[Federal Register: March 16, 2006 (Volume 71, Number 51)] [Rules and Regulations] [Page 13685-13706] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr16mr06-11] [[Page 13685]] ----------------------------------------------------------------------- Part II Department of Agriculture ----------------------------------------------------------------------- Office of Energy Policy and New Uses ----------------------------------------------------------------------- 7 CFR Part 2902 Designation of Biobased Items for Federal Procurement; Final Rule [[Page 13686]] ----------------------------------------------------------------------- DEPARTMENT OF AGRICULTURE Office of Energy Policy and New Uses 7 CFR Part 2902 RIN 0503-AA26 Designation of Biobased Items for Federal Procurement AGENCY: Office of Energy Policy and New Uses, USDA. ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: The U.S. Department of Agriculture (USDA) is amending 7 CFR part 2902, Guidelines for Designating Biobased Products for Federal Procurement, to add six sections to designate the following six items within which biobased products will be afforded Federal procurement preference, as provided for under section 9002 of the Farm Security and Rural Investment Act of 2002: Mobile equipment hydraulic fluids; roof coatings; water tank coatings; diesel fuel additives; penetrating lubricants; and bedding, bed linens, and towels. USDA also is establishing minimum biobased content for each of these items. Once USDA designates an item, procuring agencies are required generally to purchase biobased products within these designated items where the purchase price of the procurement item exceeds $10,000 or where the quantity of such items or of functionally equivalent items purchased over the preceding fiscal year equaled $10,000 or more. However, USDA is deferring the effective date for two items (water tank coatings and bedding, bed linens, and towels) until such time that more than one manufacturer of products in these two items is identified. USDA additionally is revising section 2902.2 to add definitions for ``biodegradability,'' ``EPA-designated recovered content product,'' and ``functional unit'' and section 2902.8 to adopt applicable ASTM International performance tests to verify biodegradability. DATES: This rule is effective April 17, 2006. However, as to water tank coatings and bedding, bed linens, and towels, Federal agencies will not be required to grant those items a preference until USDA learns of the availability of two or more manufacturers of products within that item and announces that availability in a future Federal Register notice. FOR FURTHER INFORMATION CONTACT: Marvin Duncan, USDA, Office of the Chief Economist, Office of Energy Policy and New Uses, Room 4059, South Building, 1400 Independence Avenue SW., MS-3815 Washington, DC 20250- 3815; e-mail: mduncan@oce.usda.gov; phone (202) 401-0461. Information regarding the Federal Biobased Products Preferred Procurement Program is available on the Internet at http://www.biobased.oce.usda.gov. SUPPLEMENTARY INFORMATION: The information presented in this preamble is organized as follows: I. Authority II. Background III. Discussion of Comments IV. Regulatory Information A. Executive Order 12866: Regulatory Planning and Review B. Regulatory Flexibility Act (RFA) C. Executive Order 12630: Governmental Actions and Interference with Constitutionally Protected Property Rights D. Executive Order 12988: Civil Justice Reform E. Executive Order 13132: Federalism F. Unfunded Mandates Reform Act of 1995 G. Executive Order 12372: Intergovernmental Review of Federal Programs H. Executive Order 13175: Consultation and Coordination with Indian Tribal Governments I. Paperwork Reduction Act J. Government Paperwork Elimination Act Compliance I. Authority These items are designated under the authority of section 9002 of the Farm Security and Rural Investment Act of 2002 (FSRIA), 7 U.S.C. 8102 (referred to in this document as ``section 9002''). II. Background On July 5, 2005, USDA published in the Federal Register (70 FR 38612) a proposed rule to designate the following six items for the biobased products preferred procurement program: Mobile equipment hydraulic fluids; roof coatings; \1\ water tank coatings; diesel fuel additives; penetrating lubricants; and bedding, bed linens, and towels. USDA has determined that each of these six items meets the necessary statutory requirements; that they are being produced with biobased products and that their procurement will carry out the following objectives of section 9002: To improve demand for biobased products; to spur development of the industrial base through value-added agricultural processing and manufacturing in rural communities; and to enhance the Nation's energy security by substituting biobased products for products derived from imported oil and natural gas. --------------------------------------------------------------------------- \1\ At proposal, this item was identified as ``urethane roof coatings,'' based on the specific formulation of the biobased product available at that time. USDA believes limiting this item to urethane-based roof coating is unnecessarily restrictive, especially in the light of another biobased product that has become available that is not urethane-based. Therefore, USDA is designating the more generic ``roof