Stewardship Contracting Assessment

Prepared by Doug MacCleery
Final November 23, 2004

Executive Summary of the Stewardship Contracting Assessment

Overview

At the Chief’s request, the Washington Office carried out an expedited review of the implementation, rules and awareness of stewardship contracting. Regional Offices were asked to provide written responses to a number of questions and 74 interviews were carried out with internal and external people. A number of common and interesting themes came out of this assessment.

People really like the idea of stewardship contracting and what it can do

• People inside and out of the forest Service think stewardship contracting is a great tool with significant potential for carrying out the Forest Service’s vegetation management program.
• People feel that the collaborative process associated with stewardship contracting has been well received by the local public and increases the support for needed fuels treatment and restoration activities.
• They feel that goods for services authority has allowed the Forest to implement resource management projects that it would not have been able to carry out or would have been delayed due to lack of funding.

But there have also been a number of commonly expressed concerns about how stewardship contracting is being implemented

• Stewardship contracting involves a significant learning curve (both internally and externally), including, more collaboration, more complex contracting, sometimes local multi-party monitoring, additional reporting, etc. This learning curve is especially steep for those not involved in the pilots.
• Because there is no new funding for stewardship contracting and it is more complicated and expensive at least at first due to the learning curve, some units have been reluctant to get involved.
• The unrealistic acreage targets that we have imposed have been getting a significant adverse reaction.^\1 Acreage targets undermine the learning-by-doing objective and are likely to result in inappropriate decisions on which projects are appropriate for stewardship contracting.
• But it is important that each national forest gets experience with one or more stewardship contracts so that we can further advance the learning curve.
• The assessment found that Regional Office leadership is critical to the success of stewardship contracting. Two key elements of success are; 1) Regional Foresters who are strongly committed to stewardship contracting, and 2) when the Acquisition Management and Timber Sale Contracting staffs are viewed as champions and actively work together to assist the field in getting the stewardship contracting job done.
• Regions should evaluate the effectiveness of their organizations to assist the field in dealing with stewardship contracting and the other new vegetation management tools. R-2 got high marks for the team it has established to assist the field in training and problem solving related to stewardship contracting.
• Many contractors are reluctant to participate in stewardship contracts because of the diverse work often involved. We need to learn from experience and develop contract packages that can be handled effectively by our existing contracting community and that will not result in inordinately high bids or no bids.
• In addition, our propensity to write contracts that limit risk to the government and require large bonds is discouraging contractor interest in stewardship contracting. The Forest Service needs to carefully evaluate what will protect the government’s interest and may need to accept a little more risk to the government as we and our contractors gain experience in stewardship contracting.
• Most people responsible for stewardship contracting have had some overview training (what stewardship contracting is). But more training is needed on what it takes to actually put stewardship contracts out on the ground.
• Some people in the Forest Service feel that the collaboration related to stewardship contracting takes too much time and effort. In addition, some Forest Service people don’t know how collaboration under stewardship contracting differs from traditional scoping and public input. Both direction and training on this was mentioned frequently as being very important by both internal and external contacts.
• The contract situation with service and timber contracts can be complicated. Contracting officer expertise is limited in some areas. Because of this, the quality of contract administration has suffered. The Timber Sale and Acquisition contracting communities are not in sync in some areas and, in others, sometimes hostile to one another. We need to find ways to deal with these issues and conflicts.

Recommendations to Address Issues and Concerns

As part of the stewardship contracting assessment, a number of specific recommendations were offered by regions and those interviewed. The Washington Office intends to work with the regions and our stakeholders to evaluate and prioritize these recommendations and develop an action plan for dealing with them.

Complete Final Stewardship Contracting Assessment

“So the Forest Service is being told to do more stewardship contracting, but: 1) there are no new dollars to help in the learning curve, 2) there are inadequate and rigid contract instruments and no agreements template, 3) there is frequently changing direction, 4) there is often inadequate training on what is needed vis-à-vis contracts and collaboration, and 5) there is a skeptical contracting community. It’s not rocket science why there aren’t more stewardship contracts.” ^\1

Overview

Concerns have arisen among leadership that there are not as many stewardship contracting projects being implemented as was expected. In addition, concerns are being expressed by the field regarding a number of implementation issues related to stewardship contracts. As a result, the Chief has requested an expedited review of the implementation, rules and awareness of stewardship contracting.

