Small Business Set-Asides for Federal Timber Sales

Small Business Set-Asides for Federal Timber Sales

May 25, 2022
Small Business Set-Asides for Federal Timber Sales
Overview
Small Business Eligibility Criteria
Congress has a direct role in the management of federally
A small business must meet the following requirements,
owned forests, including the sale of federal timber.
described at 13 C.F.R. §121.507, to be eligible to purchase
Congress established the Timber Sales Assistance Program
government-owned timber under the timber set-aside
in 1958, one of a several federal Natural Resource Property
program:
Sales Assistance Programs overseen by the Small Business
1. Be primarily engaged in the logging or
Administration (SBA), to ensure that small businesses
obtain a “fair share” of
forest products industry;
federal timber authorized for sale.
The program applies to timber and related forest products
2. Have 500 or fewer employees, taking into
owned and sold by the federal government, primarily from
account its business affiliates; and
lands managed by the Forest Service (FS) and the Bureau of
3. Make certain agreements regarding the
Land Management (BLM). It allows for preferential
manufacture and resale of the timber
bidding on sales by eligible small businesses under certain
purchased, so as to ensure that small
circumstances, such as when small business participation in
logging and forest product firms remain
sales falls below a specified amount. The buyers of federal
the main beneficiaries of the
timber are typically logging and lumber manufacturing
government’s sale.
firms, which mainly purchase sawtimber.
Small businesses that purchase timber under a set-aside
About 31% of U.S. forestland (238 million acres) is
must not sell more than 30% of the timber to a business that
federally owned. From FY2019-FY2021, the FS and BLM
does not meet the small business size requirements outlined
sold or had contracts to sell an annual average of $364
above (Alaskan businesses must not sell more than 50% to
million worth of timber volume. Federal timber harvest
larger businesses). They must also manufacture the logs
volume has fallen substantially since the late 1980s for a
they purchase at their own facilities or at another small
variety of reasons, and most timber harvested in the United
business that meets program size requirements.
States is from private lands. However, federal timber sales
remain relevant to small businesses in the forest product
A separate but related timber sales set-aside program, the
industry, particularly those located near forests managed by
Special Salvage Timber Sale Program, exists for very small
FS and BLM.
businesses with fewer than 25 employees. The program is
restricted to timber that is dead, down, or dying; the
Authorization and History
harvesting of which can help generate revenue for
Federally-owned timber sale set-asides for small businesses
restoration and other activities. Program regulations
are authorized by P.L. 85-536, as codified at 15 U.S.C.
stipulate separate size standards and requirements for the
§644: “With respect to a contract for the sale of
salvage program, available at 13 C.F.R. §121.508.
Government property, small business concerns shall receive
any such contract if, in the determination of the
Implementation
Administrator [of the Small Business Administration] and
The FS and BLM sell almost all federal timber. BLM
the disposal agency, the award of such contract is in the
generally sells timber in the western United States, where
interest of assuring that a fair proportion of the total sales of
almost all BLM land is located, while Forest Service timber
Government property be made to small business concerns.”
sales take place across the country. Other agencies that sell
federal timber, although at smaller volumes, include the
The program originated in 1958 when the SBA and FS
Department of Defense, Department of Energy, Fish and
created a timber sale set-aside for small businesses. Over
Wildlife Service in the Department of the Interior, and the
the years, the program has been reexamined and its
Tennessee Valley Authority.
procedures modified through agency regulations. In
addition to the statutory requirement to provide an
Federal agencies sell timber under a number of authorities.
opportunity for small businesses to participate in federal
For example, the Multiple Use-Sustained Yield Act of 1960
natural resources sales, the program has garnered
directs FS to balance multiple uses of the National Forest
congressional attention due to concern about acquisition of
System (e.g., recreation, timber, water, and wildlife habitat,
small forest product businesses by larger ones, resulting in
and others) and to provide a sustained yield of these uses
industry consolidation. The timber set-aside has been held
“in perpetuity.” The Federal Land Policy and Management
up as a tool for limiting such consolidation.
Act of 1976 provides similar direction for the public lands
managed by BLM. The Oregon and California lands (O&C
lands) in western Oregon are managed by BLM and FS for
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Small Business Set-Asides for Federal Timber Sales
permanent, sustainable timber production, among other
purchases of sawtimber volume sold under the timber
specified uses.
program over a five-year period. This percentage,
based upon historical purchases of sawtimber in the
Timber harvesting on FS and BLM lands may be conducted
market area, sets the framework for what constitutes
for a variety of purposes, such as to produce commercial
small businesses’ fair proportion of the total sales
