Free Notice (Other) - District Court of Federal Claims - federal

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS PRECISION PINE & TIMBER, INC., Plaintiff, v. THE UNITED STATES, Defendant. ) ) ) ) ) ) ) ) )

No. 98-720C (Judge George W. Miller)

DEFENDANT'S PROPOSED FINDINGS OF FACT Pursuant to the Court's orders of June 21, 2005, and June 28, 2005, defendant, the United States, respectfully submits the following proposed findings of fact with respect to the claims of plaintiff, Precision Pine & Timber, Inc. ("Precision Pine"). I. ARIZONA LUMBER AND TIMBER ­ AN INDUSTRY IN DECLINE 1. In terms of volume and value, Arizona is a relatively small producer of timber and

lumber. As of 1992, the total timberland in Arizona was approximately 4 million acres. More than two-thirds of that area was designated as National Forest. In terms of volume of available sawtimber, the percentage of public ownership is even higher. Despite the fact that timber and timberland in Arizona are predominately public owned, timber production in the state has been largely from non-Federal sources. Tr. 3428 (Neuberger); DX776. 2. The production of lumber from Arizona sawmills fell in every year from 1988 to

1996, from 447 million board feet ("mmbf") in 1998 to 105 million board feet in 1996. This secular (i.e., non-cyclical) decline in production continued after 1996. By 1998, lumber production in Arizona had fallen to 78 million board feet. Tr. 3330-31 (Neuberger); DX776. 3. Logging restrictions on national forest land have been largely responsible for the

downward trend in lumber production volumes in Arizona. While Federal timber sales in

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Arizona have been limited since the late 1980s, these limitations have become increasingly restrictive over time. For instance, during the 1990's, wildlife restrictions designed to protect the Northern Goshawk and the Mexican Spotted Owl substantially reduced amount of timber put up for sale by the Forest Service. As a result, the amount of timber on national forest land offered for sale declined significantly during the late 1980s and throughout the 1990s. Tr. 3327-28 (Neuberger), 3821 (Harris); DX776; see also Tr. 1111, 1112 (Porter) (acknowledging that the supply of timber in Arizona has been diminishing). 4. Offers of timber on Federal lands in Arizona were approximately 250 million

board feet in 1988, down from more than 300 million board feet in 1984 and 1985. By 1995, the amount of timber offered for sale had fallen below 70 million board feet. Since 1998, Forest Service timber offers have averaged approximately 60 million board feet per year. Tr. 3323-24 (Neuberger); DX776. 5. In terms of the volume of timber cut, amounts have fallen from approximately

280 million board feet in 1988, to approximately 40 million in 1995. Annual harvests have averaged about 30 million board feet per year since 1997. Tr. 3310-12 (Neuberger); DX776. II. PRECISION PINE'S UNSUCCESSFUL STRATEGY OF AGGRESSIVE GROWTH A. 6. Precision Pine Acquires Sawmills And Triples Its Mill Capacity While Arizona timber and lumber markets were largely on the decline throughout

the early and mid-1990s, Precision Pine chose to embark on a substantial expansion of its operations. DX776; DX798. 7. In 1990, Precision Pine was operating a single sawmill in Heber, Arizona with a

putative single-shift capacity of 850 thousand board feet ("mbf") per month. See DX798; Tr. 94, 1433 (Porter); see also Tr. 1074; DX559. At the same time, Precision Pine was operating a

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single planer in Snowflake, Arizona. DX798; Tr. 619 (Porter). 8. Precision Pine purchased a sawmill in Show Low, Arizona prior to June 1991.

Precision Pine did not operate the Show Low sawmill. DX798, Tr. 1484 (Porter). 9. Precision Pine purchased a sawmill in Clay Springs, Arizona prior to June 1991.

Precision Pine operated the Clay Springs sawmill for a short period. The Clay Springs sawmill was closed permanently in the early 1990s. DX798. 10. In December 1991, Precision Pine purchased from Duke City Lumber Company a

sawmill and two planers in Winslow, Arizona. First Joint Stip. ¶¶ 3-4; DX798; Tr. 90, 96 (Porter) (stating also that Precision Pine acquired three dry kilns from Duke City). The putative capacity of the Winslow sawmill is 1150 mbf (lumber tally) per month. Tr. 94, 1432 (Porter); see also Tr. 1074 (Porter). 11. Precision Pine operated the newly-acquired Winslow sawmill in tandem with the

company's sawmill in Heber. See DX559; DX798. Similarly, Precision Pine operated both the newly-acquired planers and its Snowflake planer. DX798; see also DX294 (April 1995 to March 1996 summary). 12. In October 1992, Precision Pine purchased a sawmill in Williams, Arizona from

Grand Canyon Forest Industries. Tr. 106 (Porter); DX798. The Williams sawmill had a capacity of about 1,100 mbf (l.t.) per month. Tr. 106 (Porter). 13. Precision Pine operated the newly-acquired Williams sawmill together with its

sawmills in Winslow and Heber. Tr. 106, 1485 (Porter); DX798. 14. Thus, by late 1992, Precision Pine was operating three sawmills and had more

than tripled its alleged single-shift capacity. DX798; DX559 (identifying sawmills in Heber, Winslow and Williams); Tr. 94, 106, 1074 (Porter) (indicating that these mills had a production

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capacity in excess of 35 million board feet (lumber tally) per year). Likewise, Precision Pine had substantially increased its planing capacity and was operating planers in both Winslow and Snowflake. See DX798. 15. In June 1993, Precision Pine purchased a sawmill in Payson, Arizona from

Kaibab Forest Products Company. Precision Pine did not operate the Payson sawmill. DX798; Tr. 106-08, 1486 (Porter). 16. During 1993, Precision Pine assembled a sawmill in Eagar, Arizona using

equipment from the sawmills it had bought in Show Low and Clay Springs. DX798; Tr. 1855-56 (Porter). The putative capacity of the Eagar sawmill is 850 mbf (l.t.) per month. Tr. 94, 1432 (Porter); see also Tr. 1074 (Porter). 17. In October 1993, Precision Pine opened the Eagar sawmill. At about the same

time, Precision Pine permanently closed its Williams sawmill. DX798; DX559; Tr.106, 1485 (Porter). B. 18. Precision Pine's Acquisition Of Timber For Expanded Mill Operations In order to secure raw material for its three sawmills from increasingly restricted

sources of supply, during the early and mid-1990s, Precision Pine bid on timber and multiproduct sale contracts offered by various sources: the Forest Service; the State of Arizona; Indian tribes; and private landowners. DX776; Tr. 1653, 2037 (Porter). 19. Bidding for timber sale contracts was competitive. Tr. 1278 (Porter). And

Precision Pine's bidding strategy was aggressive as evidenced by the bid premiums that the company was willing to pay over and above minimum bid prices. Tr. 3463 (Neuberger); DX776; see also Tr. 4139 (Harris), 4630-32 (Dils), 4563-65 (Lee); DX554 (writing, during bidding, "[d]on't give Stone anything over here"); DX559 (showing the per mbf payment to the

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Forest Service (i.e., the stumpage fee) was increasing during the 1990s). 20. While Precision Pine's aggressive bidding practices enabled the company to win

many contracts upon which it bid, and to secure some additional timber for its expanded mill operations, it also meant that the company had to pay high prices for timber ­ prices that were likely to be uneconomical. DX776; Tr. 3351-57 (Neuberger). 21. This exposed the company to considerable market risk. This market risk was

especially acute during periods in which lumber prices were depressed because the lower the market prices for lumber products, the greater the number of Precision Pine's contracts that were rendered unprofitable. Tr. 3312-14 (Neuberger); DX776. C. 22. 23. 24. 25. 26. Precision Pine's Sawmill Overcapacity Precision Pine harvested 25,399 mbf (log scale) in 1992. DX559. Precision Pine harvested 23,541 mbf (l.s.) in 1993. DX559. Precision Pine harvested 18,673 mbf (l.s.) in 1994. DX559. Precision Pine harvested 11,011 mbf (l.s.) through late 1995. DX559. Precision Pine never harvested a sufficient volume of timber to run its three

sawmills at their putative 35 million board foot annual capacity. See Tr. 1414-15, 1421-22 (Porter); DX559; see also; 1074 (Porter) (testifying that the annual capacity for Eagar, Heber and Winslow was about 35 mmbf (l.t.)/year). 27. Precision Pine's three sawmill operation was never run at its putative 35 million

board foot capacity. See Tr. 1410, 2144 (Porter); DX802. 28. Despite Precision Pine's aggressive bidding, and despite the fact that Precision

Pine's mills were operating at less than capacity, the volume of timber that Precision Pine had under contract declined steadily during the mid-1990s. DX559.

