On December 8, 2021, President Biden signed Executive Order 14057 (“Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability”), the Administration’s latest – and most significant – effort to promote cleaner and more sustainable federal procurement. At the heart of the new Order is the Administration’s goal to meet a net-zero emissions target across the federal government by 2050. To do so, the Administration promises to “transform federal procurement and operations” and to leverage the government’s portfolio of “300,000 buildings, fleet of 600,000 cars and trucks, and annual purchasing power of $650 billion [in] goods and services” to facilitate increased adoption of green technology. The new Executive Order will require further agency action to pursue and execute on these objectives, but once implemented, it appears poised to usher in a new – and greener – era of federal contracting.
In order to achieve net-zero emissions by 2050, the Executive Order and an accompanying “Federal Sustainability Plan” set four primary goals:
- Power: 100 percent carbon pollution-free electricity on a net annual basis by 2030;
- Vehicles: 100 percent zero-emission vehicle acquisitions by 2035, including 100 percent zero-emission light-duty vehicle acquisitions by 2027;
- Buildings: A net-zero emissions building portfolio by 2045, including a 50 percent emissions reduction by 2032; and
- Materials: Net-zero emissions from federal procurement no later than 2050, including a Buy Clean policy to promote use of construction materials with lower embodied emissions.
This blog post consists of three parts: (1) a summary of each of the four major goals referenced above; (2) a description of the Executive Order’s procedures for implementation, together with the exceptions to its coverage; and (3) concluding thoughts about key takeaways of this Executive Order for the contracting community and potential new entrants into the federal marketplace.
I. The Government’s Procurement Goals
Goal #1: 100 Percent Carbon Pollution-Free Electricity By 2030
Section 203 of the Executive Order sets two related clean energy benchmarks that must be met by 2030. First, each agency “shall increase its percentage use of carbon pollution-free electricity, so that it constitutes 100 percent of facility electrical energy use on an annual basis.” Second, at least half of that energy must be supplied hourly on a 24/7 basis by the same regional grid where the energy is consumed.
The term “carbon pollution-free electricity” (or “CFE”) is defined by the Executive Order to include energy produced from resources that generate no carbon emissions, including solar, wind, hydrokinetic, geothermal, hydroelectric, nuclear, renewably sourced hydrogen, and “electrical energy generation from fossil resources to the extent there is active capture and storage of carbon dioxide emissions that meets EPA requirements.”
The Sustainability Plan indicates that the Government will use a range of procurement strategies to achieve transition to CFE, including:
- Buying directly from utilities that generate CFE, and negotiating supply contracts that include CFE and energy storage for multiple federal agencies in a service territory;
- Entering into both physical and “virtual” power purchase agreements; and
- Developing onsite CFE generation and storage on federal real property.
Notably, the Plan further indicates that the federal government will partner with non-federal entities – including States and the private sector – to “accelerate progress towards a cleaner grid more broadly.”
Goal #2: 100 Percent Zero-Emission Vehicle Acquisitions By 2035, Including 100 Percent Zero-Emission Light-Duty Vehicle Acquisitions by 2027
Section 204 of the Executive Order requires that “each agency’s light-duty vehicle acquisitions shall be zero-emission vehicles by the end of fiscal year 2027.” It further provides that each agency with a fleet of at least 20 vehicles “shall develop and annually update a zero-emission fleet strategy” that will be used to maximize acquisition and deployment of zero-emission vehicles of all types (i.e., light-, medium-, and heavy-duty). The ultimate objective is for each agency to have a 100 percent zero-emission vehicle fleet.
The Sustainability Plan further indicates that the agencies will be expected to develop and expand the charging infrastructure needed to support their zero-emission fleets. The Plan indicates that this infrastructure should be developed in collaboration with the private sector, including utilities, in order to “identify and achieve cost efficiencies.” This objective is consistent with the government’s recent Federal Register notice seeking public comments on “the availability of EV chargers manufactured and assembled in the United States, including whether they comply with applicable Buy America requirements.”
