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Chapter 3 - Contracts in General

Mailing List

Contractors wishing to secure reforestation contracts must submit their names to the Forest Service and the Bureau of Land Management to be placed on a mailing list. Once the contractors are on the mailing list they are notified of the contracts being offered to the general public. The Federal Government recommends that contractors subscribe to the "Commerce Business Daily" if they want notification of solicitations in excess of $25,000, since this publication contains Government-wide procurement opportunities.

The Federal agencies maintain a separate mailing list used to notify the contractors of contracts under $25,000 which are being offered. Contractors wishing to be notified of contracts under $25,000 must submit their names to the local offices of each agency. To secure information on contracts under $25,000, you will need to contact each of the Forest Service offices or BLM offices in your State.

The same is true with the State of Oregon Forest Service. General Services issues contracts in excess of $15,000, and Contracting Officials are granted the authority to issue contracts under $15,000. The State also maintains two separate mailing lists; one is maintained by General Services and the other is maintained by the Contracting Officials.

Solicitation Methods

1. Invitation for Bids (IFB)

A solicitation method which requires a prospective contractor to submit a sealed bid. The bids are then opened at a public bid opening. Bids are considered a firm offer and cannot simply be withdrawn after the opening. Contracts are awarded to the lowest bidder.
IFB is used for all solicitations in excess of $25,000, and constitute the largest percentage of the contracts awarded.

2. Request for Proposal (RFP)

A solicitation method used with competitive negotiation for procurement. If you are making an offer in response to a RFP, you may withdraw your offer at any time before the contract is awarded. There is no public bid opening with this solicitation method.
RFP is normally used for solicitations under $25,000. The Contracting Official will determine whether on not to use either a RFP or RFQ (below).

3. Request for Quotations (RFQ)

A solicitation method that includes a request for price information. An RFQ may be either oral or written. If written quotes are required, no public opening is held. Quotes are reviewed and awards are made based on the quote which will be most advantageous to the Government, the lowest bid.
Contract Contents

The Federal agencies follow applicable Federal regulations when developing the schedules and general provisions of any pre-commercial thinning or tree planting contract. Therefore, you will find specific information contained within all contract solicitation packages. The following is a typical table of contents from a contract solicitation package:

Section A _________ Solicitation, Offer and Award

Section B _________ Continuation Sheet

Section C _________ Specifications Tree Planting

Section D _________ Inspection/Acceptance/Payment

Section E _________ Inspection/Acceptance/Payment

Section F _________ Delivery/Performance Tree Planting

Section G _________ Contract Administration

Section H _________ Special Contract Requirements

Section I _________ Service Contract Clauses

*Section J _________ Wage Determination and Fringe Benefits

*Section K _________ Representations, Certifications, and Other Statements of

*Section L _________ Instructions, Conditions, Notice to Offer

The sections marked with the "*" will contain information that may be helpful in completing your audit. In these sections you will be able to find social security numbers, employer identification numbers, addresses, entity information, bonding company information, the taxpayer's average annual receipts for the prior 3 fiscal years, if applicable, and names, addresses, EIN, and labor license numbers of reported parent companies.

The Contract Officials may be able to provide you with more information on the contractor you have under audit which will be helpful in completing your audit. The following is a listing of information that can be obtained from Federal agencies and more than likely from State agencies, so check with them.

1. A listing of payments made on each contract.

2. The inspector's report listing the crew foreman and individuals working on the contract during the job site inspection.

3. The hourly rate, required by the Service Contract Act, payable to each employee.

4. A copy of the job bid submitted by the contractor, (in most cases).

5. A copy of the Government's estimate of the costs to complete the contract, (in most cases).

6. The Government's estimate of the number of employees needed to do the job and the hours needed to complete the contract.

The information retained by the Federal and State agencies can be obtained without a summons. However, you must supply the agency with as much information about the contracts as you can, (that is, contract number, the location of the contract, or the office that issued the contract). This is important because each Federal agency maintains only those records which pertain to the contracts they have awarded. To get the information on all the contracts worked by your contractor most likely will require contacting several different offices.

Probably the most important item that can be obtained from the Federal agency is a copy of the contractor's job bid. Remember that the job bid becomes the amount for which the contract is awarded -- that is, gross income received by the contractor. The job bid may also help you to determine if the costs reported on the return are reasonable.

Delivery/Performance Requirements

Once a contract has been awarded, the Contract Officer Representative (COR) will issue the contractor a written notice to proceed. The contractor shall perform no preliminary work prior to receipt of the written notice to proceed. The contractor shall begin work within the specified number of days from the effective date of the notice to proceed. The contractor shall continue performance of the work according to the time specified within the Schedule of Items.

Failure to do so may be cause for action under the "Default" clause.

At the pre-work conference, the contractor shall provide to the COR a written "work progress plan" which details his or her work force and his or her proposed schedule for completion of the work, within the contract performance time. The work schedule will be used as a guide to measure the contractor's performance as well as to calculate such things as the rate of tree delivery to meet the contractor's needs to ensure the timely completion of the contract. If the contractor's progress falls behind 20 percent of the established work schedule, the contractor's right to proceed may be terminated for default unless satisfactory progress is attained within 3 working days of the receipt of the written notice of deficient performance.

The COR is the on-the-ground administrator for the Contract Official. The COR is authorized to clarify technical requirements, and to review and approve work within the scope of the performance of the contract. The COR has the authority to designate a Project Inspector to determine whether or not the contractor has complied with the technical specifications, drawings, work schedule, and labor provisions at the work site.

At the pre-work conference, the Contract Official or the COR will make sure that each contractor understands, among other things, that the individuals performing the work are employees and are governed by statutory and regulatory laws pertaining to the reforestation industry. Some Contract Officials or CORs will have a special checksheet for the pre-work conference; you will find a copy of an actual checksheet used by a Contract Official, see Exhibit 3-1. This checksheet may be helpful in convincing the prime contractor that his or her workers are employees and do not qualify as subcontractors. Please refer to the employee section for further discussion of employees and laws applicable to the reforestation industry.

Payments

All vendor payments of $25,000 or more must be made through the Treasury Financial Communication System (a wire transfer system). Beginning sometime after December 31, 1988, and before December 31, 1989, contractors successful in obtaining contracts were required to supply certain financial institution information, (bank account numbers), to the Federal Government so their contract payments could be deposited directly to their bank account.
Contractors normally receive more than one payment during the performance time of the contract. According to Contract Officials, the contractors are paid approximately every 2 weeks and the amount of the payment is based on the work done, determined by the percentage of completion. However, it takes approximately a month from the time the contractor begins work on a contract until he or she receives the first payment.
Keep in mind, the duration of a contract is relatively short. In other words, once the contract is awarded it is usually started within 2 to 3 weeks and completed within another 2 to 4 weeks, depending on the size of the job. The Forest Service keeps the duration of the contracts short since they are concerned about planting the trees at a time which will ensure the highest rate of survival among the new seedlings.
You may find that the contractor has deposited funds into his or her business account that he or she does not consider to be taxable. Reforestation contractors are able to secure advances from their bank by assigning the income from the contracts that they have been awarded. For a discussion on assignment of income see Chapter 6, of this audit guide.

Exhibit 3-1 - Checksheet Used by Contract Official [Exhibit omitted]