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29. 30. 31. 32. 33. DX559. 34.

In 1992, Precision Pine had 51,571 mbf (l.s.) timber under contract. DX559. In 1993, Precision Pine had 51,097 mbf (l.s.) timber under contract. DX559. In 1994, Precision Pine had 49,647 mbf (l.s.) timber under contract. DX559. In 1995, Precision Pine had 40,786 mbf (l.s.) timber under contract. DX559. In December 1995, Precision Pine had 34,288 mbf (l.s.) timber under contract.

Thus, Precision Pine had 50 percent more timber under contract in 1992 ­ the

year in which Precision Pine opened a third sawmill ­ than at the close of 1995. DX559. 35. In March 1995, Precision Pine began reducing operations by closing its

Snowflake planer ­ a planer that Precision Pine had operated continuously since the 1980s. DX798. 36. In April 1995, recognizing that additional downsizing would be necessary, Tri-

Star Logging ­ Precision Pine's long-time logging contractor for the Winslow and Heber sawmills, Tr. 1107-09 (Porter) ­ sought and obtained an agreement that it would perform all logging "for the remaining two mills" if Precision Pine is "forced to shut down another sawmill." DX463. 37. At about the same time, Precision Pine vice president, Lewis Tenney, suggested

that company would have to close its Eagar sawmill. DX85 (stating that the renewed availability of the Hay contract would "enable the small mill [in Eagar] to keep running and save jobs for a while longer") (emphasis added); see also DX81; DX82. Proposed Finding Of Fact Withdrawn. D. 38. Precision Pine Cancels Timber Contracts And Defers Harvesting By July 1995, lumber prices had fallen substantially from where they stood in

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1993 and 1994, the time period when Precision Pine was bidding on the timber it currently had under contract. See PX305; DX776 (exhibit 3). 39. As a result, even with an outlet for roundwood from its multi-product sales,1

Precision Pine was unable to profitably harvest more than a third of the timber it had under contract. See, e.g., DX523 (Jersey Horse) (1,700 mbf); DX526 (Salt) (2,120 mbf); DX528 (Campbell) (2,280 mbf); DX535 (U-Bar) (1,900 mbf); DX540 (Merritt) (700 mbf); DX542 (Hualapai) (790 mbf); DX543 (Dutch Joe) (750 mbf); DX544 (Park) (900 mbf); DX545 (Barber) (2,275 mbf). 40. To address this situation, Precision Pine (1) took advantage of opportunities to

cancel overpriced contracts, (2) operated its mills at a reduced level (substantially below their alleged capacities), and (3) deferred the harvesting of less profitable contracts. See, e.g., PX106; DX559; DX505; DX802; Tr. 1063-64 (Porter). 41. In October 1995, Precision Pine used the opportunity provided by the MSO

suspensions to negotiate the cancellation of its two highest priced (and biggest money losing) contracts ­ Barber and Campbell. PX106 ¶ 4; Tr. 1848-49 (Porter). The cancellation of these contracts reduced by about 5 million board feet the timber Precision Pine had under contract during the period of the MSO suspensions, DX528; DX545, and eliminated two (of three) principal sources of large diameter logs, see PX99 (identifying Barber, Campbell and Hay as having "large diameter trees" needed by Precision Pine); Tr. 1849 (Porter). However, it allowed Precision Pine to avoid performing two contracts upon which Precision Pine expected to lose

As discussed below, by September 1995, Stone Container Corporation was unwilling to purchase roundwood coming from Precision Pine's contracts. See paragraphs 5556, infra. This lack of an outlet for roundwood caused still more contracts to be unprofitable during the period of the MSO suspensions. See paragraphs 584-92, infra.

1

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over $800,000. See DX545 (Barber) (loss of $503,646); DX528 (Campbell) (loss of $342,839). 42. Similarly, in September 1996, Precision Pine negotiated a "friendly default" with

the State of Arizona on the Park multi-product sale. See DX546; DX699; DX7093; DX71704; Tr. 1841-42 (Porter). The default reduced the volume of timber Precision Pine had under contract during the period of the MSO suspension by nearly one million board feet, see DX544 (990 mbf), but allowed Precision Pine to avoid performing another contract on which it expected to lose money for a relatively small penalty. See DX546 (requiring payment of a $8,190 penalty); DX544 (projecting a loss, without accounting for roundwood losses, of $45,151). 43. During 1994, a year that Precision Pine's operations were not affected by Forest

Service suspensions, Precision Pine chose to operate its sawmills at 70 percent of their alleged annual capacity. See DX559; Tr. 1419-22 (Porter). 44. Similarly, prior to the MSO suspensions in 1995, Precision Pine chose to operate

its sawmills at less than their alleged capacity. DX802 (showing that Precision Pine's mills operated below their supposed capacity from April to September 1995); DX505 (showing that none of Precision Pine's mills were operating at capacity in April 1995); see also Tr.1425-29 (Porter) (Precision Pine's sawmills would have run through all logs harvested by late May had they been operating at capacity in 1995); DX559 (showing timber harvests of 11,011 mbf (l.s.)). 45. In subsequent years, Precision Pine continued to run its mills at less than capacity

and, additionally, never operated more than two mills at any given time. See Tr. 1080-82 (Porter); DX798. 46. In 1994 and prior to the MSO suspension in 1995, Precision Pine deferred

harvesting numerous timber and multi-product sales that were under contract and available. See, e.g., DX3 (cutting no timber on O.D. Ridge in 1995); DX128 (cutting no timber on Jersey Horse

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in 1994 or 1995); DX152 (cutting no timber on Salt in 1994 or 1995); DX251 (cutting no timber on Hutch-Boondock in 1994 or 1995); DX291 (cutting no timber on Mud in 1994 or 1995); DX320 (cutting no timber on Saginaw-Kennedy in 1994 or 1995); DX361 (cutting no timber on Brann in 1994 or 1995); DX437 (cutting no timber on Monument in 1994 or 1995); Tr. 1063-64 (Porter) (admitting Precision Pine deferred harvesting ­ and in fact never harvested ­ timber from the Salt, Monument and Saginaw-Kennedy contracts). 47. Precision Pine continued to defer harvesting on available timber under contract

during and after the period of the MSO suspensions. See, e.g., DX791; DX800; Tr. 1063-64 (Porter). E. 48. Precision Pine Loses Its Outlet For Roundwood In July 1995, Stone Container Corporation a/k/a Stone Forest Industries ("Stone")

inquired about purchasing Precision Pine. Tr. 1566 (Porter), 2948-49 (Tenney). 49. Stone was a competitor of Precision Pine. Tr. 1283 (Porter), 1741 (Reidhead)

(Precision Pine competed "very strongly" with Stone); DX554 ("Don't give Stone anything over here"). 50. Precision Pine's vice president, Lewis Tenney, handled negotiations with Stone.