Goal #3: Net-Zero Emissions Buildings by 2045, Including a 50 Percent Reduction By 2032
Section 205 of the Executive Order provides that “each agency shall achieve net-zero emissions across its portfolio of buildings, campuses, and installations by 2045.” It further provides that each agency shall “reduce greenhouse gas emissions by 50 percent from buildings, campuses, and installations by 2032 from 2008 levels, prioritizing improvement of energy efficiency and the elimination of onsite fossil fuel use.”
The Executive Order sets forth several specific requirements for reducing emissions, including:
- Implementing federal building performance standards that will be developed and issued by OMB;
- Pursuing building electrification strategies in conjunction with carbon pollution-free energy use, deep-energy retrofits, whole-building commissioning, energy and water conservation measures, and space reduction and consolidation;
- Ensuring that all new construction and modernization projects greater than 25,000 gross square feet will be designed to be net-zero emissions by 2030;
- Implementing the Council on Environmental Quality (“CEQ”) Guiding Principles for Sustainable Federal Buildings in building design, construction, and operation; and
- Making use of performance contracting authority to enter into Energy Savings Performance Contracts (“ESPCs”), to leverage private investment and improve the efficiency and resiliency of federal facilities.
Goal #4: Net-Zero Emissions Procurement By 2050
In addition to meeting the goals listed above (i.e., procuring cleaner electricity, vehicles, and buildings), achieving a net-zero emissions procurement system by 2050 also will also turn on several other initiatives identified in the Executive Order.
- First, sections 208 and 301 of the Executive Order provide that agencies will be expected to “incentivize markets for sustainable products and services by prioritizing products that can be reused, refurbished, or recycled”; purchasing “products that contain recycled content, are biobased, or are energy and water efficient, in accordance with relevant statutory requirements”; and otherwise pursuing “procurement strategies to reduce contractor emissions and embodied emissions in products acquired or used in Federal projects.”
- Second, section 302 provides that “major Federal suppliers” will be expected to disclose greenhouse gas emissions and climate-related financial risk, as well as their “emissions reduction targets.” This particular requirement was previously announced in the May 2021 Executive Order 14030 on Climate-Related Financial Risk, which, as relevant here, directed the FAR Council to consider amending the FAR to include these disclosure and reporting requirements. The FAR Council since has issued a call for public input on procedures for tracking and reporting greenhouse gas emissions, and this comment period recently was extended until January 13, 2022. More details about this comment period are available in our separate post on this subject.
- Third, section 303 provides for a “Buy Clean” initiative for construction materials. As relevant here, the Executive Order directs the establishment of a “Buy Clean Task Force,” that will develop policies and procedures intended to reduce “embodied emissions” (i.e., greenhouse gases emitted during the production of the relevant material). In the first instance, the Buy Clean Task Force will be charged with (i) identifying materials to be covered by the Buy Clean policy (including, for example, concrete and steel); (ii) developing a policy for embodied emissions reporting and auditing; and (iii) “recommending pilot programs that incentivize Federal procurement of construction materials with lower embodied emissions.”
II. Implementation and Exceptions
Implementing the Administration’s sustainability objectives will require substantial new rulemaking and guidance. Given the breadth of the Order, this implementation process will involve several administrative channels.
- Sustainability Officers: The Executive Order reestablishes the Office of the Federal Chief Sustainability Officer within the CEQ. This Federal Chief Sustainability Officer will be appointed by the President and will be responsible for leading the development of the polices necessary to implement the Executive Order. Additionally, each federal agency must appoint its own individual Agency Chief Sustainability Officer by January 7, 2022.
- OMB Guidance: The Executive Order directs OMB and the Chair of CEQ to issue implementing guidance for agencies that provide directions, strategies, and recommended actions to meet the policies and goals of the Order within 120 days (i.e., by April 7, 2022). This guidance is in addition to OMB’s responsibility, discussed above, to issue building performance standards aimed at helping the government reach a net-zero emissions portfolio.
