New rule effective May 22, 2024.
The Department of Defense, General Services Administration, and National Aeronautics and Space Administration have issued a final rule (the “Final Rule”) that amends the Federal Acquisition Regulation (FAR) to maximize Federal purchases of sustainable products and services. The Final Rule reflects a commitment by the Biden Administration to build a sustainable Federal supply chain and advance President Biden’s Federal Sustainability Plan, which set a goal to achieve net-zero emissions from Federal operations and procurement by 2050.
Effective May 22, 2024, the Final Rule revises Subpart 23.1 of the FAR and requires Federal agencies to procure sustainable products and services “to the maximum extent practicable.” The Final Rule defines “sustainable products and services” as products and services that are subject to and meet the following applicable statutory mandates and directives for purchasing:
The Final Rule creates a presumption that it is practicable for an agency to procure sustainable products and services, unless an agency cannot acquire products or services:
- competitively within a reasonable performance schedule;
- that meet reasonable performance requirements; or
- at a reasonable price.
When considering whether the price of a sustainable product is reasonable, agencies are directed to assess whether the product is cost-effective over the life of the product. The Final Rule also directs agencies that procure sustainable products and services to:
The DoD, GSA, and NASA have developed a presentation summarizing the changes that is available here.
The Final Rule also requires contractors to provide products that meet the definition of sustainable products and services in contract actions for services or construction if the products are:
- delivered to the government;
- furnished by the contractor for use by the government;
- incorporated into the construction of a public building or public work; or
- acquired by the contractor for use in performing services under a government contract where the cost of the products is a direct cost to a government contract (as opposed to costs that are normally applied to a contractor’s general and administrative expenses or indirect costs).
The Final Rule does exclude certain contracts from the requirement to use sustainable products and services:
- contracts performed or supplies delivered outside of the U.S., unless the agency determines that such application is in the interest of the United States
- weapons systems, although compliance with applicable agency-affirmative procurement programs is required for recovered materials and for alternatives to ozone-depleting substances, unless a written justification exists
- energy-consuming products or systems designed or procured for combat or combat-related missions not subject to requirements regarding energy- and water-consuming products
- biobased products designed to be used in military equipment, spacecraft systems, or launch support equipment not subject to requirements regarding biobased products
Finally, the Final Rule introduces a new omnibus clause, FAR 52.223-23, that must be included in all solicitations and contracts unless a justification, exception, or exemption applies to all potential sustainable products and services in an acquisition.
FAR 52.223-23 requires contractors to ensure that sustainable products and services are:
- delivered to the government;
- furnished for use by the government;
- incorporated into the construction of a public building or public work; and
- furnished for use in performing services under the contract, where the cost of the products is a direct cost to the contract (versus costs that are normally applied to a contractor’s general and administrative expenses or indirect costs).
In addition, FAR 52.223-23 requires any sustainable products and services to meet applicable standards, specifications, and program requirements at the time of quote or offer submission, or the EPA Recommendations of Specifications, Standards, and Ecolabels in effect as of October 2023.
The Final Rule may allow providers of “sustainable products and services” to become more competitive suppliers to the Federal government. Contractors also should consider the impact on their pricing that an obligation to provide “sustainable products and services” as part of the contract may have on the proposal or offer.
