20200228_BLM-FS_Phosphate_Reclamation_Bond_Guide.pdf

Phosphate Mine Reclamation Bond Preparation and Review Guide

BLM Idaho Falls District

February 28, 2020

Bill Volk, P.G.

1. Introduction

This document provides guidance for southeast Idaho phosphate mining companies involved in the calculation of a reclamation bond for the BLM and Forest Service. The methods and procedures in this guidance document are based on various information sources including the 2013 memo “Bond Requirements for Phosphate Mining Operations” from the Assistant Director, Mineral and Realty Management, BLM Washington Office. This guidance may be updated as new information becomes available.

2. Reclamation Bonding of Mines with Multiple Surface and Mineral Management Authorities

Reclamation bonds for phosphate mines involving BLM, Forest Service, State and private surface ownership and mineral authorities are typically calculated as if the entire mine would be reclaimed at one time (one mobilization). This takes advantage of any efficiencies of scale and mobilizations to avoid duplicative fixed costs. If reclamation would require more than one construction season due to factors such as winter work stoppages or the need to return equipment for normal dealer preventative maintenance, then additional mobilizations may be required.

Once the total bond amount is calculated, the BLM, Forest Service, Idaho Department of Lands (IDL) need to coordinate to determine the amount to be held by each agency. Bond calculations should be structured to allow breakout of each agencies portion. Current policy is for the BLM to hold the bond for activities on BLM public lands outside the federal phosphate lease and on federal lands (BLM and Forest Service lands) inside the federal phosphate lease boundary.

The Forest Service would hold bonds for Forest Service lands outside of lease areas (typically for Special Used Authorizations), and the IDL holds the bond for mining activities in all other areas (state surface and private surface both inside and outside federal phosphate leases). Note that on a BLM Right-of-Way, even though it is a part of the Mine and Reclamation Plan, the reclamation bond is held by the BLM State Realty Branch, not the BLM State Solid Leasables Branch.

In the past, memorandums of understanding (MOUs) between the BLM, Forest Service and State of Idaho allowed the entire bond amount to be held by one agency or split among multiple agencies, but those MOUs are currently expired, so now, each agency holds their own bond. Future MOUs could revise this approach.

Bond Calculation Standardization

Current BLM policy requires that mine reclamation bonds be fully reviewed and appropriately adjusted when mine modifications are approved that could appreciably alter the reclamation bonding scenario resulting in the risk of increased reclamation costs and a full recalculation using current unit costs at least every 3 years. The 3-year bond review cycle keeps the agency’s bond review process as efficient and timely as practical without being too cumbersome for available personnel resources. Review efficiency is also greatly enhanced if bond calculation methodology is standardized from year to year and between mines. Standardization should be applied to unit costs, production factors, component descriptions, and calculation methodologies, etc. unless factors unique to a mine dictate otherwise. In the past, each mine has taken a somewhat different tact in their calculations and used different unit costs, productivity and efficiency factors, etc. Those reclamation tasks that are similar between mines or typical to the industry should be standardized as should the methodologies, factors and unit costs. Standardization is also important to ensure the bonding process is fair and equitable and does not give one operator a competitive advantage as a result of utilizing more favorable unit costs, production factors, and etc.

Primary Goals of BLM Reclamation Bond Review

The bond support documents provided by the mining company need to be organized and, in enough detail, to allow the BLM to ascertain that the calculations are accurate, appropriate, complete, fair and reasonable. The following components will be considered.

Ensure that the bond covers an appropriate reclamation scenario that substantially meets environmental and resource performance requirements in the Record of Decision (ROD) and approved mine and reclamation plan. The scenario needs to be consistent with the lease stipulations, NEPA analysis, ROD conditions of approval, requirements of the DEQ, IDL and Forest Service SUPs and approved mine modifications.

The scenario also needs to meet current regulatory standards and performance requirements. The bond scenario also needs to consider the potential to economically recover the remaining mineral resource to the extent practical. Most importantly, the bond needs to cover the maximum potential monetary exposure for reclamation cost during the prescribed period of the bond scenario.

