
To exercise the opportunity for mutual cancellation, the purchaser must submit a request in writing for each timber sale contract the purchaser seeks to cancel. The written request must be received by the BLM within 60 days of the purchaser’s receipt of the BLM’s letter. In their request, the purchaser should describe the circumstances of the contract and the reasons for requesting mutual cancellation.
Upon receipt of a purchaser’s request for mutual cancellation, the contracting officer will evaluate the merits of such request. The contracting officer should consider, among other factors, the continued existence of a viable forest products infrastructure that the BLM needs to manage the public forest lands, the existing conditions of uncompleted work within the sale area, and any work requirements that normally completed prior to termination of the contract.
Prior to entering into negotiations with a purchaser on cancellation of a contract, the contracting officer must obtain the State Director’s approval of the proposed disposition of the contract, including when the contracting officer is considering denying a purchaser’s request. This process will help facilitate fair and consistent treatment of purchasers between field offices. On contracts where the State Director has approved mutual cancellation, the contracting officer must negotiate an agreement to cancel that serves both parties to the contract and protects the government’s interests.
These negotiations must address any payments that have been made, allowance for unamortized road construction, and other relevant factors. All negotiated cancellations must include a waiver of all claims for damages against the government. In the event that the BLM and the purchaser cannot agree on the terms for cancellation, mutual cancellation would not be appropriate. Sample language for a waiver of claims is attached (Attachment 3).
When a tentative agreement for mutual cancellation is reached, the contracting officer must receive authorization from the State Director before signing the agreement. The mutual cancellation of a timber sale contract will not prohibit the purchaser from bidding on any future BLM timber sale offerings. The mutual cancellation also does not prohibit the BLM from offering the remaining volume in a new timber sale.
The direction specified in this IM is one-time relief in response to the current economic downturn, and applies only to existing timber sale contracts sold on or before September 15, 2009, that have not yet been terminated.
Timeframe: This IM is effective immediately.
Budget Impact: Cancellation of existing timber sale contracts could create substantial but short-term reduction of expected future deposits into several BLM permanent operating funds (the 5810, 5830, and 5900 program accounts) as well as short-term loss of general receipts to the Treasury. These deposits and receipts, however, would not be realized if timber sale contract purchasers are unable to perform on the contract or to make the necessary damage payments if in default of the contract.
Background: The timber market has fallen into deep recession over the past several years. Many purchasers bought BLM contracts in good faith at prices that, under current market conditions, render the completion of contract obligations no longer economically viable. Under the principles of contract law, the parties to a contract (a willing buyer and seller) may come to a mutual agreement to cancel contractual obligations.
On September 15, 2009, the Secretary of Interior responded to a June 17, 2009, letter from members of the congressional delegations of Oregon and Montana regarding their inquiry as to his authority to extend existing BLM timber sale contracts due to the significant impact of the current economic downturn on forest product manufacturing. The Secretary responded that the BLM lacks the regulatory authority to grant across-the-board extensions; however, the Secretary states that:
“…BLM timber sale purchasers are facing immediate and difficult decisions of whether to default on their contracts or harvest the wood at a great economic loss, both of which could result in severe consequences to their companies and to the local communities;” and,
“… the BLM and timber contract purchasers may agree to mutually cancel a contract. This approach would eliminate existing purchasers’ duty to perform… The BLM is ready and willing to discuss this option with individual purchasers if such an approach makes sense.”
Manual/Handbook Sections Affected: This IM supplements guidance now contained in the Timber Sale Handbook, H-5480-1.
Coordination: This IM was coordinated between the Division of Forests and Woodlands (WO270), the Montana and Oregon State Offices, and the Solicitors Office.
Contact: Scott Lieurance, Division Chief, Forests and Woodlands, WO-270, at 202-912-7246
Signed by: Authenticated by:
Edwin L. Roberson Robert M. Williams
Assistant Director Division of IRM Governance,WO-560
Renewable Resources and Planning
3 Attachments
1 - Sample Letter to Purchaser (1p)
2 - Secretary Response to Congressional Representatives (2 pp)