Use of Stewardship Contracting Is Increasing, but Agency Data Are Incomplete

The agencies awarded increasing numbers of stewardship contracts  during fiscal years 2003 through 2007; however, details about their overall  use of stewardship contracting are incomplete because the agencies did  not begin to collect nationwide data until recently, and even these data are  not complete or consistent across agencies. From fiscal years 2003 through 2007, the number of  stewardship contracts that the agencies awarded increased each year. For other aspects of  stewardship projects, however, reliable data were available only for more  limited periods of time. The agencies did not  begin maintaining nationwide data on stewardship contracting projects  until recently—primarily because of difficulties in adapting their systems  to account for all aspects of stewardship projects. During Fiscal Years 2003 through 2007, the Agencies Awarded Increasing Numbers of Stewardship Contracts

From fiscal years 2003 through 2007, the Forest Service and BLM awarded  a total of 535 stewardship contracts. The Forest Service  collaborated with the local rural fire department as well as with  community members and environmental groups. Accordingly,  the regions require substantial appropriated dollars to supplement the  value of the timber and pay for the necessary services such as hazardous  fuel reduction. BLM officials typically refer to their stewardship contracts as “service  contracts with embedded products.” Because the value of the services  acquired typically exceeds the value of the product sold (as with Forest  Service IRSCs), BLM generally uses fuel reduction or forest management  funds to pay for a portion of the service work. Although BLM’s  stewardship contracting guidance makes an exception to the set-aside  policy in cases where “non-traditional entities (e.g., local governments,  nongovernmental entities, and nonprofit organizations) have expressed an  interest” in a project, BLM contracting officials told us they set aside all  stewardship contracts regardless, because, in their words, “the FAR  trumps BLM guidance.”

	Despite the Benefits of Stewardship Contracting, Challenges Persist, Especially in the Use of Long-Term Multiyear Contracts, for which the Agencies Lack a Strategy

The agencies cited as key benefits of stewardship contracting the ability to  accomplish more work on the ground and to build collaborative  partnerships. For example,  according to the Department of Defense’s acquisition regulation, if a  contract contains a cancellation ceiling in excess of $100 million but the  budget for that contract does not include proposed funding for the costs of  contract cancellation up to that ceiling, then the head of the agency must  provide written notification to the congressional defense committees and  to the Office of Management and Budget before awarding the contract. One element of stewardship contracting has not been widely explored,  however: the authority to enter into 10-year contracts. Although we  frequently heard that this authority is essential in helping develop markets  for timber, woody biomass, and other materials (by allowing the agencies  to provide potential contractors and industry operators more certainty of  supply), the suitability of long-term multiyear stewardship contracts to  encourage investment in infrastructure has yet to be demonstrated. The stakes are further raised by the need for a  potentially sizable up-front obligation of funds to protect both the  contractor’s and the government’s interests. Appendix I: Objectives, Scope, and Methodology

Our objectives were to determine (1) the extent to which, and for what  purposes, federal agencies are using stewardship contracting; (2) what  processes the agencies use in planning, implementing, and monitoring  stewardship projects to manage resources; and (3) what successes and  challenges the agencies have experienced in using stewardship  contracting. Our review was limited to the Forest Service and the Bureau  of Land Management (BLM), the two agencies with stewardship  contracting authority.
Why GAO Did This Study

The Department of Agriculture's Forest Service and the Department of the Interior's Bureau of Land Management (BLM) have stewardship contracting authority, which allows the agencies to trade goods--such as timber--for services (e.g., thinning forests or rangelands) that the agencies would otherwise pay for with appropriated dollars, and to enter into stewardship contracts lasting up to 10 years. The authority is set to expire in 2013. GAO was asked to determine, among other things, (1) the extent to which the agencies are using stewardship contracting and (2) what successes and challenges the agencies have experienced in using it. In doing so, GAO assessed agency data, reviewed project files, and visited projects in numerous locations.

What GAO Found

From fiscal years 2003 through 2007, the Forest Service and BLM awarded a combined total of 535 stewardship contracts, with the number increasing each year--from 38 in fiscal year 2003 to 172 in fiscal year 2007. However, for certain aspects of stewardship contracting, such as the acres involved or the value of the services exchanged for goods, reliable data were not available for the full 5-year fiscal period because neither agency has had a comprehensive database of its stewardship contracting activity since 2003. The agencies did not begin to maintain nationwide stewardship data until recently, primarily because of difficulties in adapting their systems to account for all aspects of stewardship contracting. Further, these data are not complete, and reside in myriad systems, not all of which interface with one another. These deficiencies keep the agencies and Congress from accurately assessing the costs and value of stewardship contracting. The agencies credit stewardship contracting with allowing them to accomplish more work--by allowing them to trade goods for services, thereby extending their budgets for thinning and other services--and spurring collaboration with members of the community and environmental groups. But stewardship contracting has its challenges too, including some resistance to its use (e.g., by contractors unfamiliar with it) and a paucity of markets for the small trees typically removed in stewardship projects. Also, although agency officials view long-term multiyear contracts as crucial to market development, these contracts can involve financial challenges. These contracts are attractive because they offer contractors and industry operators some certainty of supply, enabling them to obtain loans for equipment or processing facilities, which can then spur demand for materials resulting from stewardship projects. But such contracts can require a substantial up-front obligation of funds--to protect the contractor's investment if the government later cancels the contract--that may exceed the budget of a field unit (e.g., a national forest). Also, funding the annual work specified in the contract can force a unit to scale back its other programs if the value of the timber removed is not sufficient to pay for that work. Yet neither agency has developed a strategy for using such contracts, a step that could help field units determine which projects are appropriate for these long-term contracts and how they would be funded.