Ensure that the bond calculation basis including unit costs, production factors, take-off quantities, tasks and calculation methods are appropriately accurate for an “actual cost bond.” A plus or minus 20% estimate is adequate.

Ensure that the estimate is fair and equitable between companies, i.e. that one company does not gain an advantage by using different unit costs, factors or methodologies.

Ensure the bond covers all direct, indirect, administrative and overhead costs that would be incurred should the agencies need to contract the reclamation under the Federal Acquisition Regulations (FARs).

Reclamation Scenario and Basis: To calculate an accurate bond, the first task is to agree on a “reclamation scenario” upon which to base the cost estimate.

Typically, this step is performed before serious cost estimation is started although unit costs could also be addressed at this time. The scenario needs to reflect tasks required to reclaim a partially mined property to fulfill the intent of reclamation and environmental impact and mitigation performance of the normally reclaimed approved mine and reclamation plan including mine plan modifications, should the operator default before mining and reclamation is completed. Typically, the agencies or the mining company will select a time frame for the bonding scenario and present significant stages within that time period when the maximum reclamation cost liability would be incurred to reclaim the partially mined lease. The scenario also needs, to the extent practical, maintaining the viability of subsequent lessee to recover any remaining mineral resource to the extent that it does not violate environmental requirements.

A general process for determining a mine’s point of greatest reclamation cost liability is:

1. In coordination with the agencies (BLM, Forest Service and IDL as appropriate), review the approved mine and reclamation plans and any mine plan modifications to determine the overall reclamation and environmental performance goals. This would include identifying reclamation cover designs, pit backfill configurations (are there partially backfilled pits or pits not scheduled to be backfilled), water management objectives and goals such as managing seepage from waste areas, external dump locations and configurations, groundwater and surface water mitigation objectives and designs, reclamation goals for haul roads, shops and other ancillary facilities, reclamation goals for ore processing facilities, etc.

2. Review the mining sequence, typically for each mining panel or phase, to determine that phase representing the most reclamation cost exposure within a chosen time window if mining was curtailed. The point of maximum reclamation costs is often when there is the greatest area of disturbance, greatest volume of materials needing to be handled to meet reclamation goals, or some other factor or combination of factors such as engineered cover construction, that maximizes the cost to reclaim, but could also be based on existence of a particular feature that would require substantial effort to mitigate.

3. Using the scenario in Step 2 above, determine what work (field activities) would be needed to maintain the mine in compliance with environmental standards and requirements such as surface and ground water quality and also what work would be needed to backfill, re-contour, stabilize and reclaim the disturbed areas to meet the resource restoration goals and post mining uses identified in Step 1 above. A narrative and relative schedule of the reclamation and short- and long-term monitoring scenario, methods of calculation, and scheduling of tasks should be submitted to the BLM for discussion and approval prior to calculating costs.

4. Once Step 3 is agreed on by the agencies, the mining company can prepare a bond calculation submittal that includes figures, drawings and a narrative describing the tasks and phases determined in Steps 1, 2 and 3 (some of this would be included in the submittal for Step 3), along with active live spreadsheets and documentation of the cost estimate to perform the reclamation work. The agencies would evaluate this document and either request revisions, or accept it as final.

Additional details for the bond calculation submittals are provided in subsequent sections.

General Requirements

Bond Needs to be Calculated as if for a Government Contractor : Calculate costs as if the BLM or Forest Service contracted all work. Table 1 contains the indirect cost factors that should be applied to the estimate.

Table 1 – Indirect Cost Factors

A. Engineering, Design and Construction Plan 6% of Direct Costs

B. Insurance (On site Liability) 1.5% of Labor Costs

C. Performance and Payment Bonds (1.5% each) 3% of Direct Cost

D. Profit 10% of Direct Cost

E. Government Contract Administration 6% of Direct Costs

F. BLM Indirect Cost (21% of Contract Administration Cost)

1.26% of Direct Costs

G. Contractor Contract Administration Cost 6% of Direct Costs

H. Contingency 6% of Direct Costs

I. Interim Project Management 3% of Direct Costs

Interim Monitoring and Stabilization: Estimate cost of a contractor to perform all interim site maintenance (such as short term water management, short term slope stabilization, etc.) and environmental monitoring between the time the operator defaults and the time when the reclamation construction contractor mobilizes to the site. The interim contractor would be required to keep the area of operation in compliance with applicable safety and environmental requirements while the bond is being called and reclamation contracts are being developed, bid out and the contractor selected and mobilized. Experience has shown it would be at least a year before the reclamation contractor could be contracted and mobilized to the site.

