NCMA Comments on FAR Case
NCMA and its Sustainable Procurement Community of Practice (CoP) continue to track the growing Federal requirements surrounding climate and sustainable procurement principles. On November 14, 2022 DoD, GSA, and NASA proposed FAR Case 2021-015, Disclosure of Greenhouse Gas Emissions and Climate-Related Financial Risk. This rule proposes to amend the FAR, implementing compliance checks for contractors’ greenhouse gas emissions and climate-related financial risk. NCMA has responded to the call for comments on this FAR case.
Prior to developing comments on the proposed rule, NCMA conducted a brief survey of our community to obtain information on their understanding of the FAR Case and sustainable procurement. While a statistically significant number of responses was not received, NCMA was able to glean that greater awareness is needed to ensure industry and government professionals are prepared to manage compliance requirements.
The world’s leading resource for the contract management profession, NCMA prides itself on being a neutral forum for buyers and seller. In general, NCMA fully supports and agrees with the proposed rule and the approach taken to ensure compliance with the public disclosure requirements set forth in EO 14030. It must be noted, however, that the “compliance checks” that are recommended are rarely simple and additional work will be imposed on the contracting professional.
The following is the complete response from NCMA
February 13, 2023
FAR Case 2021-015 (Federal Register 68312 - Vol. 87, No. 218), Published November 14, 2022
Proposed Rule: Disclosure of Greenhouse Gas Emissions and Climate-Related Financial Risk
The National Contract Management Association (NCMA) respectfully submits comments in response to the Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) proposed rule to modify the Federal Acquisition Regulation (FAR) to implement Section 5(b)(i) of Executive Order (EO) 14030, Climate-Related Financial Risk, to require certain federal contractors to publicly disclose greenhouse gas (GHG) emissions and climate-related financial risk and to set science-based reduction targets.
NCMA is the world’s leading resource for the contract management profession. We are a neutral forum for buyers and sellers with a highly diverse community of approximately 20,000 professionals representing federal, state, and local governments, industry, and academia. Our membership includes procurement and contracting professionals, program managers, lawyers, and accountants. NCMA maintains the ANSI-approved Contracting Management Standard™ (CMS™) and four levels of professional certifications for contract management professionals. The CMS™ is the basis for the new contracting competency model adopted by the Office of Federal Procurement Policy (OFPP) in concert with the Department of Defense as they enhance legislatively required contracting certification and training programs across the federal government. At NCMA we set the standard for the common language we speak and the core competencies we need as contracting professionals.
Prior to developing comments on the proposed rule, NCMA conducted a brief survey of our community to obtain information on their understanding of the FAR Case and sustainable procurement. We did not receive a statistically significant number of responses as the survey was conducted over the holiday season. However, from the responses received, we were able to glean that greater awareness is needed to ensure industry and government professionals are prepared to manage compliance requirements.
In general, NCMA fully supports and agrees with the proposed rule and the approach taken to ensure compliance with the public disclosure requirements set forth in EO 14030. As written, the rule implies the impact on the work of the federal contracting officer (buyers) to be merely a “compliance check” in the System for Award Management (SAM) with a corresponding non- responsibility determination if a contractor fails to provide the required certification. However, “compliance checks” are rarely that simple and there is additional work imposed on the contracting professional, which is further discussed below.
Definitions: The definitions used to identify significant and major contractors for the purpose of identifying those contractors that are subject to the reporting and certification requirements are straightforward. However, providing these definitions in FAR Part 23, when all other key terms used in the FAR are defined in Part 2.1, minimizes the importance of how significant and major contractors are defined with respect to compliance with GHG and climate-related financial risk reporting. These terms, significant contractor(s) and major contractor(s) do not appear elsewhere in the FAR eliminating the potential for any confusion. Additionally, FAR Part 2.1 accounts for cross-referencing of terms and definitions that may be used in other parts of the FAR. Therefore, we recommend the definitions of significant contractor and major contractor be included in FAR Part 2.1.
