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Small Business Timber Sale Set-Aside Program Share Recomputation

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Forest Service, USDA.


Notice of proposed policy directive; request for public comment.


The Forest Service proposes to remove structural change recomputation direction contained in Forest Service Timber Sale Preparation Handbook (FSH) 2409.18 (applicable in Forest Service Regions 1 through 6 only) as one of the means of recomputing timber sale set-aside market share allocation to small business mills within a market area. This change is needed to make the recomputation process as accurate as possible by making market shares more reflective of current market conditions, in terms of volume and business capacity, as well as to simplify the process by which market share is determined. The direction on scheduled recomputation of market shares and special recomputations would be retained. Additionally, the Forest Service is proposing to include volumes sold or disposed of via stewardship contracting (Integrated Resource Contract, 2400-13 & 13T) in the volumes used to calculate market shares pursuant to the small business timber sale set-aside program.


Comments must be received in writing by October 2, 2006.


The full text of FSH 2409.18, chapter 90 is available electronically on the World Wide Web/Internet at​im/​directives.

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Richard Fitzgerald, Assistant Director, Forest Management Staff, by telephone at (202) 205-1753 or by Internet at

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Developed in cooperation with the Small Business Administration, the Forest Service Small Business Timber Sale Set-aside Program is designed to ensure that qualifying small business timber purchasers have the opportunity to purchase a fair proportion of National Forest System timber offered for sale. The current Small Business Timber Sale Set-aside Program was adopted July 26, 1990 (55 FR 30485). Direction that guides Forest Service employees in administering the Small Business Timber Sale Set-aside Program is issued in the Forest Service Manual (FSM), Chapter 2430, and in Chapter 90 of the Forest Service Timber Sale Preparation Handbook (FSH 2409.18).

According to the guidelines of the set-aside program, the Forest Service recomputes the shares of timber sales to be set aside for bidding by qualifying small businesses every 5 years. The share percentage is based on the actual volume of sawtimber that has been purchased and/or harvested by small businesses during a 5-year period. In addition to the 5-year scheduled recomputation requirement, in Forest Service Regions 1 through 6, small business shares currently must be recomputed whenever a structural change occurs (see FSH 2409.18, chapter 90, section 91.22).

Structural change (applicable to Regions 1 through 6 only) is defined at FSH 2409.18, chapter 90, section 90.5, paragraph 8b as a change that “may occur during a recomputation period when a small or large business firm that purchased at least 10 percent of the total sawlog volume during the last recomputation period discontinues operations or changes its size status Start Printed Page 43436through the sale or purchase of manufacturing capacity. When a structural change occurs, the small business share must be recomputed in accordance with the procedure set out in section 91.22b.”

In the past, the adjustment of market shares, based on scheduled recomputations and structural change recomputation where warranted, functioned acceptably, when the timber sale program operated at its historic levels of annual sell volume. However, in the past 15 years, annual volume of timber sold in all Forest Service regions has declined substantially. For example, the annual volume of Forest Service timber offered for sale has decreased from 12 billion board feet in fiscal year 1990 to around 2 billion board feet in fiscal year 2004.

Presently, nearly half of the National Forest timber volume sold has been salvaged from areas damaged by fire and other catastrophic events. The current annual timber sale program is characterized by this increase in salvage timber, a much reduced number of advertisements of timber for sale, a relatively sporadic release of the available timber sales for bidding, and the overall substantial decline in saw timber volume for sale.

Structural change recomputations, which occur at unpredictable times, may be (and have been) followed by years of minimal or no timber volume offered for sale by the Forest Service that is suitable for purchase by qualified small businesses in a market area. This results in a significantly distorted database in a 3-year period on which to base a structural change share recomputation. The problem is compounded by existing set-aside guidelines which place no limit on the amount of share change that may occur as a result of a structural change recomputation. Establishment of a new small business share through a structural change recomputation can lock in a share change based on distorted data for an inordinate period of time.

The procedure for recomputation of shares following a structural change is designed to provide small business firms the opportunity to maintain their historical share when a firm changes size, but provides for a reasonably rapid adjustment of shares to reflect the actual purchase and harvest patterns which develop (FSH 2409.18, chapter 90, section 91.22b). With changes in the timber sale program and the amount and type of timber offered for sale, structural change recomputations no longer appear to adequately accomplish these goals.

