Coalition Comments: FAR Council Proposed Rule – Contractor Climate Disclosure

By SBE Council at 9 February, 2023, 5:46 pm

Via https://www.regulations.gov

Re: Proposed Rule, Federal Acquisition Regulatory Council; Disclosure of Greenhouse
Gas Emissions and Climate-Related Financial Risk (87 Fed. Reg. 68,312, Nov. 14,
2022)

Dear Federal Acquisition Regulatory Council:

The undersigned organizations appreciate the opportunity to comment on the Federal
Acquisition Regulatory (“FAR”) Council’s proposal (“Proposed Rule”) to require significant and
major contractors to disclose certain information concerning greenhouse gas emissions (“GHG”)
and make certain climate-related financial risk disclosures, and to require major contractors to set
science-based targets to reduce their GHG emissions. Under the proposal, satisfying these new
requirements would be a condition of eligibility for federal government contracts. Given the
concerns expressed below and others raised in separate comment letters, the FAR Council should
abandon and withdraw the proposal entirely.

Combating climate change requires citizens, governments, and businesses to work
together. The business community continues to support durable solutions that improve our
environment, grow our economy, and leave the world better for generations to come. American
companies and investors are already playing a crucial role in spurring the continued evolution of
climate-related disclosures. Companies are increasingly reporting more information to the public
about their efforts to reduce GHG emissions. Many have also developed plans, commitments, and
actions concerning the reduction of emissions over time at the pace of innovation. Such leadership,
supported by technological innovations, have helped drive progress that the United States has
made to address climate change over the last decade and will help make further progress to address
the climate challenge.

The Council’s Proposed Rule is not the proper way to proceed. It is subject to several
serious legal and policy defects. The proposal, for example, would impose significant liability risk
and cost burdens on federal contractors that is contrary to federal procurement laws’ underlying
statutory goals of creating an economic and efficient system of government contracting. Indeed,
as further explained in other comment letters, the Council lacks the legal authority to promulgate
the rule. Detailed disclosure of climate-risk assessment processes and inventorying and disclosing
scope 1, 2, and 3 GHG emissions, along with developing and implementing science-based
emissions reduction targets, would add immense costs. The government’s acquisition costs would
rise as a consequence, and some contractors, and companies in the supply chain, are likely to drop
out of the market entirely. Having fewer bidding contractors would weaken competition and would
likely lead to higher contract prices. Relatedly, a decrease in eligible contractors would decrease
the procurement options available to the government, leaving them with fewer choices and
potentially less efficient products and services.

A disproportionate burden of the Proposed Rule would fall on small businesses, both
directly as federal contractors and indirectly as suppliers of major contractors. Over the last decade,
the number of small businesses doing business with the federal government has dropped by nearly
40 percent. Adding more administrative burdens on top of the current contracting criteria would
only make the challenge of increasing small business participation in federal contracting more
difficult. Saddling contractors with billions in added implementation and compliance costs would
also build barriers to market entry for service-disabled veteran-owned, woman-owned, and
Historically Underutilized Business Zone (HUBZone) small businesses.

In addition, the Proposed Rule also relies heavily on private entities such as the CDP
(formerly “Carbon Disclosure Project”) and Science Based Targets Initiative (“SBTi”) to establish
and enforce the requirements, supplanting the role of the FAR Council. Such an arrangement
would give rise to major legal and practical problems. These private organizations, for example,
have not been formed or administered to improve procurement in particular, drawing into question
their suitability for procurement standard setting. Further, the standards that the FAR Council
incorporates by reference are not consensus-based and do not appear to have significant industry
representation. For setting science-based targets, the SBTi is both the standard setter and the
validator. While some companies have voluntarily adopted the SBTi standards, delegating
standard setting and compliance to a third party would create conflicts of interest and raise
concerns about constant changes to standards that would not be accompanied by the appropriate
legal and procedural safeguards. It is also unlikely that these organizations have the necessary
resources to handle the surge of thousands of additional submissions that they would receive due
to the Proposed Rule.

With two-thirds of the federal government’s more than $600 billion dollars in contract
obligations allocated to the Department of Defense, the proposal fails to evaluate the potential
impacts of its provisions on military readiness and national-security. The importance of military
contracting is even more pronounced now, given the substantial military aid that the United States
is currently providing in the European conflict. Defense products, moreover, are designed to
government specifications and subject to various national security considerations that would
severely limit contractors’ ability to comply with emissions disclosure requirements or to
implement product emission reductions to achieve science-based targets. And while the Proposed
Rule would allow a contractor to request an exemption from certain of the proposal’s requirements,
the exemption would not be sufficient as it could only be granted for one calendar year.

The undersigned organizations would welcome the opportunity to speak with the FAR
Council to discuss these comments and related issues.

Sincerely,

Aerospace Industries Association

The Aluminum Association

American Chemistry Council

American Council for Capital Formation

American Petroleum Institute

American Road & Transportation Builders Association

American Trucking Association

Associated Builders and Contractors

Associated General Contractors of America

Liquid Energy Pipeline Association