Long Term Closure Costs: If any long-term maintenance or closure costs that the operator will not be performing themselves should be included as an attachment with the bond estimate for inclusion in a trust fund. Typical costs are those required to construct, operate, maintain and reclaim any long-term treatment facilities or post-closure structures such as water management structures required by the approved mine plan or reclamation scenario.

Labor: Since the bond should be calculated as if it were a government contract, wages and fringe benefits for laborers and equipment operators need to be no lower than federally mandated labor rates given in the most current Davis-Bacon (D-B) Act Determination. This applies to prime contracts over $2,000.

If the reclamation is solely for the dismantling or removal of improvements (buildings, pipelines, etc.), use Service Contract Act wages. Labor to operate a water treatment plant, etc. should also use Service Contract Act wages, regardless of other types of work that may require D-B Wages.

Calculating Wages

When calculating D-B wages, the Rate, Fringe benefits and Zone Pay values are added together to obtain the total hourly wage compensation. D-B Fringe benefits are paid in addition to the hourly rate. D-B fringe benefits are the costs or contributions incurred by the employer, not the employee. They do not include costs paid by the employer that are required by either Federal, State, or local law such as worker's compensation or unemployment insurance. The following are categories of costs that make up the D-B fringe benefit number.

Health & Welfare -- Medical or hospital care, or insurance to provide such care, life insurance, long-- or short--term disability, sickness, or accident insurance.

Pension (401K, etc.) -- Retirement/401K, defined contribution plans (including savings and thrift, deferred profit sharing and money purchase pension), annuity cost, or cost of insurance to provide such a benefit.

Apprentice Training -- Defrayment of the cost of apprenticeship or similar training programs.

Vacation & Holiday -- The payment of compensation for holidays and vacation.

Supervisor, Executive, Administrative, and Professional Wages: Employees who are bona fide executive, administrative, or professional employees as defined under the Fair Labor Standards Act at 29 CFR Part 541 are not covered by the Davis-Bacon (D-B) Act. The wage rates for bona fide supervisory employees (foremen, superintendents, etc.) are also not regulated under D-B and related Acts because their duties are primarily administrative or executive in nature rather than those of laborers or mechanics (operators). However, such employees who devote more than 20 percent of their time during a workweek to mechanic (operator) or laborer duties as defined by the D-B Act are considered laborers and mechanics (operators) for the time so spent, and must be paid at least the appropriate wage rates specified in the D-B wage determination.

Salaries and wages for supervisors, executives, administrators and professionals need to be based on prevailing wages and backed up with documentation.

Costs Requiring Consideration In Bond Calculations

Identify and calculate the relevant costs for the various tasks needed to complete the bonding scenario including, but not limited to:

Equipment rental or acquisition costs (cost of ownership).

Equipment operation costs (fuel, oil, grease and maintenance [FOGM] and tires).

Labor costs for manual labor, equipment operations, maintenance, monitoring, health and safety, technical, supervision and project management.

Site maintenance including water management, roads, infrastructure, power lines, fences, and environmental monitoring, etc.

Reclamation materials (acquisition, shipping, etc.).

Equipment mobilization and demobilization.

Permits.

Taxes (sales, property).

Equipment Productivity: There are several methods for calculating fleet and equipment production rates. They all utilize or assume factors such as material densities, operator efficiency, altitude corrections, fill factors, scheduled hours per year, rolling resistance, etc. To keep reclamation costs fair and equitable, and consistent between possibly competing mining companies, a list of reasonable values for these factors applicable throughout the phosphate patch is presented in Table 2. Keep in mind; these are factors that a third-party government contractor would use in a bid, not necessarily the factors that a mining company has determined for their equipment and personnel operating a mine at a specific site.

