27 February 2023 • 10 minute read
How the Biden Administration’s climate focus may affect government contractors
Global Government Contracting: Insight SeriesIn November 2022, the Federal Acquisition Regulatory Council issued a proposed rule on greenhouse gas, or GHG, emissions and climate-related financial risk that would impose significant and, for many contractors, new disclosure and reporting requirements.[1] Since then, federal agencies have continued to aggressively pursue the Biden Administration's goals related to climate change.
First, this article will highlight recent climate change developments involving the federal procurement process, including agencies' use of climate change considerations when making award decisions and the government's efforts to transition to carbon pollution-free electricity and an electric vehicle fleet.
These developments emphasize the need for contractors to consider taking actions that align with the federal government's environmental goals, as the failure to do so may adversely affect contractors in future procurements.
Second, this article will address recent actions taken by the US Environmental Protection Agency, the US Department of Transportation, and the White House Council on Environmental Quality, which further reflect federal agencies' commitment to the Biden Administration's climate change goals.
Importantly, these actions indicate that agencies will be seeking to reduce sources of GHG emissions that fall within their regulatory purview. In doing so, agencies will likely incorporate GHG and other climate considerations into the contracts, grants and other agreements that they award to contractors.
Climate change developments involving the federal procurement process
Use of climate change considerations as evaluation criteria
The Biden Administration has issued executive orders indicating that agencies should include environmental and climate change considerations as evaluation factors in the next few years. The US General Services Administration recently implemented this guidance in the Alliant 3 procurement, its massive best-in-class acquisition to provide federal agencies with information technology solutions over the next 10 years.
Specifically, on January 7, the GSA issued an amendment to the draft solicitation for the Alliant 3 procurement, adding an evaluation criterion for sustainability related disclosures. The award criteria for the Alliant 3 procurement utilizes a points-based evaluation system. The amendment allows offerors to score points if they are publicly disclosing their Scope 1 and 2 GHG emissions, as well as additional points if they are publicly disclosing their Scope 3 GHG emissions.
To receive those points, offerors must identify the location of the public disclosures and provide a self-attestation that the GHG emissions were calculated in accordance with the GHG Protocol's corporate accounting and reporting standard.
The potential points available under the criterion for GHG disclosures represent approximately 4% of the total available points, and the criterion is worth roughly the same amount of points as the other following criteria: having an adequate cost accounting system; demonstrating performance of two cost-reimbursement contracts; demonstrating performance of two indefinite-delivery, indefinite-quantity contracts; and maintaining a facility security clearance. Thus, offerors that are publicly disclosing their GHG emissions will essentially receive bonus points in the GSA's evaluation.
Additionally, in December 2022, the Department of Transportation issued a notice of funding opportunity detailing the steps to obtain grant funding for the federal-state partnership for intercity passenger rail programs.
The notice states that projects will be ineligible to receive funding if they have not sufficiently considered climate change and sustainability in their planning. Additionally, grant recipients must address how their projects will result in significant GHG reductions, support emissions reductions goals in a local/regional/state plan and promote clean transportation options.
Thus, in both the procurement and grant context, federal agencies have begun incorporating climate change considerations into the evaluation and award process, and that trend likely will accelerate and continue over the next year or two. In light of this development, contractors should proactively take steps toward understanding the federal government's goals in this area and altering their practices to align with those goals if economically feasible and consistent with their business strategy.
As the Alliant 3 procurement demonstrates, contractors may receive more favorable consideration in future procurements by voluntarily inventorying and disclosing GHG emissions, and potentially taking actions to reduce those emissions, even if they are not required to do so for another two years or more under the proposed rule.
Leading the transition to clean energy is critical to U.S. national security: it can make U.S. military installations more resilient, our operating forces more agile, and our country more competitive in the face of rapidly-shifting global energy markets. The Department of Defense is one of the largest electricity purchasers in the world, and when it comes to clean energy, we're sending a clear signal to the marketplace: DoD is buying.
Additionally, in January, the GSA, which is the primary agency that procures electricity for the federal government, issued a request for information to help it prepare for purchasing carbon pollution-free electricity for all U.S. retail choice electricity markets.
