Surety Bond Encyclopedia

Timber Sale Bond - Statewide in Pennsylvania

Brief Summary

The performance bond on a Pennsylvania state forest timber sale is not a flat amount. It is a percentage of your bid plus the Bureau's road estimate, and the percentage drops as the sale gets bigger. A corporate surety bond lets the winning bidder meet that requirement without tying up cash in a cashier's check for the life of the contract.

The Pennsylvania Department of Conservation and Natural Resources, Bureau of Forestry, requires the successful bidder on a state forest timber stumpage sale to furnish a performance deposit payable to the Commonwealth of Pennsylvania. A corporate surety bond is one accepted form. The amount runs from 25% down to 10% of the bid plus the Department's estimated road and seeding costs, and it must be furnished within 30 days of the District Forester's letter along with the signed contract.

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How to Apply for a Timber Sale Bond:

Review the sale prospectus for the bid deposit amount and the Bureau's road and seeding estimate.
Submit the bid with the required bid deposit, or rely on a permanent bid bond if you are a regular buyer.
After award, calculate the performance security from the band that matches your bid.
Obtain a corporate surety bond payable to the Commonwealth of Pennsylvania in that amount.
Sign the Tree Estimate Timber Stumpage Sale Contract and furnish the bond within 30 days of the District Forester's letter.
Pay in full for each cutting block before logging begins on it.

Detailed Information About the Pennsylvania Timber Sale Bond:

The bond amount is a percentage, not a set figure

DCNR's State Forest Timber Stumpage Sale Bidding and Performance Requirements set the performance security as a share of the sum of the bid and the Bureau's road estimate. Recent prospectuses describe the base as the bid value plus the Department's estimated road and seeding costs.

Under $50,000: 25%
$50,000 to $250,000: 20%
$250,000 to less than $2.5 million: 15%
$2.5 million or more: 10%

The percentage is applied to the bid plus the road and seeding estimate, so the bond is larger than the same percentage of the bid alone.

Accepted forms of performance security

The successful bidder may furnish a corporate surety bond or a certified, cashier's or treasurer's check, official check, or bank, postal or express money order payable to the Commonwealth of Pennsylvania. Negotiable securities, including a letter of credit, bank savings account or bank investment certificate, may be furnished instead. Personal checks and personal money orders are not accepted. The contract describes the security as a corporate bond or other security approved by the State Office of Attorney General.

The bid deposit comes first

Every bid carries a deposit set by sale value. The published schedule runs from $100 for sales of $100 to $1,000 up to $65,000 for sales of $4,000,001 to $5,000,000, and 1.5% of value rounded to the nearest $1,000 above that. Each prospectus states the deposit for that sale. Unsuccessful bidders get their deposits back after the bid opening. The winner's deposit is returned once the contract is signed and a satisfactory performance deposit is furnished. Regular buyers have the option of providing permanent bid bonds.

Deadline and what the bond secures

The successful bidder has 30 days from the date of the District Forester's letter to sign the Tree Estimate Timber Stumpage Sale Contract and furnish the performance deposit. The security guarantees faithful performance of the contract. If the buyer defaults, the Department may apply the deposit to the buyer's obligations, place the buyer on a contractor responsibility list and declare the buyer ineligible for future state forest timber sales.

Paying for the timber

The bond does not replace stumpage payment. Under the contract, the marked or designated timber on a cutting block must be paid for in full before logging starts on that block.

How bids are submitted

DCNR's bidding page states that bids after January 1 use the Bid Express system and that mailed paper bids are not accepted.

Eligibility and Requirements for a Pennsylvania Timber Sale Bond:

Corporate surety bond or other security approved by the State Office of Attorney General.
Commonwealth of Pennsylvania as payee and obligee.
Amount of 25%, 20%, 15% or 10% of the bid plus the road and seeding estimate, depending on bid size.
Bond in force for the life of the timber sale contract.
No personal checks or personal money orders as security.

Pennsylvania Timber Sale Bond FAQs:

How much is the performance bond on a state forest timber sale?

It depends on the bid. The security is 25% for bids under $50,000, 20% from $50,000 to $250,000, 15% from $250,000 to less than $2.5 million, and 10% at $2.5 million or more, applied to the bid plus the Department's estimated road and seeding costs.

Is the bid deposit the same as the performance bond?

No. The bid deposit goes in with the bid and is set by sale value. The performance deposit is furnished after award and is returned on its own terms. The winner's bid deposit comes back once the contract is signed and a satisfactory performance deposit is in place.

How long do I have to post the bond after winning?

Thirty days from the date of the District Forester's letter, together with the signed contract.

What happens if I default on the contract?

The Department may apply the security to what you owe, place you on a contractor responsibility list and declare you ineligible for future state forest timber sales.

Can I use a bond for the bid deposit too?

Regular buyers have the option to provide permanent bid bonds. Otherwise the prospectus calls for a certified, cashier's, treasurer's or official check, or a bank, postal or express money order.