The following factors are based on several sources: The Cat Performance Handbook, experience, review of past and current phosphate mine reclamation bonds and other cost estimating references.

Table 2 - Standardized Performance Factors for SE Idaho Phosphate Mine Reclamation Bonds

Factor Value Notes

Overburden Loose Density (lbs/cy)

3,000 Assumes 20% swell factor. Typical of values used in previous bond calculations.

Overburden Bank Density (lbs/cy)

3,700 Typical of values used in previous phosphate mine bond calculations and on in pit design densities.

Equipment Performance Altitude Correction Factor

Typically <1 Specific for each type of equipment and each mine based on mine altitude

Elevation for Altitude Correction Factor

7800 ft (2300 m) amsl

Typical altitude of mines in phosphate patch. Smoky Canyon and Husky-North Dry Ridge are examples of mines that may be sufficiently higher and thus require a lower altitude correction factor.

Upper equipment speed limit for material haulage

25 mph Assumes medium haul distance. Adjust down for short hauls, up for long hauls over easy terrain.

Swell Load Factor (L.F.) 83% L.F.= (100%/(100%+20%swell)

Loader Fill Factor (%) 100% Bucket loaders typically have a fill factor of at least 100%

Hauler Body Fill Factor (%) 95% Typical of values used in previous bond calculations.

Operator Efficiency (%) 85% Accounts for an experienced operator handling unfamiliar material in an unfamiliar location under varying conditions.

Scheduled Hours per Year for Operations

2,310 hours

One 10-hour shift per day, six days a week accounting for weather, holidays, equipment maintenance, mob and demobilization, misc. down time. Use if actual workdays/hours and fleet availability are not used.

(Source: USACE EP 1110-1-8, Vol 8)

Fleet Availability (%) 83% Accounts for downtime for maintenance, etc. 50 min work hour. (typical from many cost references)

Rolling Resistance (%) 5% Dirt roadway rutted or flexing under load, little maintenance, no water, 2 in. tire penetration. Typical of construction site. (Source: Cat Handbook)

Job Efficiency (day) 0.83 50 min/hr.

Job Efficiency (night) 0.75 45 min/hr.

Note: These production and performance factors are not necessarily mutually exclusive, additive nor multiplicative. It depends on the method used to calculate job performance.

Equipment Production Calculation Software: An application like FPC™, DozSim™, etc. can be used to obtain fleet production values. When these applications are used, provide printouts (screen shot, etc.) of the inputs and outputs and identify where the values are used in any outside calculations.

Caterpillar Performance Handbook™: If referencing the Caterpillar Performance HandbookTM, provide edition number and page number and a brief explanation of parameters used to obtain the value or selected methodology.

RS Means™: If using RS Means™, provide the book title, date, reference line number and any parameters, such as volume, haul distance, cycle time, etc.

used to select the value. Provide printouts of estimates using the RS Means “Advanced” option in their on-line application or a copy of the front page and line item page used if a hardcopy book version is used.

EquipmentWatch™ Rental Blue Book or Green Book: If Blue Book or Green Book values are used, provide publication date (current date if using online version), and a copy or printout of the equipment rate pages showing rate adjustment for rate effective date, model year, region (Idaho), and ownership and operating factors. Avoid specifying equipment over five years old.

Other References: If other references are used, provide detail equivalent to that noted above so costs can be verified.

Standard Reclamation Cost Evaluator (SRCE) “The Nevada Method”:

The Nevada Department of Environment Protection (NDEP), Nevada BLM, Forest Service and Nevada Mining Association have adopted a reclamation and closure cost estimator for Nevada that, in the words of the author, “standardizes user input requirements, productivity calculations, volume and area calculations in a consistent format to facilitate accuracy, completeness and consistency in the calculation of costs for mine site reclamation.” The model was validated in the State of Nevada through an 18-month testing process. Although it has been used extensively in Nevada and worldwide by its developers, it has not been validated for general use by BLM or the Forest Service in Idaho or the phosphate patch.

The application depends on an extensive set of both standardized and site- and region-specific input data that includes labor rates, performance factors, unit operating rates, rental rates, material costs, etc. Nevada has a committee that periodically reviews and updates this standardized data set for Nevada.

