This report discusses the advantages and limitations of proposed approaches to stewardship contracting to reduce threats to national forests exacerbated by unnaturally high amounts of biomass

Gorte, Ross W.

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1 For more information, see CRS Report RS20822, Forest Ecosystem Health: An Overview.Congressional Research Service ò The Library of CongressCRS Report for CongressReceived through the CRS WebOrder Code RS20985August 10, 2001Stewardship Contracting for the NationalForestsRoss W. GorteNatural Resource Economist and Senior Policy AnalystResources, Science, and Industry DivisionSummaryMany forests, especially the national forests, are widely thought to have unnaturally highamounts of dead and dying trees, dense undergrowth, and dense stands of small trees.  Thisbiomass can exacerbate insect and disease infestations and wildfire threats.  Because muchof this biomass has little or no commercial value, some have proposed stewardship contractingto reduce these threats.  Two approaches have been suggested: traditional serviceprocurement contracts and contracts that include exchanging goods (timber) for stewardshipservices.  Congress has debated authorizing these goods-for-services contracts for severalyears, but to date has only authorized several pilot tests.  This report discusses the advantagesand limitations of each of these approaches.  It will be updated only if legislation is enacted toalter stewardship contracting authorities.Most U.S. forests are in better condition than they were a century ago; however, manyforest ecosystems, especially the national forests in the intermountain west, are widely thoughtto be in poor health.1  Interest groups disagree over what constitutes a healthy forest, what hascaused the current problems, and what the solutions should be.  Nonetheless, most accept thathigh biomass accumulations — dead and dying trees, dense undergrowth, and dense stands ofsmall trees — can contribute to catastrophic wildfires, pest problems, and lower biologicaldiversity.The nature and severity of these accumulations vary, depending on the ecosystems andpast management of the sites.  In some forests (e.g., spruce-fir and lodgepole pine), theproblem may be widespread dead trees due to drought and/or insects and diseases.  In others(e.g., southern pines and western mixed conifers), the problem may be dense undergrowth ofdifferent species (palmetto in the south, firs in the west).  In still others (e.g., Ponderosa pine),the problem may be stand stagnation — too many small trees that are growing very slowly.  Inall these cases, biomass is accumulating to historically unnatural levels, but the nature and levelof “excess” biomass differs.CRS-22 Federal programs also exist to provide technical and financial assistance for improving thestewardship of nonfederal forests; see CRS Report RL31065, Forestry Assistance Programs.3 Rick Brown, Thinning, Fire and Forest Restoration: A Science-Based Approach forNational Forests in the Interior Northwest (Lake Oswego, OR: Defenders of Wildlife, 2000).4 For more information, see CRS Report 95-1077 ENR, Forest Service Timber Sale Practicesand Procedures: Analysis of Alternative Systems.The problem can best be seen and may be most ecologically threatening in forestecosystems that evolved with frequent surface fires which burned grass, pine needles, and othersmall fuels every 5 to 25 years (e.g., southern pines and Ponderosa pine), depending on the siteand plant species.  These ecosystems are adapted to the frequent surface fires, where mostlarge trees survive; however, unnaturally high biomass levels can lead to stand replacement fires,where most trees are killed.  In addition, small trees and dense undergrowth can create “fuelladders” that can carry surface fires upward into the forest canopy, changing them touncontrollable stand replacement fires.Considerable interest has been expressed in improving the stewardship of forests,especially the national forests.2  Salvage and other timber harvesting is often identified as ameans of reducing biomass in forests.  However, a substantial portion of the biomass that manybelieve should be removed3 is not of commercial value — the small diameters and low qualityeffectively prevent using the material profitably for producing lumber, paper, or energy.  Foraddressing the problem in the national forests, many have suggested stewardship contractingas a way to provide local jobs while improving national forest health by cutting and removingor burning the excess biomass.  Two basic approaches have been suggested: continuing thecurrent approach to procuring services and contracting to exchange goods for services.Traditional Contracting to Procure ServicesProcurement contracts are used by the Forest Service (and other federal agencies) toperform a wide variety of tasks, and could be used for many forest stewardship services.Typically, a contract proposal identifies the tasks to be performed:  the unmerchantable treesor underbrush to be cut and the treatment of the cut (and possibly additional) materials — leftas is, piled and burned, lopped and scattered to accelerate rotting or for prescribed burning,or even removed from the site.  