What is Federal Procurement?
Federal procurement is the process by which government agencies purchase goods and services. Through this process, government agencies establish specifications for what they need, and then solicit the private sector for goods and services that meet those specifications. Typically, agencies will issue a request for proposals, and companies will respond by submitting offers in a competitive process.
Federal procurement is a powerful tool and driver for markets and innovation. As the largest purchaser of goods and services in the country, accounting for $7 trillion annually and 10-15% of U.S. GDP, the federal government provides huge market opportunities for corporations and businesses. The government’s purchasing power allows it to set conditions that stimulate markets for products that meet societal goals and objectives. Federal procurement that reduces emissions can include purchases of low-carbon fuels, electric vehicles, clean energy, efficient building stock, and more. One way to ensure procurement reduces emissions is to establish a Buy Clean procurement standard across one or more areas of the government.
In the context of carbon removal, federal procurement can stimulate markets for carbontech––the wide variety of commercial products and services made with the carbon dioxide (CO2) emissions captured from power plants, biomass, or direct air capture. Examples of carbontech products include transportation fuels, building materials, plastics, chemicals, and more. Creation of carbontech markets creates a market value for waste carbon, which creates an economic incentive to capture and convert waste carbon into products rather than release it into the atmosphere. Carbontech products can also help lower technology costs for carbon capture and conversion technologies by providing a demand-side incentive to capture and use waste carbon feedstocks. Federal procurement can also stimulate the market for carbon capture technology itself.
How does Federal Procurement work?
By providing project developers and investors with certain and predictable markets and offtake opportunities, federal procurement acts as an effective stimulator for project financing. It is a hugely important tool for the federal government to help scale up new products, technologies, and services.
The typical federal procurement process begins with acquisition personnel within an agency determining the goods and services an agency needs; these needs are typically referred to as the agency’s “requirements.” A solicitation is then posted on the Federal Business Opportunities website for companies and entities to see. Solicitations commonly include the goods or services an agency wants to purchase, instructions for companies seeking to submit an offer, the source selection methodology to evaluate offers, and a deadline for the submission of offer proposals. Interested companies submit an offer in response to the posting, and agency personnel evaluate all the offers after the deadline has passed, using the source selection method and criteria described in the solicitation. The agency then awards the contract to the selected company.
Key Design Considerations for Federal Procurement
What are the desired outcomes for a climate-friendly procurement policy? What are the parameters for the private market to respond to?
Which markets currently exist? How can these markets advance low-carbon and carbontech products? Where are new markets needed to advance these products?
What are fair and reasonable prices that will still meet climate objectives?
What government needs can be met through low-carbon or carbon removal products and services?
State legislatures including California, Hawaii, and New York have experience with government procurement policies surrounding clean energy technologies. For example, the Buy Clean California Act (AB 262) requires state agencies to consider the embedded carbon emissions in industrial products when contracting for state-funded infrastructure projects, with the goal of cutting greenhouse gas emissions.
At the federal level, targeted procurement policies have served as market-based drivers for wind, solar, and other forms of energy. Procurement could similarly propel carbon removal by creating markets for carbontech and for carbon capture and storage. Carbontech is a promising emerging industrial sector, with both federal commodities and high-value consumer goods. The economic opportunity for carbontech in U.S. markets is massive, with an estimated $1 trillion total available market including potential revenue from products that could be made from carbontech materials or conversion processes. Of the 182 global ongoing carbontech projects, the U.S. is home to more projects than any other single country. U.S. projects include carbon conversion into jet fuels and construction projects, such as Virgin Atlantic and Lanzatech’s 747 jet flight from Orlando, Florida to London, England using jet fuel derived from factory CO2 emissions, or CarbonCure’s supply of over 3 million cubic yards of concrete made from carbon waste to construction projects. Federal legislation that has been introduced to advance carbontech includes the CLEAN Future Act, USE IT Act, EFFECT Act, and the SEA FUEL Act.