Proposed Sustainable Procurement Revisions to the Federal Acquisition Regulation
As part of its Federal Sustainability Plan, the Biden administration has issued a proposed rule that would revise the Federal Acquisition Regulation (“FAR”) to incentivize federal government buyers to prioritize the acquisition of sustainable products and services. This proposed rule follows the November 2022 proposed FAR rule that would require contractors to disclose information regarding greenhouse gas emissions, which we discussed here.
Among other things, the proposed rule directs federal agencies to follow the Environmental Protection Agency’s (“EPA”) procurement recommendations across thirty-four purchase categories, and to avoid procuring products containing perfluoroalkyl and polyfluoroalkyl (“PFAS”) chemicals. The proposed rule also provides greater clarity about what qualifies as a sustainable product or service, and creates a new Sustainable Products and Services contract clause that will be applicable to all contract actions (subject to certain exceptions), thereby expanding the scope of these new policies.
Companies that regularly do business with the federal government should closely review the proposed rule to determine how their products and services may be affected. If compliance with the new requirements will prove difficult, you should submit comments on the new proposal. Moving forward, contractors should take care to substantiate any claims regarding the environmentally friendly or sustainable nature of their products, practices, and services to avoid the risk of their products becoming ineligible for government purchase or later claims of fraud in supplying them to government agencies. This is all the more important given the upcoming revisions to the Federal Trade Commission’s (“FTC”) “Green Guides” that will affect marketing and sales claims to private parties.
The FAR Council has proposed wide-ranging revisions to the FAR — the U.S. government’s policies and procedures for acquisitions by executive agencies. The proposed revisions implement Section 208 of Executive Order 14057, Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability, which directs agencies to reduce emissions, promote environmental stewardship, support resilient supply chains, drive innovation, and incentivize markets for sustainable products and services. The proposed rule would, among other things, revise FAR Subpart 23.1 to: (1) supplement and consolidate the policies and procedures (as well as exceptions and exemptions) for purchasing and prioritizing sustainable products and services; and (2) add a new omnibus contract clause that would apply to all contract actions, including the purchase of commercial products (including commercially available off-the-shelf (“COTS”) items) and commercial services, as well as those procurements at or below the micro-purchase threshold. The proposed revisions would also more generally restructure and streamline FAR Part 23, which addresses sustainable government procurement practices, and update other FAR provisions necessary to implement Executive Order 14057.
1. Policies and Procedures (and Exceptions and Exemptions) for Purchasing and Prioritizing Sustainable Products and Services
The proposed rule would require federal agencies to procure sustainable products and services “to the maximum extent practicable.” Moreover, the proposed rule creates a new presumption that it is always practicable to procure sustainable goods and services unless one of the following circumstances is met: (1) the agency cannot competitively do so within a reasonable performance schedule; (2) such goods and services do not meet reasonable performance requirements; or (3) such goods and services are not reasonably priced. The revisions also propose requirements for federal agencies to prioritize purchasing products and services that have multiple sustainability attributes — i.e., products and services that meet both a statutory purchasing program and a required EPA purchasing program. However, contracting officers are not required to procure products and services that meet required EPA purchasing programs when doing so would conflict with statutes, executive orders, or regulations that impose domestic manufacturing and content requirements (such as the Buy American Act).
Additionally, the proposed rule states that products under services contracts will be subject to the new sustainability policy in certain circumstances. Such circumstances include products that are: (1) delivered to the government during performance; (2) acquired by the contractor for use in performing services where the cost of the products is a direct cost to a government contract; or (3) furnished by the contractor for use by the government, including use at government-owned contractor-operated facilities.
In a change that largely adds detail to what previously qualified as a sustainable acquisition,1 the proposed rule includes a definition of “sustainable products and services,” which are “products and services that are subject to and meet statutory purchasing program requirements or other EPA purchasing program requirements” such as:
- Products containing recovered material designated by the EPA under the Comprehensive Procurement Guidelines;
- Energy- and water-efficient products that are ENERGY STAR® certified or FEMP-designated products;
- Biobased products meeting the content requirement of the U.S. Department of Agriculture under the BioPreferred® program;
- Acceptable chemicals, products and manufacturing processes listed under EPA’s Significant New Alternatives Policy (“SNAP”) program;
- Water-efficient products and services with the WaterSense® label;
- Safer Choice-certified products (products that contain safer chemical ingredients); and
- Products and Services that meet EPA recommendations of Specifications, Standards, and Ecolabels.
The proposed revisions would also expand current FAR exceptions and exemptions to sustainable procurement regulations. Notably, such exceptions would include: (1) contracts performed outside of the U.S. (unless the agency believes that sustainable purchasing is in the best interests of the U.S.); (2) weapons systems, although compliance with applicable agency affirmative procurement programs would be required for recovered materials and for alternatives to ozone-depleting substances unless a written justification exists; (3) energy-consuming products or systems designed or procured for combat or combat-related missions for certain requirements regarding energy- and water-consuming products; and (4) biobased products designed to be used in military equipment, spacecraft systems or launch support equipment for certain requirements regarding biobased products. The proposed rule also revises the FAR’s existing exemptions to allow agency heads to exempt certain activities and acquisitions, including allowing the Director of National Intelligence to exempt certain intelligence activities.
2. Omnibus Contract Clause
The proposed rule would also extend the sustainable procurement obligations to contractors by requiring the incorporation of a new omnibus clause in all solicitations and contracts, unless there is written justification that it is not practicable to procure sustainable products and services or an exception or exemption applies. The clause would direct contractors to: (1) deliver and furnish sustainable products and services for government use (including use at government-owned contractor-operated facilities); (2) incorporate sustainable products and services into the construction of public buildings or public works; and (3) furnish sustainable products and services for contractor use in performing services under the contract, where the cost of the products is a direct cost to the contract (versus costs that are normally applied to a contractor’s general and administrative expenses or indirect costs). The proposed clause also states that the contract will identify any products or services not subject to the clause, and provides that sustainable products and services must meet applicable standards, specifications, and program requirements at the time of quote or offer submission. The omnibus clause would provide direction to contractors on prioritization of statutory and multi-attribute sustainable products and services, referring them to federal resources (such as the Green Procurement Compilation) for a list of sustainable products and services, as well as other related sustainability guidance.
Takeaways and Next Steps
The proposed rule should create incentives for new, more eco-friendly products and services providers to become more competitive suppliers to the federal government relative to “standard” offerings. It is also likely that the proposed revisions, if adopted as proposed, will encourage companies to promote the sustainability-related attributes of their products in an attempt to receive government contracts or subcontracts. The proposed rule does not provide detail on how such sustainability claims would be further validated by the government and assessed for accuracy other than reliance on EPA guidance or certifications, but any such claims may be subject to the same standards loosely described in the FTC’s Green Guides (currently under revision, the scope of which remains unclear). Thus, companies should ensure that the sustainability attributes of their products are not overstated, especially at a time when companies are increasingly coming under scrutiny for “greenwashing” — the practice of claiming that practices, products, or services are more sustainable or environmentally friendly than they really are.
The comment period for the proposed rule will close on October 2, 2023.
The V&E team is available to provide more in-depth guidance about the proposed revisions to the FAR and steps that companies can take to reduce greenwashing risks as well as aid any companies wishing to publicly comment on the proposed rule.
1 FAR §§ 2.101; 23.103.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.