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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: January 11, 2005

SUBJECT: Department of Agriculture; Guidelines for Designating Biobased Products for Federal Procurement

SOURCE: Federal Register, January 11, 2005, Vol. 70, No. 7, page 1792

AGENCIES: Office of Energy Policy and New Uses, U.S. Department of Agriculture (USDA)

ACTION: Final Rule

SYNOPSIS: USDA is establishing guidelines for designating items made from biobased products that will be given federal procurement preference.

EDITOR’S NOTE: For more on the notice of proposed rulemaking (NPRM), see the December 19, 2003, FEDERAL CONTRACTS DISPATCH “Department of Agriculture; Guidelines for Designating Biobased Products for Federal Procurement.”

EFFECTIVE DATE: February 10, 2005.

FOR FURTHER INFORMATION CONTACT: Marvin Duncan, USDA, Office of the Chief Economist, Office of Energy Policy and New Uses, Room 361, Reporters Building, 300 Seventh Street, SW., Washington, DC 20024; e-mail: mduncan@oce.usda.gov; 202-401-0532. Information on the Federal Biobased Products Preferred Procurement Program is available at http://www.biobased.oce.usda.gov.

SUPPLEMENTAL INFORMATION: Section 9002 of the Farm Security and Rural Investment Act of 2002 (Public Law 107-171) (FSRIA) requires federal agencies to purchase biobased products for all items costing over $10,000, or when the quantities of functionally equivalent items purchased over the preceding fiscal year equaled $10,000 or more, unless the items are not reasonably available, fail to meet applicable performance standards, or are available only at an unreasonable price.

In this final rule, USDA is establishing guidelines addressing the designation process, how to determine the biobased content and other attributes of specific products, and cost sharing for product testing. In addition, these guidelines include the Section 9002 requirement that federal agencies have in place, within one year of the publication of final guidelines (that is, by January 11, 2006), a procurement program that assures biobased products within designated items will be purchased to the maximum extent practicable, an agency promotion program, and provisions for the annual review and monitoring of the agency's procurement program. USDA and the Office of Federal Procurement Policy (OFPP) will work in cooperation to ensure implementation of the requirements of Section 9002 in the Federal Acquisition Regulation (FAR).

In designating items (generic groupings of specific products such as crankcase oils or synthetic fibers) for preferred procurement, USDA will consider the availability of such items and the economic and technological feasibility of using such items, including life cycle costs. Federal agencies will be required to purchase products that fall within an item only after that item has been designated for preferred procurement. In addition, USDA will provide information to federal agencies on the availability, relative price, performance, and environmental and public health benefits of such items and, where appropriate, will recommend the level of biobased content to be contained in the procured product. Manufacturers and vendors will be able to offer their products to Federal agencies for preferred procurement under the program when their products fall within the definition of an item that has been designated for preferred procurement and the biobased content of the products meets the standards set forth in the guidelines.

The legislative history of Title IX of FSRIA suggests that Congress had in mind three primary objectives when enacting Section 9002:

1. Improve demand for biobased products. This would increase domestic demand for many agricultural commodities that can serve as feedstocks for production of biobased products, and encourage substitution of products with a more benign or beneficial environmental impact, as compared to the use of fossil energy-based products.
   
   
2. Spur the development of value-added agricultural processing and manufacturing in rural communities. Since biobased feedstocks are largely produced in rural settings and, because of their bulk, require pre-processing or manufacturing close to where they are grown, increased dependence on biobased products appears likely to increase the amount of pre-processing and manufacturing of biobased products in rural regions. This trend would help to create new investment, job formation, and income generation in these rural regions.
   
   
3. Enhance the nation's energy security by substituting domestically produced biobased products for fossil energy-based products derived from imported oil and natural gas.

On December 19, 2003, USDA published an NPRM to implement Section 9002 by establishing guidelines in Title 7 of the Code of Federal Regulations, Part 2902, Guidelines for Designating Biobased Products for Federal Procurement (7 CFR Part 2902). USDA received 271 comments from 64 commenters on the NPRM -- from private citizens, consultants, companies, industry organizations and trade groups, nonprofit organizations, universities, a member of Congress, and state and federal agencies. Most of the commenters supported the goals of Section 9002 and the proposed guidelines, although nearly all of the commenters either had specific suggestions for changes to the proposed guidelines or raised issues related to the implementation of the program. Because many comments displayed confusion regarding how the program would work, USDA has completely reorganized the final rule into a more reader-friendly format, has used section titles that are more descriptive, and added paragraph headings throughout to help readers to locate information more efficiently.

