StatementOfWork_FINAL.doc

Statement of Work

Lumber Indices for Use in Stumpage Rate Adjustment on Timber Sales

I. INTRODUCTION

The Forest Service uses a stumpage rate adjustment procedure to adjust timber sale contract tentative rates (bid rates) on most sawlog timber sales over 1-year in length in Regions 1-6. The Forest Service has obtained the indices used for this process from the nonprofit Western Wood Products Association (WWPA) since the 1950’s.

II. BACKGROUND

The Forest Service sells timber to private purchasers through competitive bidding. The Agency awards a timber sale contract to the responsible bidder submitting the highest qualified bid.

Title 36, Code of Federal Regulations, Part 223, §223.64 allows for the adjustment of contract (stumpage) rates during the term of a timber sale contract. These regulations state:

Timber may be appraised and sold at a lump-sum value or at a rate per unit of measure which rate may be adjusted during the period of the contract and as therein specified in accordance with formulas or other equivalent specifications for the following reasons: (a) Variations in lumber or other product value indices between the price index base specified in the contract and the price index actually experienced during the cutting of the timber;

In Regions 1-6 most sawlog timber sales with contract terms exceeding one year include a provision for adjusting stumpage rates during the term of the contract by the use of lumber price indices. The purpose of the stumpage rate adjustment procedure is to allow a timber sale purchaser's stumpage payments to follow the price trends when the primary forest product manufactured from National Forest System timber is expected to be lumber. This procedure helps reduce the risk of loss to a purchaser holding a timber sale contract during periods of declining lumber prices and benefits the Government by increasing stumpage receipts during periods of rising lumber prices.

The Forest Service established stumpage rate adjustment procedures in the 1950’s. Those procedures have evolved over time with the most recent significant change occurring in the 1990’s.

In September, 1991, the Department of Agriculture Office of Inspector, issued a report (Audit Report NO. 08099-122-SF dated 9/91- Stumpage Rate Adjustment on Timber Sales) stating that the 50 percent upwards and 100 percent downwards stumpage rate adjustment procedure, then in use, lowers the risk of market fluctuations to the purchaser at the monetary expense of the Government. The audit recommended either eliminating the stumpage rate adjustment procedure or modifying it so that adjustments to stumpage rate are the same percentage for both periods of rising and falling lumber prices. On December 31, 1997, the Forest Service gave notice of a revision in stumpage rate adjustment procedures in the Federal Register. The new procedures provide for stumpage prices to increase or decrease by 100 percent of the change in lumber prices.

III. SCOPE

The purpose of this contract is to provide the Forest Service with monthly and quarterly lumber price indices based on index logs that are representative of the lumber market for 9 species groups of lumber as follows:

Hemlock-Fir

Rocky Mountain Ponderosa Pine

Sugar Pine

Inland Red Cedar

White Fir (Hem-Fir)

Douglas Fir-Larch

White Woods

In addition to providing monthly and quarterly average indices the contractor is required to conduct a grade recovery survey resulting in new index logs and to provide a procedure to equitably change to a new basis when new index logs become effective.

IV. APPLICABLE DOCUMENTS

Timber Sale Contracts FS-2400-6 and FS-2400-6T (6/06 version), including pertinent provisions:

A/AT4a—Timber Payment Rates for Species and Products to be Paid for at Rates Escalated under B/BT3.2;

A/AT5—Indices Used in Quarterly Adjustment

B/BT3.2—Escalation Procedures; and

B/BT3.21—Unavailable index

PNW Coast and Inland Index Logs, Western Wood Products Association, January 2015.

V. DELIVERABLES

A. Deliverables to be provided under this contract:

1. Monthly Indices: Two monthly PNW Coast and seven monthly Inland lumber prices indices used by the Forest Service for adjusting stumpage rates during the life of the timber sale contract. Species for which indices will be provided:

Hemlock-Fir

Rocky Mountain Ponderosa Pine

Sugar Pine

Inland Red Cedar

White Fir (Hem-Fir)

Douglas Fir-Larch

White Woods

2. Quarterly Average Indices: Quarterly averages of the monthly indices for the quarters ending March, June, September and December.

Monthly and quarterly indices are to be e-mailed to a list of Forest Service recipients when first available but no later than the 10th of each month, or the next business day if the 10th falls on a weekend or federal holiday. The Contracting Officer will provide Contractor with the names and e-mail address of up to 15 Forest Service recipients.