It is also possible, though not commonly used, to specify thedesired resulting condition of the area to be treated, rather than specifying the tasks to beperformed.  Currently, the Forest Service awards contracts to the lowest bidder; however,Congress could specify other factors to consider — for example, local employment or qualityof a bidder’s past performance — in directing or further authorizing procurement contractingfor stewardship services.In addition, some have suggested that any commercially valuable material could becollected under a procurement contract and sold separately by the Forest Service.4  Thisapproach, commonly known as log sales, is common in Europe and has been discussedsporadically for the national forests for at least 40 years.  The authorization for Forest Servicetimber sales also permits log sales, but the agency has not used this authority extensively.CRS-35 USDA Forest Service, Fire Sciences Laboratory and Fire Modeling Institute, Historical FireRegimes By Current Condition Classes, Version 2000 (Missoula, MT: Feb. 22, 2001), p. 8.6 U.S. General Accounting Office, Western National Forests: A Cohesive Strategy is Neededto Address Catastrophic Wildfire Threats, GAO/RCED-99-65 (Washington, DC: April 1999).Advantages of Traditional Procurement Contracting.  The principaladvantage of using current contracting methods for forest stewardship is that it is the system theForest Service currently uses for procuring most services.  It is a simple, straightforwardapproach, well-known to agency personnel and to the potential private contractors, andnumerous private contractors exist to bid on such contract proposals.Another advantage of using the current contracting system is the opportunity forcongressional control and oversight.  Annual budget justifications for forest stewardship, underthe current structure or a new structure designed to enhance oversight of national foreststewardship, could give Congress a way to assess the efficiency and effectiveness of agencyefforts, while the appropriations for such efforts could be targeted to areas of greatest need.Limitations of Traditional Service Contracting.  One major limitation of usingtraditional service procurement contracting for national forest stewardship is the potentiallyenormous federal expenditures on such a program.  The Forest Service has identified 29 millionacres of frequent-fire forest ecosystems, and 21 million acres of other forest ecosystems, ashaving a high risk of significant ecological damage from catastrophic wildfires due toaccumulations of excess biomass.5  With treatment costs ranging from $100 to $1,000 per acre,treating these 50 million acres could cost $5–$50 billion in total.  The General AccountingOffice estimated treatment costs at more than $12 billion over 16 years ($725 million annually)for an earlier (lower) estimate of the acreage at high risk.6Suggested modifications to traditional service procurement contracting for foreststewardship could also hamper efforts at improving national forest stewardship.  Using resultingdesired conditions (instead of tasks to be performed) would probably best improve foreststewardship, because it would focus on what’s left on the site, rather than on the activitiesperformed or on the biomass (wood) removed from the site.  However, no standardizedmeasures of desired forest conditions for contracting (or for reporting on agency stewardshipefforts) have been developed, making this approach difficult to implement.  In addition,proponents advocate separate log sales for any commercially valuable wood to be removed.However, log values depend on how the log is cut (log lengths and locations of major knots);the independence of the service contractors from the potential log purchasers would be difficultto assure, but important to avoid possible conflicts-of-interest; and the agency has littleexperience with log sales.  Thus, traditional service procurement contracting has limitations fornational forest stewardship.Goods-For-Services ContractingObservers believe that, to improve forest stewardship, it may be necessary to combinevarious activities (e.g., salvage sales with mixed-species planting or prescribed burning afterCRS-47 See CRS Report RS20822, Forest Ecosystem Health: An Overview, pp. 3-5.precommercial thinning).7  Because of this need and the high cost of many activities, some haveproposed a different approach to contracting for forest stewardship: trading goods(commercially valuable timber) for services (other activities in the same area).  Called landmanagement service contracts, stewardship contracts, end-results contracts, and other terms,these goods-for-services contracts are essentially highly-modified timber sales, where timberpurchasers are required to perform other, typically related services (e.g., precommercialthinning or watershed restoration), and in return pay less for the timber harvested.Various federal laws prohibit federal agencies from retaining and using the receipts fromselling assets (e.g., from timber sales) without congressional authorization.  