The final 7 CFR Part 2902 consists of Subpart A, General, which explains the Section 9002 requirements and procedures, and Subpart B, Designated Items, which is “reserved” for now. The following are the sections that constitute Subpart A:

2902.1, Purpose and Scope
2902.2, Definitions
2902.3, Applicability to Federal Procurements
2902.4, Procurement Programs
2902.5, Item Designation
2902.6, Providing Product Information to Federal Agencies
2902.7, Determining Biobased Content
2902.8, Determining Life Cycle Costs, Environmental and Health Benefits, and Performance
2902.9, Funding for Testing

The following are the primary provisions of CFR Part 2902:

• Section 2902.2, Definitions, provides the following definitions:
  
  
  • BEES. “An acronym for ‘Building for Environmental and Economic Sustainability,’ an analytic tool used to determine the environmental and health benefits and life cycle costs of items, developed by the U.S. Department of Commerce National Institute of Standards and Technology, with support from the U.S. Environmental Protection Agency, Office of Pollution Prevention and Toxics (BEES 3.0, Building for Environmental and Economic Sustainability Technical Manual and User Guide, NISTIR 6916, National Institute of Standards and Technology, U.S. Department of Commerce, October 2002). Also, see http://www.bfrl.nist.gov/oae/software/bees_USDA.html...”
    
    
  • Biobased product. “A product determined by USDA to be a commercial or industrial product (other than food or feed) that is composed, in whole or in significant part, of biological products or renewable domestic agricultural materials (including plant, animal, and marine materials) or forestry materials.”
    
    
  • Biological products. “Products derived from living materials other than agricultural or forestry materials.”
    
    
  • Designated item. “A generic grouping of biobased products identified in Subpart B that is eligible for the procurement preference established under Section 9002 of FSRIA.”
    
    
  • Small and emerging private business enterprise. “Any private business which will employ 50 or fewer new employees and has less than $1 million in projected annual gross revenues.”
  
  
• Section 2902.3, Applicability to Federal Procurements, states, “The guidelines in this part apply to all procurement actions by federal agencies involving items designated by USDA in this part, where the federal agency purchases $10,000 or more worth of one of these items during the course of a fiscal year, or where the quantity of such items or of functionally equivalent items purchased during the preceding fiscal year was $10,000 or more. The $10,000 threshold applies to federal agencies as a whole rather than to agency subgroups such as regional offices or subagencies of a larger federal department or agency.”
  
  It goes on to state that procurements subject to Environmental Protection Agency (EPA) regulations under the Solid Waste Disposal Act are not subject to the guidelines “to the extent that the requirements of this part are inconsistent with such regulations.”
  
  Finally, it states that FSRIA “requires federal agencies to procure designated items composed of the highest percentage of biobased products practicable, consistent with maintaining a satisfactory level of competition, considering these guidelines. Federal agencies may decide not to procure such items if they are not reasonably priced or readily available or do not meet specified or reasonable performance standards.”
  
  
• Section 2902.4, Procurement Programs, states the following:
  
  
  • “These guidelines are not intended to address full implementation of these requirements into the federal procurement framework. This will be accomplished through revisions to the Federal Acquisition Regulation.”
    
    
  • “On or before January 11, 2006, each federal agency shall develop a procurement program which will assure that items composed of biobased products will be purchased to the maximum extent practicable and which is consistent with applicable provisions of federal procurement laws. Each procurement program shall contain: (i) a preference program for purchasing designated items; (ii) a promotion program to promote the preference program; and (iii) povisions for the annual review and monitoring of the effectiveness of the procurement program.”
    
    
  • “In developing the preference program, federal agencies shall adopt one of the following options, or a substantially equivalent alternative, as part of the procurement program:

    “(i) A policy of awarding contracts to the vendor offering a designated item composed of the highest percentage of biobased product practicable...”
    
    “(ii) A policy of setting minimum biobased products content specifications in such a way as to assure that the biobased products content required is consistent with Section 9002 of FSRIA and the requirements of the guidelines in this part...”

    These policies do not apply to items that are not available within a reasonable time; fail to meet performance standards set forth in the applicable specifications, or the reasonable performance standards of the federal agency; or are available only at an unreasonable price.
    
    
  • “After the publication date of each designated item, federal agencies that have the responsibility for drafting or reviewing specifications for items procured by federal agencies shall ensure within a specified time frame that their specifications require the use of designated items composed of biobased products, consistent with the guidelines in this part. USDA will specify the allowable time frame in each designation rule. The biobased content of a designated item may vary considerably from product to product based on the mix of ingredients used in its manufacture. In procuring designated items, the percentage of biobased product content should be maximized, consistent with achieving the desired performance for the product.”
  
  
• Section 2902.5, Item Designation, specifies that designated items are in Subpart B. “In designating items, USDA will designate items composed of generic groupings of specific products and will identify the minimum biobased content for each listed item. As items are designated for procurement preference, they will be added to Subpart B.” It goes on to exclude motor vehicle fuels and electricity from the program. “USDA additionally will not designate items for preferred procurement that are determined to have mature markets. USDA will determine mature market status by whether the item had significant national market penetration in 1972.”
  
