Morrison Foerster’s Government Contracts Insights provides our in-depth analysis of developments and trends impacting government contracting. Through Insights, our attorneys offer a real-time assessment of the statutory, regulatory, legal, and business-related developments and trends that are shaping the industry. We also examine a full array of non-U.S. public procurement issues, mindful that our clients compete in a global marketplace.Morrison Foerster’s nationally recognized Government Contracts and Public Procurement practice represents the world’s leading companies in the aerospace and defense, intelligence, cybersecurity, information technology, financial and professional services, education, healthcare, infrastructure, and logistics support sectors. We are enlisted to address our clients’ most complex and important legal issues. Our work includes contract and subcontract negotiation and other transactional matters, business and regulatory compliance counseling, internal investigations, bid protests, and a wide array of enforcement and litigation matters. Our clients range from Fortune 50 companies to small and medium-sized companies just entering the public sector. We advise both U.S. and non-U.S. companies involved in municipal, state, federal, and non-U.S. procurement matters.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Tina is Co-chair of Morrison Foerster’s Government Contracts & Public Procurement practice. She represents a wide variety of government contractors including information technology, defense, biotechnology, and pharmaceutical companies, with a focus on general contract counseling and compliance, particularly concerning intellectual property, and cybersecurity matters and federal grant funding.Tina counsels contractors on compliance with federal, state and local acquisition and ethics regulations and with the evolving myriad of requirements pertaining to data security and cybersecurity. She has been involved with numerous internal investigations and compliance reviews, and with mandatory and voluntary disclosures to agencies, and litigation of False Claims Act matters.Tina routinely advises clients concerning:<ul><li>Prime-subcontractor relationships</li><li>Sources of supply and country of origin requirements</li><li>Price reductions and price reporting issues</li><li>Organizational conflicts of interest</li><li>Safeguarding of intellectual property and other proprietary interests</li><li>Licensing and data rights issues</li><li>Handling of classified materials and controlled unclassified information</li><li>Agency suspension and debarment proceedings</li></ul>She also assists clients with due diligence and other activities related to the acquisition of government contracting concerns, and with the drafting and negotiation of teaming agreements, subcontracts, licensing agreements, and cooperative research and development agreements. She also assists clients applying for federal grants (including SBIR and STTR agreements), and those who seek to obtain other transactional authority agreements, as well as those competing for state and local government work.Tina’s litigation experience includes government contracts claims litigation in federal courts and before boards of contract appeals, bid protests before the Government Accountability Office and the Court of Federal Claims, and complex disputes in federal courts, including civil fraud and False Claims Act litigation and reverse Freedom of Information Act litigation.Prior to joining Morrison Foerster, Tina worked at another large national firm and as a trial attorney in the Office of the General Counsel of the Navy, Navy Litigation Office.<h4>Representative Experience</h4><ul><li>Negotiation of largest CHIPS Act federal funding agreement between multinational semiconductor corporation and U.S. Department of Commerce.</li><li>Negotiated prime contract and major subcontracts related to the Department of Energy’s next generation supercomputer program, including extensive IP rights negotiations and negotiation of associated patent rights waivers.</li><li>Negotiated series of other transaction authority agreements with DARPA and associated subcontracts with more than a dozen research universities on behalf of a firm biotech client, including complex IP rights allocations and material transfer agreements.</li><li>Assist clients with FedRAMP authorization process and with development of license agreements for software products sold to federal, state and local government agencies.</li><li>Cyber incident response counseling to some of the largest companies and organizations impacted by security incidents.</li><li>Advises clients on Bayh-Dole reporting of inventions and IP strategies for contracts and grants.</li><li>Conducts due diligence for major government contract mergers and acquisitions.</li></ul>

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Tina is co-chair of Morrison Foerster’s Government Contracts & Public Procurement practice. She counsels a wide variety of government contractors on compliance with federal acquisition and ethics regulations. She drafts and negotiates contracts on their behalf and has been involved with numerous internal investigations and compliance reviews, and with bid protest, contract claims, and False Claims Act litigation. She also advises on M&A transactions involving government contractors.

