Free Motion to Amend/Correct - 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. 02-131C (Judge George W. Miller)

DEFENDANT'S APRIL 2005 STATUS REPORT On October 29, 2004, the Court remanded this action in order to facilitate the recalculation of breach of contract damages by the United States Forest Service in accordance with the Court's opinion of that date. Opinion and Order of Judge George W. Miller (Oct. 29, 2004). The Court directed that the recalculation of damages be completed within six months and further directed the United States to "file and serve the recalculations together with a brief describing the methodology used in each recalculation and explaining how it is consistent with CT 9.4 as interpreted by the Court." Id. In accordance with the Court's order, the Forest Service has competed the recalculation of damages owed by plaintiff, Precision Pine & Timber, Inc. ("Precision Pine"), as a result of the breach of the Brann, Brookbank, Gentry, Hutch-Boondock, Jersey Horse, Lily, Manaco, Monument, O.D. Ridge and Saginaw-Kennedy, U-Bar and Wiggins contracts. Additionally, the Forest Service has prepared a summary describing how the calculations were performed and demonstrating that the calculations are in accordance with the Court's interpretation of CT 9.4. The Forest Service's summary of the methodology used to recalculate the damages is attached to this filing as Exhibit A. The detailed calculations of damages in connection the Brann, Brookbank, Gentry, Hutch-Boondock, Jersey Horse, Lily, Manaco, Monument,

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O.D. Ridge and Saginaw-Kennedy, U-Bar and Wiggins contracts are attached as Exhibits B ­ M, respectfully. Respectfully submitted, PETER D. KEISLER Assistant Attorney General DAVID M. COHEN Director s/ Kathryn A. Bleecker KATHRYN A. BLEECKER Assistant Director s/ David A. Harrington DAVID A. HARRINGTON Trial Attorney Commercial Litigation Branch Civil Division Department of Justice 1100 L Street, N.W. Attn: Classification Unit 8th Floor Washington, D.C. 20530 (202) 307-0277 (202) 307-0972 (fax) Attorneys for Defendant April 28, 2005

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Precision Pine and Timber,Inc
V.

The United States Summary Regarding Final DamageCalculations Pursuantto Provision CT9.4-- Failure to Cut (4/82)

Pursuant to the Opinionand Order of the Court dated October29, 2004, this memorandum documentsthe methodologyused in the recalculation of damagesand explains howeach recalculation is consistent with provision CT9.4as interpreted by the Court. The contracts addressed in this memorandum O.D. Ridge (Contract No.001574), are: Brookbank(Contract No. 001822, Jersey Horse (Contract No. 001756), Saginaxv-Kennedy, (Contract No. 006585), Brann (Contract No. 006577), U-Bar (Contract No.005051)Monument (Contract No. 005564), Manaco (Contract No. 004625), Hutch-Boondock (Contract 005465), Gentry (Contract No. 005564), Wiggins(Contract No. 020012), and Lily (Contract 020140). Eachof the contracts contained provision CT9.4-Failure to Cut (4/82) describiug the methodfor calculating damages the event of tem~inationfor breach: in CT9.4 - FAILURE CUT.(4/82) In event of(a) termination TO for breach or (b) Purchaser'sfailure to cut desi~m~ated timber portions of Sale Area by TerminationDate, Forest Service shall appraise remaining Included Timber, unless tem~ination is under CT8.2or BT8.22. Such appraisal shall be madewith the standard Forest Service methodin use at time of termination. Damages the UnitedStates for Purchaser's failure to cut and due removeInclnded Timbermeeting Utilization Standards shall be the mnountby which Cunent Contract Value, plus costs described below, less any Effective Purchaser Credit remainingat time of termination, exceedsthe resale value at newBid Rates. If there is no resale, damages shall be determinedby subtracting the due value established by said appraisal from the difference between CunentContract Value and unused Effective Purchaser Credit, plus m~y the followingapplicable costs: of (a) Thecost of resale or reoffering; (b) Anyincrease in Purchaser Credit Limit allowance for un-constructed Specified Roadfacilities whichare neededto harvest the remaininguncut volume. Suchincreases are limited to costs for constructing the road to the samestandard and specifications required by this contract;

