On April 22, the Department of Defense, General Services Administration, and National Aeronautical and Space Administration (NASA) promulgated a final rule amending the Federal Acquisition Regulation (FAR) to implement an agency requirement to procure sustainable products and services to the maximum extent practicable.

This rule is the latest step in a broader push by the Biden administration to leverage the purchasing power of the United States government to advance its climate agenda.

What Does the Final Rule Require?

The final rule states, “[a]gencies shall procure sustainable products and services to the maximum extent practicable.” Procurement becomes impracticable when the agency cannot acquire the products or services “[c]ompetitively within a reasonable performance schedule; [t]hat meet reasonable performance requirements; or [a]t a reasonable price.” To determine whether a price is reasonable, “agencies should consider whether the product is cost-effective over the life of the product.”

Standards from the Final Rule

“Sustainable products and services” are required to meet certain statutory or required Environmental Protection Agency (EPA) purchasing programs. Statutory purchasing programs include:

1. Products containing recovered material designated by the [EPA] under the Comprehensive Procurement Guidelines.
2. Energy- and water-efficient products that are ENERGY STAR certified or Federal Energy Management Program (FEMP)-designated.
3. Biobased products meeting the content requirement of the USDA under the BioPreferred program.
4. Acceptable chemicals, products, and manufacturing processes listed under the EPA’s Significant New Alternatives Policy (SNPA) program.

EPA purchasing programs include:

1. WaterSense labeled (water efficient) products and services.
2. Safer Choice-certified products.
3. Product and services that meet EPA Recommendations of Specifications, Standards, and Ecolabels in effect as of October 2023.

While government agencies maintain these lists, the standards were developed for public use. The government sees this as an advantage allowing the government to “access and utilize recognized private sector environmental performance standards and ecolabels;” however, commenters worried that these standards were too loose and suggested the government move away from voluntary guidelines. In addition, a commenter rebuffed the government’s failure to align standards with global sustainability frameworks. The final rule, unfortunately, does not ameliorate these concerns.

Exceptions and Exemptions

The final rule offers a number of exceptions and exemptions that apply to the sustainable products and services requirements. For example, contracts for the procurement of weapon systems, energy-consuming products or systems designed or procured for combat-related missions, biobased products to be used in military equipment, spacecraft systems, or launch support equipment, and contracts performed outside the United States are exempt from the general requirement. In addition, agencies can be exempted from the rule where the requirement is not in the interest of national security, the products are for certain vehicles involved in combat support or training for such operations, the agency head requests an exemption from the president, or the products or services are determined to be used to facilitate defense against certain attacks or disasters. The Director of National Intelligence may also exempt certain intelligence activities.

Application to Subcontractors

The rule also requires prime contractors to “ensure” sustainable products and services, “as required by the contract, are delivered, furnished, or incorporated during performance of the contract.” The final rule incorporated the “ensure” language in response to a misplaced industry belief that the requirement was not applicable to subcontractors. Now, the rule makes clear that prime contractors will ultimately be held responsible for ensuring sustainable products and services are properly delivered under a contract.

Contractor Takeaways

First, the new rule will undoubtedly increase the number of procurements for sustainable products and services. In addition to there now being uniform requirements assisting with predictability, the exceptions, exemptions, and circumstances in which it is impracticable are relatively limited in their application.

Second, the new agency mandate and justification requirement could open a new avenue for both pre-award and post-award protest claims. When an agency determines the procurement of sustainable products or services is impracticable, it is required to submit a written justification explaining its reasoning. Commenters expressed support for a justification as it creates a written record, which can inform corrective actions. Contractors offering sustainable products and services should understand the requirements of impracticability and review agency justifications where applicable to determine whether a protest could be successful.

Third, contractors who already offer sustainable products and services should ensure they are on the lists that agencies will utilize when conducting market research to source relevant products. In response to a comment requesting clarification about “how agencies will be required to source [sustainable products and services],” the government stated, “[a]gencies are encouraged to review GSA’s Green Procurement Compilation.”

Overall, the final rule fits squarely within the Biden administration’s efforts to leverage over $700 billion in annual federal spending to address climate change. The rule stems from a December 2021 Executive Order designed to “reestablish the Federal Government as a leader in sustainability” and in furtherance of goals set by the 2021 Federal Sustainability Plan. The contracting community is also eagerly waiting for the publication of a final requiring federal contractors to disclose their emissions and, in some cases, assess their climate risks and set reduction targets. We wrote about the proposed rule in a November 2022 blog post. Contractors should expect additional climate-focused rules and plan accordingly.