As part of the Biden administration’s effort to use federal purchasing power to tackle climate change, the FAR Council issued a final rule, effective May 22, 2024, requiring agencies to procure “sustainable products and services,” to the “maximum extent practicable.” The “sustainable products and services” rule is just one of several proposed rules and directives intended to compel the government and government contractors to do business in a more environmentally sustainable way.
Under the final rule, the procurement of sustainable products and services is considered “practicable” if the products or services meet “reasonable performance requirements” and can be acquired “competitively within a reasonable performance schedule” and at “a reasonable price.” Federal Acquisition Regulation (“FAR”) 23.103(a)(1). To determine whether the price is reasonable, the regulation directs agencies to “consider whether the product is cost-effective over the life of the product.” FAR 23.103(a)(2). If an agency determines that it is not practicable to procure sustainable products or services, the contracting officer must document the reason in writing in the contract file. FAR 23.103(a)(2).
When a government contract is for services or construction, a contractor is required to provide sustainable products if the products will be delivered to or used by the government, incorporated into a public building or work, or acquired by the contractor for use in performing services where the cost of the products is a direct cost to the contract (including contracts for the management and operation of government-owned facilities where the agency would be required to comply if it operated the facility). FAR 23.103(c); FAR 52.223-23(b)(2).
The new rule also updates FAR 2.101 to define “sustainable products and services” as those products that meet the requirements of a statutory or Environmental Protection Agency (“EPA”) purchasing program, such as EPA-identified products containing recovered material, that are non-ozone depleting, use safer chemicals, are water efficient, or have an EPA-recommended “ecolabel” (in effect as of October 2023), as well as Energy Star-certified and Federal Energy Management Program-designated products, and biobased products meeting United States Department of Agriculture requirements under the Biopreferred program.
To ensure receipt of responsive offers and compliance during contract performance, the agency must identify the “sustainable products and services, including the purchasing program and type of product or service, that are applicable to the acquisition” in the solicitation and contract. FAR 23.104(b). The FAR Council also created a new contract clause, FAR 52.223-23, which states that the applicable sustainable products and services, and any products or services that are not subject to the clause, will be set forth in the statement of work or elsewhere in the contract. FAR 52.223-23(b)(1). Although there is no express flow down requirement, the FAR Council stated that prime contractors must flow down the clause to subcontractors as appropriate.
Lastly, the rule contains certain exceptions, including for supplies delivered outside of the United States and products or systems designed or procured for combat, as well as exemptions for intelligence activity, national security, or in the case of an emergency or major disaster. FAR 23.105; FAR 23.106.
While the FAR has for some time required the government to purchase “green” products, the new rule is expected to increase the volume of sustainable products and services procured by the government and required to be used by contractors. The language in the rule directing agencies to procure sustainable products and services to the “maximum extent practicable” will require agencies to make genuine efforts to comply or otherwise justify why they cannot.
Reflecting the government’s push to address climate change through its purchasing power, the FAR broadly states that the objective of “sustainable acquisition” is to maintain conditions “under which humans and nature can exist in harmony” and that “permit fulfilling the social, economic, and other requirements of present and future generations.” FAR 2.101. To that end, the sustainable purchasing rule is likely just the beginning of changes contractors can expect.
Another proposed rule would require contractors to inventory and publicly disclose their greenhouse gas (“GHG”) emissions and set science-based reductions targets. The public comment period on the proposed rule closed in January 2023 and the comments are reportedly being reviewed by the Defense Acquisition Regulations Council, which is scheduled to issue a report on May 22, 2024, unless the date is further extended. In addition, in September 2023, the Biden administration directed agencies to consider the social costs of GHG emissions in federal procurement decisions. The directive followed the FAR Council’s October 2021 Advanced Notice of Proposed Rulemaking seeking public input on a potential FAR amendment requiring the social cost of GHGs to be considered in procurement decisions and, where feasible, giving preference to bids and proposals from suppliers with a lower social cost of GHG emissions. A proposed rule is still pending review.