As part of this review: 1) we requested that the Regions provide written responses to various questions designed to assess the status of stewardship contracting and the issues and concerns that have arisen in its implementation, and 2) we conducted telephone and face-to-face interviews with both external stakeholders and internal agency personnel. The assessment reflects the views of those who were interviewed and may not reflect the views of those responsible for direction and oversight of the stewardship contracting program. We do view all the findings as helpful for refining and updating the direction of stewardship contracting. Any changes in the program will be reflected in updates to our directives system.

The following is a summary of who was interviewed and where they were located.

The following paper summarizes the commonly heard themes coming out of both the written and oral responses. These are compilations of both statements and summaries of comments that were heard and provided. They are described without passing judgment on their merit.

What has been working well with stewardship contracting?

• Stewardship contracting is a terrific tool with significant potential for the Forest Service’s vegetation management program (perhaps 15-40% or more when the tool is fully understood and implemented).
• The collaborative process associated with stewardship contracting, including multi-party monitoring, has been well received by the local public and increases the support for needed fuels treatment and restoration activities.
• Goods for services authority has allowed the Forest to implement resource management projects that it would not have been able to carry out or would have been delayed due to lack of funding.
• Stewardship contracting has reduced the numbers of contracts by combining needed work into one contract. This has reduced solicitation, administrative, and contract costs. It has reduced the number of entries by bundling associated restoration work into one contract. This reduces environmental impacts, including threatened and endangered species, by reducing disturbance that can occur from multiple entries. It also increases community support because the work can be accomplished in a shorter time period.
• Templates for contracts have helped to reduce the duplication and confusion that would otherwise result from blending procurement contracts with timber sale contracts.
• Federal dollars to conduct on the ground projects are often being leveraged by matching funds from external sources to support projects identified by collaborative groups. This has increased our ability to form partnerships with communities and non-governmental organizations (NGOs).
• Contractor participation in suggesting options for achieving project objectives provides ownership in solutions and achievement of project objectives and stronger commitment to making their ideas work. Experience to date with contractors who have been awarded stewardship best value contracts has been good.
• Stewardship contracting, done properly, allows accomplishment of more work with less money. Goods for services authority gets more benefit to the ground vs. costly Forest Service overhead associated with Knutson-Vandenberg (KV) and brush disposal (BD) collected in timber sales.

What are most commonly expressed concerns and barriers over the implementation of stewardship contracting?