Implementation Timing: The time provided for compliance, one year after publication of a final rule for significant contractors and two years for major contractors, appears reasonable and sufficient for updates to contract writing and reporting systems. More importantly, this time can be used to develop industry and federal government policy/procedure documentation and training for contracting professionals. It is recommended that the FAR Council coordinate with the GSA systems management teams to ensure SAM and other impacted systems are updated, tested, and rendered operational before the final rule is implemented.
Training and Policy Development: While the rule contemplates that implementation of the compliance requirements will not require significant training for federal contracting professionals, awareness of the new rules and some level of training to ensure understanding of the impact, importance, and relevance of the actions undertaken when complying (seller side) and verifying compliance (buyer side) is necessary. In other words providing training for both government and industry contracting professionals is essential to promote awareness, understanding, and acceptance of responsibility for their role in the process.
Of significance are the changes to FAR Part 9.104-3(e), which will require that contracting officers “presume the prospective contractor is nonresponsible pursuant to 9.104-1” if the contractor fails to provide the necessary certification in SAM. That said, the rule does provide flexibility for the federal contracting officer to consider mitigating factors after obtaining additional information from the contractor. The rule also allows for the Senior Procurement Executive to grant a waiver of up to one calendar year. Ensuring procedures are clearly defined and contracting professionals are properly trained on the processes is important.
While contracting officers know and understand the steps for conducting a non-responsibility determination, this new requirement could create some confusion. For example, when making a non-responsibility determination of a small business, the contracting officer must refer the matter to the Small Business Administration (SBA) for them to determine if a Certificate of Competency will be issued. Given this non-responsibility determination is about “sustainable procurements” some contracting officers may perceive that SBA review is not required - this new rule does not change that requirement.
Exceptions: The proposed rule provides exceptions for Federally-recognized tribes or tribal or Native corporations, institutions of higher education, non-profit research organizations, state or local government, or entities deriving 80% or more of annual revenue from federal management and operating (M&O) contracts, and includes a rationale for these exceptions. However, the stated purpose of Executive Order 14030, Climate-Related Financial Risk, is to properly analyze and mitigate climate risk by requiring federal contractors/suppliers to publicly disclose their GHG emissions. The President has made it a matter of public policy that the United States will address the impact of climate change through the procurement process (see the President’s Management Agenda, Priority 3 and associated strategies). Therefore, the inclusion of exceptions for certain entities that are “recipients” of significant federal government funds through contracts, grants, or other financial instruments contradicts the intent and spirit of the President’s stated objectives.
The FAR Council should reconsider the granting of exceptions. While exceptions may be consistent “with related Federal procurement policies and current commercial norms for sustainability reporting,” exceptions send a contradictory message to the federal contractor community on the importance of public disclosure of GHG emissions when it only applies to some and not others. Unfortunately, such exceptions could also create incentives for implementing procurement strategies that use these types of organizations in lieu of competition, small business set-asides, the inclusion of significantly underrepresented groups, and other acquisition strategies that provide greater opportunities. Today, several of these organizations receive substantial contract awards with obligations often far exceeding $7.5M per year. Given the significance and importance of this rule it seems appropriate to eliminate or, at least, minimize the “exceptions” and create greater equity in compliance.
Finally, tools like the GSA Federal Contractor Climate Action Scorecard | D2D, are useful for tracking and monitoring the degree to which federal contractors are complying with public disclosure requirements. As indicated in the latest scorecard, progress is being made but more can be done to incentivize all federal contractors to comply with public disclosure requirements. Using the responsibility determination at FAR Part 9 is a strong incentive to promote compliance.
FAR Part 23 Changes: Discussions with senior policy analysts in the federal government suggest that a complete rewrite of FAR Part 23 would be beneficial to promote greater understanding and compliance with regulations. In that the implementation of this rule will require significant changes to this section of the FAR, it is recommended that the FAR Council consider a redrafting of FAR Part 23.
Once again, we appreciate the opportunity to comment on the FAR Case and look forward to the publication of the final rule.
For additional information about NCMA, please visit our website at www.ncmahq.org. To learn about the NCMA Community of Practice (COP) and resources on climate and sustainable procurement, please visit Climate and U.S. Sustainable Procurement (ncmahq.org).
Chief Executive Officer
National Contract Management Association