FOREST SERVICE HANDBOOK OGDEN, UTAH FSH 2409.18 - TIMBER SALE PREPARATION HANDBOOK Region 4 Supplement No. 2409.18-92-1 Effective January 2, 1992 POSTING NOTICE: This supplement is the first in a new numbering series corresponding to the year in which material was amended. Since this amendment replaces all R-4 text except Interim Directives (ID), do not check for the last transmittal received for this title. Replace the entire chapter of Region 4 text except ID's. Place this transmittal sheet at the front of the title and retain until the first transmittal of the next calendar year is received. New Document Name (Number of Pages) 2409.18,60 10 2409.18, Exhibits01-05 5 Digest: 60 - Provides definitions, guidelines, procedures and exhibits for Annual Bid Monitoring Reports. GRAY F. REYNOLDS Regional Forester FSH 2409.18 - TIMBER SALE PREPARATION HANDBOOK R4 SUPPLEMENT 2409.18-92-1 EFFECTIVE 1/2/92 CHAPTER 60 - BID OPENING - GATE 5 66.1 - Monitoring for Noncompetitive Bidding Patterns. Regional direction for evaluation of potential collusive bidding practices is administratively confidential. Access to the direction, and required reports, will be limited to personnel responsible for the monitoring program. Procedures to follow in preparation of the annual report are found in the official "R-4 Guidelines for Monitoring Timber Sale Bidding Patterns," dated 1991. The "R-4 Guidelines for Monitoring Timber Sale Bidding Patterns" provides guidance for meeting the requirements of Section 14a(3) of the National Forest Management Act, which requires that procedures be developed to monitor bidding activities for possible collusive practices. During oral auction and sealed bidding for public timber, collusions and violations may occur. Individuals responsible for bid monitoring should be alert to the following types of activities during bidding: 1. Bid Rigging. An agreement or arrangement among independent purchasers by which bids are fixed; generally occurs prior to bid submission. 2. Bid Rotation. Colluding purchasers take turns being high bidder; based on simple rotation, sale size, or sale characteristics. 3. Bid Suppression. One or several purchasers, who would otherwise be expected to bid, refrain from bidding or withdraw a bid so that a competitor's bid is accepted. 4. Complementary Bidding. Purchasers submit token bids that are unresponsive to give the appearance of bidding, but enabling a competitor's bid to be accepted. 5. Territorial Allocation. Purchasers have geographical sale areas and agree not to compete in each other's area. 6. Market Division. Purchasers agree to refrain from competing in a designated portion of the market. In this context, "market" means sales with a particular product or species mix or perhaps sale size. 7. Preclusive Bidding. An attempt to maintain dominance in a particular territory by bidding as high as necessary, even beyond a sales economic break-even point, to defeat bidding challengers. 8. Subcontracting. Unsuccessful bidders or nonbidders receive subcontracts from the successful high bidder. R-4 Guidelines for Monitoring Timber Sale Bidding Patterns. The direction listed below is to be used in analyzing bidding patterns and also in preparing the annual bid monitoring report. See FSM 24** R-4 supplement. Because several Forests share the same purchaser, Forests shall combine their bid monitoring analysis areas and submit only one report between Forests. This should reduce Forest time and expense and would give each National Forest some insight to purchaser activities on adjacent Forests. The Forests shall combine their reporting efforts into six Regional Zones: Monitoring Zone Forest Far West *Toiyabe - Humboldt Northwest *Boise - Payette - Sawtooth North Central *Salmon - Challis Northeast *Targhee - Bridger-Teton - Caribou Southeast *Ashley - Wasatch - Uinta Southern *Dixie - Fishlake - Manti- LaSal The Forests with an "*" shall report to the Regional Forester annually for that zone by December 15. Forests may alternate reporting responsibilities within their zone. For example: the Targhee National Forest may coordinate the reporting for its zone the first year, the Bridger-Teton National Forest the second year, and the Caribou National Forest the third year. Each Forest shall prepare their report based on the following information and submit it to the reporting Forest designated within their zone by November 20. The reporting Forest will then consolidate the information and prepare the final report to the Regional Forester. The Forest Supervisor shall: 1. Review quarterly bidding patterns and trends for all competitively advertised timber sales. Bidding patterns and trends for the most recent quarter shall be compared with averages for the previous 16-quarter period. The objective is to determine possible or suspected cases of collusive bidding. Bid monitoring reports shall be produced through the Summary of the Reports of Timber Sales (Form 2400-17). A bid monitoring report shall be submitted annually to the Regional Forester along with a narrative report (FSH 2409.18, section 66). 2. Annually compile and complete and bid monitoring report for sealed and oral auction sales, average number of bidders, weighted averaged bid ratio, and average overbid by species. 