What are Procurement Standards?
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.
Procurement standards set the conditions under which the federal government purchases goods and services. Procurement standards that address environmental concerns, particularly toxic pollution and greenhouse gas (GHG) emissions, are commonly called “Buy Clean” procurement standards. With the federal government as the largest purchaser of goods and services in the country, accounting for $7 trillion annually and 10-15% of U.S. GDP, a federal Buy Clean procurement standard can utilize the government’s purchasing power to increase the development and uptake of low-carbon manufacturing processes and products. It is also commonly seen as a tool to strengthen the competitiveness of American manufacturing and promote cleaner and more innovative domestic supply chains.
How do Procurement Standards work?
Buy Clean procurement standards work by setting a maximum emissions intensity (i.e., emissions per unit produced) for a set of materials the federal government purchases. The standard may be adjusted over time to decrease the maximum intensity benchmark, thereby driving deeper emissions reduction. By providing project developers and investors with certainty about the requirements for federal offtake, a procurement standard stimulates investments in innovative low-carbon processes and products. This provides both direct and indirect emissions abatement: The government is both reducing its own carbon footprint (direct reductions) and building a domestic clean manufacturing supply chain that can help state and local governments, private companies, and consumers purchase goods with a smaller emissions footprint (indirect reductions).
Buy Clean procurement standards require a consistent and fair way to calculate a product’s lifecycle GHG emissions, commonly called “embedded emissions.” Today, this is commonly conducted via an Environmental Product Declaration (EPD), which is an independent international standard for quantifying and comparing lifecycle environmental impact across products. A federal procurement standard may utilize EPDs or define its own methodology.
Key Design Considerations
What are the specific goods covered by the procurement standard? Does the standard extend to all federal purchasing, or just specific functions or agencies?
What method should the procurement standard use for consistent and fair lifecycle emissions accounting? Which agency should be tasked with enforcing or refining that method?
What is the emissions-intensity benchmark that materials must meet, and when does it go into effect? How should the benchmark adjust (i.e., become more stringent) over time?
How can the procurement standard be designed to strengthen the competitiveness of U.S. manufacturers relative to global suppliers? Should additional incentives or investments be enacted alongside the standard to enable domestic producers to meet it?
Should additional preference be given to producers that go above and beyond the standard’s requirement (i.e., a “gold standard” or “high achievers’ market”) to incentivize the most innovative approaches? Should top preference be given to producers that meet other government objectives, such as fair labor practices?
U.S. Experience with Government Procurement Standards
State legislatures including California, Hawaii, and New York have experience with government procurement policies surrounding clean energy technologies. Most notably, the Buy Clean California Act (AB 262) passed in 2017 as the first state-wide Buy Clean procurement standard, with the goal of leveraging California’s substantial purchasing power to reduce climate pollution and strengthen the global leadership of domestic businesses. The law requires contractors who bid on state infrastructure projects to disclose, via an EPD, the GHG emissions data for certain materials produced in their facilities. Then, starting in 2021, contractors will have to show that their materials do not exceed the emissions standard.
At the federal level, targeted procurement policies have served as market-based drivers for wind, solar, and other forms of energy.