Enhanced Sustainability Requirements for Federal Contractors
On April 22, 2024, the U.S. government issued a final rule ("Rule") to restructure and update the Federal Acquisition Regulation ("FAR") to implement a requirement for agencies to procure sustainable products and services to the "maximum extent practicable."
The Rule goes into effect on May 22, 2024, and makes a number of changes and additions to the FAR, including: (i) restructuring FAR part 23 to focus on environmental and sustainability matters; (ii) adding a definition of "sustainable products and services" to FAR 2.101; and (iii) imposing additional compliance requirements on contractors by creating a new contract clause–i.e., FAR 52.223-23, Sustainable Products and Services.
The Rule defines "sustainable products and services" as "products and services that are subject to and meet … applicable statutory mandates and directives for purchasing." The definition then references a number of statutory purchasing programs and required U.S. Environmental Protection Agency purchasing programs, such as Energy Star® certification.
The new contract clause could have broad compliance implications for contractors. The clause, which applies to all contracts absent an exception, provides that government will specify which products and services must be sustainable for a contract. Contractors must ensure they provide those sustainable products and services if they are: (i) delivered to the government; (ii) provided for use by the government; (iii) incorporated into the construction of a public building or public work; or (iv) used by the contractor in performing services under a contract where the cost of the products is a direct cost to the contract. Any sustainable products or services must meet the applicable requirements at the time of offer submission. While the clause does not require flow down to subcontractors, prime contractors remain responsible for ensuring sustainable products and services are provided regardless of which entity performs.
The Rule comes when the Biden Administration is pursuing other climate-related rule changes that it claims would: (i) ensure that major agency procurements minimize climate change risks; and (ii) require certain contractors to publicly disclose greenhouse gas emissions and set science-based target initiatives to reduce those emissions. The Administration’s focus on these changes could also signal future enforcement efforts. Failure to comply could result in a finding of nonresponsibility, suspension and debarment proceedings, or False Claims Act liability.