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(c) If Purchaserhas failed to cut individual trees in the portions of Sale Areacutover and there is no resale of such individual trees, Purchasershall pay Forest Service for cost of felling and removalor otherwise eliminating such uncut trees in addition to paymentof damagesdescribed above, except for occasional trees not cut for reasons stated in BT6.4; (d) The Government's loss caused by the delay in receipt stumpagepayments. Suchloss will be measuredby interest at the cunent rate being paid for borrowingby the United States (as calculated and published by the Treasury Departmentin TF~ 68025.2) on the unpaidcontract value at Temaination Date. Interest will be chargedfor the total nmnber months,or portions thereof of from Temaination Date until midpointof the contract resale period, less any time in excess of 1 year neededto makethe resale; (e) Any increase in reforestation costs, including site preparation, seeding, and planting causedby Purchaser's failure to harvest Included Timber by TemainationDate. Baseduponthe provision, and consistent with the Court's finding, there are two alternative methodsfor detemainingdamagesin the event of breach: one where the timber has been resold; and another where the timber has not been resold. This memorandmn the uses following abbreviations: Appraised Value @Termination = = Current Contract Value (@term) = Effective Purchaser Credit = Resale Value @NewBid Rates Subpara~aphs through (e) (or 1-5) (a) AppV CCV EPC RSV MISC$

Therefore, pursuaaat to CT9.4, damages calculated according to the following formulas: are 1) Damages Under Resale = [(CCV+MISC$-EPC)-RSV] Damages

2) Damages with No Resale = [ (CCV-EPC)-AppV+ MISC$] = Damages Detailed calculations using these fomaulasare shownon spreadsheets addressing each sale. Final damages calculated under formula I for the O.D. Ridge, Jersey Horse and are Wigginscontracts. Final Dmnages under formula2 are affected by the fact that there are at least t~vo scenarios whichcould result in "no resale:" one wherethere is a management decision to not reoffer the sale; and a secondwherethere is a reoffered sale whichreceived "No Bids." Theonly

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difference bet~veenthe t~vo scenarios is on the inclusion of certain MISC$ values (i.e. under a management decision to not reoffer, there wouldbe no charges for subpart (a) - the cost of resale or reoffering.) The following sales were not reoffered for sale due to management decisions or on-thepound conditions: Brann, Saginaw-Kennedy,Hutch-Boondock,and U-Bar. Dmnagesare assessed pursuant to formula2 with MISC$ charges for subparts (b), (c) and (d), if applicable. Thefollowing sales were reoffered for sale but received "no bids" on the assigned date of bid opening: Manaco (reoffered as the "Diamond" sale), Lily, Monument, Brookbankand Gentry. The final damage assessments are based on Formula2 and inclnde the costs incurred for resale or reoffering pursuant to subparagraph (a), and costs detailed in subparagraphs (b), (c) and (e), applicable. The following table summarizes final damage tbe assessmentsfor each of the sales at issue and showsthe change from the initial damageestimates. Amounts showndo not include interest or penalties as prescribed by provisions CT4.4and CT4.41of the contract. Original Forest Service DamageEstimate $148,845.38 $9,035.47 $101,642.20 $36,888.97 $215,691.04 $81,477.88 $2,278.72 $92,236.78 $13,016.93 $66,512.35 $0.00 $0.00 $767,625.72 Forest Service "Final" Damage Estimates ++ $0.00 $17,056.01 $83,157.15 $25,994.78 $124,367.14 $70,835.50 $2,278.72 $75,241.81 $14,387.27 $58,890.90 $0.00 $0.00 $472,209.28