Indices are to be based on the sales price of lumber shipped and the mix of lumber included in the indices must be representative of lumber production in western sawmills. This price may be collected at the time of shipping or the time of order. The mix of lumber in the indices must be representative of lumber production in western sawmills. If a sample of lumber prices is taken, the sampling error must be no more than 5% of the index value at the 95% confidence level (2 standard errors or t=2).

The PNW Coast includes Oregon and Washington west of the Cascade Mountains.

Hemlock-Fir includes hemlocks and true firs from the PNW Coast.

White Woods includes any volume invoiced and shipped as White Woods and Western Woods, as well as Engelmann spruce and lodgepole pine. Volumes shipped as White Woods may include mixed species shipments with any combination of Engelmann spruce, true firs, hemlocks, and pines (except Ponderosa pine). Volumes shipped as Western Woods may include any combination of western softwood species, except redwood and cedar.

Coast-Inland North Ponderosa Pine includes ponderosa pine milled in Washington, Oregon, California, Nevada, Montana west of the Rocky Mountains (Continental Divide), and all of Idaho, except the southeastern portion (i.e. generally east of I-15). Rocky Mountain Ponderosa Pine includes ponderosa pine milled in the remainder of the West.

3. Index Logs and Grade Recovery Survey: Conduct a grade recovery survey in 2019 in order to provide 2017-2018 Index Logs available for use on January 1, 2020. The grade recovery survey shall be based on a minimum of 50% of the lumber volume produced for each index species group for the 24 month period January 2017 through December 2018.

D. Project Timing:

1. Monthly Indices: Beginning at time of award, and continuing for each month thereafter until contract termination, e-mail the 9 indices based on the previous months transactions, to the Forest Service when first available but no later than the 10th or the next business day if the 10th falls on a weekend or federal holiday.

2. Quarterly Indices: Beginning at time of award, prepare quarterly indices for the quarters ending March, June, September and December. Quarterly indices shall be sent with the monthly indices.

3. Index Logs: The index log for each index species group shall be provided to the Government no later than January 1, 2020.

VI. PERFORMANCE

The Government will approve work products monthly to authorize payment. At the Government's option, an audit may be conducted of the contractor's procedures.

VII. PRE-WORK MEETING

A pre work meeting will be held telephonically will be scheduled within 15 days after the date of contract award.

VIII. SUPPORTING INFORMATION

A. Place of Performance:

Work will be performed at the contractor’s place of business.

B. Period of Performance:

The initial 1-year contract period will include the preparation of 12 monthly indices and 4 quarterly indices. The monthly indices will be included for the duration of the contract.. The quarterly indices will be for quarters ending March 2017, June 2017, September 2017, and December 2107. The period of performance of this Is one year from the date of award.

For Option Periods 1 through 4; the same monthly indices and quarterly average indices described for the initial 1-year contract will be provided. In addition, the index log for each index species group shall be provided to the Government no later than January 1, 2020.

The contract includes four optional periods as follows:

Option Period 1: TBD at time of award

Option Period 2: TBD at time of award

Option Period 3: TBD at time of award

Option Period 4: TBD at time of award C. Key Personnel:

1. At least one person must have a thorough knowledge of lumber grading standards and milling practices such as a Lumber Mill and Grading Specialist. At least one person must have a thorough knowledge of data management such as a Data Systems Manager. No credentials are necessary, but grading will be based upon breadth and years of experience.

2. During the first ninety (90) days of performance, the Contractor shall make no substitutions of key personnel unless the substitution is necessitated by illness, death, or termination of employment. The Contractor shall notify the Contracting Officer within 15 calendar days after the occurrence of any of these events and provide the information required by paragraph (3.) below. After the initial 90-day period, the Contractor shall submit the information required by paragraph (3.) to the Contracting Officer at least 15 days prior to making any permanent substitutions.

3. The Contractor shall provide a detailed explanation of the circumstances necessitating the proposed substitutions, complete resumes for the proposed substitutes, and any additional information requested by the Contracting Officer. Proposed substitutions should have comparable qualifications to those of the persons being replaced. The Contracting Officer will notify the Contractor within 15 calendar days after receipt of all required information of the decision on substitutions. The contract will be modified to reflect any approved changes of key personnel.