A few pilot tests ofgoods-for-services contracts were authorized in the FY1992 and FY1993 InteriorAppropriations Acts (P.L. 102-154 and P.L. 102-381).  Separate authorizing legislation hasbeen introduced in several Congresses, but no action has been taken on any bills to broadlyauthorize Forest Service goods-for-services contracting.In 1998, Congress established a broader test of goods-for-services contracting.  Section347 of the FY1999 Interior Appropriations Act (P.L. 105-277) authorized 28 “stewardshipend result contracting demonstration projects” with substantial direction on the locations andprocedures to be followed.  Another 28 projects were authorized in the FY2001 InteriorAppropriations Act (P.L. 106-291), and 28 more would be authorized in the FY2002 InteriorAppropriations Act (H.R. 2217) as passed by the Senate.  Such an authorization might also beconsidered in forestry provisions in the 2002 Farm Bill.Advantages of Goods-For-Services Contracting.    One possible advantageof goods-for-services contracting is greater efficiency, and thus lower cost, in forest stewardshipactivities.  The desired services may require some of the same equipment as timber harvestingand removal, and the same personnel might be used for both tasks.  Relying on the sameequipment and personnel for multiple tasks on a site seems likely to reduce the total cost ofperforming the tasks.  Thus, one contractor and one contract for multiple, related tasks thatencompass both sale of goods and performance of services might be more efficient thanmultiple, independent, traditional contracts for the tasks.Another “advantage” proclaimed by some proponents is that goods-for-servicescontracting is off-budget financing for forest stewardship.  Concerns over the adequacy ofappropriations for forest stewardship have led some to search for alternative fundingmechanisms, and goods-for-services contracting is one approach that has been proposed.Essentially, the Forest Service would be able to buy stewardship services with timber assets,as part of modified timber sale contracts, instead of with appropriations.Limitations of Goods-For-Services Contracting.  One limitation of usinggoods-for-services contracts to improve forest stewardship is the high contracting costs.  Oneobserver noted that the Forest Service procedures for the pilot tests of goods-for-servicescontracting were a complicated combination of traditional service contracting with standardtimber sale contracting: “The result is an extremely cumbersome process which requires moreCRS-58 George Leonard, “Review of National Forest Timber Sale Policies,” memorandum to AssistantSecretary Jim Lyons (Washington, DC: Dec. 20, 1993), in Improving Administrative Flexibilityand Efficiency in the National Forest Timber Sale Program, background materials(Washington, DC: USDA Forest Service, Oct. 30-31, 1996), p. 29.9 Randal O’Toole, Reforming the Forest Service (Washington, DC: Island Press, 1988).up-front effort than if the activities were done separately.”8  This critic also suggested that alonger-term authorization and simpler contracting procedures were needed to realize thebenefits of goods-for-services contracting.Another possible limitation is that, in bypassing the annual appropriations process, goods-for-services contracting is likely to receive less congressional oversight and control.  Othercongressionally authorized Forest Service “off-budget” financing mechanisms (technically,permanent appropriations of receipts for specific purposes), such as the Knutson-Vandenberg(KV) Fund and brush disposal, have received very little congressional oversight.  The ForestService might be able to use goods-for-services contracting for many years with little or nopublic participation in or congressional control over its use.Finally, some interests have questioned the appropriateness of goods-for-servicescontracting generally.  Observers have noted that exchanging goods for services creates anincentive for agency managers to increase the sale of goods (timber) to generate value toprovide services (e.g., precommercial thinning).  In another context, the incentive to increasetimber sales to generate value to provide services — mitigating and enhancing other resourcevalues in timber sale areas under the KV Fund — has been described as “perverse incentives,”where managers support an allegedly environmentally damaging activity (timber harvests) togenerate funds to be used for environmental restoration, including to mitigate damage causedby generating the funds.9  Exchanging timber for forest stewardship activities might create similarincentives, especially when the needed stewardship activities involve cutting and removing non-commercial woody biomass on or near the ground (since timber harvesting exacerbates theproblem in the short run by bringing combustible and quickly decaying material, such as treelimbs and tops, to ground level).  