Tina D. Reynolds

Jim Tucker is of counsel in Morrison Foerster’s Government Contracts and Public Procurement Practice Group and is based in the firm’s Washington, D.C. office.Jim’s practice runs the gamut of litigation and counseling in federal procurement matters, with an emphasis on bid protests, Cost Accounting Standards disputes, and small business matters. He has represented both protesters and awardees in scores of protests before the Government Accountability Office, the Court of Federal Claims, and procuring agencies, in acquisitions ranging from small business procurements to multibillion-dollar contracts of global significance. His representative protest matters span the aerospace sector, the Intelligence Community, base operations and logistics, healthcare, nuclear and environmental work, and information technology and software acquisitions. His protests have included both classified and unclassified programs. In addition to prevailing in published decisions, Jim has also secured favorable corrective action on behalf of clients in a wide variety of protests that were resolved without a published decision.Jim’s work also focuses on disputes over cost allowability and compliance with the Cost Accounting Standards, and he has appeared before the Armed Services and Civilian Boards of Contract Appeals, in size and status protests before Small Business Administration (SBA) area offices, and appeals before the SBA Office of Hearings and Appeals. Jim regularly counsels clients on contract interpretation, organizational conflicts of interest, and small business compliance.Jim graduated with high honors from the George Washington University Law School, where he focused his studies on federal procurement law, was a member of the Law Review, and interned with the General Services Administration’s suspension and debarment office. Jim also holds a degree in theology magna cum laude from the Pontifical Gregorian University in Rome and a bachelor’s degree in classical languages and literature summa cum laude from the University of Kentucky, where he graduated Phi Beta Kappa.

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Jim maintains an active practice in bid protests before the Government Accountability Office and contracting agencies and counsels clients in contract disputes and compliance obligations.

Jim Tucker is of counsel in Morrison Foerster’s Government Contracts and Public Procurement Practice Group and is based in the firm’s Washington, D.C. office. Jim’s practice runs the gamut of litigation and counseling in federal procurement matters, with an emphasis on bid protests, Cost Accounting Standards disputes, and small business matters.

James Tucker

<div style="margin-bottom: 15px;" class="videoWrapper"><iframe class="sticky-video" title="Meet Alex Ward, Government Contracts Practice Co-Chair" src="https://www.youtube-nocookie.com/embed/TkliwdSlTaQ?rel=0" frameborder="0" allow="autoplay; encrypted-media" allowfullscreen="1" title="iframe"></iframe></div>J. Alex Ward is co-chair of Morrison Foerster’s Government Contracts and Public Procurement group. His practice covers a full range of government contracts matters, including investigations, bid protests, claims, general litigation, corporate transactions, and counseling. Alex strives in all matters is to provide his clients the highest level of efficient and effective representation.Alex represents contractors in internal and external investigations, disclosures to the government, and qui tam litigation, with great success in reducing or eliminating his clients’ exposure through active engagement with the government. His work in this area includes obtaining numerous declinations and dismissals of False Claims Act cases in their earliest stages, sparing his clients the cost, risk, and exposure of litigation.He has also served as lead counsel in dozens of bid protests involving military and civilian agency procurements of a wide range of products and services, including all manner of pre- and post-award protests in the GAO, the U.S. Court of Federal Claims, and state tribunals, as well as appeals to the U.S. Court of Appeals for the Federal Circuit and size protest appeals before the SBA’s Office of Hearings and Appeals.Alex handles all aspects of the claims process, from the initial assessment and drafting of requests for equitable adjustment through litigation in the Boards of Contract Appeals and the Court of Federal Claims. Alex’s practice also covers the full gamut of other controversies confronting government contractors, including prime-sub, teaming partner, employer-employee, competitor, and indemnification disputes. His litigation work also includes a wide variety of pro bono engagements, in which he has represented both individual and institutional clients in matters ranging from immigration and criminal defense to sustainable procurement and protection of the environment.Prior to joining the firm, Alex served in the U.S. Army as a commissioned officer and an Assistant to the General Counsel of the Army responsible for civil works and international matters, and as a clerk for judges on the U.S. Courts of Appeals for the Armed Forces and the D.C. Circuit. He is a member of the Boards of the Morrison & Foerster Foundation and the Chesapeake Bay Foundation and of Law360’s Government Contracts Editorial Board.

