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petitioner would save if the Walker entities stopped bidding on
public timber. Clausen studied sales by the Forest Service, BLM,
and the State of Oregon to quantify how much direct competition
there was between the Frereses and Walkers during the 7 years
before the Walker asset sale. He found nine sales in which
petitioner was the high bidder and Walker was the second high
bidder. He assumed that petitioner could have been the high
bidder for slightly more than the third high bid for those sales
if Walker had not bid. He subtracted the high bid from the third
high bid. The difference is the "upbid". In his opinion, the
upbid was the cost Walker imposed on petitioner. He calculated
that the annual average upbid for the 7-year period was $524,400.
He applied that amount to each year from 1981 to 1987. He
calculated the total present value of the upbids over the 7 years
to be $1,568,277 discounted by 20 percent and $1,757,870
discounted by 15 percent. He averaged those two amounts and
concluded that the covenants were worth $1,650,000.
We believe Clausen significantly overstated his conclusion.
He assumed that the upbid is the difference between the highest
and third highest bid. Clausen did not adequately explain why he
subtracted the upbid resulting from two bidders to estimate the
effect on the contract price of one bidder. He did not explain
why it is reasonable to assume that a bidder could count on
beating the third highest bidder by an insignificant amount.
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