33() jDri'txAi, oi" i'!)i<i;s'i'KN' 



value and laljor costs being given proper weight in determining the 

 amount of refund due the purchaser or the portion of the bond to be 

 held fully to pay the Government. For the protection of the Govern- 

 ment, contracts should provide that a certain small percentage of the 

 deposits should be held as non-refundable in any event. 



In determining selling values the actual average selling values for the 

 region during the period in question should apply. Labor costs also 

 should be determined not on the basis of actual expenditures by the 

 individual purchaser, but rather on the basis of the standard number of 

 liours fixed in the appraisal for performing the operation, multiplied 

 into the average wage schedules of the region during the life of the 

 contract. By this means will it be possible to avoid penalizing the 

 unusually efficient operator and to encourage an effort to exceed the 

 schedule and thereby reahze an extra profit. If the operator is able to 

 devise methods of logging cheaper than the standard practice of the 

 time and region, or if he is able to apply his man-hours with more than 

 ordinary effect, he is justly entitled to and will receive an increased 

 profit as a result. 



It is believed that it has been the experience of the Forest Service in 

 the past that nearly all large sales are made at the appraised value, not- 

 withstanding the fact that timber is auctioned to the highest bidder. 

 That this condition will. continue to obtain for some time to come now 

 seems probable : but to meet the possibility of bids above the appraised 

 price it will be advantageous, under the ])roposed method, to regard 

 any premium offered by the purchaser as a bonus to be paid bv him for 

 the contract and retained by the Government, regardless of whether 

 t^he appraised value is found to be low. excessive, or correct when the 

 final adjustment is made. 



The average wage schedules and selling values to apply should be 

 the average obtaining for the region during the life of the sale, and to 

 cover conditions of wide or rapid fluctuation it is probable that selling 

 prices should be considered for a period of six months after the com- 

 pletion of operations on the sale, in order that the true selling value of 

 all the manufactured product may be ascertained. 



It will be noted that this plan does not contemplate the guarantee of 

 any profit to the operator, nor does it undertake any assurance that the 

 logging can actually be done in the estimated number of hours. It 

 does aim to relieve the complaint that a Government stumpage contract 

 is hide-bound and one-sided, and it is believed to offer some assurance 

 to purchasers that stumpage rates will be based on actual existing 

 rather than hyj^othetical unit values for labor and product. 