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Alex is co-chair of Morrison Foerster’s Government Contracts and Public Procurement practice. His practice covers a full range of government contracts matters, including bid protests, claims, investigations, corporate transactions, and counseling.

J. Alex Ward

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Morrison Foerster’s Government Contracts Insights blog provides an in-depth analysis of news, developments, and trends impacting government contracting and procurement. Through Insights, attorneys from our nationally recognized Government Contracts and Public Procurement practice will offer a real-time assessment of the statutory, regulatory, legal, and business-related developments that are shaping the industry. This blog will also examine a full array of U.S. and non-U.S. public procurement issues, mindful that our clients compete in a global marketplace.Read about our <a href="http://govcon.mofo.com/editors/">Authors</a>.Never miss a post. Subscribe to get real-time updates.

Brad is a partner in Morrison Foerster’s Litigation Department, Managing Partner of the Austin office, and Chair of the firm’s Israel practice. He is the former Co-Chair of the firm’s Global Litigation Practice and the Government Contracts + Public Procurement Practice.

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The Tortured Regulations Department: SBA’s New Rule and Its Effect on Investments

Bid Protest Spotlight: Standing, Relationships, Responsibility

House’s Passage of the SAMOSA Act Signals Policy Shift Towards Government-Wide Enterprise Software Licensing

