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including other work unrelated to the sale of timber in the timber-sale contract. These additions 

 are expensive and make it difficult for the small mills to purchase the sale. 



In recent years, the Forest Service has included pre-haul road maintenance as a requirement of 

 some contracts. This practice requires a purchaser of timber to complete various road- 

 maintenance tasks prior to cutting and hauling the timber. Most times the Forest Service includes 

 work items that have little to do with past logging; rather the road damage has been caused by 

 recreationists or weather. Sometimes the roads are perfectly useable but the agency engineers 

 have decided to replace culverts or cattle guard that are old and in disrepair. The front-end 

 loading of required contract work has two very negative effects. First, it delays the time when 

 a purchaser can bring in logs to convert them to lumber and therefore revenue; second, it costs 

 the purchaser up-front money they many need for other projects. 



This is not the only contractual practice that unfairly impacts the smaller companies The entire 

 financial security portion of a Forest Service timber-sale contract is very costly and disadvantages 

 the few remaining small business operators. Federal timber sale contracts require the purchaser 

 to make: (1) a 10% bid guarantee which is held until 25% of the value of the sale has been 

 logged; (2) a 10% performance guarantee equal to 10% of the total bid value of the sale which 

 is held until the end of the sale; (3) deposit funds equal to 70 days worth of harvesting before 

 harvesting can begin. Then the agency requires a mid-point payment equal to 50% of the sale 

 value and an additional interim payment worth 25% of total sale value, due three-fourths of the 

 way through the contract. 



The adverse effect of these requirements is compounded by the fact that most large business mills 

 have enough financial backing that they are able to purchase bonds which are accepted in leu of 

 cash. The larger the company, the less the cost of the bonds Some of the larger companies, like 

 Pope & Talbot, purchase performance bonds for pennies on the dollar. Payment bonds are 

 funded through the sale of stocks and bonds, and typically a large business's cost of payment 

 bonds is three to four percent less than banks can offer the small business purchaser. 