Sale Name O.D.Ridge Timber Sale Jersey Horse Timber Sale Sagina~v-Kermedy Timber Sale BrmmTimber Sale U-Bar Timber Sale Monument Multi-Product Sale Hutch-BoondockMulti-Product Sale Gentry Multi-Product Sale WigginsMulti-Product sale Lily TimberSale BrookbankMulti-Product Sale ManacoTimber Sale Total (ExcludingInterest)

Difference
*~t;*

$8,020.54 ($18,485.05) ($10,894.19) ($91,323.90) ($10,642.38) $0.00 ($16,994.97) $1,370.34 ($ 7,621.45) $0,00 $0.00

++ Final Damage Estimates do not include interest charges, haterest charges are shownon a spreadsheet attached to this naemorandum. *** O.D. Ridge: The original damageassessment shmvedthere were no damagessuffered by the Govenmaent pursumat to provision CT9.4, The damagesshownabove are charges Precision Pine owedfor timber cut and removed from the sale area that had not been paid. Precision Pine subsequentlypaid for this timber, plus applicable interest and penalty charges. Thecalculation of final damages confirmsthat there were no other dm'nages.

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A separate documentattached at the end of this memorandum provides a summary of damages and interest calculations for each sale. Interest is calculated fromthe date of initial due billing for estimated damagesthrough May31, 2005. INTEREST AND PENALTIES: Nodamages being assessed pursuant to CT9.4for the O.D. Ridgetimber sale, are Manaco timber sale or Brookbank multi-product sale. The following discussion does not, therefore, pertain to these sales. Each of the remainingconta'acts contains contract provision CT4.4- Payments Not Receivedfor TimberCut and Other Charges (version 1/84, 3/93 or 10/96). The U-Barcontract contains the (1/84) version of the provision; Brmm, Saginaw-Ke~medy, Hutch-Boondock, Monument, Jersey Horse contain the (3/93) version of the provision and the Lily, Gentry and and Wigginscontracts each contain the (10/96) version of the provision. With the exception of the U-Barcontract, each of the contracts also contains contract provision CT4.41-Other Payments Not Received(3/93). Contract provision CT4.4-Payments Received for Timber Cut and Other Charges Not (3/93 and 10/96versions) states, in pertinent part: Pursuant to the Debt Collection Act, as amended U.S.C 3701, (31 et ~, if paymentis not received by the Forest Service within 15 daysof the date of issue as indicated on the Bill for Collection: SimpleInterest shall be assessed at the higher of the U.S. Treasurycurrent value of funds rate, as publishedby the Secretary of Treasuryin the Federal Register, or the rate established by the Secretmyof Treasury under section 12 of the Contract Disputes Act of 1978(41 U.S.C. 611). Interest will beginto accrue as of the date of issue as indicatedon the initial Bill for Collection. Debtors will be assessed administrative charges in addition to the delinquent amountdue. Administrative charges are those additional costs incurred by the Govermnent in processing, handling and collecting delinquent debts. A penalty charge of 6 percent per annum will be assessed on any portion of a debt delinquent morethan 90 days. This penalty chargewill be in addition to the interest and administrative charges under paragraph (1) aud (2). penalty charge shall accrue fromthe date of issue as indicated on the Bill for Collection and shall be assessed on all outstanding amounts including interest and administrative costs assessed under paragaphs(1) and (2).