New DFARS Regulation on Small Business Affiliate Past Performance

Bid Protest Spotlight: Unclear Criteria, Data Rights, Conflicts

In Innovative Technologies, Inc., ASBCA No. 6186, 62185, the Armed Services Board of Contract Appeals (“ASBCA” or the “Board”) held that, despite the federal government’s failure to include or incorporate the McNamara-O’Hara Service Contract Act (“SCA”) FAR Clause 52.222-41 (the “SCA Clause”) in the contract, the contractor was required to comply with the SCA and not entitled to an equitable adjustment for all costs it incurred from a $1.5 million settlement with the U.S. Department of Labor (“DOL”) for its noncompliance. This case serves as an important reminder for contractors to be vigilant in determining whether their services contracts are covered by the SCA, even if the agency fails to include or reference the SCA Clause. Factual BackgroundIn 2006, the Defense Media Agency (“DMA”) awarded the contractor a firm-fixed price contract for performance of engineering services in the United States. The DMA contracting officer did not include or incorporate in the contract or any subsequent task orders the SCA Clause, but the surrounding circumstances indicated that the SCA might apply to the contract, including incorporation of DOL wage determinations (“WDs”) in the contract; an attachment with “Contractor Labor Categories” for offerors to propose “Fully Burdened/Escalated Rates”; the predecessor contract containing the SCA Clause; and the solicitation questions and answers for the predecessor contract describing how WDs would be issued and prices adjusted for those new WDs. Here, the contractor’s price proposal was not clear whether it intended to comply with the SCA, but it also had passing references suggesting that the contract might be subject to the SCA. The contractor proceeded to perform almost the entire contract from 2006 to 2013, without the contractor or DMA appearing to acknowledge the contact was subject to the SCA or seeking to incorporate new WDs into the contract. In May 2013, the DOL notified the contractor it was investigating several potential labor violations and required DMA to modify the contract to add the SCA Clause and applicable WDs. In October 2013, the DOL issued a determination, finding the contractor failed to pay workers appropriate prevailing wages and fringe benefits in compliance with the SCA, including misclassifying workers, paying at lower labor categories, and failing to keep records as required by the SCA. After initially disputing the violations, the contractor ultimately entered a settlement agreement with the DOL, agreeing to pay roughly $1.53 million in back wages to impacted workers, retroactive to the date of the initial 2006 contract award.In January 2017, the contractor submitted to DMA a request for equitable adjustment (“REA”) under FAR 22.1015 and other equitable adjustment language in earlier contract modifications, seeking repayment of the $1.5 million DOL settlement, plus another $850,000 in “applicable burdens.” The contractor argued that it was entitled to an equitable adjustment because DMA’s failure to include the SCA Clause resulted in its noncompliance and led to the $1.5 million DOL settlement. The DMA mostly denied the contractor’s claim, but it subsequently issued an equitable adjustment for $568,000. The contractor then appealed the decision to the Board for the amount it initially sought. The Board’s HoldingOn review, the Board held that: (1) the SCA clearly applied despite the lack of FAR clause; and (2) most of the claim did not fit the criteria to receive an equitable adjustment under FAR 22.1015 or other equitable adjustment provisions. <ul><li dir="ltr">Compliance with the SCA was Required Despite Omission of the SCA Clause: The Board found that the contract was subject to the SCA despite the DMA failing to reference or incorporate the SCA Clause into the contract. The Board noted “[t]he contract was