President Clinton issued Executive Order ("EO") 13101 entitled "Greening the Government Through Waste Prevention, Recycling and Federal Acquisition" (See Footnote 1) on September 14, 1998, which superceded EO 12873. (See Footnote 2.) EO 13101 encourages federal agencies to buy bio-based (See Footnote 3) and other "green" products. (See Footnote 4.) This client alert outlines recent activities showing that the acquisition and use of environmentally preferable (See Footnote 5) products and services is gaining acceptance by federal agencies.
EO 13101 Broadens Authorities for Environmentally Preferable Purchasing
Final EPA Guidance Required. Under EO 13101, EPA is directed to issue its proposed Guidance on Acquisition of Environmentally Preferable Products and Services ("EPA Guidance") within 90 days (December 13, 1998). Under EO 12873, the EPA had published for public comment proposed EPA Guidance for environmentally preferable products. (See Footnote 6.) As a part of the proposed EPA Guidance, the EPA included seven guiding principles to help federal agencies incorporate environmental preferability into their procurement practices:
- Consideration of environmental preferability should begin early in the acquisition process and be rooted in the ethic of pollution prevention, which strives to eliminate or reduce, up front, potential risks to human health and environment.
- A product or service's environmental preferability is a function of multiple attributes.
- Environmental preferability should reflect the lifecycle considerations of products and services to the extent feasible.
- Environmental preferability should consider the scale (global versus local) and temporal reversibility aspects of a product or service's impact.
- Environmental preferability should be tailored to local conditions where appropriate.
- Environmental objectives of products and services should be a factor or subfactor in competition among vendors, when appropriate.
- Agencies need to examine product attribute claims carefully.
Although the EPA has yet to issue the final EPA Guidance by the deadline set in EO 13101 -- December 13, 1998 -- some federal agencies appear to be following the proposed guiding principles.
Federal Environmental Executive's Responsibilities Enhanced. EO 13101 substantially broadens the authority of the Federal Environmental Executive ("FEE"), who is designated by the President to ensure federal agencies comply with the requirements of EO 12873.
The major expansions of the FEE's authority are: (1) developing a Government-wide Waste Prevention and Recycling Strategic Plan ("Strategic Plan") that is to provide direction and initiatives for acquisition of environmentally preferable products and services; (2) having within each federal agency a designated Agency Environmental Executive ("AEE"), who acts as the FEE's agency contact; and (3) working with state and local governments to improve the federal, state and local governments' use of environmentally preferable products and services.
If the FEE identifies an inconsistency between the EO and an agency's procurement specification, standard or product description, the FEE can request that the AEE advise the FEE as to why the specification cannot be revised or have the agency submit a plan for revising it within 60 days.
Federal Agencies' Added Responsibilities. EO 13101 also imposes the following responsibilities on federal agencies:
- Use EPA Guidance in pilot projects to develop practical information.
- Establish a model demonstration program with new and innovative approaches incorporating environmentally preferable and bio-based products. Use the technical expertise of non-government entities ("NGEs") (See Footnote 7) such as labeling, certification or standard-developing organizations as well as the National Institute of Standards and Technology.
- Use the EPA Guidance in addition to the lessons from pilot and demonstration projects in identifying and purchasing environmentally preferable products and services, and modifying their procurement programs as appropriate.
- Set goals for increasing the use of environmentally preferable products and services for those products and services for which the agency has completed a pilot program.
- Use environmentally preferable products in acquisition planning (developing plans, drawings, work statements, specifications or other product descriptions), and in the evaluation and award of contracts, as appropriate.
- Consider any environmentally preferable purchasing criteria developed by the EPA when developing, reviewing, or revising federal or military specifications, product descriptions (including commercial item descriptions), or standards. Each agency must report annually to FEE on its compliance with this requirement.
Federal Acquisition Regulations ("FAR") Revised to Institutionalize Acquisition of Environmentally Preferable Products and Services
On August 22, 1997, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council adopted a final rule to incorporate policies for the acquisition of environmentally preferable and energy-efficient products and services. (See Footnote 8.) This final rule took effect on October 21, 1997, for new federal contracts.
The FAR revisions institutionalize environmental purchasing considerations throughout the procurement and contracting process. The FAR revisions adopt the policy that federal agencies "...shall implement cost-effective contracting preference programs favoring the acquisition of environmentally preferable and energy-efficient products and services, and shall employ acquisition strategies that affirmatively implement [environmental] objectives...." (See Footnote 9.)
The FAR's environmental objectives (See Footnote 10) are:
- Obtaining products and services considered to be environmentally preferable based on EPA-issued guidance.
- Obtaining products considered to be energy-efficient.
- Eliminating or reducing the generation of hazardous waste and the need for special material processing.
- Promoting the use of nonhazardous and recovered materials. Realizing life-cycle cost savings.