Tr. 1566-67 (Porter), 2948-52, 3035 (Tenney). 51. Precision Pine's president, Lorin Porter, was less interested in selling the

company to Stone than was Mr. Tenney. Tr. 1568 (Porter), 2949, 3033 (Tenney). 52. In order to provide Mr. Tenney information on the value of timber under contract,

on July 17, 1995, Mr. Porter prepared a set of profit projections addressing each of Precision Pine's timber and multi-product sale contracts. Tr. 1568, 2063 (Porter); DX519; DX521-45. 53. Mr. Porter's profit projections showed the anticipated gross profit for the sale of

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lumber and by-products. See Tr. 1568, 1570 (Porter); DX519; DX521-45. 54. The profit projections did not address the roundwood component of multi-product

sales and did not provide a net profit figure, i.e., they did not deduct general and administrative overhead expenses. See Tr. 1571, 2137 (Porter); DX519; DX521-45. 55. During the course of negotiations with Stone, Precision Pine provided detailed

information about its timber sale contracts (e.g., the volume of timber and roundwood remaining under contract, sale area maps, the periodic payment dates) and allowed Stone representatives to tour Precision Pine's lumber manufacturing facilities. Tr. 1567 (Porter), 1948-52, 3033, 3035 (Tenney); DX458; DX473. 56. Based in part on Mr. Porter's profit projections, Mr. Tenney offered to sell the

Precision Pine to Stone for the sum of $10 million. Tr. 2950-51, 3033-34, 3043-44 (Tenney). 57. Stone did not make a counteroffer and a sale of Precision Pine to Stone was never

consummated. Tr. 3034, 3043 (Tenney). 58. As of August 1995, as Stone had learned during negotiations, the total volume of

roundwood remaining to be harvested on the contracts at issue was 19,306 hundred cubic feet ("ccf"). See Third Joint Stip. ¶¶ 2, 4, 6, 9, 11, 13, 15, 17, 19, 21 & 23; see also DX473. 59. Stone was the only substantial purchaser of roundwood from Precision Pine's

multi-product sale contracts. See Tr. DX566; DX570; DX800. 60. On occasions when Stone would purchase roundwood from Precision Pine,

Precision Pine and Stone would execute a contract that established the sale price, the quantity of roundwood that Stone would accept, and the multi-product sale contract from which the roundwood would be harvested. See DX457; DX470; DX471; PX223. 61. Precision Pine was not usually able to cover the roundwood stumpage cost owed

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to the Forest Service. Tr. 1731 (Reidhead). 62. As of August 25, 1995, no contracts between Precision Pine and Stone required

Stone to purchase roundwood harvested from any of the contracts at issue. See DX457; DX470; DX471; PX223. 63. In September 1995, shortly after the MSO suspensions had begun, Mr. Tenney

sent a letter to Stone stating that he had recently heard that Stone was interested in purchasing roundwood. DX474. Mr. Tenney expressed "surprise" that no one at Stone had contacted Precision Pine. Id. He offered to sell Stone 1,000 cords of roundwood from the Park timber sale ­ a multi-product sale that had been awarded to Precision Pine by the State of Arizona. Id. 64. On October 3, 1995, Stone rejected Mr. Tenney's offer to purchase roundwood

from Precision Pine. Stone explained that it was "not looking to make any new commitments" for roundwood during the 1995-96 season. DX475. 65. For the next two years, Stone continued to refuse to purchase roundwood from

Precision Pine's multi-product sale contracts. See DX263 (Oct. 31, 1995); DX242 (Nov. 6, 1995); DX243 (Nov. 14, 1995); DX667 (Nov. 30, 1995); DX375 (Jan. 26, 1996); DX349 (Jan. 30, 1996); DX306 (Apr. 9, 1996); DX555 (June 6, 1996); DX309 (July 12, 1996); DX313 (Sept. 26, 1996); DX455 (Mar. 7, 1997); DX454 (Mar. 22, 1996); DX279DX706 (Jan. 22, 1997); DX41 (Apr. 28, 1997); DX21 (May 12, 1997); DX403 (June 6, 1997); DX339 (June 20, 1997); DX392 (June 20, 1997); DX280 (July 1, 1997); DX47 (Aug. 23, 1997); DX461 (Aug. 29, 1997); see also Tr. 1741 (Reidhead) (Stone would refuse to buy roundwood because Precision Pine would often compete "very strongly" with Stone and "Stone would get upset"); Tr. 3857-61, 3864 (Harris) (during 1996 Stone refused to take roundwood from Art Daley upon learning that Mr. Daley was obtaining the roundwood from a Precision Pine sale); Tr. 1942

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(Porter) (Precision Pine did not enter into any contracts with Stone concerning roundwood during the period of the MSO suspensions); Tr. 682-83 (Porter) (Stone did not consistently buy roundwood from Precision Pine or from Tri-Star Logging); Tr. 1642, 1648-49, 1956, 1969-72, 2015 (Porter) (Precision Pine had difficulty moving roundwood in 1996); Tr. 1947-48 (Porter) (Precision Pine decked roundwood at its Eagar mill in 1997 as it had no outlet for roundwood). 66. Because Stone declined to accept roundwood from Precision Pine, on numerous

occasions during and after the period of the MSO suspensions, Precision Pine informed the Forest Service that it had no outlet for roundwood. See, e.g., DX263 (Oct. 31, 1995) ("PP&T does not have an outlet for pulpwood at this time"); DX306 (Apr. 9, 1996) ("we have no outlet for pulpwood"); DX555 (June 6, 1996) ("Stone Container has in the recent past declined to purchase pulpwood from PP&T"); DX309 (July 12, 1996) (stating that Stone still remained unavailable as an "outlet for our roundwood"); DX279DX706 (Jan. 22, 1997) (noting continuing uncertainty about "the availability of a market for our pulpwood"); DX403 (June 6, 1997) ("Stone is not accepting any pulpwood at this time"); DX280 (July 1, 1997) (citing current "problems with marketing the smaller size material"); DX47 (Aug. 21, 1997) (noting "Stone's unwillingness to buy . . . roundwood from us"). 67. For the fiscal year ending March 31, 1996 ("FYE 1996"), Precision Pine's

financial statement shows no revenue from roundwood sales. PX248; DX777 (page 6a1). 68. For the fiscal year ending March 31, 1997 ("FYE 1997"), Precision Pine's

financial statement shows no revenue from roundwood sales. PX248; DX777 (page 6c1). 69. In August 1997, Precision Pine transferred the Kettle multi-product sale contract

to Stone. PX117. Precision Pine informed the Forest Service that it was transferring the contract because of "Stone's unwillingness to buy the roundwood from us." DX47; Tr. 1964-65 (Porter).

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Stone obtained roundwood as part of its acquisition of the Kettle multi-product sale. See PX117; DX553 (accepting roundwood from the Kettle sale that Precision Pine had cut and decked (i.e., stacked) at the Eagar mill). 70. In November 1997, Stone and Precision Pine executed a contract selling

roundwood from the Mud multi-product sale to Stone. This was the only roundwood contract between Precision Pine and Stone that was entered into after August 25, 1995. Tr. 2121-22 (Porter); PX223; see also Tr. 1942-43 (Porter) (Precision Pine did not enter into any contracts with Stone concerning roundwood during the period of the MSO suspensions). 71. On February 12, 1998, Stone announced that it intended to stop purchasing

roundwood as Stone would be using only recycled material at its paper mill. See Tr. 991-92 (Porter); PX126. F. 72. Lumber Prices During The Period Of The MSO Suspensions The price for wood products hit bottom during middle of the MSO suspensions.