General Issues and Concerns

• Stewardship contracting involves a significant learning curve (both internally and externally), especially for those not involved in the pilots. It takes extra time. Because of this, many in the field want to start small and simply, and get experience in the process.
• There is no new funding for stewardship contracting; it comes out of existing programs. Since it is more expensive at first – due to the steep learning curve: more collaboration, more complex contracting, programmatic (and sometimes local) multi-party monitoring, additional reporting, etc – many units see little incentive to get involved.
• The unrealistic acreage targets that have been assigned have been getting an almost universal adverse reaction.^\2 Many feel strongly that such targets are both inappropriate and counterproductive. There are not acreage targets for timber sale contracts or service contracts, so why such targets for stewardship contracts and agreements? If targets must be established, they need to be meaningful and added to or included in our existing reporting systems. Targets also encourage the field to convert off-the-shelf projects into stewardship projects with inadequate collaboration and other attributes of the new tool. While stewardship contracting is a great management tool, it is not a program.
• If a target is needed, numbers of stewardship contracts per national forest would be more appropriate than a clearly unrealistic acreage target (and the number should be low, to facilitate phased learning).
• The upward reporting requirements associated with stewardship contracting are viewed by some as a disincentive to become involved.
• In some cases, there has been a tendency to bundle a variety of diverse work into one contract, reducing the numbers of potential bidders and driving up costs. Many contractors specialize in particular types of work, e.g., logging or land treatment, and are very leery of getting involved in the complexity of work and risks of stewardship contracts. We need to learn from experience and develop contract packages, at least initially, that can be handled effectively by our existing contracting community and that will not result in inordinately high bids or no bids.
• The Forest Service propensity to write contracts that limit risk to the government and require large bonds is discouraging contractor interest in stewardship contracting.
• The Washing Office (WO) is sending mixed signals to the field. On one hand the Chief and others in leadership are promoting more use of stewardship contracts, but have also been reported to have said that we need to select projects carefully and not do anything that might cause us to lose the use of the tool. At the same time, some contracting people are: 1) telling the field all the things they can’t do in putting stewardship contracts out on the ground, and 2) requiring complicated rules and formats for what can be done.
• Stewardship contracting has the potential to be used for the full range of forest restoration activities. Unfortunately, the current focus that the agency now has on fuels reduction and on meeting the targets associated with it, while understandable, is leading to substantial missed opportunities for the Forest Service to get its broader land management and restoration objectives accomplished (while also accomplishing fuels treatment at the same time). But doing so will take more time, effort and planning.
• Most people responsible for stewardship contracting have had some overview training (what stewardship contracting is). But more training is critically needed on what it takes to actually put stewardship contracts out on the ground, as well as on the role of stewardship contracting in relation to the other tools that have become available, e.g., categorical exclusions (CEs), Healthy Forests Initiative (HFI) and Healthy Forests Restoration Act (HFRA) tools. Detailed contract training is also needed internally.
• Joint training with stakeholders (community leaders, contractors, NGOs and others) where it has occurred has been very successful. Training that involves both agency and non-agency people in the same session encourages the productive exchange of perspectives and ideas and can lead to synergistic approaches to problems and constructive relationships down the road. Unfortunately, this kind of training is relatively uncommon.
• Some people in the Forest Service feel that the collaboration associated with stewardship contracting takes too much time and effort. In the crunch to crank fuels projects out to make targets, working with the community is taking a lower priority if it slows that up. In addition, some Forest Service people don’t really know how to go about collaboration as the concept has evolved. How does it differ from traditional scoping and public input? How much is enough in particular situations? Both direction and training on this was mentioned frequently as being very important by both internal and external contacts.
• Loss of flexibility under self-imposed administrative constraints is a real concern, especially, for those who were involved in the pilots. For others, especially those not involved in the pilots, the direction in the Stewardship Contracting Handbook (FSH 2409.19 chapter 60) has often been viewed as being helpful, but more flexibility is desired by many.
• Limitations on the use of retained receipts are viewed as a problem by some. Some, particularly external folks, want to allow for their use for monitoring. They see a link between active community participation and dollars available for monitoring. Others, primarily internal people, want to use retained receipts to pay for salaries under certain conditions, e.g., contract administration or force account burning where the contractor does not want to take on that job, for National Environmental Policy Act (NEPA) analysis, or for adding or replacing infrastructure to reduce environmental damage, e.g., relocate roads or trails, and add pit toilets to reduce stream pollution, etc.
• The contract situation with service contracts and timber sale contracts can be complicated. Acquisition (AQM) Contracting Officers (COs) are often not familiar with timber sale contract (TSC) rules and TSC COs with service contract rules. This has caused confusion. CO expertise is very limited in some areas and because of that the quality of contract administration has suffered. The TSC and AQM contracting communities are not in sync in some areas and, in others, actually hostile to one another.
• Tying fuels treatment or forest restoration projects to commercial timber removal may increase controversy and risk of appeals and litigation.
• In some areas, the services needed are greater than the value of the goods available and appropriated funds are not sufficient to make up the difference. This limits the amount of fuels and restoration work that can be done.
• Getting NEPA done in a timely fashion remains a problem, but is not limited to stewardship contracting.
• Regional Offices (ROs) are providing varying levels of leadership and commitment on this issue. R-1, R-2, R-4 and R-8 are given high marks for leadership and commitment; other Regions, somewhat less so. Two key elements of success are when the Regional Forester expresses strong commitment to stewardship contracting and when the Acquisition Management and Timber Sale Contracting staffs are viewed as champions of the tool and actively work together to assist the field in working through problems and getting the job done. The decision of R-2 to put in place an RO-based team to assist the field in training and problem solving is given high marks by the field and external groups.
• WO leadership gets some good reviews and some mixed reviews. Having a full time position in Forest Management to deal with stewardship contracting has been viewed as very positive. But there is a general impression that the WO has been overly rigid and hide-bound and there is a general call from both internal and external folks for the WO to allow the field more flexibility. The WO has also repeatedly promised things, such as the integrated resource TSC template, that they have been unable to deliver in a timely fashion. Some ROs feel that the WO has taken inordinate time to answer important contract questions. In addition, some view the TSC and AQM shops in the WO as not always coordinated and consistent in their contract input to the field.