- Promoting cost-effective waste reduction when creating plans, drawings, specifications, standards, and other descriptions authorizing material substitutions, extension of shelf-life and process improvements.
For negotiated procurements, the FAR revisions require, as an evaluation factor, that environmental objectives (See Footnote 11) shall be considered in every source selection, when appropriate, and this consideration may be expressed in terms such as resource or energy conservation, pollution prevention, waste minimization and recovered material content. (See Footnote 12.)
Federal Agency Pilot Projects
The following is a brief description of pilot projects jointly sponsored by the EPA and other federal agencies.
General Services Administration ("GSA"). The Cleaning Projects Pilot Project actually predated the issuance of EO 12873. The purpose of the project was to develop a framework for identifying and comparing environmentally preferable commercial cleaning products. The GSA and EPA used product literature, Material Safety Data Sheets ("MSDSs"), actual use survey and comparative risk management assessment to identify environmentally preferable cleaning products. Suppliers and manufacturers of products identified as biodegradable by the GSA and EPA were also asked to voluntarily contribute information on seven environmental attributes -- skin irritation, food chain exposure, air pollution potential, fragrances, dyes, packaging and potential concentrate exposure.
Starting with the 1996 GSA Commercial Supplies catalog, environmentally preferable cleaning products identified by the GSA and EPA are grouped in a front section and prominently displayed as biodegradable cleaners and degreasers -- so-called "green dot" approach. In addition, a matrix of the voluntary answers to the seven environmental attributes is included in the catalog so that purchasers can compare the products and make decisions using the environmental attributes most critical to intended use and geographic region -- so-called "matrix" approach.
At the GSA's annual Earth Day celebration in April 1998, the GSA introduced "Planet GSA" having four goals -- buying green (procurement), building green (design and construction), driving green (alternative-fuel vehicles) and saving green (energy). As part of the buying green goal, the GSA issued the Environmental Products Guide to increase the procurement of "green" products. This guide contains information about more than 3,000 environmentally oriented products that span the range of products and services provided by the Federal Supply Service. Environmental notations are provided for listings to identify specific attributes.
Department of Defense ("DOD"). The DOD and EPA adopted a unique three-step method for incorporating environmental preferability into a parking lot contract that does not include an approved product list, does not rely on outside certification and allows the contract to be modified to include additional environmental attributes. First, bidders were required to include previous environmental performance information and a plan for obtaining products with environmental attributes in their proposals. Second, the DOD and EPA identified baseline attributes that could be used to compare the environmental preferability of products to be used under the contract. Third, the DOD and EPA developed price differentials as an incentive for the contractor to use products that at least met the baseline attributes.
In June 1997, the DOD awarded a five-year, $1 million per year, fixed-price, line-item contract to maintain and repair the parking lots and access roads at the Pentagon and three other DOD facilities in the Washington, D.C. area. The contract includes work sheets for 20 product categories representing 90% of the materials used to repair and maintain the parking lots. In addition to mandatory operational requirements for a product, 11 work sheets also include optional environmental attributes. The work sheets were developed by the DOD and EPA.
Two incentives to use environmentally preferable products and services were included in this procurement. First, each bidder's environmentally preferable purchasing plan was evaluated as part of the technical evaluation score. This included experience or familiarity with environmentally preferable purchasing practices and a demonstrated propensity for environmental stewardship such as onsite recycling or selection of products based on environmental consideration.
The second incentive is using price differentials to encourage the contractor to use products with improved environmental performance. The contract allowed the contractor, with DOD approval, to earn a 2% price differential for each attribute it incorporates up to a ceiling of 10% per line item, and an overall task order price differential of 5%. The contract also provides the opportunity for the contractor to improve environmental performance and earn price differentials, subject to the same line-item and task order ceilings.
This contract is a small business set-aside contract. The use of price differentials is justified by the DOD to compensate the contractor for identifying and procuring products with multiple environmental attributes. Hence, the use of price differentials for a multimillion-dollar, non-small business contract may not be a viable option for the DOD's budget. However, use of products with improved environmental performance may be part of the contractor's annual performance evaluation. The DOD feels that this should be sufficient incentive for contractors.
Applicable Legal Requirements
Federal agencies are required to specify their needs in a manner designed to promote full and open competition and may include restrictive provisions only to the extent that they further legitimate environmental considerations. (See Footnote 13.)
Use of NGEs. There are two considerations. First, if a federal agency were to rely on independent labeling organizations to identify and approve products with environmental attributes and were to require the contractor to use these "approved" products whenever possible, this would be an improper delegation of an "inherently governmental function. (See Footnote 14.) The federal agency must make final decisions on product selection. (See Footnote 15.)
Potential conflicts of interest must be carefully analyzed and either mitigated or avoided. (See Footnote 16.) NGEs must be able to render impartial advice or assistance and must not be impeded by competing private business or financial interests.
