The Government Shutdown's Effect on Forest Service

Client Alert- October 8, 2013

The Government Shutdown's Effect on Forest Service Timber Sale and Stewardship Contracts

As you may already have heard, as a result of the Federal shutdown, late last week the Chief of the Forest Service ordered Contracting Officers to provide written notice to all timber sale Purchasers and stewardship Contractors directing them to suspend operations until notified otherwise.

Under the contracts, such direction will provide the Purchaser/Contractor with additional time within which to perform (aka Contract Term Adjustment). Additionally, under a Timber Sale and/or Integrated Resource Timber Contract such a suspension order would entitle the Purchaser either to (1) reimbursement of: out-of-pocket- expenses, a rate redetermination to measure any decline in the market, a temporary credit for unamortized road construction cost and temporary bond cost reduction; or (2)the increased costs of performing the contract.

The Chief's order also provides that Contracting Officers must assure that erosion control measures are in place in the event that operations cannot be resumed prior to expected seasonal periods of precipitation or runoff. To the extent that this work has become necessary only because of the suspension, it should be compensable.(Keep careful track of the equipment and labor needed to do this work.)

With regard to equipment and camps already onsite, the Chief's letter indicates that Purchasers and Contractors will have to make their own decisions whether removing equipment and camps or leaving them in place is most appropriate for their situation. In general, if the Purchaser/Contractor can put the equipment to productive use elsewhere during the suspension, it probably makes sense to move it there and charge the government for costs of an additional move-in/move-out of the current contract site. Note that, to the extent the Purchaser/Contractor does not, however, have another place to use the equipment, it probably does not make sense to move it out and the government would be liable for the idle equipment cost.

With regard to labor, the general rule is that in the case of suspension, the Purchaser/Contractor should lay off any workers who, at least temporarily, are not necessary. There is an exception to this rule, i.e., where laying off workers would make it very difficult for the Purchaser/Contractor to reassemble a trained, competent workforce upon the suspension being lifted, the government can be found liable for the Purchaser/Contractor's cost of keeping the workers on payroll during the suspension. (Again, if you do this, keep careful records as to how much time each employee was idle as well as how much time, if any, he/she was doing alternate tasks, e.g., a faller spending time re-painting your mill.)

Lastly, we hear through the grapevine that local Forest Service types are giving out free, but incorrect, legal advice as to what the Forest Service may be liable for as a result of the shutdown. For example, one Contracting Officer has indicated, verbally, that because of the Anti-Deficiency Act, contract holders can't do anything that would incur a cost to the Forest Service during the shutdown.

Such a statement is an extremely simplistic analysis of the law and a good reason why you should never ask the other party to a contract (even if it were Mother Theresa) about your rights under the agreement. A far better (yet still simple) analysis of the Anti-Deficiency Act in this instance is that because Congress has yet to appropriate funds for FY 2014, the Forest Service cannot incur any new obligations for which such appropriated funds are required.

Since neither a Timber Sale nor a Stewardship Contract awarded prior to September 30, 2013 require any FY 2014 funds, the Anti-Deficiency Act does not apply directly. However, FY 2014 funds are necessary to pay Forest Service contract administration personnel after September 30, 2013. Because those funds have not yet been appropriated and Forest Service personnel have not been designated as "essential" (which would have created an exception), the Anti-Deficiency Act does not allow the Forest Service to obligate itself to pay the salary of contract administration personnel after September 30th, i.e., such folk must be furloughed without pay. In the absence of such personnel to oversee contract operations, the Chief ordered the suspension of all Timber Sale and Stewardship Contracts. (FYI, the costs resulting from the suspensions are paid from previous years appropriations and therefore not affected by the Anti-Deficiency Act.)

For more information, contact Alan Saltman [http://www.smithcurrie.com/attorneys-Alan-Saltman.html] at 202-452-2140 or [email protected] [mailto:[email protected]].

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