PX305; DX776 (exhibit 3); Tr. 3311 (Neuberger). 73. Ponderosa Pine prices were better both before the suspensions in 1993 and 1994

and after the suspensions in 1997. PX305 (showing that WWPA's annual average lumber price index for Inland Rocky Mountain Ponderosa Pine was: $460.50 in 1993; $473.23 in 1994; $423.32 in 1995; $426.38 in 1996; and $471.10 in 1997); see also DX776 (exhibit 3). 74. Lumber prices for Ponderosa Pine remained below pre-suspension levels until late

1996. PX305; see also DX776 (exhibit 3). 75. Due to the drastic downturn in lumber prices in 1995 and 1996, in March 1996,

the Forest Service offered Precision Pine contract term adjustments pursuant to contract clause CT 8.212. This gave Precision Pine the option of requesting a contract term adjustment of four

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months for each of its contracts. See DX271; DX272. 76. Precision Pine requested and obtained market-related term adjustments on several

contracts. See DX2; DX239; DX436. G. 77. Forest Service Fire Closures During The Summer Of 1996 The summer of 1996 was an unusually severe fire season. Tr. 3900-01, 4165

(Harris); see also Tr. 3871, 4499, 4533 (Harris). As a result, the Forest Service was forced to implement progressively more stringent restrictions on timber harvesting operations in the Apache-Sitgreaves, Coconino, Kaibab, and Tonto National Forests. See, e.g., Tr. 3900-01, 4165-66 (Harris) (explaining that the Forest Service took the extraordinary step of closing entire National Forests to the public). 78. On or about May 6, 1996, the Forest Service implemented Industrial Fire Plan D

on the Apache-Sitgreaves, Coconino, Kaibab, and Tonto National Forests timber. E.g., Tr. 390001, 4165-66, 4533 (Harris); PX113; DX118; DX275; DX277; DX308; DX333; DX378; DX380; see also Tr. 2095-96 (Porter) (discussing fire closures on the Apache-Sitgreaves and Kaibab National Forests). This required the suspension of all timber harvesting operations. Tr. 1506 (Porter); Tr. 3900 (Harris). 79. Conditions on the ground improved and Industrial Fire Plan D was lifted on

July 9, 1996, at which time timber harvesting operations were permitted to resume. See, e.g., Tr. 4123, 4165 (Harris), 2096 (Porter). 80. Precision Pine could have requested and received contract term adjustments for

time lost as a result of the fire closures but for the MSO suspensions. Tr. 3905-06, 4123-24 (Harris), 4555-56 (Lee), 1521-22 (Porter); DX277.

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H.

The MSO Suspensions Are Lifted And Precision Pine Elects To Continue The Contracts When the MSO suspensions were lifted, Precision Pine elected to continue ­ not

81.

cancel ­ its contracts. Precision Pine chose instead to reaffirm its contractual obligations, including the obligation to harvest all sawtimber and roundwood. E.g., Precision Pine & Timber, Inc. v. United States, 62 Fed. Cl. 635, 651 (2004); First Joint Stip. ¶ 34; Tr. 1479 (Porter). 1. 82. Precision Pine's Post-Suspension Timber Harvesting

During the post-suspension period (i.e., from December 4, 1996 to January 31,

2001), Precision Pine cut and removed approximately 45 percent of the sawtimber available from the Brookbank, Hay, Jersey Horse, Kettle, Manaco, Monument, Mud, O.D. Ridge, Saginaw-Kennedy, Salt and U-Bar contracts. DX832. 83. DX791. 84. Precision Pine could have earned more by fully harvesting the contracts during Precision Pine did not cut the remainder for various "business reasons." DX800;

the post-suspension period than it claims it would have earned during the period of the MSO suspensions. See DX834 (showing a claimed revenue for Ponderosa Pine products of $666.01 per mbf (l.t.) during the period of the MSO suspensions, and an actual revenue of $700.71 per mbf (l.t.) obtained in the post-suspension period). 2. 85. Precision Pine's Post-Suspension Sawmill Operations

Before and after the MSO suspensions, Precision Pine's sawmills were

periodically closed for days or weeks due to holidays, maintenance, log shortages or equipment breakdown. See DX798; Tr. 2102-03, 2140 (Porter). 86. Precision Pine closed the Heber sawmill in September 1995. The Heber sawmill

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was reopened by Precision Pine in November 1995. DX798. 87. Precision Pine closed the Heber sawmill in June 1996. The Heber sawmill was

reopened by Precision Pine in October 1997. DX798. 88. Precision Pine closed the Eagar sawmill in December 1995. DX798. The Eagar

sawmill was reopened by Precision Pine in February 1997. DX96-97DX97. 89. Precision Pine closed the Eagar sawmill on July 30, 1997 due to a lack of logs

resulting from the Forest Guardians suspension and the impending sale of the Kettle contract to Stone. See Tr. 1255, 1258 (Porter); PX117 (sale to Stone dated August 15, 1997). The Eagar mill was never reopened. Tr. 1255 (stipulation of counsel); First Joint Stip. ¶ 7. 90. The Winslow sawmill was severely damaged by fire, and as a result permanently

closed, on September 17, 1998. First Joint Stip. ¶ 4. 91. Precision Pine did not run its sawmills at their alleged annual capacity of

approximately 35 mmbf in 1997. Tr. 1074, 1080 (Porter). 92. Precision Pine did not run its sawmills at their alleged annual capacity of

approximately 35 mmbf in 1998. Tr. 1074, 1080-82 (Porter). I. 93. Payment Of Claims Regarding The MSO Suspensions Between August 15, 1997, and November 17, 1997, Precision Pine sent to the

Forest Service claims letters seeking compensation as a result of the MSO suspensions, which were submitted pursuant to the Contract Disputes Act ("CDA") and certified by Mr. Porter. PX194; PX196; PX198; PX200; PX202; PX204; PX206; PX208; PX210; PX212; PX214; PX216; PX218; PX220. 94. Between November 28, 1997, and March 16, 1998, Precision Pine received final

decisions from Forest Service contracting officers that granted in part, and denied in part, the

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claims that had been submitted. PX195; PX197; PX199; PX201; PX203; PX205; PX207; PX209; PX211; PX213; PX215; PX217; PX219; PX221. Precision Pine was awarded, and the Forest Service paid, total compensation in the amount of $16,278.85 in connection with the claims. PX195; PX197; PX199; PX201; PX203; PX205; PX207; PX209; PX211; PX213; PX215; PX217; PX219; PX221; see also PX131 (exhibit 2). III. THE CONTRACTS A. 95. Awarding Forest Service Timber And Multi-Product Sale Contracts The Forest Service manages National Forest lands for multiple uses. The

harvesting of timber is only one of many such uses. Tr. 3749-53 (Harris). 96. When the Forest Service concludes that conducting a timber sale would be

consistent with its overall strategy for managing a National Forest, the Forest Service establishes a sale area and determines parameters for harvesting that are consistent with environmental requirements and management objectives. Tr. 3753-55 (Harris). 97. One of the steps in preparing a timber sale to be offered to the public is surveying

the sale area to determine the volume, size, and quality of timber that is present. To do this, the Forest Service conducts a "cruise" of trees in the cutting units of the proposed sale area. Tr. 3755-58 (Harris). 98. A cruise assesses the total volume, the average diameter at breast height (dbh),

and the percent clear faces of the sawtimber being sold. Forest Service cruises are specifically designed for the sale area under consideration and use statistical principles to reach an error of less than 10 percent with a 95 percent confidence level. Tr. 3755-58, 3777-78 (Harris); Tr. 4323-24 (Munn). 99. From the standpoint of potential bidders, a timber sale commences when the

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Forest Service issues an advertisement and prospectus that describe the timber to be harvested, the estimated volume of sawtimber and (for multi-product sales) roundwood being sold, and the dates bids must be submitted. Tr. 3767 (Harris). Included in the advertisement is a minimum bid price. Tr. 3766 (Harris). See generally Seaboard Lumber Co. v. United States, 48 Fed. Cl. 814, 816 (2001), aff'd, 308 F.3d 1283 (Fed. Cir. 2002). 100. A prospectus and sample contract are made available to interested bidders.

