The Federal Acquisition Regulation (FAR) Council published 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 previously commented. 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 blog post.
FAR Part 23 Reorganization
The proposed rule includes a restructuring of FAR Part 23 through the following key updates:
- 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.
- 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.
- 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.”
- 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.”
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 Clause
As 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:
- (i) Deliver and furnish sustainable products and services for Government use, including use at Government-owned contractor‑operated facilities;
- (ii) Incorporate sustainable products and services into the construction of a public building or public works; and
- (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).
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.
- (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).
- (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).
- (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).
- (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).
(2) Required EPA purchasing programs.
- (i) WaterSense® labeled (water efficient) products and services (https://www.epa.gov/watersense/watersense-products).
- (ii) Safer Choice-certified products (products that contain safer chemical ingredients) (https://www.epa.gov/saferchoice/products).
- (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).
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.
This 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.