Thus, the Forest Service proposes to drop the structural change recomputation from the direction in FSH 2409.18. Any structural changes which were previously announced and are underway would be dropped. When a 5-year recomputation was skipped because of the structural change, the 5-year recomputation would be completed and the results made retroactive to the normal 5-year recomputation schedule.

Special recomputations of market share, as defined at FSH 2409.18, chapter 90, section 91.23, would remain in effect to deal with unique and unforeseen circumstances which may require departure from established procedure.

The directive text being proposed for removal (FSH 2409.18, chapter 90) includes section 90.5, paragraph 8b (definition for structural change) and section 90.41, paragraphs 4 and 9 (Forest Supervisor responsibilities), as well as references to structural changes in sections 91.17, 91.22, 91.22a, 91.22b, and 91.3.

The directive text being proposed for removal may be found on the World Wide Web/Internet at​cgi-bin/​Directives/​get_​dirs/​fsh?​2409.18/​ in the file named 2409.18_90.doc.

Section 347 of the Department of the Interior and Related Agencies Appropriations Act, 1999 (as contained in section 101(e) of division A of Public Law 105-277), as amended by section 323 of the Department of the Interior and Related Agencies Appropriations Act, 2003 (as contained in division F of Public Law 108-7; 16 U.S.C. note), authorizes the Forest Service (FS) and the Bureau of Land Management (BLM), until September 30, 2013, to enter into stewardship contracting projects (stewardship projects) with private persons or public or private entities, by contract or by agreement, to perform services to achieve land management goals for the national forests or public lands that meet local and rural community needs.

The land management goals for stewardship projects may include treatments to improve, maintain, or restore forest or rangeland health; restore or maintain water quality; improve fish and wildlife habitat; and reduce hazardous fuels that pose risks to communities and ecosystem values, reestablish native plant species, or other land management objectives. Stewardship projects are not a replacement for agencies' existing timber sale programs. Stewardship contracting may differ from other contracting authorities in the following manner:

—A source for performance of contracts shall be selected on a best value basis;

—Contract length may exceed 5 years but may not exceed 10 years;

—The agencies may apply the value of timber or other forest products removed as an offset against the costs of any services received;

—The agencies may collect monies from a stewardship contract so long as the collection is a secondary objective of negotiating contracts that best achieve the purposes of section 347, as amended by section 323;

—Monies received from the sale of timber, forest products, or vegetation via a stewardship contract may be retained by the agencies and available for expenditure at the project site or at another stewardship project site without further appropriation;

—A multiparty monitoring and evaluation process is required.

The Forest Service has issued guidance in Forest Service Handbook 2409.19, chapter 60. Stewardship projects are authorized on all Forest Service units. Forest Supervisors select the projects for their respective units and Regional Foresters provide oversight of the program.

The Forest Service has sold some sawlog volume from stewardship projects on National Forest System lands under its integrated resource contracts (IRC). Sawlog volume from the IRC was tracked, but not included in the volumes used to calculate the small business timber sale set-aside program for the recomputation period ending in 2005. Some sawlogs disposed of via stewardship contracts have been purchased by small and large timber industry businesses.

The Forest Service has four IRCs. Two are designed for use when the value of the timber to be disposed of in the project exceeds the value of the services received in the project (2400-13 & 13T). These two contracts are generally referred to as integrated resource timber contracts (IRTC). The other two contracts used for stewardship are used when the value of the services received exceeds the value of the timber to be disposed, and are generally referred to as integrated resource service contracts (IRSC). These contracts are primarily considered procurement contracts and include contract provisions required by the Federal Acquisition Regulations and other procurement related laws and regulations. However, the IRSC also contains some provisions necessary to govern the disposal of the timber.

The amount of timber volume offered under traditional timber sale contracts has declined significantly over the past Start Printed Page 43437decade. Consequently, the sawlog volumes used to calculate market shares also have declined. In light of these significant declines and the need to adequately and fully consider sawlog volumes disposed of via contracts with the timber industry, the Forest Service proposes to include sawlog volumes from IRTC (2400-13 & 13T) in the volumes used to calculate market shares pursuant to the small business timber sale set-aside program. Since new market shares recently have been recomputed and announced for the 5-year period ending in 2010, the Forest Service proposes to include volumes sold via the IRTC in the operation of the regular set-aside program for the 2005-2010 period. The volumes will be tracked and used to establish new market shares at the end of the 2010 period, as well as for special recomputations that may occur prior to scheduled recomputations.