3. The Narrative Outline of the bid monitoring report shall include: a. Purpose. b. Objective. c. Overview of the timber industry within the Forest market area. d. Analysis of data. e. Summary. f. Conclusion. g. Exhibits and graphs. Within the Narrative Outline, the following information should be included: a. Local industry composition and annual output demand for or dependency on National Forest timber. b. Current volume under contract and volume harvested during fiscal year for each local industry. This information should be available through your ATSAS System. c. Brief review of market conditions for the fiscal year (that is, fluctuations in demand for primary products). d. Other situations or conditions leading to bidding patterns noted in the analysis (that is, changes in production capabilities, and so forth). 4. In figuring the Weighted Average Bid Ratio for Exhibit 01, use the Stat High Bid Rates without roads. 5. Report suspected incidents of bid collusion immediately to the Regional Forester. Written documentation of such incidents shall be maintained at the Forest level. All such documentation shall be marked "Confidential" and be located in a folder which contains the following caption displayed in prominent fashion on the cover: "In Investigatory Document/Record, Prepared for Specific Adjudicative and Enforcement Purposes Pursuant to 16 U.S.C. and 472a(e)(3), Federal Antitrust Laws, and 36 CFR and 223.51 - NO FOIA RELEASE - 5 U.S.C. and 552(b)(7)." 6. A system-generated report for use in the Bid Monitoring Reports shall be produced through a Regional Program for data information quarterly. If additional information is needed to analyze situations that may involve collusive bidding, based on information in your monitoring area, additional data or information can be produced for your specific needs. Forests shall use a bar graph for weighted average bid ratio sales sold by either sealed or oral auction for the 16 previous quarters. Also use a bar graph for the average number of bidders, both oral and sealed, and another graph for the average overbid by species. The following listed graphs should give you a good data display of bidding patterns, both current and historical, in order to write your annual Bid Monitoring Report. Following is a list of exhibits and bar graphs to be used: a. Exhibit 01. Bid Monitoring Report - Oral Auction Sales* (Optional Report) b. Exhibit 02. Bid Monitoring Report - Sealed Bid Sales* (Optional Report) c. Exhibit 03. Average Number of Bidders - Sealed and Oral Auction d. Exhibit 04. Average Overbid by Species e. Exhibit 05. Weighted Average Bid Ratio - Sealed and Oral Auction 7. Designate an official to maintain the confidential official guidelines, files, related bid monitoring materials, and prepare the reports either to the lead zone Forest or to the Regional Forester. 8. Annually maintain, at the Forest level, a market area map identifying the following: a. Local purchaser's area of sale purchased - color code and ID number. b. Major marketing points and/or mill locations by name. c. Overlays of general sale locations for current fiscal year and previous four fiscal years with purchaser's ID number listed. *Forests may construct their own forms for oral and sealed auction sales. 66.1 - Exhibit 01 BID MONITORING REPORT - ORAL AUCTION SALES Region:_____________ Forest:_______________ Appraisal Zone(s):______________ Monitoring Period:_____________ 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER Sale Name Purchaser & To- Ave St- Bid To- Ave St- Bid To- Ave St- Bid To- Ave St- Bid Other Bidders tal Ad- at Ra- tal Ad- at Ra- tal Ad- at Ra- tal Ad- at Ra- & PID No's Vo- v. Hi- tio Vo- v. Hi- tio Vo- v. Hi- tio Vo- v. Hi- tio l. Ra- gh l. Ra- gh l. Ra- gh l. Ra- gh So- te Bid So- te Bid So- te Bid So- te Bid ld ld ld ld (M- (M- (M- (M- BF) BF) BF) BF) Total Average Species: 66.1 - Exhibit 02 BID MONITORING REPORT - SEALED BID SALES Region:_____________ Forest:_______________ Appraisal Zone(s):______________ Monitoring Period:_____________ 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER Sale Name Purchaser & To- Ave St- Bid To- Ave St- Bid To- Ave St- Bid To- Ave St- Bid Other Bidders tal Ad- at Ra- tal Ad- at Ra- tal Ad- at Ra- tal Ad- at Ra- & PID No's Vo- v. Hi- tio Vo- v. Hi- tio Vo- v. Hi- tio Vo- v. Hi- tio l. Ra- gh l. Ra- gh l. Ra- gh l. Ra- gh So- te Bid So- te Bid So- te Bid So- te Bid ld ld ld ld (M- (M- (M- (M- BF) BF) BF) BF) Total Average Species: 66.1 - Exhibit 03 AVERAGE NUMBER OF BIDDERS, SEALED AND ORAL AUCTION 8 | | 7 | | 6 | | 5 | | 4 | | 3 | | 2| | | 1 | | 0 | | | | | | | | | | | | | | | | | | | | | 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 FY 83 FY 84 FY 85 FY 86 FY 87 66.1 - Exhibit 04 AVERAGE OVERBID BY SPECIES 8 | | 7 | | 6 | | 5 | | 4 | | 3 | | 2| | | 1 | | 0 | | | | | | | | | | | | | | | | | | | | | 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 FY 83 FY 84 FY 85 FY 86 FY 87 66.1 - Exhibit 05 WEIGHTED AVERAGE BID RATIO, SEALED AND ORAL AUCTION 8 | | 7 | | 6 | | 5 | | 4 | | 3 | | 2| | | 1 | | 0 | | | | | | | | | | | | | | | | | | | | | 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 FY 83 FY 84 FY 85 FY 86 FY 87