No such standardized data set exists for southeast Idaho and it is expected that any dataset for Idaho could have significant differences from Nevada. Also, SRCE does not include every type of task or activity that could be required to fulfill the reclamation scenario, so additional cost estimating references outside of SRCE could be required. An example of a task that SRCE does not cover would be the installation of a GCLL, or a store and release cover. That said, the application contains many of the calculations needed to handle reclamation and would be acceptable for phosphate reclamation bonding if BLM approved standardized input values for southeast Idaho were used. To document the bond calculation and the application spreadsheets and input parameters need to be submitted along with the bond documentation.

Calculation Units:

Before actual cost bond calculations were required of phosphate mines, bonds were typically calculated as a cost per acre. At mine sites where no significant earthmoving tasks such as backfilling, recontouring or road prism reconstruction were required for reclamation, or where water treatment or other non-area-based reclamation is significant using cost per acre values to calculate bonds appeared to be adequate. Now that actual cost bonds are required, calculating and using cost per acre for reclamation is only appropriate for those reclamation tasks whose cost is proportional to area reclaimed. Below is a discussion of when costs based on volume (cubic yards, tons) of material and costs based on area (acres, sq-ft, etc.), and costs based on other factors are appropriate. Also, using assembly costs is addressed below.

Volume Units – Use volume units (cubic yards, etc.) for costing all cut and fill tasks such as road recontouring or prism reconstruction; recontouring piles;

excavation, loading, hauling, filling and spreading operations, etc. Typically, if it needs to be haul by truck, or large material volumes need pushing by dozer, the costs need to be by volume.

Treatment volume or flowrate units can also be used for water treatment capital and operating costs. The costs per volume must be based on substantial past experience with the treatment method, or the cost needs to be based on engineered construction and operating costs that are provided with the bond documentation.

Area – Cost per unit area (acres, square feet, etc.) can be used where large areas are reclaimed in a uniform fashion such as waste covers (GCLL, store and release covers, etc.), topsoil delivery and spreading, and revegetation, provided the components and methods used to calculate the costs per unit area are provided or a contractor bid is provided. For example, to unitize revegetation per acre, pounds of live seed per acre, fertilizer per acre, equipment type and production rates per acre, total time to accomplish etc. should be provided. For covers, synthetic costs per acre, equipment type, layer thicknesses, volume and bulk densities of the materials used per unit area should be provided plus the location of source material so load/haul/dump or push distances and costs can be verified.

Assembly Costs and Contractor Bids: Assembly costs are costs for tasks or materials that can be lumped together to form a unit cost. Examples might be cost per foot to abandon a well, cost per cubic foot to demolish a building, cost per square foot to install synthetic liner, cost per gallons per minute for a package water treatment system, etc. Often, assembly costs are obtained from published price or rate sheets or by acquiring bids from outside contractors to perform a well-defined task or manufacture a specific assembly (thus the term “assembly cost”). A bid from an analytical lab to perform a defined set of water analysis can be considered an assembly cost. Assembly costs can be used for specific tasks provided the underlying unit costs, or bid request documentation is provided. For example, three “cost per acre” bids could be obtained for reseeding. The “request for bid” document should be provided to the agency along with the bond calculation so that it can be shown that the requirements of the reclamation scenario are satisfied. The bidder should also be informed that it is for a federal contract job since government jobs carry additional risk and expenditures that private industry contracts typically do not.

Submittals (Data Deliverables)

Reclamation Requirements

Scope of Area to be Reclaimed

Bonding Scenario Narrative with Reference Figures

Phases of Reclamation Tasks

Equipment Fleet

Work Assumptions

Figures Showing Facilities and Contours Before and After Reclamation Scenario

Figures: Provide figure(s) and drawings showing (as appropriate):

Map showing surface ownership within reclamation scenario.

Extent of mine covered by existing bond showing scenario mine features.

Extent of mine covered by Cost Estimate.

Areas for which bonding has been released.

Areas that have been fully reclaimed (recontoured, topsoiled, and reseeded) but that have not been released from bonding. Label when each area was last seeded.

