In recent years, the U.S. government made sustainability a priority in its procurement practices. To accomplish this goal, the FAR Council published a new final rule (Rule), primarily addressing sustainability practices and enforcing agency obligations to procure sustainable products and services. Below, PilieroMazza highlights key aspects of the Rule and outlines potential challenges and opportunities for federal government contractors.

The Rule

On April 22, 2024, the FAR Council published a new rule that takes effect today, May 22, 2024, focused on sustainable procurement practices. The FAR Council also noted that FAR Part 23 will be entirely dedicated to environmental matters and announced a new omnibus contract clause, FAR 52.223-23, Sustainable Products and Services, to provide uniformity among sustainable product and service requirements.

The Rule itself is substantially more direct in its requirements and broader in its application than prior rules relating to environmental aspects of procurement. For instance, the new rule requires federal agencies to “procure sustainable products and services to the maximum extent practicable.” Sustainable products and services include those that meet relevant standards promulgated by the Environmental Protection Agency (EPA) or the United States Department of Agriculture (USDA).

Even more notable, the Rule applies to most contracts, “including those using part 12 procedures for the acquisition of commercial products, including commercially available off-the-shelf (COTS) items and commercial services and acquisitions valued at or below the micro-purchase threshold.” The Rule’s broad application underscores the Government’s commitment to sustainable procurement practices, as many FAR rules, unlike the Rule here, specifically carve out exceptions for purchases below the micro-purchase threshold. That said, the Rule is not without exceptions. For instance, the following types of contracts are not subject to the requirement to procure sustainable products and services:

1. contracts performed outside of the United States;
2. weapons systems;
3. energy-consuming products or systems designed for combat or combat-related missions; and
4. biobased products for use in military equipment, spacecraft systems, or launch support requirements.

Additionally, an agency can demonstrate it is not practicable to procure sustainable products or services by submitting a written justification explaining that the agency cannot procure sustainable products or services:

1. competitively within a reasonable performance schedule;
2. that meet reasonable performance requirements; or
3. at a reasonable price.

The Rule also means contractors who advertise their products and services as sustainable must ensure those products and services meet the Rule’s criteria. This puts the onus on contractors to conduct their own due diligence regarding the products and/or services they will provide to determine whether they meet the requisite sustainability criteria. To assist contractors and standardize what the Federal government considers sustainable, the Rule directs contractors to the General Services Administration’s Green Procurement Compilation website where contractors can identify sustainable products and services.  Additionally, the Rule requires that contracting officers identify the sustainable products and services applicable to the procurement, along with which products and services are not subject to the new Rule.  

Challenges

While the Rule on sustainable procurement represents a positive step forward, it also poses challenges. One common issue raised with sustainable procurement regulations is the potential for increased costs. For instance, implementing sustainability measures may increase the cost of products or services, impacting contractors’ competitiveness and/or profitability. Moreover, compliance with new regulations often requires additional administrative work and resources. Another consideration for contractors is potential supply chain disruptions, as introducing new sustainability requirements may disrupt existing supply chains. Suppliers might need to adjust their processes or sourcing practices to meet the new standards, potentially causing delays or shortages in the supply of products or services.

The Rule may also present unique challenges to small businesses. In particular, small businesses may face higher relative compliance costs compared to larger enterprises due to their limited resources. Implementing sustainable practices and meeting sustainability requirements may require investment in new technologies, products, or training, which could strain the financial resources of small businesses. Relatedly, if financial resources are strained, small businesses may find it more difficult to offer competitive prices.

Opportunities

Despite the challenges the Rule on sustainability may pose, it also offers contractors new business opportunities. By offering sustainable products or services, contractors can tap into the government’s growing market for sustainable products and services, which provides additional revenue streams for contractors. Additionally, long-term investment in sustainable products and services can potentially deliver long-term cost savings. For example, more energy-efficient products can lead to lower utility costs going forward.

Conclusions

In sum, the Rule shows that the government is beginning to take sustainable procurement practices seriously. As government agencies begin implementing the Rule, it is imperative for contractors to start considering how they can offer more sustainable products and services going forward.