These actions show that agencies are taking seriously the Biden administration's goals of transitioning to carbon pollution-free energy. For contractors in the energy sector, offering solutions that support the transition to clean energy could become an important competitive discriminator in business with federal agencies.
Procurement of electric vehicles
On December 20, 2022, the US Postal Service announced that it anticipates purchasing at least 66,000 electric delivery vehicles by the end of 2028, including at least 45,000 electric next-generation delivery vehicles and 21,000 commercial-off-the-shelf electric vehicles.[2]
The announcement stated that the purchase was enabled by the overall network modernization efforts of the USPS, which allow for a more rapid deployment of electric vehicles, and $3 billion in funding under the Inflation Reduction Act.
With the largest fleet of vehicles in the federal government, the USPS announcement is a significant step toward meeting the Biden Administration's goal of transitioning to a zero-emission fleet by 2035, and we likely will see other agencies follow the lead of the USPS in acquiring electric vehicles.
The short-term objectives generally seek to use the funding and authority included in the Inflation Reduction Act and Infrastructure Investment and Jobs Act to initiate a broad sector-based transition to zero tailpipe emissions from light-, medium- and heavy-duty vehicles and sustainable fuels.
The blueprint also addresses other modes of transportation, including aircraft, rail, marine vessels, off-road vehicles and pipelines.
In the medium and long term, the blueprint sets out goals for scaling and accelerating adoption of system-level transportation solutions through new policies and targeted public investments, partnerships and programs. Additional information regarding the blueprint can be found here.
The potential points available under the criterion for GHG disclosures represent approximately 4% of the total available points, and the criterion is worth roughly the same amount of points as the other following criteria: having an adequate cost accounting system; demonstrating performance of two cost-reimbursement contracts; demonstrating performance of two indefinite-delivery, indefinite-quantity contracts; and maintaining a facility security clearance. Thus, offerors that are publicly disclosing their GHG emissions will essentially receive bonus points in the GSA's evaluation.
Additionally, in December 2022, the Department of Transportation issued a notice of funding opportunity detailing the steps to obtain grant funding for the federal-state partnership for intercity passenger rail programs.
The notice states that projects will be ineligible to receive funding if they have not sufficiently considered climate change and sustainability in their planning. Additionally, grant recipients must address how their projects will result in significant GHG reductions, support emissions reductions goals in a local/regional/state plan and promote clean transportation options.
Thus, in both the procurement and grant context, federal agencies have begun incorporating climate change considerations into the evaluation and award process, and that trend likely will accelerate and continue over the next year or two. In light of this development, contractors should proactively take steps toward understanding the federal government's goals in this area and altering their practices to align with those goals if economically feasible and consistent with their business strategy.
As the Alliant 3 procurement demonstrates, contractors may receive more favorable consideration in future procurements by voluntarily inventorying and disclosing GHG emissions, and potentially taking actions to reduce those emissions, even if they are not required to do so for another two years or more under the proposed rule.
Procurement of carbon pollution-free electricity
In December 2021, the Biden administration issued an Executive Order No. 14057 on catalyzing clean energy industries and jobs, which provides that the federal government shall use its procurement power to, among other goals, achieve 100% carbon pollution-free electricity on a net annual basis by 2030.
Carbon pollution-free energy is electrical energy produced from resources that generate no carbon emissions, including marine energy, solar, wind and nuclear.
In December 2022, the Defense Logistics Agency issued two solicitations for the purchase of carbon pollution-free electricity to support US Department of Defense installations and agencies. In connection with those solicitations, Deputy Secretary of Defense Kathleen Hicks stated:
In December 2021, the Biden administration issued an Executive Order No. 14057 on catalyzing clean energy industries and jobs, which provides that the federal government shall use its procurement power to, among other goals, achieve 100% carbon pollution-free electricity on a net annual basis by 2030.
Carbon pollution-free energy is electrical energy produced from resources that generate no carbon emissions, including marine energy, solar, wind and nuclear.
