By Alexander Gorelik of Smith, Currie & Hancock LLP
Published September 19, 2022
Climate change has been a hot topic of discussion for some time now. President Joseph Biden’s administration has focused in on that issue, and the related need for protecting the environment, as part of its regulatory agenda through several Executive Orders (EO). Each of those EOs, specifically No. 14030 (“Climate-Related Financial Risk”), No. 14057 (“Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability”), and No. 14008 (“Tackling the Climate Crisis at Home and Abroad”), alluded to the potential of new environmental requirements for certain federal contractors and subcontractors. Although it will likely be several months until these new policies begin appearing in the Federal Acquisition Regulation (FAR), the government’s rapid progress in implementing these environmental requirements signals that contractors need to start paying attention to the scope of the requirements even as they are still taking shape.
On August 31, 2022, the White House Council on Environmental Quality (CEQ) issued Implementing Instructions for one of those EOs (EO 14057), which provides the federal government with direction on the implementation of the various environmental requirements contemplated by the President. The Instructions note that the sustainable product and service acquisition policies apply to all new contract actions, including IDIQ contracts, task and delivery orders against existing contracts, and goods or services acquired through purchase cards. The release of the Implementing Instructions confirms that federal contractors should expect the release and implementation of these environmental requirements to occur sooner rather later. With that in mind, below is a list of the most significant aspects of the Implementing Instructions that address the environmental requirements.
Highlights.
Overall Goals. The Federal Government intends to “lead by example to achieve a carbon pollution-free electricity sector by 2035 and net-zero emissions[1] economy-wide by 2050, using its scale and procurement power to achieve:
- 100 percent carbon pollution-free electricity on a net annual basis by 2030, including 50 percent 24/7 carbon pollution-free electricity;
- 100 percent zero-emission vehicle acquisitions by 2035, including 100 percent zero emission light-duty vehicle acquisitions by 2027;
- A net-zero emissions building portfolio by 2045, including a 50 percent emissions reduction by 2032;
- A 65 percent reduction in certain greenhouse gas emissions from Federal operations by 2030 from 2008 levels;
- Net-zero emissions from Federal procurement, including a Buy Clean policy to promote use of construction materials with lower embodied emissions;
- Climate resilient infrastructure and operations; and
- A climate- and sustainability-focused Federal workforce.”
The White House CEQ and Office of Management and Budget will issue guidance to federal agencies for setting initial targets on cutting greenhouse gas emissions and attaining the other sustainability goals addressed above. Agencies will also have annual targets that they will monitor and strive to satisfy.
New Policies Affect Best Value Determinations
Among the most important changes these policies bring to procurements will be the use of environmental goals in proposal evaluation. The Instructions state that “Agencies should procure products and services in a cost-effective manner that advances energy, sustainability, and climate adaptation goals, and should base ‘best value’ determinations on full life-cycle costs, including measurable costs of environmental impacts in all phases of the product or service life-cycle, where possible. Agencies must consider a price unreasonable when the total life-cycle costs, including measurable costs of any associated environmental impacts, are significantly higher for the sustainable product or service than for the non-sustainable product or service.”
Specific Requirements
The White House policies include a number of specific requirements aimed at reducing the environmental impact of federal procurements. Major suppliers will be required to publicly disclose their greenhouse gas emissions and climate-related financial risk, and will be required to set science-based emissions requirements.
The new policies specifically target federal contractors in construction, leasing, and transportation and logistics industries, among others.
For Construction Contractors:
The Buy Clean Task Force, established by EO 14057, will “identify and prioritize pollutants and materials, such as concrete and steel, to be covered under a Buy Clean policy, taking into account the availability of relevant data[,]” and will “recommend pilot programs that incentivize Federal procurement of construction materials with lower embodied emissions.”
New buildings designed after 2022 will have to meet net-zero emissions standards by 2030. Agencies are also instructed to “prioritize emissions reductions whenever a retrofit, renovation, retuning, operations and maintenance measures, or space reconfiguration is being planned.” Reduction of water usage and waste production will also be considered in building designs. Additional requirements will target the use of products that contain perfluoroalkyl or polyfluoroalkyl substances (PFAS) and single-use plastics.
For Leasing Contractors:
The Instructions note that “GSA must issue green lease standards and guidelines to be applied to Federal leases, including provisions that promote a standard framework for lessor reporting of emissions, energy, water, and waste associated with the leased space. Agencies with independent leasing authority must incorporate the guidelines and language into agency-specific leasing policies and procedures.”
To facilitate compliance with the goals for zero-emission vehicles, the Instructions also note that leases should include necessary infrastructure and Electric Vehicle Supply Equipment (i.e., battery and plug-in hybrid electric vehicle charging infrastructure and other types of refueling infrastructure), where applicable, to support a fully electric fleet, consistent with agency mission, facility security, and technical feasibility.
For Transportation & Logistics Contractors:
The Instructions suggest that the government intends to pursue the goal of having 100 percent zero-emission vehicle acquisitions through broad mandates applicable to “all agencies that own, operate, lease, or otherwise control 20 or more non-tactical automobiles or [motor vehicles] located in the United States,” to those agencies’ entire fleets unless otherwise exempted, and even to overseas vehicles where feasible.
The Instructions add that agencies should even “include requirements in relevant contracts, where a central purpose of the contract is to provide vehicle transportation services of people or materials on a Federal site, to ensure contractor-owned vehicles operated under such contracts are consistent with the [zero-emission variant] goals.”
Takeaways.
The federal government is still working out the details of the forthcoming requirements, but the final rules are likely to have significant effects on federal contractors. Federal contractors should take the release of the Implementing Instructions as an opportunity to start considering their capabilities to comply with increased sustainability goals, and to prepare to comment on the new rules as they come out. For those interested in monitoring the latest information regarding the sustainability requirements, the website for CEQ’s Office of the Federal Chief Sustainability Officer should serve as a good source.
[1] Carbon-free refers to the generation of electricity that does not use fossil fuels or emit carbon, while net-zero goes further by requiring the limited use of not only carbon emissions, but all greenhouse gases, and doing so without off-sets.