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Payments will be credited on the date received by the designated depositoryor collection officer, at the designatedaddress. Additionally, contract provision CT4.41- Other Payments Received(3/93) states, Not pertinent part: Payments due and payable on the date of issue as indicated on are the Bill for Collection. When paymentfor charges other than those subject to CT4.4is not received at the location designated by the Forest Service by the date allowedfor receipt of paymentas indicated on the Bill for Collection, Forest Service will suspendall or any of the Purchaser's Operationsuntil paymentis received. Such charges maybe, but are not limited to: (a) damages pursuant to CT9.4,(b) ineffective PurchaserCredit, (c) road use fees, (Periodic Paymentspursuant to CT4.264#,or (e) other mandatory deposits. Except for Advance Deposits, failure to pay alnounts due by the date allo~vedfor receipt of payment shall be considered a ..... breachunderBT9.3 .............. If performanceor paymentis guaranteed by surety bond, the surety(s) will receive .......... for immediate payment. Pursuant to the Debt Collection Act, as anaended(31 U.S.C 3701, et se~), if payment not received by the Forest Service within 15 is days of the date of issue as indicated on the Bill for Collection: SimpleIaaterest shall be assessedat the higher of the U.S. Treasurycurrent value of funds rate, as publishedby the Secretary of Treasuryin the Federal Register, or the rate established by the Secretary of Treasury under section 12 of the Contract Disputes Act of 1978 (41 U.S.C. 611). Interest will beginto accrue as of the date of issue as indicated on the initial Bill for Collection. Debtorswill be assessed administrative charges in addition to the delinquent amountdue. Administrative charges are those additional costs incurred by the Gove~m~ent in processing, handling and collecting delinquent debts. A penalty charge of 6 percent per annum will be assessed on any portion of a debt delinquent morethan 90 days. This penalty chargewill be in addition to the interest and administrative charges under paragaph (1) and (2).

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penalty charge shall accrue from the date of issue as indicated on the Bill for Collection and shall be assessed on all outstanding amountsincluding interest and administrative costs assessed under paragaphs(13 and (2). Paymentswill be credited on the date received by the desi~ated depositoryor collection officer, at the desia~atedaddress. Provisions CT4.4(3/93 and 10/96 versions) and CT4.41(3/93) are applicable to contracts at issue in this matter with the exceptionof O.D. Ridgeand U-Barand provide the Govermnent authority and obligation to assess both interest and penalties on amounts the due fromthe initial date indicated on the Bill for Collection. Provision CT4.4- PaymentsNot Received(1/84 version) is applicable to the U-Bar contaact only. Theprovision states: When paymentis not received by collection officer or depository at the desigq~atedaddress within 15-calanderdays of billing, Forest Service maysuspendall or any part of Purchaser's Operationsuntil paymentor acceptable paymentguarantee is received. Failure to pay amountsdue whenpaymentsare guaranteed by a paymentguarantee shall be considered a breach under BT9.3, and the 30-calanderday notice period prescribed therein shall begin to run as of end of business of the 15-calalder days allmvedfor such payment.Suchpaymentsreceived after the due date are subject to interest char~es(emphasis original) at the cunent rate of interest in prescribed by the U.S. Departmentof treasury (TFRM 6-8020.20), as published in the FEDEI~L REGISTER, beTinnin~ from the date the bill wasdue. (emphasisin original). Suchinterest rate shall remainunchanged until those bills have beenpaid or settled. If follow-upbecomes necessary due to failure to pay principal and/or interest due, cost of such billings maybe addedto the amountsdue. In addition, amoantsoverdue in excess of 90 days shah be subject to a~t additional 6percent penalty chalge. (EmphasisAdded)Paymentswill be credited on the date received by the designateddepositary or collection officer. Forest Service remediesfor Purchaser's failure to pay amounts due, except for the accrual of interest, suspension all or any part of or Purchaser's Operationand Administrativeoffset, shall be stayed for so long as (a) bonafide dispute exists as to Purchaser's obligation to makesuch payment,and (b) Purchaser files and prosecutes and timely claim under the Contract Disputes Act of 1978.

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Baseduponthe languageof the provision, the Forest Service is authorized to assess interest and penalty charges for damagesowedthe Government the U-Barcontract. on

Prepared By: DavidP. Hartis Forester, Southwestern Region USDA Forest Service 333 Broadway, SE Albuquerque, N~ 87102

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