Tr. 3766 (Harris). The prospectus identifies the length of time the contractor will be allowed to perform the contract, establishes the contract's operating season, specifies the timing of contractor payments for the sawtimber, and, for multi-product sales, states the fixed price for the sale's roundwood component. Tr. 3766 (Harris). Interested parties are invited to examine the site and available timber prior to bidding. Tr. 3768-69, 4183 (Harris). See generally Seaboard Lumber, 48 Fed. Cl. at 816. 101. Forest Service contracts generally define "sawtimber" as trees larger than 9

inches dbh. "Roundwood" refers to smaller trees that are between 5.0 and 8.9 inches dbh. See, e.g., PX169-79. 102. The price of the roundwood component of a multi-product sale is fixed and is

administratively-established by the Forest Service. Tr. 3781 (Harris). The bid price affects only the stumpage price paid for sawtimber component of the sale. See, e.g., PX169-79. 103. Forest Service contracts require the removal of all "included timber" ­ both

roundwood and sawtimber ­ and, therefore, a prospective bidder must take into account the fixed roundwood cost in determining what to bid for the sawtimber component of a multi-product sale. See, e.g., PX169-79; Tr. 1827, 2025 (Porter). 104. Forest Service timber sale contracts and multi-product sale contracts are generally

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competitively bid and awarded to the highest bidder. First Joint Stip. ¶ 10; Tr. 1286 (Porter). 105. Forest Service timber and multi-product sales frequently are awarded to

purchasers who do not own a sawmill or planer, and who not to have access to such manufacturing facilities. Such purchasers are fully capable of performing the logging and hauling required by Forest Service timber sale contracts. Tr. 1762-65 (Reidhead), 2920-21 (Matson), 3116-17 (Lewis), 3770 (Harris). 106. Tri-Star Logging, which has never owned or operated a sawmill or a planer, bid

on, was awarded, and performed several Forest Service timber sale contracts. Tr. 1762-63, 1765 (Reidhead). 107. Similarly, Zellner Firewood bid on, was awarded, and performed Forest Service

multi-product sale contracts. Zellner did not own or operate a sawmill and ordinarily sold the logs obtained from Forest Service sales as firewood. Tr. 1651 (Porter). B. 108. The Contracts At Issue This action concerns 14 contracts: (1) the O.D. Ridge timber sale; (2) the Kettle

multi-product sale; (3) the Hay timber sale; (4) the Brookbank multi-product sale; (5) the Jersey Horse timber sale; (6) the Salt multi-product sale; (7) the Manaco multi-product sale; (8) the St. Joe timber sale; (9) the Hutch-Boondock multi-product sale; (10) the Mud multiproduct sale; (11) the Saginaw-Kennedy multi-product sale; (12) the Brann multi-product sale; (13) the U-Bar timber sale; and (14) the Monument multi-product sale. Precision Pine & Timber, Inc. v. United States, 50 Fed. Cl. 35, 38 (2001); see also PX169-79; DX211; DX238; DX342. 109. The contracts are spread across four National Forests: (1) the Apache-Sitgreaves

National Forest; (2) the Coconino National Forest; (3) the Kaibab National Forest; and (4) the

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Tonto National Forest. See PX169-79; DX211; DX238; DX342. 110. The contracts each establish a normal operating season in which harvesting

operations are to be performed. See PX169-79; DX211; DX238; DX342; Tr. 3800-01 (Harris) (discussing clause AT17). 111. The contracts require the purchaser to submit to the Forest Service an annual

operating schedule. The contracts also require the purchaser to meet with the Forest Service prior to commencing or restarting harvesting operations to discuss their operating plan, as well as issues unique to the sale and sale area. See PX169-79; DX211; DX238; DX342; Tr. 3808-09 (Harris) (discussing clause BT6.31). 112. Each contract requires the purchaser to cut and remove all sawtimber and (for

multi-product sales) roundwood by the contract's termination date. Each contract prescribes the manner of conducting logging and hauling operations, as well as land restoration work. See PX169-79; DX211; DX238; DX342; Tr. 3803, 3805-07, 3831-32 (Harris). 113. Each contract establishes a pricing mechanism for sawtimber and a fixed price for

roundwood. The price for sawtimber is frequently based upon the Inland Rocky Mountain Ponderosa Pine index published by the Western Wood Products Association. See PX169-79; DX211; DX238; DX342; First Joint Stip. ¶ 32. 114. Payment for timber and roundwood occurs when the logs are cut and removed

from the sale area. However, each Forest Service contract also contains a midpoint payment date that requires an initial payment even if no work on the contract has occurred. See PX169-79; DX211; DX238; DX342; Tr. 4150-52 (Harris). 115. The contracts require the purchaser to make a down payment and to maintain

payment and performance bonds. See PX169-79; DX211; DX238; DX342.

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116.

The contracts each contain a sale area map. The sale area for each contract is

divided into payment units. Payment units are further subdivided into cutting units. See PX16979; DX211; DX238; DX342; Tr 3799, 4168-69 (Harris). 117. At any given time, operations can occur upon only three payment units. Only

when all work on a payment unit (i.e., all cutting and hauling of timber and roundwood, and all land restoration work) is completed may the next payment unit be opened and work commence. See PX169-79; DX211; DX238; DX342; Tr. 3802, 3830-31 (Harris). 118. Forest Service contracts do not require the purchaser to process logs from the sale

at its sawmill or at any sawmill whatsoever. See PX169-79; DX211; DX238; DX342; Tr. 3770 (Harris), 1541-43 (Porter), 1762-65 (Reidhead), 3116-18 (Lewis). 119. Once the purchaser has cut, removed and paid for the logs, subject only to

statutory and regulatory constrains such as the statutory prohibition on exporting unprocessed logs from Federal lands, the purchaser is free to put harvested logs to any use it chooses. See PX169-79; DX211; DX238; DX342; Tr. 4151-52 (Harris), Tr. 2920-21 (Matson). 120. Precision Pine took advantage of the flexibility afforded by its Forest Service

contracts. At times, Precision Pine milled logs and planed and sold the resulting lumber. At other times, logs from Forest Service sales were (1) milled and sold as rough cut (unplaned) lumber products, (2) sold to third parties for use in the other parties' milling or manufacturing operations, (3) sold for use as pulpwood, (4) sold as firewood, (5) sold for resale as vigas or firewood, and (6) stacked and left unused. E.g., DX468-71DX47; DX457; DX470; DX553; DX795PX182; Tr. 1652 (Porter). 1. 121. The Brann Multi-Product Sale Contract

Brann was a multi-product sale. As a multi-product sale, the Brann contract

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contained both sawtimber and roundwood components. See, e.g., DX342. 122. The Brann contract was sold on a ccf basis, that is, volumes were measured by the

Forest Service in ccf. The volume of "included timber" on the Brann contract was 1,827 ccf sawtimber and 1,812 ccf roundwood. DX342 (AT2). 123. The sawtimber component of the Brann contract had an average dbh of 12.2

inches and 9.0 percent grade. PX13. 124. The contract-specific ccf-to-mbf conversion factor for the sawtimber component

of the Brann contract was 0.5000. PX13. 125. The Brann contract's normal operating season ran from April 15 to December 31.

DX342 (clause AT17). 126. The Brann contract contained additional restrictions that further limited timber

harvesting as a result of endangered, threatened and sensitive species. See DX342 (clause CT6.25). 127. The Brann contract was awarded to Precision Pine on September 29, 1994. First

Joint Stip. ¶ 20. 128. Precision Pine did not inform the Forest Service of any special circumstances,

plans, or considerations relating to the Brann contract at or before its award. Tr. 1856-57 (Porter). 129. Stip. ¶ 29. 130. As of August 25, 1995, the volume remaining to be cut and removed from the The Forest Service suspended the Brann contract on August 25, 1995. First Joint

Brann contract sale area was 1,827 ccf (or 914 mbf (l.s.)) sawtimber and 1,812 ccf roundwood. DX361; PX13.

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131.

The Forest Service lifted the suspension and, subject to the terms and conditions

of the contract, made Brann available for harvesting by Precision Pine on October 18, 1995. First Joint Stip. ¶ 30; Precision Pine, 50 Fed. Cl. at 47 & n.18; see also PX106 (paragraph 3(m)); Tr. 3858-59 (Harris). 132. Precision Pine requested and obtained a contract term adjustment as a result of the

suspension of the Brann contract, which provided an adjustment for days lost during the contract's normal operating season. First Joint Stip. ¶ 34. 133. Precision Pine partially harvested the Brann contract beginning in January 1996.

