Timber Sale Contract Defaults: Forest Service Needs to Strengthen Its
Performance Bond and Contract Provisions (Letter Report, 10/28/93,
GAO/RCED-94-5).

The Forest Service has assessed damages totaling about $302 million
against purchasers who defaulted in timber sale contracts between
January 1982 and March 1993.  The Forest Service has collected about $42
million, or 14 percent, of this amount and has determined that about
$136 million is uncollectible for a variety of reasons, such as the
bankruptcy or the death of the purchaser.  Continuing litigation has
been the main reason for the delays in the final disposition of the
remaining $124 million, most of which is owed by 14 timber purchasers.
When many of these defaulted contracts were awarded, the Forest Service
had few safeguards in place to protect the government against losses
from defaults.  Since then, the Forest Service has begun requiring
purchasers to make down payments and has raised the dollar limit on the
performance bond that purchasers must provide.  In addition, the Forest
Service is considering retaining the down payments until the contracts
are substantially complete and clarifying the liability provisions in a
new performance bond--measures that GAO strongly supports.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-94-5
     TITLE:  Timber Sale Contract Defaults: Forest Service Needs to 
             Strengthen Its Performance Bond and Contract Provisions
      DATE:  10/28/93
   SUBJECT:  Timber sales
             Contract termination
             Contractor performance
             National forests
             Government collections
             Damages (legal)
             Debt collection
             Performance bonds
             Bankruptcy
             Litigation

             
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