Contracting Issues and Concerns

• The interface between AQM and TSC responsibility can be confusing, internally and externally. There is confusion over the interface between timber contract clauses and service clauses and under what circumstances the legal authorities of TSCs and those of service contracts are operable. This confusion is expressed at multiple levels in the Forest Service. The lack of CO expertise in the field is viewed as a real problem in some areas, as is lack of coordination between the TSC and AQM communities in the field.
• The field wants the option and flexibility to use alternative contracting templates. The integrated resource service contract template is viewed as being much more complicated than it needs to be, especially for simple situations that exist in R-8 and R-9. This perception is viewed as discouraging both Forest Services and contractors’ participation. The field wants the flexibility to use simpler instruments. Some are concerned that the product removal provisions of the integrated resource service contract are written in a traditional timber sale contract format, rather than in a performance-based (end result) format. Some really want the integrated resource TSC to be made available for use.
• In some regions, longer term contracts are needed to encourage private investment. But providing assurance of funding for longer term projects is also needed, but problematic.
• Both internal and external people feel that the Forest Service must learn to accept more risk in the contract, and reduce its accountability rules for low value material.
• Bonding is viewed as a real problem by both internal and external people, especially for communities and small purchasers. Only a few bonding companies now write bonds for this kind of work. Either because of existing rules or the way they are being interpreted, the feeling is that the Forest Service is asking contractors to post bonds in excess of the real risk to the government. Bonding on long term contracts has also been viewed as a significant constraint. Bonding came up time and time again as an important constraint to stewardship contracting, especially in the West.
• There is much confusion, at least in some parts of the Forest Service, over what constitutes “best value” contracting. This has delayed contract award for inordinate lengths of time in some cases and is a major concern for prospective bidders.
• The WO requirements (in FSH 6509.18 Chapter 20) for bidders to submit 3-year financial statements is seen as an important constraint to broad-based participation by operators.
• Forest Service appraisals of merchantable material often are unrealistically high, transaction evidence appraisal (TEA) appraisals are inappropriate for many stewardship contracts, and Forest Service skills in cruising and appraisal are weak.
• Templates for the use of agreements in stewardship contracting need to be finalized for field use. The Tribes, in particular, are very interested in using agreements.
• Designation by prescription or description does not work in areas where the treatment prescription is complex. It becomes too complicated to implement the project using a service contract. In this case, it is more cost effective and saves relationships among agencies and contractors if the Forest Service does the marking. More guidance and training is needed on when and how to use designation by description and prescription effectively.

Summary of Recommendations Received to Address Issues and Concerns^\3

Leadership and Organizational Response:

• Allow Regional Foresters to delegate stewardship contracting approval authority down to Forest Supervisors’ Offices (SOs).
• WO AQM needs a dedicated position for stewardship contract coordination.
• The Stewardship Handbook needs field review and revision, with a view toward providing more flexibility to the field.
• Other regions should consider establishing regional teams to assist the field in training and problem solving as R-2 has done.
• National direction should be for a dedicated, full-time stewardship position in each region, or a shared position between cooperating regions, and possibly with the Bureau of Land Management (BLM).
• Regions that are more advanced in stewardship contracting, such as R-1, should make themselves available to assist in accelerating the learning curve for others.
• BLM and the Forest Service should make more systematic efforts to learn from one another at various organizational levels and coordinate in training, developing contracting templates and other materials.