Detail maps, cross-sections and drawings showing mine scenario to which bond should be applied (the before reclamation scenario) and time frame when this scenario should occur in the mining sequence. If operations specific location names are used in the narrative description of the scenario, show those locations on the figures and the area that these names pertain to (for example: at North Rasmussen Ridge Mine there is a Bowles Boulevard, Homer’s Hump, Malfunction Junction, and Buck’s Bank that refer to sections of a haul road). It would be preferable to keep the use of slang place names to a minimum.

Detail map showing final reclamation surfaces (after reclamation scenario) for selected scenario including surface preparation (Dinwoody cover, GCLL, topsoil thickness, cover type such as seeding or rock armoring, etc.).

Surface Land Ownership: Provide acreages of each surface owner within the reclamation bond scenario.

Survey Stations: If survey stations are used in the task descriptions (such as for road reclamation), provide a map showing the station locations in sufficient detail to follow the narrative and calculations.

Intermediate Stages of Reclamation: Show intermediate stages in the reclamation scenario that help to illustrate the techniques, equipment, push and haul distances, location of stockpiles, volumes and areas, etc.

Cross-sections: Provide longitudinal and lateral cross-sections in enough detail across cut and fill areas to allow verification of volumes, initial and final slopes, push and haul distances and grades. Provide cross-sections of roads and other cut of fill tasks showing the pre-reclamation and final reclamation profiles to allow a take-off of areas and volumes. Show area and quantities on each section.

Excel Spreadsheets: Provide live Excel spreadsheets showing all calculation cells including equations, unit values, production rates, volume calculations, mobilization, fleet costs, haulage, excavation, interim monitoring, long term management, etc. The BLM has examples of a spreadsheet that can be used as a template. If using SRCE, provide the application with the populated spreadsheets.

Direct Costs

If the government needs to perform reclamation and cash in the bond, a government contract to perform the reclamation will be executed in accordance with the Federal Acquisition Regulations (FARs) (48 CFR 1). The FARs define direct costs as those contractor costs that they can identify specifically with that project. Typical direct cost items include but are not limited to the following items.

Site Survey, Inventory and Design

Typically, when an operator defaults, mining and reclamation stops quickly leaving the site in a state of partial closure and reclamation. The agency typically must hire a surveyor and engineering consultant to evaluate and document the condition of the site so a closure/reclamation plan and specification can be prepared.

Interim Operations and Maintenance

O&M of the site for the time period between company default and completion of the reclamation. This is essentially stabilizing the site and performing prescribed environmental monitoring while reclamation designs are prepared, and contracts are let.

Site Reclamation

Full reclamation of the site based on the reclamation scenario.

Long-term Maintenance and Monitoring

Cost to monitor environmental sites such as ground water and surface water for a defined period of time and maintain site until water management structures are shown to be adequate and reclamation revegetation has stabilized.

Items to be Considered in Direct Cost Calculation

Hazardous Materials Handling and Disposal

Demolition, Removal and Disposal of Structures, Equipment and Materials

Fences

Power lines, transformers

Hard-surfaced roads

Bridges

Abandoned equipment

Culverts

Railroads

Facility Buildings (shops, warehouses, offices, etc.) Provide total building volumes.

Mineral handling facilities (truck dumps, conveyors, silos, scales, etc.)

Support facilities (ready line, fuel tanks, water tanks, equipment yards, explosive storage sites, electrical substations)

Earthwork

Equipment types - Describe equipment, procedures and costs with reference to a quality, and current map of the project site. The map should show haul distances and grades.

Location of stockpiles and load and dump areas.