patently for the furnishing of services in the United States through the use of service employees, so it was governed by the Service Contract Act.” The Board found that the SCA Clause could apply by operation of the law, reasoning that the “DMA’s omission of the SCA [C]lause and other administrative lapses, however negligent, did not alter the fundamental nature of the contract, nor the applicability of the SCA.” The Board also rejected the contractor’s argument that DMA’s inattention to the SCA requirements should factor into the contractor’s noncompliance. Instead, the Board highlighted the fact that the contract mentioned the SCA in other clauses and included WDs at time of award. </li><li dir="ltr">The Claim Did Not Fit the Criteria for an REA: The Board noted that REAs are required for increased labor costs when: (1) the agency has failed to include or omitted WDs; (2) the contractor’s labor rates do not meet or exceed the rates in the applicable WDs; and (3) the DOL requires the contractors to fix the errors or omissions. Here, however, the Board found that the contractor “d[id] not contend, or offer any evidence, that it would have proposed different contract labor rates, or acted differently in any other way, if the SCA [C]lause had been incorporated into the solicitation.” In fact, many of the contractor’s wages were already higher than the applicable WDs. The Board also noted that the remedies for FAR 22.1015 are “limited to costs caused by a government wage determination mistake and this FAR provision is not a free pass for contractors to obtain compensation for unrelated labor problems of their own making.” Here, the Board found that the contractor was entitled to an REA for a small portion of the backpay related to the missing applicable WDs, but the contractor was not entitled to an REA for the majority of DOL’s settlement because it was based upon labor violations unrelated to omission of applicable WDs, i.e., misclassification, nonpayment of overtime, and insufficient fringes violations. The Board also found that the equitable adjustment language in the contract modifications between DMA and the contractor mirrored the language in FAR 22.1015, so the contractor was limited to the same remedies as under FAR 22.1015.</li></ul>Practical TakeawaysThis case underscores the importance of contractors determining before contract performance whether their services contracts are covered by the SCA. Even if the agency fails to include or reference the SCA Clause in the contract, as here, contractors will not likely be relieved of their obligations to comply with the SCA for service contracts that fit the criteria for SCA coverage. The SCA also carries significant remedies for noncompliance, including significant back wages, suspension or termination of federal contracts, or mandatory debarment of the contractor from being able to contract with the federal government. Even where the DOL does not seek contract remedies or debarment, contractors can find themselves without recourse for an equitable adjustment under FAR 22.1015 or otherwise for any costs incurred relating to SCA noncompliance.Prudent contractors should closely review (with counsel) any service contracts for SCA coverage before contract performance, even if the contract does not include or reference the SCA Clause, WDs, or have other indicia of SCA coverage. If it is unclear whether the SCA may apply to a services contract, contractors should consider all surrounding circumstances and materials, including whether the predecessor contract was subject to the SCA, whether the solicitation includes any references to the SCA, WDs, or service workers, and whether the employees performing services on the contract are non-exempt employees that could be subject to the SCA. Contractors might also consider submitting questions and answers to the agency to clarify the agency’s position in addition to conducting their own independent review.