Voluntary Consensus Standards. The EPA has invited non-governmental standards developers to work with the EPA to promote the development of voluntary consensus standards (See Footnote 17) for environmentally preferable goods and services. (See Footnote 18.) These standards must be based on objective scientific information and not the private standards of individual firms. (See Footnote 19.)
Environmental Marketing Claims. Federal agency procurement decisions must be based on verifiable claims and comply with the Federal Trade Commission ("FTC") Guides for the Use of Environmental Marketing Claims. (See Footnote 20.) The FTC Guide states that a claim that a product is "environmentally preferable" is deceptive by conveying a wide range of meanings to consumers that may be difficult to substantiate, or that the product is environmentally superior to other products in all respects. To avoid being considered deceptive, the FTC recommends that the claim must be "accompanied by clear and prominent qualifying language limiting the environmental superiority representation to the particular product attribute or attributes for which it could be substantiated, provided that no other deceptive implications were created by the context." (See Footnote 21.)
The FTC Guide also states that an unqualified claim that a product is "Eco-Safe," "Environmentally Friendly," "Environmentally Safe" or contains an environmental label with the text "Earth Smart" would be considered to be deceptive.
1/ 63 Fed. Reg. 49643 (Sep. 16, 1998). return
2/ 58 Fed. Reg. 54911 (Oct. 22, 1993). EO 12873 on "Federal Acquisition, Recycling, and Waste Prevention" was issued on October 20, 1993. return
3/ Biobased industrial products (non-food, non-feed) are made from agricultural and forestry materials and animal by-products. return
4/ Although EO 13101 also has requirements pertaining to recycling and waste prevention, this client alert focuses only on the federal acquisition portion of EO 13101. return
5/ Section 201 of EO 12873 defines the term "environmentally preferable" to mean "products or services that have a lesser or reduced effect on human health and the environment when compared with competing products or services that serve the same purpose. This comparison may consider raw materials acquisition, production, manufacturing, packaging, distribution, reuse, operation, maintenance or disposal of the product or service." return
6/ 60 Fed. Reg. 50722 (Sept 29, 1995). return
7/ In June 1998, EPA issued a policy statement on "Pilot Project Approach for the Acquisition of Environmentally Preferable Products and Services." 63 Fed. Reg. 33927 (June 22, 1998). This policy statement outlines three approaches as to how federal agencies can use NGEs to support environmentally preferable purchasing efforts: use of existing information developed by NGEs; use of NGEs as certifiers of specific claims; and use of NGEs as "consultants" under advisory and assistance contracts. return
8/ 62 Fed. Reg. 44809 (Aug. 22, 1997). This final rule adopts an interim rule that was published for comment at 60 Fed. Reg. 28494 (May 31, 1995). return
9/ 48 C.F.R. § 23.704(a)(1998 ed.) return
10/ 48 C.F.R. § 23.704(b)(1998 ed.) return
12/ 48 C.F.R. § 15.605(b)(1)(iv) (1998 ed.). return
13/ See Trilectron Industries, Inc., B-248475, Aug. 27, 1992, 92-2 CPD ¶ 130, in which Comptroller General found that specifications that implemented legitimate environmental considerations were not unreasonable or unduly restrictive of competition. return
14/ See Office of Federal Procurement Policy ("OFPP") Policy Letter 92-1 (Inherently Governmental Functions), dated Sep. 23. 1992, 57 Fed. Reg. 45100 (Sep. 30, 1992). return
15/ See Advance Machine Company, B-219766, Nov. 5, 1985, 85-2 CPD ¶ 526 (Comptroller General has held that "the items offered bear a specific label demonstrating approval by a particular testing laboratory is unduly restrictive and improper [cite omitted]. . . [T]he absence of such approval should not automatically exclude products that may conform equally to the solicitation, since the government, not the testing laboratory, is primarily charged with the determination of actual conformance"). return
16/ 41 C.F.R. Subpart 9.5 (Organization and Consultant Conflicts of Interests). See also OFPP Policy Letter 89-1 (Conflict of Interest Policies Applicable to Consultants), dated Dec. 8, 1989, 54 Fed. Reg. 51807 (Dec. 18, 1989). return
17/ Section 12(d) of the National Technology Transfer and Advancement Act of 1995 ("NTTA"), Pub L. No. 104-113, encourages federal agencies to adopt standards developed by "voluntary consensus bodies." Voluntary consensus standards are technical standards (e.g., materials specifications, test methods, sampling procedures and business practices) that are developed or adopted by voluntary consensus standards bodies. return
18/ 64 Fed. Reg. 2640 (Jan. 15, 1999). return
19/ OMB Circular A-119, Revised, defines "voluntary" standards as not including the "private standards of individual firms." return
20/ 16 C.F.R. Part 260 (1998 ed.) return
21/ 16 C.F.R. § 260.7(a) (1998 ed.), Example 6. return