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New Federal Rule Mandates Sustainable Procurement for Contractors

May 23, 2024

The Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) have issued a final rule to amend the Federal Acquisition Regulation (FAR) to prioritize environmental and sustainability considerations. Effective May 22, 2024, this rule mandates federal agencies procure sustainable products and services to the greatest extent practicable.

Important aspects of the rule include emphasizing energy savings performance contracts, consolidating hazardous material requirements, and updating pollution prevention guidelines. Prime contractors must ensure subcontractors comply with sustainability requirements, and life-cycle costs should be considered in price assessments. Agencies are required to specify in contracts which sustainable products and services are applicable.

Additionally, the rule introduces a new omnibus contract clause requiring federal contractors to deliver specified sustainable products and services, with exceptions for contracts outside the U.S., weapons systems, and certain military equipment. It defines “sustainable products and services” in FAR 2.101, updates environmental purchasing requirements in FAR subpart 23.1, and aligns construction and architect-engineer contracts with the Council on Environmental Quality’s principles.

The rule broadly applies to commercial and small purchases, except if sustainable products are not competitively available, are too costly, or fail to meet performance standards. The goal is to leverage the federal government’s purchasing power to support American manufacturing and establish sustainable supply chains, which presents challenges and opportunities for contractors.

Challenges include potential cost increases, administrative burdens for small businesses, and possible supply chain disruptions. However, the rule also opens new business opportunities for sustainable products and services in the expanding market, with potential long-term cost savings from more energy-efficient products.