Tr. 3849-56 (Harris); DX347; DX348; DX361. 134. Precision Pine stopped harvesting the Brann contract in February 1996. Tr. 3869

(Harris); see also DX361. Precision Pine informed the Forest Service that it was leaving the Brann contract so that it could harvest the C-12 timber sale on the Hualapai Indian Reservation. Tr. 3869 (Harris); DX800 at 2. 135. Precision Pine's logger ­ Tri-Star Logging ­ had sufficient capacity to log both

the Hualapai and Brann contracts at the same time. See Tr. 1743-44, 1755 (Reidhead). 136. Stone subsequently refused to accept roundwood that a small third party operator

­ Art Daley ­ had removed from the Brann sale. Stone informed Mr. Daley, who subsequently informed Mr. Porter, that Stone would not take roundwood, directly or indirectly, from Precision Pine. Tr. 3861, 3864, 3867 (Harris); DX454. 137. During the period when other contracts remained suspended (i.e., from

October 19, 1995 to December 4, 1996), Precision Pine did not complete harvesting the Brann contract. Tr. 1469 (Porter), 3872 (Harris). As of December 1996, only 57 percent of available sawtimber and 14 percent of available roundwood had been cut and removed by Precision Pine.

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Tr. 1456, 1459-60 (Porter); DX360; DX361; DX552. 138. Although the contract was subsequently available, Precision Pine never resumed

work or completed timber harvesting upon the Brann contract. Tr. 3872 (Harris); DX361. 139. The Forest Service terminated the Brann contract as a result of Precision Pine's

default on January 9, 2001. Precision Pine & Timber, Inc. v. United States, 62 Fed. Cl. 635, 638 (2004) (case no. 02-131). 140. Pursuant to CT 6.01, the Forest Service paid Precision Pine $44.65 in connection

with the suspension of the Brann contract. See PX211; PX131 (exhibit 2). 2. 141. The Brookbank Multi-Product Sale Contract

Brookbank was a multi-product sale. As a multi-product sale, the Brookbank

contract contained both sawtimber and roundwood components. See, e.g., PX172. 142. The Brookbank contract was sold on a ccf basis, that is, volumes were measured

by the Forest Service in ccf. The volume of "included timber" on the Brookbank contract was 4,393 ccf sawtimber and 5,992 ccf roundwood. PX172 (AT2). 143. The sawtimber component of the Brookbank contract had an average dbh of 12.6

inches and 22.9 percent grade. PX4; DX820; see also Tr. 1366-67 (Porter) (stating agreement with the Brookbank appraisal). 144. The contract-specific ccf-to-mbf conversion factor for the sawtimber component

of the Brookbank contract was 0.4780. PX4. 145. The Brookbank contract's normal operating season ran from April 15 to

November 15. PX172 (clause AT17); DX800 at 5. 146. The Brookbank contract was awarded to Precision Pine on April 13, 1995. First

Joint Stip. ¶ 22.

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147.

Precision Pine did not inform the Forest Service of any special circumstances,

plans, or considerations relating to the Brookbank contract at or before its award. Tr. 1856-57 (Porter). 148. The Forest Service suspended the Brookbank contract on August 25, 1995. First

Joint Stip. ¶ 29. 149. As of August 25, 1995, the volume remaining to be cut and removed from the

Brookbank contract sale area was 2,711 ccf (or 1,296 mbf (l.s.)) sawtimber and 5,347 ccf roundwood. Third Joint Stip. ¶¶ 10-11; PX4. 150. The suspension of the Brookbank contract was lifted on December 4, 1995. First

Joint Stip. ¶ 31; Precision Pine, 50 Fed. Cl. at 39, 70; DX 800 at 6. 151. Precision Pine requested and obtained a contract term adjustment as a result of the

suspension of the Brookbank contract, which provided an adjustment for days lost during the contract's normal operating season. First Joint Stip. ¶ 34. 152. DX800 at 6. 153. Precision Pine's logger ­ Tri-Star Logging ­ had sufficient capacity to log the The Brookbank contract was unaffected by the Forest Guardians suspension. See

Brookbank contract in 1997 or in subsequent years. See Tr. 1743-44, 1755 (Reidhead). 154. Precision Pine chose not to commence post-suspension harvesting upon the

Brookbank contract until November 1997. DX109; DX800 at 6-7; DX791 (describing Precision Pine's decision as based upon "business reasons"). 155. 156. Precision Pine never completed harvesting the Brookbank contract. DX109. The Forest Service terminated the Brookbank contract as a result of Precision

Pine's default on January 9, 2001. Precision Pine & Timber, Inc. v. United States, 62 Fed. Cl.

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635, 638 (2004) (case no. 02-131). 157. Pursuant to CT 6.01, the Forest Service paid Precision Pine $2,565.89 in

connection with the suspension of the Brookbank contract. See PX197; PX131 (exhibit 2). 3. 158. 159. The Hay Timber Sale Contract

Hay was a not a multi-product sale. See, e.g., PX169. The Hay contract was a "scaled" sale, that is, the Forest Service measured the

volume of logs removed by Precision Pine from the sale area. Charges to Precision Pine were based upon the actual log volume measured by the Forest Service. Tr. 4135, 4151-52 (Harris); PX169; PX265. 160. The sawtimber on the Hay contract had an average dbh of 17.2 inches and 20.6

percent grade. PX1; DX820. 161. The Hay contract's normal operating season ran from April 15 to November 30.

PX169 (clause AT17); DX 800 at 9. 162. The Hay contract contained additional restrictions that further limited timber

harvesting as a result of endangered, threatened and sensitive species. Specifically, logging on cutting units 1-6, 9-15, 19-21, 23-25, 33, 36 and 41 could only take place between September 1 and November 30. Logging on cutting unit 7 could only take place between June 30 and November 30. See PX169 (clause CT6.25); DX800 at 9. 163. Unlike the other contracts at issue, the Hay contract did not contain clause

CT 6.01. PX169; Tr. 1878 (Porter). 164. The Hay contract originally was awarded to Reidhead Lumber Company, Inc., on

January 17, 1990. First Joint Stip. ¶ 24. The Hay contract was transferred to Precision Pine by contract modification on June 24, 1991. Id. ¶25.

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165.

Precision Pine did not inform the Forest Service of any special circumstances,

plans, or considerations relating to the Hay contract at or before its award in January 1990. Tr. 1852 (Porter). 166. Precision Pine did not inform the Forest Service of any special circumstances,

plans, or considerations relating to the Hay contract at or before its transfer to Precision Pine in June 1991. Tr. 1855 (Porter). 167. Precision Pine first notified the Forest Service that it intended to haul logs from

the Hay sale to Precision Pine's sawmill in Eagar, Arizona on November 23, 1994. Tr. 720-22, 1867-68 (Porter); PX260. Precision Pine requested that the Forest Service establish an area for scaling logs from the Hay sale at the Eagar sawmill. PX260. 168. Precision Pine's pre-suspension (FYE 1996) logging and hauling costs for the

Hay contract were $93.70 per mbf (l.s.). See PX248 (total logging and hauling cost of $173,358); PX290 (total volume of 1,851 mbf (l.s.)). 169. Stip. ¶ 31. 170. As of August 25, 1995, the volume sawtimber remaining to be cut and removed The Forest Service suspended the Hay contract on August 25, 1995. First Joint

from the Hay contract sale area was 3,819 mbf (l.s.) sawtimber and no roundwood. Third Joint Stip. ¶¶ 18-19. 171. The suspension of the Hay sale was lifted on December 4, 1996. First Joint Stip.