The Forest Service is proposing to include only the IRTCs in the set-aside program as these are the contracts that have significant timber volumes and the logs generally are of sufficient size to produce sawlogs, the primary focus of the set-aside program. The Forest Service does not propose to include the IRTCs as they generally have lesser quantities of timber volume and they are governed by the Federal Acquisition Regulation and other procurement related statutes and regulations, as well as the laws and regulations governing set asides for small businesses seeking procurement contracts. The Department of Agriculture already has requirements for small business consideration for service contracts; therefore, there is no need to include the IRSCs in the small business timber sale set-aside program.

New market shares recently have been recomputed and announced for the next 5-year period ending in 2010. The Forest Service believes it now is appropriate to include stewardship contract sawlog volumes from 2400-13 and 13T contracts in the implementation of the small business timber sale set-aside program for 2005-2010, and including the results of these sales along with the regular timber sale program results when recomputing market shares for the period ending 2015.

The 70/30 rule for traditional timber sale contracts requires that at least 70 percent of the sawlog volume sold via a timber sale contract be processed by a small business manufacturer (FSH 2409.18, chapter 90). Because of unique aspects of stewardship contracting (such as offsetting the costs of services received by the value of timber or forest products contained in a stewardship contract; and the nature of stewardship contracting which makes collection of money from a stewardship contract a secondary objective), it would not be appropriate to include the 70/30 requirement in the small business timber sale set-aside program.

Thus, the Forest Service proposes to amend the direction in FSH 2409.18, chapter 90 (the direction for the timber sale set-aside program) and the direction in FSH 2409.19, chapter 60—Stewardship Contracting, to include the sawlog volumes from projects sold as integrated resource contracts 2400-13 and 13T in the small business timber sale set-aside program. Further, disposal of the logs from IRCs would not be subject to the 70/30 processing requirement.

Regulatory Certifications

Regulatory Impact

This proposed directive change has been reviewed under USDA procedures and Executive Order 12866 on Regulatory Planning and Review. It has been determined that this is not a significant policy. This proposed change will not have an annual effect of $100 million or more on the economy nor adversely affect productivity, competition, jobs, the environment, public health or safety, nor State or local governments. This proposed policy will not interfere with an action taken or planned by another agency nor raise new legal or policy issues. Finally, this action will not alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients of such programs. Accordingly, this policy is not subject to OMB review under Executive Order 12866.

Moreover, this proposed directive change has been considered in light of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), and it has been determined that this action will not have a significant economic impact on a substantial number of small entities as defined by that Act.

Environmental Impact

Section 31.1b of Forest Service Handbook 1909.15 (57 FR 43180; September 18, 1992) excludes from documentation in an environmental assessment or impact statement “rules, regulations, or policies to establish service-wide administrative procedures, program processes, or instructions.” The agency's assessment is that this proposed directive change falls within this category of actions and that no extraordinary circumstances exist which would require preparation of an environmental assessment or environmental impact statement.

Unfunded Mandates Reform

Pursuant to Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538), which the President signed into law on March 22, 1995, the Department has assessed the effects of this proposed policy on State, local, and tribal governments and the private sector. This proposed directive change does not compel the expenditure of $100 million or more by any State, local, or tribal governments, or anyone in the private sector. Therefore, a statement under section 202 of the Act is not required.

Controlling Paperwork Burdens on the Public

This proposed directive change does not contain any recordkeeping or reporting requirements or other information collection requirements as defined in 5 CFR 1320 and, therefore, imposes no paperwork burden on the public. Accordingly, the review provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) and implementing regulations at 5 CFR part 1320 do not apply.

No Takings Implications

This proposed directive change has been analyzed in accordance with the principles and criteria contained in Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights, and it has been determined that it would not pose the risk of a taking of private property as they are limited to the revision of administrative procedures.

Civil Justice Reform

This proposed directive change has been reviewed under Executive Order 12988, Civil Justice Reform. This proposed change will direct the work of Forest Service employees and is not intended to preempt any State and local laws and regulations that might be in conflict or that would impede full implementation of this directive. The change would not retroactively affect existing permits, contracts, or other instruments authorizing the occupancy and use of National Forest System lands and would not require the institution of administrative proceedings before parties may file suit in court challenging its provisions.

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Dated: June 21, 2006.

Dale N. Bosworth,


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[FR Doc. E6-12310 Filed 7-31-06; 8:45 am]