  
• Section 2902.6, Providing Product Information to Federal Agencies, states that USDA will maintain an informational website at http://www.biobased.oce.usda.gov. “This Web site will provide nformation as to the availability, relative price, biobased content, performance and environmental and public health benefits of the designated items. USDA encourages manufacturers and vendors to provide product, business contacts, and product information for designated items. Instructions for posting information are found on the Web site itself. USDA also encourages Federal agencies to utilize this website to obtain current information on designated items, contact information on manufacturers and vendors, and access to information on product characteristics relevant to procurement decisions.”
  
  
• Section 2902.7, Determining Biobased Content, establishes certification requirements. “For any product offered for preferred procurement, manufacturers and vendors must certify that the product meets the biobased content requirements for the designated item within which the product falls...Verification of biobased content must be based on third party ASTM/ISO compliant test facility testing using the ASTM International Radioisotope Standard Method D 6866. ASTM International Radioisotope Standard Method D 6866 determines biobased content based on the amount of biobased carbon in the material or product as percent of the weight (mass) of the total organic carbon in the material or product.”
  
  
• Section 2902.8, Determining Life Cycle Costs, Environmental and Health Benefits, and Performance, requires manufacturers and vendors to provide, when requested by federal agencies, “information on life cycle costs and environmental and health benefits based on tests using either of two analytical approaches: the BEES analytical tool along with the qualifications of the independent testing entity that performed the tests; or either a third-party or an in-house conducted analysis using the ASTM standard for evaluating and reporting on environmental performance of biobased products D7075. Both BEES and the ASTM standard are in accordance with ISO standards, are focused on testing of biobased products, and will provide the life cycle assessment and life cycle cost information federal agencies might require...In assessing performance of qualifying biobased products, USDA requires that federal agencies rely on results of performance tests using applicable ASTM, ISO, federal or military specifications, or other similarly authoritative industry test standards. Such testing must be conducted by an ASTM/ISO compliant laboratory. The procuring official will decide whether performance data must be brand-name specific in the case of products that are essentially of the same formulation.”
  
  
• Section 2902.9, Funding for Testing, provides that “USDA use of funds for biobased content and BEES testing. USDA will use funds to support testing for biobased content and conduct of BEES testing for products within items USDA has selected to designate for preferred procurement through early regulatory action (EDITOR’S NOTE: Congress has provided USDA $1,000,000 a year through fiscal year 2007 to test biobased products). USDA initially will focus on gathering the necessary test information on a sufficient number of products within an item (generic grouping of products) to support regulations to be promulgated to designate an item or items for preferred procurement under this program. USDA may accept cost sharing for such testing to the extent consistent with USDA product testing decisions. During this period USDA will not consider cost sharing in deciding what products to test. When USDA has concluded that a critical mass of items have been designated, USDA will exercise its discretion...to allocate a portion of the available USDA testing funds to give priority to testing of products for which private sector firms provide cost sharing for the testing. (EDITOR'S NOTE: The introduction to the December 19, 2003, NPRM stated that USDA expects that the critical mass will be achieved within three years.)
  
  Once there is a critical mass of designated items, “USDA will announce annually the solicitation of proposals for cost-sharing for life cycle costs, environmental and health benefits, and performance testing of biobased products...to carry out this program. Information regarding the submission of proposals for cost sharing also will be posted on the USDA informational website, http://www.biobased.oce.usda.gov.”
  
  Cost sharing will be first considered for products of “small and emerging private business enterprises.” “If funds remain to support further testing, USDA will consider cost sharing proposals for products of all other producers of biobased items as well as the remaining proposals for products of small and emerging private business enterprises. Proposals will be selected based on priority rating until available funds for the fiscal year are committed.”
  
  “Proposals will be evaluated and assigned a priority rating. Priority ratings will be based on the following criteria: (i) a maximum of 25 points will be awarded a proposal based on the market readiness; (ii) a maximum of 20 points will be awarded a proposal based on the potential size of the market for that product in federal agencies; (iii) a maximum of 25 points will be awarded based on the financial need for assistance of the manufacturer or vendor; (iv) a maximum of 20 points will be awarded a proposal based on the product's prospective competitiveness in the market place; [and] (v) a maximum of 10 points will be awarded a proposal based on its likely benefit to the environment...Proposals will be selected based on priority rating until available funds for the fiscal year are committed.”
  
  “For products selected for life cycle costs and environmental and health benefits testing under this paragraph, USDA could provide up to 50 percent of the cost of determining the life cycle costs and environmental and health effects, up to a maximum of $5,000 of assistance per product. For products selected for performance testing, USDA could provide up to 50 percent of the cost for performance testing, up to $100,000 of assistance per product for up to two performance tests (measures of performance) per product...Proposals submitted in one fiscal year, but not selected for cost sharing of testing in that year, may be resubmitted to be considered for cost sharing in the following year.”

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953.

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