¶ 31; Precision Pine, 50 Fed. Cl. at 39, 70; DX800 at 9. 172. Precision Pine requested and obtained a contract term adjustment as a result of the

suspension of the Hay contract, which provided an adjustment for days lost during the contract's normal operating season. First Joint Stip. ¶ 34.

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173.

In December 1996, Precision Pine requested and was granted permission by the

Forest Service to operate the Hay timber sale outside of the contract's normal operating season. See PX169; PX257; DX54. 174. 175. Precision Pine resumed logging upon the Hay contract in December 1996. DX68. Precision Pine could have hauled logs from the Hay sale to Eagar and decked

them at the Eagar sawmill during December 1996 and January 1997. Tr. 1874 (Porter). 176. Precision Pine made a "business decision" to haul to Winslow rather than Eagar

in December 1996 and January 1997. Tr. 1875 (Porter). 177. Precision Pine requested that the Forest Service re-establish an area for scaling

logs at the Eagar sawmill on January 30, 1997. Tr. 1869-73 (Porter); PX265. 178. Precision Pine made a business decision to continue hauling some logs from the

Hay sale to Winslow after January 30, 1997. Tr. 1874 (Porter). 179. 180. Precision Pine stopped logging the Hay contract in February 1997. DX68. Precision Pine's logging and hauling costs for the Hay contract between

December 1996 and February 1997 were $154.64 per mbf (l.s.). See PX248 (total logging and hauling cost of $333,518); PX290 (total volume of 2,157 mbf (l.s.)). 181. The Forest Service suspended the Hay timber sale in June 1997 as a result of the

Forest Guardians action.2 Tr. 983 (Porter); PX119; DX800 at 9. 182. DX800 at 9. The Forest Guardians suspension was lifted in December 1997. Tr. 983 (Porter);

Precision Pine has filed a separate action seeking compensation as a result of the Forest Guardians suspension. See Precision Pine & Timber, Inc. v. United States, No. 01-415C (Fed. Cl.) (filed July 17, 2001).

2

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183.

In October 1998, Precision Pine resumed harvesting the Hay contract; harvesting

was completed in January 1999. DX68; Tr. 853, 1834 (Porter). 184. Precision Pine's logging and hauling costs for the Hay contract between October

1998 and January 1999 were $137.47 per mbf (l.s.). See PX248 (total logging and hauling cost of $228,548); PX290 (total volume of 1,662 mbf (l.s.)). 185. If Precision Pine had not closed the Eagar sawmill in July 1997, it would have

been available for logs from the Hay sale in 1998. Tr. 1863 (Porter). 186. Precision Pine earned more by harvesting the Hay contract in the post-suspension

period that it allegedly would have earned by harvesting during the period of the MSO suspensions. PX131 ($2.61 million claimed); PX182 ($3.07 million earned); see also DX834 (showing higher revenue per mbf). 4. 187. The Hutch-Boondock Multi-Product Sale Contract

Hutch-Boondock was a multi-product sale. As a multi-product sale, the Hutch-

Boondock contract contained both sawtimber and roundwood components. See, e.g., DX238. 188. The Hutch-Boondock contract was sold on a ccf basis, that is, volumes were

measured by the Forest Service in ccf. The volume of "included timber" on the HutchBoondock contract was 4,717 ccf sawtimber and 1,645 ccf roundwood. DX238 (AT2). 189. The sawtimber component of the Hutch-Boondock contract had an average dbh of

12.6 inches and 0.8 percent grade. PX14; DX820. 190. The contract-specific ccf-to-mbf conversion factor for the sawtimber component

of the Hutch-Boondock contract was 0.4656. PX14. 191. The Hutch-Boondock contract's normal operating season ran from April 15 to

November 30. DX238 (clause AT17).

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192.

The Hutch-Boondock contract contained no additional restrictions that further

limited timber harvesting as a result of endangered, threatened and sensitive species. See DX238 (clause CT6.25). 193. The Hutch-Boondock contract was awarded to Precision Pine on June 29, 1994.

First Joint Stip. ¶ 16. 194. Precision Pine did not inform the Forest Service of any special circumstances,

plans, or considerations relating to the Hutch-Boondock contract at or before its award. Tr. 1856-57 (Porter). 195. The Forest Service suspended the Hutch-Boondock contract on August 25, 1995.

First Joint Stip. ¶ 29. 196. As of August 25, 1995, the volume remaining to be cut and removed from the

Hutch-Boondock contract sale area was 4,717 ccf (or 2,196 mbf (l.s.)) sawtimber and 1,645 ccf roundwood. DX249; DX251. 197. The Forest Service lifted the suspension and, subject to the terms and conditions

of the contract, made Hutch-Boondock available for harvesting by Precision Pine on October 18, 1995. First Joint Stip. ¶ 30; Precision Pine, 50 Fed. Cl. at 47 & n.18; see also PX106 (paragraph 3(m)). 198. Precision Pine requested and obtained a contract term adjustment as a result of the

suspension of the Hutch-Boondock contract, which provided an adjustment for days lost during the contract's normal operating season. First Joint Stip. ¶ 34. 199. On October 31, 1995, Precision Pine informed the Forest Service that it had no

outlet for roundwood from the Hutch-Boondock contract. DX263. 200. Based upon Precision Pine's representation, the Forest Service allowed Precision

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Pine to defer harvesting the roundwood component of the Hutch-Boondock contract. Tr. 391921 (Harris). 201. Precision Pine conducted harvesting the Hutch-Boondock contract from

November 1995 to January 1996. DX251. 202. Precision Pine conducted additional harvesting between July and December 1996.

DX251; see also DX800 at 10. 203. Although the Hutch-Boondock contract was unaffected by the Forest Guardians

suspension, Precision Pine conducted no harvesting during 1997. See DX251; DX800 at 11. 204. Precision Pine's logger ­ Tri-Star Logging ­ had sufficient capacity to log the

Hutch-Boondock contract in 1997 and in subsequent years. See Tr. 1743-44, 1755 (Reidhead). 205. Although the contract was subsequently available, Precision Pine never

completed timber harvesting upon the Hutch-Boondock contract. See DX251. 206. During the period when other contracts remained suspended (i.e., from

October 19, 1995 to December 4, 1996), Precision Pine did not complete harvesting of the Hutch-Boondock contract. Tr. 1469 (Porter); DX251. As of December 1996, only 96 percent of available sawtimber and 24 percent of available roundwood had been cut and removed by Precision Pine. Tr. 1456, 1459-60 (Porter); DX249; DX251; DX552. 207. The Forest Service terminated the Hutch-Boondock contract as a result of

Precision Pine's default on January 9, 2001. Precision Pine & Timber, Inc. v. United States, 62 Fed. Cl. 635, 638 (2004) (case no. 02-131). 208. Pursuant to CT 6.01, the Forest Service paid Precision Pine $128.80 in connection

with the suspension of the Hutch-Boondock contract. See PX221; PX131 (exhibit 2).

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5. 209. 210.

The Jersey Horse Timber Sale Contract

Jersey Horse was a not multi-product sale. See PX170. The Jersey Horse contract was sold on a ccf basis, that is, volumes were measured

by the Forest Service in ccf. The volume of "included timber" on the Jersey Horse contract was 3,163 ccf sawtimber and no roundwood. PX170 (AT2). 211. The sawtimber on the Jersey Horse contract had an average dbh of 17.9 inches

and 37.9 percent grade. PX2; DX820. 212. The Jersey Horse contract's normal operating season ran from April 15 to

November 15. PX170 (clause AT17). 213. The Jersey Horse contract contained additional restrictions that further limited

timber harvesting as a result of endangered, threatened and sensitive species. Specifically, logging, hauling and road construction in payment units 2-7 was only permitted between September 1 and November 15, and logging, hauling and road construction in cutting unit 14 was permitted only between October 1 and November 15. See PX170 (clause CT6.25). 214. The Jersey Horse contract was awarded to Precision Pine on December 13, 1993.

