How to build and maintain sustainability in government contracting

In 2021, President Biden set forth an ambitious target: to increase the share of government contracts awarded to small disadvantaged businesses by 50%. The focus on increasing federal small disadvantaged business contracting comes at the same time that the government seeks to leverage its buying power to address the challenges of climate change.

The Executive Order on Climate-Related Financial Risks emphasized the government’s buying power, integrating climate disclosure and impact reduction efforts into the federal procurement process. As part of that EO, the Administration asked the Federal Acquisition Regulatory Council to consider an amendment to the Federal Acquisition Regulation that would require federal suppliers to disclose greenhouse gas (GHG) emissions and set science-based targets for carbon reduction.

In response, the Defense Department, the General Services Administration and NASA published an advance notice of proposed rulemaking regarding a potential Federal Acquisition Regulation (FAR) amendment for major federal procurements in October, 2021. This proposed rulemaking considers the implications of expanding the aperture of sustainable procurement to consider the “social cost of greenhouse gas emissions” in making procurement decisions and the concept of giving preference to offers from suppliers with a “lower social cost of greenhouse gas emissions.”

Requiring federal contractors to set reduction targets could have a material impact over time. In fact, GSA has stated that carbon emissions from federal contractors (supply chain emissions) are estimated to be four times greater than emissions from federal buildings and fleets.

While necessary to harness the federal government’s buying power in addressing the climate crisis, new acquisition regulations could inadvertently serve as a barrier to entry to the federal market. Small businesses who do not have resources focused on sustainability to help formulate carbon reduction plans and measure against science-based targets could be particularly impacted.

If new language is added to the FAR, the federal government will need to provide additional information on SBTs as well as user-friendly toolkits to enable small businesses to navigate the complexities.

Fortunately, the U.S. government, through its membership in the Greening Government Initiative and similar organizations, can look to its international counterparts for guidance and lessons learned on optimizing the sustainability of government supply chains, leveraging its significant buying power. One key consideration for U.S. leaders is tying economic priorities to climate priorities. The U.K. has sought to do exactly that through its U.K. SME Climate Hub, a government-backed effort aimed at providing small and medium-sized businesses with access to resources to help them take the practical steps necessary to understand and reduce their emissions.

In September of 2021, the U.K. government issued new rules requiring suppliers bidding on contracts worth £5 million (approximately $6 million) a year or more to commit to the government’s target of net zero carbon emissions by 2050 and to publish a carbon reduction plan. Companies that do not meet these new requirements are excluded from bidding.

I believe that changes to the U.S. federal acquisition regulations focused on leveraging its buying power for more sustainable operations are inevitable. We have already seen the congressional focus on federal fleet investments, including the introduction of the Green Postal Services Fleet Act of 2022 (H.R. 7018), which would prohibit the U.S. Postal Service from procuring its next generation fleet unless those purchases are 75% electric or zero-emission vehicles.

As the U.S. government considers changes in acquisition policy, it should accompany any change with a commitment to tooling to support small businesses in adopting practices for measuring sustainability of their business operations and supply chains; funding for green initiatives specifically targeted for small and disadvantaged business; and establishing innovative public-private partnerships including mentorship programs where experts from the federal government and large businesses can coach and guide small businesses on their sustainability journeys.

Mark Flugge serves as CGI Federal’s sustainability and climate change lead.

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