Executive Order 13514: Environmental Game-changer for Federal Acquisition

As federal-agency Chief Sustainability Officers (CSOs) develop and execute the world's most progressive environmental strategy, the Federal Acquisition Team is doing its part by systematically engaging the federal supply base. Contract Management, the Contracting Officer (CO), Industrial Engineering (IE) and Contract Officer Technical Representative (COTR) are involved in a collaboration on the U.S. Greenhouse Gas (GHG) Protocol, Scope 3 impact on the federal government supply base, and Executive Order (EO) 13514's long-term success. The acquisition team must tackle GHG and operational topics, e.g.,

-Contractor business travel emissions
-Employee commute emissions
-Emissions from purchased computer electronics
-Agency-purchased transportation emissions for products and services (e.g., office supplies, computer equipment, outreach events, medical supplies, etc.)
-Agency-purchased outsourced activities such as waste removal, waste disposal, recycling, logistics support, legal support, real estate services, etc.
-Fleet emissions from government-owned vehicles
-Emissions from purchased fuels.

The shared vision embedded in EO 13514 requires an aggressive mitigation plan to meet the appointed January 2011 mandate. A simple three-step methodology will create an effective foundation on which to build a workable, eco-friendly federal supply chain.

What are the available acquisition tools and resources?
It was announced early 2010 that the U.S. government is now the second-largest greenhouse gas emitter in the world. Federal agency heads manage $400 billion in contract spending, a 650,000-vehicle fleet and more than 400,000 federal buildings; in addition, they buy more than $3 billion in energy. Over the years, the Environmental Protection Agency (EPA), Department of Energy (DOE) and U.S. Department of Agriculture (USDA) have developed tools and resources that streamline the Federal Acquisition Team's environmental transformation effort. The most expressive set of public sustainability tools and resources is posted online at http://www.fedcenter.gov/programs/buygreen. It is important to understand that these tools are mandatory, necessitating an increase in the Contracting Officer's workload in January 2010. EO 13514 mandates agencies to report GHG inventories and water-optimization strategies. Samples of the timesaving programs posted at Fed Center are Sample Green Lease Policy, Sample Energy Star Contract Language and Sample Sustainability Policies.

What's the first step?
We all know that pollution prevention and energy security are not new concepts in all federal agencies. The likely first step for the Federal Acquisition Team is to analyze EOs 13101, 13221, 13423 and 13497, the Energy Policy of 2005 and the Energy Policy and Security Act of 2007. An expected output of the team's analysis is a comprehensive implementation strategy for EO 13514, GHG Scope 3.

The first step after assigning a leader and forming a team is to determine the"current state"from an environmental federal supply chain perspective, looking at three existing contracts; current vendors; and prospective vendors based on commercial best practices. Tackling this phase requires a level of sophistication across each component. Contract segmentation is a commercial best practice that is directly applicable to determining the status of existing contracts; this is a critical initial rung on the ladder that prioritizes workflow. Three common approaches are spend analysis, market analysis and cost/value analysis. The output from contract segment analysis is a comprehensive priority list that will mitigate implementation risk downstream.

The second rung on the ladder is assessing the current state of the vendor base. Many large contractors with progressive energy and environmental strategic plans are in great shape. In turn, a host of niche large and small businesses are moving toward the wrong side of the bell curve. An effective starting point to determine companies on the right side of the bell curve is in existing federal sustainability programs. Some of these include the EPA, DOE, USDA Energy Star, Electronic Product Environmental Assessment Tool (EPEAT), Green Power Purchasing Partnership, Climate Leaders, U.S. Green Building Council, World Business Council for Sustainable Development, National Retail Federation and The Climate Registry. Simple website and central contractor registration searches alone may prove to have limited value because they lack credibility.

The top rung on the current state ladder is to understand market environmental strengths and weakness by North American Industry Classification System NAICS codes or product family. Two potential outputs from this task may include a report of best-in-class environmental contractors by NAICS code and a market-complexity matrix that categorizes and prioritizes the acquisition team's environmental transformation plan. Figure 2-2 is an example of a complexity matrix for NAICS #611310 - Colleges, Universities and Professional Schools. Training vendors located in the top right,"customized quadrant"will require more attention than a vendor in the bottom left"off-the-shelf quadrant."The rationale: a customized solution represents more value to the government and a higher total cost of ownership (TCO) to the agency.   