Targets:

• Acreage targets for stewardship contracting have been universally condemned by the field and externals, who strongly recommend that they be dropped.

Funding:

• Need some up-front funding for stewardship contracting to help fund learning curve.
• Some feel we are not yet integrated to take advantage of NFVW, NFWF, etc. to put stewardship contracts together with NFTM and NFHF dollars to treat more acres.
• In addition some feel we need guidance and training on how to obligate an integrated resource contract as well as use of specific management codes. For example, if the stewardship contract is accomplishing hazardous fuels treatment as well as some minimal road work, can a HF management code be used solely as the funding or must the obligation be a mix of HF and Roads management codes?

Training Needed:

• We need training on all of the new tools (CEs, HFI, HFRA, stewardship contracting, etc) and where they can best be used in an effective mix to get the vegetation management job done.
• Provide direction on what is adequate collaboration and in what circumstances and put together training packages on collaboration, including the role of collaboration in the various new tools that have become available (CEs, HFRA, National Fire Plan, etc) in addition to stewardship contracting.
  (Since this assessment was completed, the agency has contracted with the Pinchot Institute for Conservation to complete 5 training sessions on collaboration and stewardship contracting in June 2005. The agency plans on drafting guidance on the basic principles and practices of collaboration in FSH 2409.19 chapter 60 by August 2005. The agency is committed to teach by example, sharing lessons learned on stewardship contracting and collaboration on our website as well as key resources on collaboration. The collaboration website was posted on June 22, 2004.
• Need to encourage joint training with stakeholders (community leaders, contractors, NGOs and others) in stewardship contracting.
• Training should focus on the full range of objectives that can be achieved through stewardship contracting.
• Need training on what contract instruments to use and in what circumstances. National standardized training needs to be provided for the detailed use of the new stewardship integrated resource contracts and the use of the stewardship authorities in general, now and as soon as possible after new contract instruments are officially released.
• Need cross training of AQM and TSC COs.
• Need stewardship contracting awareness training for other staffs.
• Provide readily accessible information on lessons learned in stewardship contracting for use by the field and stakeholders
• Note: some state that significant efficiencies could be gained by national or multi-regional cooperative efforts in putting together training packages and delivering them to the field, while other regions and forests prefer to develop their own training.

Monitoring (multi-party and programmatic):

• Need guidance to the field on monitoring and collaboration.
• Also need information and training on the feed-back loop between monitoring and adaptive management. This link is often missing.

Direction:

• Need guidance on: delegation of authority, consistency on accounting, use of stewardship credits, etc.
• Need better direction on when to require Service Contract Act and Davis-Bacon Act wage rates.
• Need direction and training on when and how best to use designation by description or prescription.

Accounting and Reporting Requirements:

• Need clear understanding on what is required for upward reporting on stewardship contracting.
• Complexity of financial accounting should be reduced.
• Need automated cost accounting.

Retained Receipts:

• Some external people want use of retained receipts for local and regional monitoring.
• Some internal people want retained receipts to be available for salaries in some situations (e.g., to administer stewardship contracts, for NEPA analysis or to pay for force account burning when the contractor does not want to do it, etc.).
• Some want flexibility to use retained receipts to correct environmental problems, e.g., construction of road and trails to limit resource damage, pit toilets to protect stream quality, etc.
• Others want to be able to incorporate retained receipts into Wyden authority to do restoration work on adjacent private land.
• Some want the flexibility to use retained receipts for research.