In December 2022, the Defense Logistics Agency issued two solicitations for the purchase of carbon pollution-free electricity to support US Department of Defense installations and agencies. In connection with those solicitations, Deputy Secretary of Defense Kathleen Hicks stated:
Additionally, in January, the GSA, which is the primary agency that procures electricity for the federal government, issued a request for information to help it prepare for purchasing carbon pollution-free electricity for all U.S. retail choice electricity markets.
These actions show that agencies are taking seriously the Biden administration's goals of transitioning to carbon pollution-free energy. For contractors in the energy sector, offering solutions that support the transition to clean energy could become an important competitive discriminator in business with federal agencies.
Procurement of electric vehicles
On December 20, 2022, the US Postal Service announced that it anticipates purchasing at least 66,000 electric delivery vehicles by the end of 2028, including at least 45,000 electric next-generation delivery vehicles and 21,000 commercial-off-the-shelf electric vehicles.[2]
The announcement stated that the purchase was enabled by the overall network modernization efforts of the USPS, which allow for a more rapid deployment of electric vehicles, and $3 billion in funding under the Inflation Reduction Act.
With the largest fleet of vehicles in the federal government, the USPS announcement is a significant step toward meeting the Biden Administration's goal of transitioning to a zero-emission fleet by 2035, and we likely will see other agencies follow the lead of the USPS in acquiring electric vehicles.
Additional environmental initiatives
In addition to the acquisition developments described above, three environmental initiatives were recently announced that could shape policy and operational changes within certain federal agencies and their related business sectors. Contractors should be aware of these initiatives and consider how they might affect change within their respective market sectors, particularly the transportation and energy sectors.
US National Blueprint for Transportation Decarbonization
On January 10, the Biden Administration released its US National Blueprint for Transportation Decarbonization, setting forth proposals for decarbonizing the nation's transportation sector by 2050. The strategies outlined in the blueprint build upon a September 2022 memorandum of understanding between the US Department of Energy, the DOT, the US Department of Housing and Urban Development, and the EPA.
Those agencies each must develop detailed action plans to achieve the three key strategies outlined in the blueprint:
In addition to the acquisition developments described above, three environmental initiatives were recently announced that could shape policy and operational changes within certain federal agencies and their related business sectors. Contractors should be aware of these initiatives and consider how they might affect change within their respective market sectors, particularly the transportation and energy sectors.
US National Blueprint for Transportation Decarbonization
On January 10, the Biden Administration released its US National Blueprint for Transportation Decarbonization, setting forth proposals for decarbonizing the nation's transportation sector by 2050. The strategies outlined in the blueprint build upon a September 2022 memorandum of understanding between the US Department of Energy, the DOT, the US Department of Housing and Urban Development, and the EPA.
Those agencies each must develop detailed action plans to achieve the three key strategies outlined in the blueprint:
- Increasing convenience by implementing system-level and design solutions
- Improving efficiency through mode shift and more efficient vehicles and
- Transitioning to clean options by deploying zero-emission vehicles and fuels.
The short-term objectives generally seek to use the funding and authority included in the Inflation Reduction Act and Infrastructure Investment and Jobs Act to initiate a broad sector-based transition to zero tailpipe emissions from light-, medium- and heavy-duty vehicles and sustainable fuels.
The blueprint also addresses other modes of transportation, including aircraft, rail, marine vessels, off-road vehicles and pipelines.
In the medium and long term, the blueprint sets out goals for scaling and accelerating adoption of system-level transportation solutions through new policies and targeted public investments, partnerships and programs. Additional information regarding the blueprint can be found here.
Climate change-focused national enforcement and compliance initiative
Every four years, the EPA, in its national enforcement and compliance initiatives, selects national initiatives that would benefit from federal enforcement to protect human health and the environment.
On January 12, the EPA proposed to include climate change in its enforcement and compliance initiatives, which reflects the Biden Administration's commitment to build climate considerations into all aspects of its national and foreign policies.
The climate change enforcement and compliance initiatives would focus on reducing (1) noncompliance with the illegal import, production, use and sale of hydrofluorocarbons pursuant to the American Innovation and Manufacturing Act; (2) excess emissions from sources within certain industrial sectors, including solid waste landfills and oil and natural gas production facilities; and (3) noncompliance with other requirements such as mobile source, fuels and methane regulations.