What's the next step?
Preparing for and collecting greenhouse gas inventories provides the acquisition team with an opportunity to identify, for the first time, the most complex supply chain GHG emissions. Several guiding principles will help streamline data collection and reporting.

The consistency principle ensures that all boundaries, inventory methodology, emissions data and other factors are documented, tracked and monitored. Consistency is an imperative for COTR or independent third-party audits. Documenting changes start at the baseline and continue year over year. 

Transparency is another key principle that federal contractors must plan for early in the environmental transformation planning phase. Transparency is a means of sharing all appropriate GHG emissions data with the acquisition team. Federal acquisition officials must be sensitive across other federal agency boundaries. Government-owned property and security are two areas likely to present transparency challenges.

Given the transparency push, vendors must still plan and submit accurate GHG inventories. The Completeness & Accuracy principle ensures that FY 2020 goals are met. The accuracy of the GHG report is highly dependent on the vendor's strategy and approach during the baseline phase. Established green IT software tools - CarbonView, Hara and Carbonetworks (ENXSuite) - support an effective baseline all the way to program maturity.

Undoubtedly, the Contracting Officer and Contracting Officer Technical Representative (COTR) are fielding numerous inquiries during this phase that the above principles do not address. The most common answer for private and public companies focuses on operational GHG measurement boundaries. Typically, inventory boundaries come in the form of process or organizational, with the preferred accounting approach for most contractors being organizational. An organizational approach accounts for all GHG Scope 1, 2, and 3 emission sources.

Given the more than 600,000 vendors in the federal supply chain, organizational boundaries could take many forms during the planning phase, including such categories as business unit, contract, geographic, etc. As a general rule, when possible, contractors should report GHG inventories at a facility level and rolled up to a business-unit level. Each agency may have a difference approach; the DOE carbon emissions data collection system, for instance, will be a limiting factor. We recommend consulting the Office of the Federal Environmental (OOFE) in order to reduce contractor rework.

How do I verify report accuracy?
Verifying baseline GHG report completeness and accuracy closes the loop on EO 13514, January 2011 deadline. Implications for not verifying emissions data will be felt from the simple Landscaping Task Order, P Card transaction to Information Technology Service Contract. COTR and industrial engineering teams will likely be tasked to verify a percentage of GHG emissions. 

One approach of which many federal acquisition professionals are unaware is data transfer from existing national GHG databases such as The Climate Registry. The Climate Registry is a well-established system used by the U.S. Postal Service, the U.S. Department of Transportation as well as hundreds of existing manufacturers, service companies, city governments and not-for-profits. The benefits of engaging third-party data transfer are significant: standardized data collection, reduced development costs and a commercial best practice. The Climate Registry also provides a directory of approved third-party auditors, many of whom are active federal contractors. 

Implications
Finally, the big question: Is everyone on board? EO 13514 is one of many new January 2011 requirements mandated by the Executive Branch and/or Congress. The private sector (non-federal contractor) has similar challenges except being held accountable for a near-term deadline.  The new Federal Sustainability Policy, EO 13514, was announced in October 2009. Most of the workload has been in the CSO's court. Now is the time to jump on board and impact global air, water and land-use quality.

Payoff
By adopting these concepts, an organization can quickly get its arms around greenhouse gas planning, data collection and reporting reality. The near-term 2010 benefit for carving out time for Federal Sustainability Program planning is a wise use of CO, COTR and other federal acquisitions personnel over the next three to nine months. The payoff is a strong start to achieving the federal government's 2020 goal. GHG data collection is no longer an abstract concept. Greening the federal supply chain will have a positive impact of the nation's air, water and land-use quality - and ultimately on citizen health, food quality and national security.  

The acquisition community and tax payers are demanding substantial and systemic change on a number of fronts., and agency level sustainability plans are in place. The time has never been better to solve this nearly 100-year old challenge.   

*Footnotes