Just two days before Donald Trump’s Inauguration, the Federal Acquisition Regulatory Council published a proposed rule to implement Executive Order 13693, Planning for Federal Sustainability in the Next Decade, and certain biobased acquisition provisions of the Agricultural Act of 2014. The Council characterized the rule as advancing policies put into effect by an interim rule from May 2011, which “established a culture within the Federal acquisition community to. . . foster markets for sustainable technologies and materials, products and services.” The proposed rule represents a shift in the FAR towards greater alignment with existing government programs that set forth sustainability standards for products and services.
The proposed revisions direct agencies to purchase “sustainable products and services,” which as noted below, are defined to include products and services approved by various Environmental Protection Agency (“EPA”), Federal Energy Management Program (“FEMP”), and Department of Agriculture programs, including ENERGY STAR, WaterSense, and SmartWay, among others. Interestingly, the Council conceded that “the anticipated costs associated with this rule are not quantified in dollar amounts,” but that it anticipates “any such impact will be outweighed by the expected benefits of this rule.” The Council did not provide further explanation on this point, but it is likely referring to a new requirement that sustainable products and services must be “life-cycle cost-effective,” discussed in more detail below.
Key proposed changes to the FAR are summarized below:
- New Definitions. The rule adds definitions specific to FAR part 23 governing “clean energy,” “alternative energy,” “fuel cell energy systems,” and “renewable electric energy,” among others. Additionally, the proposed rule revises FAR § 2.101, which contains definitions that are generally applicable to all other parts of the FAR (unless otherwise specified), to include a definition for the key term, “sustainable products and services.” The rule proposes to define this term to include products and services that —
- Meet statutory mandates governing agency purchases of: EPA-designated recycled content products, EPA ENERGY STAR and FEMP approved energy and water efficient products, and content requirements of the Department of Agriculture BioPreferred program;
- Are identified by other EPA programs including: Significant New Alternatives Policy and Safer Choice Certified (applicable to chemicals), WaterSense (applicable to water-consuming products and services), and SmartWay (applicable to fuel consuming products and services); or
- “Meet or exceed specifications, standards, or labels recommended by EPA,” or where there is not an applicable specification, “meet criteria developed or adopted by voluntary consensus standards bodies.”
- New Agency Targets. The proposed rule removes the existing requirement at FAR § 23.103 which specifies that agencies must “ensur[e] that 95 percent of new contract actions” are energy-efficient, water-efficient, biobased, or meet similar applicable requirements. Instead, agencies must “advance sustainable acquisition by ensuring that new contract actions. . . require sustainable products and services. . . to the maximum extent practicable.” (Emphasis added.) Although the revised policy no longer requires agencies to hit a 95 percent acquisition target, because the proposed definition for “sustainable products and services” now directly incorporates more specific EPA standards as described above (e.g., WaterSense and SmartWay certified), agencies may face less flexibility in some purchasing decisions.
- New Exemptions. The proposed rule expands on the current set of exemptions from agency targets that are outlined in FAR § 23.104. Currently, only weapons systems and contracts performed outside of the United States are wholly exempt from the requirements. Under the proposed regulation, contracts continue to be exempt if they are performed outside of the United States, but are also exempt if the sustainable product or service cannot meet reasonable performance requirements, or if such products or services are not “life-cycle cost effective” (e.g., the total costs of acquiring, operating, and maintaining the new product or service are estimated to be equal to or less than those for the current product or service). Contracting officers would also have to maintain in their contract files the documentation for any exemption. The rule also retains the present exemptions (where an agency head deems applicable) at FAR § 23.105 for intelligence, law enforcement, and national security activities, so long as the agency notifies the Chair of the Council on Environmental Quality within 30 days of issuing any exemption.
- Removal of References to EPEAT. Consistent with a policy that “references to proprietary programs such as EPEAT should be removed from the FAR,” as well as the terms of Executive Order 13693 (which no longer cites to EPEAT as an environmental standard), the proposed rule eliminates all existing references to EPEAT in the FAR. Consequentially, agencies would no longer have to meet the current requirement at FAR § 23.704, which specifies that at least 95 percent of electronic product purchases for use in the U.S. must be EPEAT-registered products, unless an exception applies. Instead, unless an exception applies, agencies would have to purchase electronic products that are identified on the EPA’s Greener Products and Services registry.
- New Contract Clause. Finally, the proposed rule removes several piecemeal contract clauses and creates a new replacement clause. Similar to the existing clauses, the new clause is applicable to COTS items and acquisitions below the Simplified Acquisition Threshold. It incorporates the technical definition of “sustainable products and services,” and specifies that the contractor must: (1) “Deliver, furnish for Government use; (2) Incorporate into the construction of a public building or public work; or (3) Furnish for Contractor use at a Federally-controlled facility sustainable products and services as specified in the contract.” This broad requirement presumably captures virtually all contracts with the government, other than those covered by one of the exceptions mentioned above.
It remains to be seen whether the new administration will ultimately move forward with the issuance of a final rule, especially in light of its recent directive to freeze contracts and grants at the EPA. It is clear however, that the administration intends to closely scrutinize regulatory changes, as evidenced by a recent memorandum for the Heads of Executive Branch Departments and Agencies to halt publication of any new rules until designated presidential appointees review and approve them. Whether the administration adopts the rule as proposed, significantly modifies it, or scraps it entirely, contractors are advised to keep apprised of further developments in this area.