Missing SCA Clause Did Not Excuse Noncompliance or Allow for Full Equitable Adjustment

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Nicole Giles is an associate in the Government Contracts practice in Morrison Foerster’s Washington, D.C. office.

Nicole Giles

Nicole E. Giles

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Co-Chair, Global Employment and Labor Practice

Andrew co-chairs the firm’s Global Employment and Labor Group. He represents companies on a broad range of labor and employment litigation and counseling matters, successfully defending clients in number complex matters before federal and state courts and administrative agencies.

Andrew R. Turnbull

Andrew Turnbull represents companies on a broad range of labor and employment litigation and counseling matters. He has successfully defended clients in complex employment litigation before federal and state courts and administrative agencies. A primary focus of his practice involves helping companies navigate the unique employment issues that arise when doing business with the federal government, including advising on all aspects of OFCCP compliance, creating and implementing affirmative action plans, defending OFCCP audits and onsite investigations, conducting mock pay equity audits, drafting and developing business ethics policies and programs, and complying with the Service Contract Act, E-Verify, and the Drug Free Workplace Act.

Andrew Turnbull

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Missing SCA Clause Did Not Excuse Noncompliance or Allow for Full Equitable Adjustment

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In Innovative Technologies, Inc., ASBCA No. 6186, 62185, the Armed Services Board of Contract Appeals (“ASBCA” or the “Board”) held that, despite the federal government’s failure to include or incorporate the McNamara-O’Hara Service Contract Act (“SCA”) FAR Clause 52.222-41 (the “SCA Clause”) in the contract, the contractor was required to comply with the SCA and not entitled to an equitable adjustment for all costs it incurred from a $1.5 million settlement with the U.S. Department of Labor (“DOL”) for its noncompliance.

On May 19, 2023, the General Services Administration (GSA) issued Multiple Award Schedule (MAS) solicitation refresh 16, which introduced a formal offer process for joint ventures. To provide guidance on navigating those changes, GSA also issued a list of <a href="https://www.gsa.gov/system/files/Final%20JV%20Industry%20FAQs%20071923.pdf" target="_blank">Frequently Asked Questions (FAQ)</a> for joint ventures. The FAQ illuminates both positive and negative implications.The GoodStarting off with the good news: we now have official confirmation that joint ventures can hold a GSA MAS contract. Although this is old news to the many joint ventures that already hold GSA schedules, some in the industry were unaware it was possible for an unpopulated joint venture with little to no sales history to qualify for the schedule. This FAQ publicly confirms this avenue for growth.Unrelated to the GSA schedule itself, another positive found in this announcement is that GSA officially confirms that when a Mentor-Protégé Agreement (MPA) pursuant to the Small Business Administration (SBA) Mentor-Protégé Program ends, the same mentor and protégé can enter into a second MPA together. This is consistent with SBA’s brand-new regulations, which provide that a protégé may elect to renew its MPA with the same mentor, thereby reaching 12 years for the relationship, rather than six.The BadDespite this good news, GSA’s guidance is frustratingly impractical and will almost certainly be impossible to implement (wait for the revision). In the past, a joint venture would be awarded labor categories which could be utilized by any joint venture member to fulfill the required mentor-protégé workshare of 40% for the protégé (if applicable). Mid-contract, GSA has cast that fundamentally sound approach aside. In its place, GSA no longer permits joint venture partners to share labor categories. Instead, each member must propose and perform under their own separate (and not overlapping) labor categories. To make matters worse, GSA is requiring the joint venture partners to identify the source of labor for each partner for the life of contract. GSA will also require existing joint venture MAS contracts to conform their labor categories to this new convention. We hope joint venture members have their crystal balls ready, because not only does this require joint venture partners to predict well in advance how they are going to perform under all task orders in the future, but mentor-protégé joint ventures (MPJVs) or joint ventures where only one member has a given socio-economic status also have the added wrinkle of having to be able to do so with enough specificity to ensure they will be able to meet SBA’s performance of work requirements—years in advance! Although the GSA schedule is not a set-aside contract, orders thereunder may be, and according to GSA’s new solicitation refresh, joint venture partners must have been able to adequately predict which of the protégé’s labor categories might make up a minimum of 40 percent of a future set-aside task order’s statement of work.This change unnecessarily complicates proposal submissions and may even deter small business joint ventures from competing for set-aside task orders under GSA schedules. Worse still, there is no reason for this change. Current joint ventures’ holding schedules have been able to comply with both GSA and SBA rules without locking in labor categories for decades. Hopefully, GSA will promptly recognize the error of its ways and revert to its prior rule.Finally, GSA is now requiring all parties to a joint venture to submit a Commercial Sales Practice report. This may introduce an additional layer of risk joint venture parties may want to consider before competing for a GSA Schedule.Special thanks to Jennifer Aubel, senior manager of government contracting at Aprio, for contributing to this blog post.