This effort is also unique in that it focuses on climate mitigation rather than climate resiliency, furthering the administration's effort to reduce climate disruption and increases in global temperatures. The EPA is accepting comments on the proposal until March 13.
Every four years, the EPA, in its national enforcement and compliance initiatives, selects national initiatives that would benefit from federal enforcement to protect human health and the environment.
On January 12, the EPA proposed to include climate change in its enforcement and compliance initiatives, which reflects the Biden Administration's commitment to build climate considerations into all aspects of its national and foreign policies.
The climate change enforcement and compliance initiatives would focus on reducing (1) noncompliance with the illegal import, production, use and sale of hydrofluorocarbons pursuant to the American Innovation and Manufacturing Act; (2) excess emissions from sources within certain industrial sectors, including solid waste landfills and oil and natural gas production facilities; and (3) noncompliance with other requirements such as mobile source, fuels and methane regulations.
This effort is also unique in that it focuses on climate mitigation rather than climate resiliency, furthering the administration's effort to reduce climate disruption and increases in global temperatures. The EPA is accepting comments on the proposal until March 13.
New guidance to disclose climate impacts in environmental reviews
On January 6, the Council on Environmental Quality released updated guidance on consideration of greenhouse gas emissions and climate change for public comment.[3] The goal of the revised guidance is to help federal agencies better assess and disclose climate impacts as they conduct environmental reviews under the National Environmental Policy Act.
Importantly, the guidance employs a rule of reason that the depth of analysis should be proportional to a project's impacts and clarifies that projects that reduce GHG emissions can have less detailed GHG emissions analysis.
The guidance also recommends that agencies mitigate GHG emissions to the greatest extent possible, including indirect emissions, which is consistent with Executive Order No. 13990 on protecting public health and the environment, issued in January 2021. The Council on Environmental Quality invites comments on the guidance through March 10.
Going forward
The climate change developments over the past few months may be viewed favorably by contractors who are already offering, or planning to offer, sustainable goods and services, as the developments reflect a commitment from the federal government to procure such goods and services.
Additionally, the developments may be welcomed by contractors who are already inventorying and disclosing GHG emissions, as agencies are beginning to consider those practices when making award decisions.
On January 6, the Council on Environmental Quality released updated guidance on consideration of greenhouse gas emissions and climate change for public comment.[3] The goal of the revised guidance is to help federal agencies better assess and disclose climate impacts as they conduct environmental reviews under the National Environmental Policy Act.
Importantly, the guidance employs a rule of reason that the depth of analysis should be proportional to a project's impacts and clarifies that projects that reduce GHG emissions can have less detailed GHG emissions analysis.
The guidance also recommends that agencies mitigate GHG emissions to the greatest extent possible, including indirect emissions, which is consistent with Executive Order No. 13990 on protecting public health and the environment, issued in January 2021. The Council on Environmental Quality invites comments on the guidance through March 10.
Going forward
The climate change developments over the past few months may be viewed favorably by contractors who are already offering, or planning to offer, sustainable goods and services, as the developments reflect a commitment from the federal government to procure such goods and services.
Additionally, the developments may be welcomed by contractors who are already inventorying and disclosing GHG emissions, as agencies are beginning to consider those practices when making award decisions.
An earlier version of this article appeared on Law360 on February 16, 2023.
[1] At a high level, the proposed rule requires that significant contractors (ie, those that received between $7.5 million and $50 million in federal contract funds in the prior federal fiscal year) inventory and disclose their Scope 1 and 2 GHG emissions. The proposed rule also requires that major contractors (ie, those that received in excess of $50 million in federal contract funds in the prior federal fiscal year) inventory and disclose their Scope 1, 2 and 3 GHG emissions, complete an annual climate disclosure, and implement validated science-based targets for reducing GHG emissions.
[2] Although the electric vehicles will help replace USPS's aging delivery fleet of 220,000 vehicles, the USPS anticipates that it will continue purchasing internal combustion vehicles as needed to meet immediate requirements.
[3] Guidance on Consideration of Greenhouse Gas Emissions and Climate Change, https://ceq.doe.gov/guidance/ceq_guidance_nepa-ghg.html.