- Coordination with the Private and Non-Profit Sectors: The Executive Order expresses a desire to engage with stakeholders – including “the public, private, and non-profit sectors and labor unions and worker organizations” – to help facilitate the government’s goals. To that end, the Executive Order directs OPM and the Chair of CEQ to establish a “a Presidential Sustainability Executives Program to place senior leaders from the private and non-profit sectors into term-limited appointments to bring innovative perspectives and expertise to Federal Government and assist agencies in efforts related to climate action and sustainability.”
- Agency Planning: The Executive Order provides that the heads of 22 “principal agencies” will be required to develop and implement “annual sustainability plans.” Those plans will be based on guidance from the CEQ and will describe, among other things “actions and progress toward the goals and requirements of this [Executive Order].”
- Federal Working Groups: The Executive Order directs the creation of multiple working groups to be housed within the CEQ, including the aforementioned Buy Clean Task Force, as well as task forces dedicated to Carbon Pollution-Free Electricity; Zero-Emission Vehicle Fleets; Net-Zero Emissions Buildings; Net-Zero Emissions Procurement, and Climate Adaptation and Resilience. These working groups shall provide semiannual reports on their actions, findings, and progress towards government-wide goals.
It should be noted that not all federal operations are subject to the Order’s new emphasis on cleaner and more sustainable operations. The Order does not apply to activities, resources, and facilities located outside of the United States. Additionally, the Order also recognizes that agency heads may exempt activities and resources from the requirements of this order in three circumstances: (1) where necessary for national security or to protect intelligence and law enforcement operations; (2) for any vehicle, vessel, or aircraft used in combat support or relief operations; and (3) for any other reason but only if the requested exemption is approved by the President.
III. Concluding Thoughts
If fully implemented, the Executive Order has potential to alter the landscape of the government’s procurement system. Of course, an executive order does not have the same durability as legislation enacted by the Congress, so these new goals could be subject to change by future administrations – especially where, as here, all four of the major objectives discussed above are scheduled to be met after the conclusion of President Biden’s current term. But regardless of the long-term future of the Executive Order, three points are clear today.
- First, the Executive Order is the latest – but certainly not the first – sign that clean energy and sustainability considerations have arrived (and are here to stay) in the world of federal procurement. This is the second executive order in the past six months, along with Executive Order 14030 on Climate-Related Financial Risk, that includes provisions specifically focusing on greening federal procurement. But even before this latest Order, the government already was trumpeting its desire to prioritize the procurement of greener products and services. To that end, there are several open requests for public comment related to potential changes to the FAR and federal procurement practices to support a more sustainable procurement process. And the pending FY22 National Defense Authorization Act currently includes a number of provisions aimed at accelerating the shift toward more sustainable federal operations, including a requirement that 10 percent of major military installations achieve energy net-zero by 2035.
- Second, the Order presents both challenges and significant opportunities for industry. For traditional contractors, changing procurement rules and procedures often present a short-term challenge, but those who are quickest to adapt to the federal government’s new emphasis on sustainability can seize a distinct competitive advantage going forward. And for non-traditional government contractors, including renewable energy, tech, and other players in the rapidly growing green economy, the Executive Order presents a unique opportunity to gain access to federal marketplace that exceeds $650 billion annually. Of course, doing business with the government poses its own regulatory challenges, but companies that navigate these requirements may find that the reward is well worth the effort.
- Third, implementation of this Order already is underway. Although the Order contemplates that its primary goals would be achieved over a longer time horizon, it directs federal agencies to start planning their new rulemaking and guidance processes now. These initial steps will set the parameters for the eventual changes to procurement rules and requirements envisioned by the Order, and contractors would be wise to closely monitor this implementation process and seek out opportunities to shape aspects of emerging new requirements in real time.
There is much more to come in this space. We will continue to monitor developments closely and provide regular updates.