GSA Issues Multiple Award Schedule Solicitation Refresh 16: What It Means for Joint Ventures, Good and Bad

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Ali Young is an associate in the Government Contracts practice in Morrison Foerster’s Washington, D.C. office.

Alissandra Young McCann

Ali Young is an associate in the Government Contracts practice in Morrison Foerster’s Washington, D.C. office.

Alissandra McCann

Jim Tucker is of counsel in Morrison & Foerster’s Government Contracts and Public Procurement Practice Group and is based in the firm’s Washington, D.C. office.
Jim’s practice runs the gamut of litiga

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Damien is a partner in the firm’s Government Contracts & Public Procurement practice. He represents clients in all facets of government contracts transactions, as well as regulatory counseling, subcon

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Damien C. Specht

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GSA Issues Multiple Award Schedule Solicitation Refresh 16: What It Means for Joint Ventures, Good and Bad

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The Federal Acquisition Regulation (FAR) Council <a href="https://www.federalregister.gov/documents/2023/08/03/2023-16012/federal-acquisition-regulation-sustainable-procurement" target="_blank">published</a> on August 3, 2023, a proposed “Sustainable Procurement” rule that reorganizes FAR Part 23 for clarity, moves subparts unrelated to sustainability or material safety to FAR Part 26, and includes a proposed “Sustainable Products and Services” contract clause. The new proposed clause will apply to all procurement contracts, including those for commercial products and services (even commercially available off-the-shelf items and those at or below the micro-purchase threshold), unless the agency issues a written justification or an authorized exception or exemption applies.  The rule implements Section 208 of Executive Order (EO) 14057, Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability, which requires agencies to incentivize use of sustainable products and services. As part of the Biden administration’s vision for a net-zero emissions economy by 2050, the proposed rule is the second to be issued from a set of three related open FAR cases. Last November, the FAR Council issued a proposed rule on disclosing contractors’ greenhouse gas emissions, on which we <a href="https://govcon.mofo.com/topics/white-house-announces-federal-supplier-climate-risks-and-resilience-rule" target="_self">previously commented</a>. The third FAR case, “Minimizing the Risk of Climate Change in Federal Acquisitions,” remains open, with a report from the FAR council’s Acquisition Environmental and Contract Management Team to the Defense Acquisition Regulations Council (DARC) Director expected later this month. Additional commentary by Morrison Foerster on the open FAR cases is available in our <a href="https://govcon.mofo.com/topics/sustainable-procurement-far-case-to-clarify-far-part-23" target="_blank">blog post</a>. FAR Part 23 ReorganizationThe proposed rule includes a restructuring of FAR Part 23 through the following key updates:<ul style="direction: ltr;text-align: left;"><li style="direction: ltr;text-align: left;">FAR 23.1, which will be titled “Sustainable Products and Services,” will now incorporate policies and procedures for sustainable purchasing preferences, including sections outlining existing statutory and EPA-required purchasing programs (see proposed FAR 2.101 definition below). It will also feature, at FAR 23.109, numerous provisions and clauses associated with these requirements as applicable to certain materials and services.</li><li style="direction: ltr;text-align: left;">FAR 23.2 will be dedicated to “energy saving performance contracts” (ESPCs) as authorized under the National Energy Conservation Policy Act (42 U.S.C. § 8287), but otherwise remains stable. Under an ESPC, an agency can contract with an energy service company for a period not to exceed 25 years to improve energy efficiency in one or more agency facilities at no direct capital cost to the U.S. Treasury in exchange for a contractually determined share of the cost savings that result.</li><li style="direction: ltr;text-align: left;">FAR 23.3 will be retitled “Hazardous Material Identification, Material Safety Data, and Notice of Radioactive Materials” and will combine the existing subparts 23.3, “Hazardous Material Identification and Material Safety Data,” and 23.6, “Notice of Radioactive Material.” </li><li style="direction: ltr;text-align: left;">FAR 23.4 will consolidate content related to environmental considerations at federal facilities that currently is found in other parts of the FAR, including FAR 23.10, “Federal Compliance with Right-to-Know Laws and Pollution Prevention Requirements,” FAR 23.9, “Contractor Compliance with Environmental Management Systems,” and the FAR 23.705 prescription for FAR 52.223-10, “Waste Reduction Program.”</li></ul>In sum, the proposed rule creates logical order out of various environmental-related sections currently scattered throughout the FAR and dedicates FAR Part 23 specifically to environmental matters.The Sustainable Products and Services ClauseAs noted above, the proposed FAR 23.1 includes the directive that agencies procure sustainable products and services to the maximum extent practicable and that they prioritize sustainable options. It also extends these obligations to contractors, through implementation of a new FAR clause to be included in most solicitations, including those conducted using FAR Part 12 procedures and acquisitions valued at or below the micro-purchase threshold. The subpart also includes authorized exemptions and exceptions, which generally require high-level agency justification and approval.FAR 52.223-XX, “Sustainable Products and Services,” will be required in all solicitations and contracts absent a written justification or authorized exception or exemption. Crucially, the clause at (b)(1) requires contractors to:<ul style="direction: ltr;text-align: left;"><li style="direction: ltr;text-align: left;">(i) Deliver and furnish sustainable products and services for Government use, including use at Government-owned contractor‑operated facilities;</li><li style="direction: ltr;text-align: left;">(ii) Incorporate sustainable products and services into the construction of a public building or public works; and</li><li style="direction: ltr;text-align: left;">(iii) Furnish sustainable products and services for use in performing services under this contract, where the cost of the products is a direct cost to this contract (versus costs which are normally applied to the Contractor's general and administrative expenses or indirect costs).