Contracting:

• The field wants a truly new, innovative contracting mechanism which will deal with timber removal and a full suite of traditional service and construction activities. This would be one integrated resource contract, which could handle both positive value timber and appropriated funds, with one CO. It would be a simplified contract, clear and concise, which woods workers/loggers could readily understand and follow.
• Reconsider the current guidance for bonding stewardship contracts.
• Need clarification of delegation of authority:
  • For IR contracts
  • 1,000 ccf limit for AQM is too low and discourages participation.
    (Since this assessment was completed, the limit was increased on October 21, 2004 to 10,000 ccf in FSM 2404.26 and 2404.28 Exhibit 01. Some field personnel have expressed concerns that the delegation of authority should be larger than 10,000ccf.)
  • TSC and AQM delegation of authorities need clarification.
    (Since this assessment was completed, direction on delegation of authorities under stewardship contracting was clarified in the October 21, 2004 publication of FSM 24000. Some field personnel feel additional changes are needed particularly to FSM 2404.16 #8(d) allowing Forest Supervisor Contracting Officer authority for 2400-6(T), 2400-13(T) as well as 2400-4 contracts; and to FSM 2404.24 #5 allowing Regional Foresters to delegate COs by name but not for specific contracts).
• Release the FS-2400-13 and 2400-13T integrated resource timber contract as soon as possible. Since the assessment was completed, the FS-2400-13(T) contracts were posted on our websites on October 15 , 2004 at:
  • Stewardship Contracting Contracts
  • http://fsweb.wo.fs.fed.us/fm/stewardship/contracts/index.shtml [a Forest Service intranet website that is not accessible from the Internet]
• The Automated Timber Sale Accounting system should be modified to track stewardship contracting down payments and periodic payments, stewardship credits, retained receipts, and above base rate values.
• Designation by description and prescription is problematic. More guidance and training is needed in assessing risk-benefit mix, e.g. reduced up front costs vs. increased administration costs and risk.
• We need to find ways to deal with service contract issue that governments must have $ to cover non-recurring costs of contractor in the event of cancellation (cancellation ceiling) (R-1).
• Some want the option to include under the term “stewardship”, existing timber sale contract tools with the addition of goods-for-services authority. Advertisement and award of contracts would be through conventional timber sale procedures for small scale projects. Service work would be appraised into the minimum acceptable bid (the present process of preparing a proposal that addresses multiple contract-performance-monitoring items is too cumbersome to be attractive to many contractors and too time consuming to prepare and administer for small projects).
• Some Regions want the option to develop their own contract mechanisms where it is a benefit. In many cases, simple adaptations of or standard contract mechanisms (2400-3, 2400-6, service contract, service contract with product removal) is sufficient to achieve our stewardship objectives.
• Allow establishment of Minimum Bid Value for Products of an integrated resource contract (IRC). As the accepted price of the product produced for sale "funds" associated service work if a contractor bids the product at the minimum then less service work can be accomplished in the goods for services trade-off. Consider if it is prudent to determine minimum bid values for products for I RCs differently than for a classic "timber sale" contract.
• Being able to share risk with contractors related to market changes in long-term contracts is critical to getting contractors. We need to be able to adjust price of products as markets change through rate re-determination to reduce risk to contractors.
• Allow the use of the standard service contract with a clause that allows for the removal of products “subject to agreement”. If both the purchaser and the FS agree the products can be deck scaled and removed using the 2400-2 contract.
• We need a contract requirement for the operator to post an annual operating plan. By not requiring annual operating plans, the chance for contract extension or default is greater. The contract should contain guidelines for annual operating plans to maintain an adequate pace of operations to ensure the contract is completed on time.
• Clarify current confusion about when to follow general timber sale direction and when to follow service contract direction - direction on where to establish sale area boundaries is not clear.
• Develop direction on serious issues concerning delegations of authority, contracting authority, and consistency on accounting direction in establishing and using “stewardship credits,” etc.

Related Issues/Concerns

• Reliability of supply from National Forest System lands
  Reliability of supply from National Forest System lands remains a key constraint to investment in logging and processing equipment in many parts of the West and severely limits product markets and the value of the goods that can be traded for services.
• Lack of markets
  Lack of funds for fuels treatment where product values are low.
• NEPA still takes time and remains a barrier to expedient treatments
• Treating multi-ownerships
  We are not yet geared up to integrate activities with communities to treat multiple ownerships to get the “best” or highest priority areas treated from a fuels standpoint.