In addition, dominant or exclusive use of goods-for-servicescontracts would emphasize stewardship on lands with commercial timber, and might limit theopportunities for stewardship on other national forest lands.Summary and ConclusionsMany forests, especially in the intermountain west, are widely thought to be in poor health,with unnaturally high accumulations of biomass that can exacerbate insect and diseaseinfestations and wildfire threats.  Salvage and other timber harvesting are often proposed forreducing forest biomass, but much of abnormal accumulation is biomass with little or nocommercial value.  Many have suggested stewardship contracting to employ locals to improveforest health by cutting and removing or burning the excess biomass.  Various interests havesuggested traditional service procurement contracting and goods-for-services contracting forforest stewardship activities.CRS-610 Henry H. Carey and Theresa M. Duncan, Development and Implementation of theStewardship End Results Contracts, unpublished paper (Santa Fe, NM: The Forest Trust, n.d.),6 p.11 Pinchot Institute for Conservation, Implementation of Multi-Party Monitoring/Evaluation:The USDA Forest Service Stewardship Contracting Pilot Projects – FY2000, a report to theUSDA Forest Service, Pursuant to the requirements of Subsection (g) of Section 347 of title IIIof Section 101(e) of division A of Public Law 105-277 (Washington, DC: January 2001), p. 24.Traditional procurement contracting could be used for the various activities needed toimprove national forest stewardship.  Its principal advantage is the long experience of theagency and potential contractors with this simple, straightforward approach.  Some interestshave suggested that the agency contract to procure desired forest conditions, rather thanspecific tasks, to emphasize stewardship by focusing on the forest instead of the activities or thebiomass removed, with separate agency log sales for any commercial wood removed.However, this could complicate contracting, because of the lack of standard measures ofdesired forest conditions and agency inexperience with log sales.  Procurement contracting forforest stewardship would also likely provide opportunities for congressional oversight andcontrol through the annual appropriations process (unlike goods-for-services contracting), inpart because of the substantial funding needed to treat the area identified as at high risk ofsignificant ecological damage from catastrophic wildfires.Because of the substantial cost of traditional procurement contracting and because of thelikely need to combine activities (e.g., prescribed burning after precommercial thinning), somehave proposed an alternative approach for stewardship: trading goods (commercially valuabletimber) for stewardship services (other activities in the same area, such as thinning or watershedrestoration).  Goods-for-services contracts are “off-budget” financing (permanentappropriations of receipts) for forest stewardship; this is claimed as an advantage by proponentsconcerned by the high cost and limited appropriations for forest stewardship activities, but couldalso limit the congressional oversight and control of the decisions.  Such contracts could alsobe more efficient (lower cost) than traditional contracts, when the activities requirecomplementary equipment or personnel, but the Forest Service process for goods-for-servicescontracting has been cumbersome, with very high contracting costs.  Finally, some agency criticsare concerned that goods-for-services contracting would create incentives for agency managersto increase timber harvesting that would exacerbate forest health problems to generate moneyfor forest stewardship activities that address those forest health problems.Tests of goods-for-services contracting have been authorized for the Forest Service inseveral appropriations acts, including some in the early 1990s, but two proponents have notedthat the success of goods-for-services contracts has been difficult to evaluate.10  Others,however, have concluded that the goods-for-services pilot projects provide “an importantexperimental opportunity to test alternative contracting arrangements under ‘real world’conditions.”11  Additional tests have been authorized in the FY1999 and FY2001 InteriorAppropriations Acts; legislation to authorize further tests or for broad implementation has beenintroduced and debated in several Congresses, but no bills have been enacted.  More testswould be authorized in the FY2002 Interior Appropriations Act as passed by the Senate, andadditional testing or broad authorization might be considered in the forestry provisions of the2002 Farm Bill.

Stewardship Contracting for the National Forests

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Stewardship Contracting for the National Forests

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