</li></ul>Importantly, the proposed rule includes the following, a definition of “sustainable products and services” that will be included in FAR 2.101 and apply throughout the FAR:Sustainable products and services means products and services that are subject to and meet the following applicable statutory mandates and directives for purchasing:(1) Statutory purchasing programs.<ul style="direction: ltr;text-align: left;"><li style="direction: ltr;text-align: left;">(i) Products containing recovered material designated by the U.S. Environmental Protection Agency (EPA) under the Comprehensive Procurement Guidelines (42 U.S.C. 6962) (40 CFR part 247) (https://www.epa.gov/smm/comprehensive-procurement-guideline-cpg-program#products).</li><li style="direction: ltr;text-align: left;">(ii) Energy- and water-efficient products that are ENERGY STAR® certified or Federal Energy Management Program (FEMP)‑designated products (42 U.S.C. 8259b) (10 CFR part 436, subpart C) (https://www.energy.gov/eere/femp/search-energy-efficient-products) (https://www.energystar.gov/products?s=mega).</li><li style="direction: ltr;text-align: left;">(iii) Biobased products meeting the content requirement of the U.S. Department of Agriculture under the BioPreferred® program (7 U.S.C. 8102) (7 CFR part 3201) (https://www.biopreferred.gov).</li><li style="direction: ltr;text-align: left;">(iv) Acceptable chemicals, products, and manufacturing processes listed under EPA’s Significant New Alternatives Policy (SNAP) program, which ensures a safe and smooth transition away from substances that contribute to the depletion of stratospheric ozone (42 U.S.C. 76711) (40 CFR part 82, subpart G) (https://www.epa.gov/snap).</li></ul>(2) Required EPA purchasing programs.<ul style="direction: ltr;text-align: left;"><li style="direction: ltr;text-align: left;">(i) WaterSense® labeled (water efficient) products and services (https://www.epa.gov/watersense/watersense-products).</li><li style="direction: ltr;text-align: left;">(ii) Safer Choice-certified products (products that contain safer chemical ingredients) (https://www.epa.gov/saferchoice/products).</li><li style="direction: ltr;text-align: left;">(iii) Products and services that meet EPA Recommendations of Specifications, Standards, and Ecolabels (https:// www.epa.gov/greenerproducts/recommendations-specifications-standards-and-ecolabels-federal purchasing).</li></ul>The proposed clause requires the contract to identify any products or services that are not subject to the clause and clarifies that proffered sustainable products and services must meet all applicable standards, specifications, or other program requirements at time of quote or offer submission.The new clause would require contractors to prioritize delivery of sustainable products and services in the following sequence: (1) provide products and services that meet all applicable statutory purchasing program requirements; (2) prioritize multi-attribute sustainable products and services (i.e., those that meet both statutory and other required EPA purchasing program requirements); (3) procure sustainable products and services that meet required EPA purchasing program requirements where no other statutory purchasing program requirements apply; and (4) procure products and services that meet required EPA purchasing programs and that do not conflict with statutes, executive orders, or regulations that impose domestic manufacturing and content requirements, such as the Buy American statute (41 U.S.C. chapter 83; see generally FAR Part 25) and the Berry Amendment (10 U.S.C. § 4862). The proposed clause does not contain a mandatory flow-down requirement and therefore applies only to the prime contractor in its current formulation.The FAR Council includes several exceptions and exemptions from application of the sustainable products and services requirements. The exceptions include contracts performed outside the United States, weapon systems (which must still comply with recovered materials and alternatives to ozone-depleting substances requirements), combat or combat-related military equipment, spacecraft systems, and launch support equipment (which are not subject to energy-efficient or bio-based requirements). The proposed exemptions generally apply to intelligence activities, national security matter, or any other President-approved reason.TakeawaysThis proposed rule has the potential to impact virtually all federal contractors. Although the requirements in the proposed rule largely are based on existing statutory and regulatory requirements, consolidation of applicable policies into one section of the FAR clarifies the applicable obligations. With greater ease of reference and a specific FAR contract clause on point, contracting officers will more easily include sustainable procurement requirements in drafting solicitations and making procurement decisions. The proposed rule also makes it easier for contractors to familiarize themselves with the existing statutory and EPA-required purchasing program requirements that now may be more expressly included in their contracts, especially because they will now apply to even commercial item contracts and procurements at or below the simplified acquisition threshold. Contractors interested in commenting on the proposed rule must do so by October 2, 2023. Although a final rule is likely to follow the general provisions discussed above, provisions may change through the notice-and-comment process. Morrison Foerster will continue to monitor developments in sustainable procurement.

Proposed Sustainable Procurement Rule Would Streamline Existing Environmental Regulations and Clarify FAR Part 23

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Markus Speidel