timber, to promote certain forest conditions (e.g., to control
volume. If at any time, the small business market share
the spread of insects and disease), or for multiple purposes.
falls below this percentage, subsequent timber program
Congress has directed FS and BLM to engage in long-term
sales would be set-aside for preferential bidding by
land use and resource management planning, which sets the
small businesses. Set-aside sales in the timber program
framework for land management, uses, and protection,
will continue until such time that the small business
including describing where timber harvesting may occur
market share rises above the triggering percentage.
and sustainable timber harvest levels. The FS and BLM use
these plans to guide implementation of individual timber
The BLM’s timber sales set-aside program includes its
sales.
Non-activated Program and Activated Program. Under the
Non-activated Program, an MOU with the SBA permits the
The SBA’s Role in Interagency Coordination
SBA to review BLM’s annual timber sale plans prior to
The SBA and agencies that sell timber (hereinafter, partner
publication and to request set-aside sales. When BLM
agencies) jointly administer timber sales set-asides for
agrees to set-aside certain sales for small businesses, BLM
small businesses. The SBA’s role in the program comprises
consults with SBA concerning financial and other
two activities: (1) establish set-asides when necessary to
performance qualifications to be included as conditions of a
ensure that small businesses are receiving a fair share of
sale. Under the Activated Program, sales in the O&C lands
government property sales; and (2) aid, counsel, and assist
in western Oregon are set aside when triggered by
small businesses on all matters pertaining to disposal and/or
semiannual analysis; if triggered, the BLM and SBA
leases of government property.
negotiate the selection of sale tracts to be set aside in the
following six-month period.
The SBA’s Office of Natural Resources Sales Assistance
(ONRSA) works with timber sales agencies by reviewing
Set-asides are triggered when the small business sector fails
their timber sale plans, evaluating the effect of the sales on
to purchase at least 90% of the “adjusted small business
small businesses in the area, and recommending changes.
share” of a market area’s timber sales volume. The adjusted
ONRSA’s specialized industry staff are located in field
small business share equals the percentage of total timber
offices covering different geographic areas of the country
volume sold to small business in the current six-month
and maintain relationships with the officials and personnel
analysis period, plus any deficit or minus any surplus from
at the federal agencies selling timber.
the preceding analysis period.
Timber sales are meant to be set-aside for exclusive bidding
Proposed Program Changes
by small businesses when market conditions show that
One of SBA’s currently proposed rules would affect the
small businesses are not receiving enough timber volume
timber set-aside program, but only as it applies to the FS.
under full-and-open competition. Because statute does not
The rule would amend regulations to include instructions on
define the “fair proportion” of federal sales for small
how timber hauling costs are estimated in developing an
businesses, agencies have used “market share” methods
appraised price for small business set-aside sales. The SBA
based on prior small business participation in a particular
recently indicated that it intended to issue a final rule in
geographic or market area, such as a particular national
September 2022.
forest, to establish the appropriate amount of small business
sales.
Program Importance to Congress
As part of its oversight role with respect to the FS and
Determining Set-Asides
BLM, Congress may be interested in the impact of federal
Memoranda of Understanding (MOUs) between the SBA
timber harvesting on small businesses and the local
and agencies selling timber, along with agency policies,
economies near national forests. Additionally, Congress
guide sales and the creation of small business set-asides.
may consider legislative proposals that affect timber sales
and set-asides. For example, legislation during the 117th
Both FS and BLM have specific procedures for determining
Congress proposes to convert timber sales to salvage sales
the appropriate small business market shares of sales. Other
on lands impacted by wildfires.
partner agencies designate sales for small business bidders
when either a specialist in the SBA’s ONRSA or the
Additional Resources
contracting officer for the timber selling agency
For additional information, see the following reports: CRS
substantiates a need for such a set-aside.
Report R45688, Timber Harvesting on Federal Lands, by
Anne A. Riddle; CRS Report R43872, National Forest
FS’s market share calculation methods are described in a
System Management: Overview, Appropriations, and Issues
Federal Register announcement (81 FR 66199):
for Congress, by Katie Hoover and Anne A. Riddle; and
CRS Report R46976, U.S. Forest Ownership and
In order to determine the small business market share
Management: Background and Issues for Congress, by
that triggers a set-aside sale, FS calculates the current
Katie Hoover and Anne A. Riddle.
small business market share based on small business
https://crsreports.congress.gov

Small Business Set-Asides for Federal Timber Sales

Anne A. Riddle, Analyst in Natural Resources Policy
IF12121
R. Corinne Blackford, Analyst in Small Business and
Economic Development Policy

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