Topsoil/Growth Media: Show redistribution of topsoil or growth media on all disturbed areas that are to receive topsoil

Revegetation

Seedbed preparation

Mulch

Seed

Fertilizer

Post seeding maintenance (weed control, mowing, interseeding, rill repair)

– suggest 10% of Revegetation costs

Removal of monitoring structures (if structures need to be operational for a period after primary reclamation, include inflation for that period in costs)

Ground water monitoring wells

Other operator owned wells

Surface water monitoring stations

Experimental study sites

Meteorological/air quality monitoring sites

Environmental, Health & Safety Mitigation

Long Term Operation and Maintenance (O&M)

Surface Water Management Maintenance (sediment ponds, straw wattles, silt fencing other BMPs)

Revegetation Monitoring and Maintenance

Surface Water and Groundwater Quality Monitoring

Environmental Monitoring (resources other than revegetation and water)

Geotechnical Monitoring

Water Treatment (if needed)

Inflation for all tasks and long-term O&M – Recommend 2.5%

Salvage: No salvage value can be credited for facilities, equipment, or other infrastructure. This is because salvage value is so unpredictable. It is not uncommon for salvage value to be zero. For example, in 2004 the salvage value for steel was zero. It is also common for items of value to have already been removed from the site to pay company debts before bond money for on-site reclamation work is available.

Contract Assumptions:

Assume work will be performed in the appropriate season. Consider weather, ground conditions, Migratory Bird Treaty Act restrictions, etc.

Assume that work during the 3 months of winter will be limited. The added expense of working in the winter is typically not acceptable in a government contract. Rental equipment on long term rentals typically need to be returned to rental company for preventive maintenance, often in the winter.

Assume work will be performed during daylight hours.

Assume workers travel per diem is in accordance with the local government rate.

Indirect Costs

Contractor Costs

Performance and Payment Bonding and Insurance

Performance bond: Performance bonds are required for federal construction contracts over $150,000 (Federal Acquisition Regulations [FAR] 28.102). It covers bringing in another contractor in case the successful bidder can’t complete the work and such items as repair of damaged structures or natural resources. The BLM and Forest Service consider a premium of 1.5% of the total contract (direct) cost to be fair and equitable.

Payment bond: A payment bond is required for federal construction contracts (FAR 28.102). It pays subcontractors if the prime contractor defaults and can be no less than the performance bond. The BLM and Forest Service consider a premium of 1.5% of the total contract (direct) cost to be fair and equitable.

Insurance: Insurance is required for government contracts (FAR 28.3) The BLM and Forest Service consider a premium of 1.5% of the total labor cost to be fair and equitable.

Profit

Profit is the contractor’s profit calculated as a percentage of total direct costs that do not already contain a profit. The FAR considers 10% profit to be fair and equitable.

Taxes

Add sales tax to all materials and add sales and property tax to the cost of equipment purchased, rented, leased or used in a mine reclamation bond (IAC

35.01.02.082 “Idaho Tax Code Rule 82”). For Idaho, the sales tax is 6% and property tax is 2%.

Overhead and Per Diem (typically 15% of direct cost)

Corporate overhead (typically 15%), called G&A (General and Administrative) costs, need to be added to all direct costs. This percentage is allowed to be a part of the winning contractor’s bid and is determined by the Defense Contract Audit Agency (DCAA). Yes, the DCAA is part of the Department of Defense, but interagency agreements allow them to do contractor audits for other agencies such as the USDA and DOI. They also perform the G&A audits of the BLM and Forest Service, which is where their overhead percentages originate.

Risk or Contingency (General Conditions) (typically 10% for reclamation projects))

Contingency costs are for errors that may exist in estimate resulting from the use of assumptions and conceptual information rather than actual measurement of work performed. Contingency cost is not intended to cover worst-case scenarios or reclamation failure.

Contract Administration (6% of Direct Project Cost)

Pays Mineral Administrator, Fiscal, Engineering and Other Specialists

Pays Per Diem for inspections

Pays Agency Contract Administration (Contracting Officer and staff, COR, Inspectors)

Agency Indirect Costs (21% of Contract Administration Cost)

Pays for Washington office (payroll, etc.), State office administration, District office costs. Determined by DCAA (see above).

Inflation Factor (total of the following) Assume 2.5% per year long term.

Time until reclamation scenario occurs.

Time until out years activities like monitoring well sampling, reporting and abandonment are scheduled.

Time to actualize the bond, assume a year minimum.

This is the time between actualizing bond (bond collection) and initiation of agency reclamation (time to prepare and execute bid). Experience shows that this takes a year minimum.