First Joint Stip. ¶ 20. 215. Precision Pine did not inform the Forest Service of any special circumstances,

plans, or considerations relating to the Jersey Horse contract at or before its award. Tr. 1856-57 (Porter). 216. The Forest Service suspended the Jersey Horse contract on August 25, 1995.

First Joint Stip. ¶ 29. 217. As of August 25, 1995, the volume remaining to be cut and removed from the

Jersey Horse contract sale area was 3040 ccf sawtimber and no roundwood. Third Joint Stip.

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¶¶ 12-13. 218. The suspension of the Jersey Horse contract was lifted on December 4, 1996.

First Joint Stip. ¶ 30; Precision Pine, 50 Fed. Cl. at 39, 70; DX 800 at 15. 219. Precision Pine requested and obtained a contract term adjustment as a result of the

suspension of the Jersey Horse contract, which provided an adjustment for days lost during the contract's normal operating season. First Joint Stip. ¶ 34. 220. The Jersey Horse contract was unaffected by the Forest Guardians suspension.

See DX800 at 15. 221. Precision Pine partially harvested the Jersey Horse contract beginning between

September 1997 and January 1998. DX128. 222. Precision Pine's logger ­ Tri-Star Logging ­ had sufficient capacity to log the

Jersey Horse contract in 1997 and in subsequent years. See Tr. 1743-44, 1755 (Reidhead). 223. Although the contract was subsequently available, Precision Pine never resumed

work or completed timber harvesting upon the Jersey Horse contract. DX128. 224. The Forest Service terminated the Jersey Horse contract as a result of Precision

Pine's default on January 9, 2001. Precision Pine & Timber, Inc. v. United States, 62 Fed. Cl. 635, 638 (2004) (case no. 02-131). 225. Pursuant to CT 6.01, the Forest Service paid Precision Pine $1,335.25 in

connection with the suspension of the Jersey Horse contract. See PX203; PX131 (exhibit 2). 6. 226. The Kettle Multi-Product Sale Contract

Kettle was a multi-product sale. As a multi-product sale, the Kettle contract

contained both sawtimber and roundwood components. See, e.g., PX173. 227. The Kettle contract was sold on a ccf basis, that is, volumes were measured by the

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Forest Service in ccf. The volume of "included timber" on the Kettle contract was 5,702 ccf sawtimber and 3,958 ccf roundwood. PX173 (AT2). 228. The sawtimber component of the Kettle contract had an average dbh of 12.3

inches and 23.0 percent grade. See PX5; DX820. 229. The contract-specific ccf-to-mbf conversion factor for the sawtimber component

of the Kettle contract was 0.4757. See PX5. 230. The Kettle contract's normal operating season ran from May 15 to October 31.

PX173 (clause AT17); DX800 at 5. 231. Stip. ¶ 23. 232. Precision Pine did not inform the Forest Service of any special circumstances, The Kettle contract was awarded to Precision Pine on July 20, 1995. First Joint

plans, or considerations relating to the Kettle contract at or before its award. Tr. 1856-57 (Porter). 233. Stip. ¶ 29. 234. As of August 25, 1995, the volume remaining to be cut and removed from the The Forest Service suspended the Kettle contract on August 25, 1995. First Joint

Kettle contract sale area was 5,702 ccf (or 2712 mbf (l.s.)) sawtimber and 3,958 ccf roundwood. Third Joint Stip. ¶¶ 20-21; PX5. 235. Precision Pine informed local government officials in December 1995 that the

Kettle was not profitable to operate. DX7227. 236. The suspension of the Kettle contract was lifted on December 4, 1995. First Joint

Stip. ¶ 31; Precision Pine, 50 Fed. Cl. at 39, 70; DX 800 at 17. 237. Precision Pine requested and obtained a contract term adjustment as a result of the

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suspension of the Kettle contract, which provided an adjustment for days lost during the contract's normal operating season. First Joint Stip. ¶ 34. 238. DX800 at 17. 239. at 17. 240. The Forest Service did not authorize the deferred harvesting of roundwood on the Precision Pine began harvesting the Kettle contract in May 1997. DX31; DX800 The Kettle contract was unaffected by the Forest Guardians suspension. See

Kettle contract. As a result, because Precision Pine had no outlet for roundwood, Precision Pine decked (i.e., stacked) harvested roundwood at its Eagar sawmill. Tr. 1947-48 (Porter); DX553. 241. Precision Pine did not fully harvest the Kettle contract. DX31. Rather, on

August 15, 1997, Precision Pine sold the Kettle contract to Stone. PX117; DX477 (same). 242. Stone paid $60,495 and agreed to accept the roundwood that Precision Pine had

previously cut and decked at the Eagar sawmill. DX477PX117; DX553; DX587. Precision Pine sold the Kettle contract because it had been unable to find an outlet for the roundwood on the sale. DX47. 243. The price at which Precision Pine sold the Kettle sale to Stone ($60,495) was

much lower than Precision Pine's "worst case" profit projection of July 17, 1995 ($120,351), PX117; DX514, despite the fact that lumber prices in August 1997 were substantially higher, see PX305. 244. Pursuant to CT 6.01, the Forest Service paid Precision Pine $1,344.91 in

connection with the suspension of the Kettle contract. See PX207; PX131 (exhibit 2). 7. 245. The Manaco Multi-Product Sale Contract

Manaco was a multi-product sale. As a multi-product sale, the Manaco contract

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contained both sawtimber and roundwood components. See, e.g., PX178. 246. The Manaco contract was sold on a ccf basis, that is, volumes were measured by

the Forest Service in ccf. The volume of "included timber" on the Manaco contract was 5,692 ccf sawtimber and 1,587 ccf roundwood. PX178 (AT2). 247. The sawtimber component of the Manaco contract had an average dbh of 12.9

inches and 0.7 percent grade. PX10; DX820. 248. The contract-specific ccf-to-mbf conversion factor for the sawtimber component

of the Manaco contract was 0.4845. PX10. 249. The normal operating season for payment unit one of the Manaco contract ran

from May 1 to the weekend before Memorial Day and from the day after Labor Day to November 30. The normal operating season for payment units two through ten of the Manaco contract ran from May 1 to July 15 and from August 15 to November 30. PX178 (clause AT17). 250. The Manaco contract contained additional restrictions that further limited timber

harvesting as a result of endangered, threatened and sensitive species. See DX238 (clause CT6.25). Specifically, activities in cutting units 7, 12-16, 19, 30-33, 36, 38 and 39 could take place only between October 1 and November 30. Log hauling from cutting units 9-11, 17, 20 and 37 could only take place between October 1 and November 30. Road building, maintenance and usage of specified Forest Service roads was prohibited until October 1. See PX178 (clause CT6.25); DX800 at 18. 251. The Manaco contract was awarded to Precision Pine on January 17, 1995. First

Joint Stip. ¶ 21. 252. Precision Pine did not inform the Forest Service of any special circumstances,

plans, or considerations relating to the Manaco contract at or before its award. Tr. 1856-57

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(Porter). 253. The Forest Service suspended the Manaco contract on August 25, 1995. First

Joint Stip. ¶ 29. 254. As of August 25, 1995, the volume remaining to be cut and removed from the

Manaco contract sale area was 5,006 ccf (or 2,425 mbf (l.s.)) sawtimber and 1,348 ccf roundwood. Third Joint Stip. ¶¶ 14-15; PX10. 255. A Mexican Spotted Owl was discovered adjacent to the Manaco sale during the

summer of 1996. Precision Pine was informed that the discovery of the owl ­ a threatened species protected by the Endangered Species Act ­ would require a suspension of operations and consultation with the Fish and Wildlife Service. See Tr. 4625 (Dils); DX800 at 18. 256. As a result of the presence of the owl, the suspension of the Manaco contract

continued after December 4, 1996. The suspension of the Manaco contract was lifted in March 1997. Tr. 4625 (Dils); DX 800 at 18-19. 257. Precision Pine requested and obtained a contract term adjustment as a result of the

suspension of the Manaco contract, which provided an