coatings'' as the item for preferred procurement under this program. --------------------------------------------------------------------------- When USDA designates by rulemaking an item (a generic grouping of products) for preferred procurement under the Federal Biobased Products Preferred Procurement Program (FB4P), manufacturers of all products under the umbrella of that item that meet the requirements to qualify for preferred procurement can claim that status for their products. To qualify for preferred procurement, a product must be within a designated item and must contain at least the minimum biobased content if one has been established for the designated item. When the designation of specific items is finalized, USDA will invite the manufacturers of these qualifying products to post information on the product, contacts, and performance testing on its FB4P Web site, http://www.biobased.oce.usda.gov. Procuring agencies will be able to utilize this Web site as one tool to determine the availability of qualifying biobased products under a designated item. Some of the biobased items designated for preferred procurement may overlap with products designated under the Environmental Protection Agency's (EPA) Comprehensive Procurement Guidelines program for recovered content products. Where that occurs, an EPA-designated recovered content product (also known as ``recycled content products'' or ``EPA-designated products'') has priority in Federal procurement over the qualifying biobased product. In situations where USDA believes there may be an overlap, it plans to ask manufacturers of qualifying biobased products to provide additional product and performance information to Federal agencies to assist them in determining whether the biobased products in question are, or are not, the same products for the same uses as the recovered content products. This information will be available on USDA's Web site with its catalog of qualifying biobased products. In cases where USDA believes an overlap with EPA-designated recovered content products may occur, manufacturers will be asked to indicate the various suggested uses of their product and the performance standards against which a particular product has been tested. In addition, depending on the type of biobased product, manufacturers may also be asked to provide other types of information, such as whether the product contains petroleum-based components and whether the product contains recovered [[Page 13687]] materials. Federal agencies may also ask manufacturers for information on a product's biobased content and its profile against environmental and health measures and life cycle costs (the Building for Environmental and Economic Sustainability (BEES) analysis or ASTM Standard D7075 for evaluating and reporting on environmental performance of biobased products). Such information will permit agencies to determine whether or not an overlap occurs. Where a biobased item is used for the same purposes and to meet the same requirements as an EPA-designated recovered content product, the Federal agency must purchase the recovered content product. For example, if a biobased hydraulic fluid is to be used as a fluid in hydraulic systems and because ``lubricating oils containing re-refined oil'' has already been designated by EPA for that purpose, then the Federal agency must purchase the EPA-designated recovered content product, ``lubricating oils containing re-refined oil.'' If, on the other hand, that biobased hydraulic fluid is to be used to address certain environmental or health requirements that the EPA-designated recovered content product would not meet, then the biobased product should be given preference, subject to cost, availability, and performance. This final rule designates three items for preferred procurement for which there may be overlap with EPA-designated recovered content products. These items are: (1) Mobile equipment hydraulic fluids, (2) roof coatings, and (3) penetrating lubricants. Qualifying products under these three items may overlap with lubricating oils containing re-refined oil and recovered content roofing materials, depending on how these products are to be used. Since publication of the proposed rule to designate items for the FB4P, section 9002 was amended by section 943 of the Energy Policy Act of 2005, Pub. L. 109-58 (Energy Policy Act). Section 943 of the Energy Policy Act amended the definitions section of FSRIA, 7 U.S.C. 8101, by adding a definition of ``procuring agency'' that includes both Federal agencies and ``any person contracting with any Federal agency with respect to work performed under that contract.'' The amendment also made Federal contractors, as well as Federal agencies, expressly subject to the procurement preference provisions of section 9002 of FSRIA. However, because this program requires agencies to incorporate the preference for biobased products into procurement specifications, the statutory amendment makes no substantive change to this program. USDA intends to further amend the Guidelines to incorporate the new definition of ``procuring agency'' by publishing a notice of final rule at a later date. In making future designations, USDA will continue to conduct market searches to identify manufacturers of products within items. USDA will then contact the identified manufacturers to solicit samples of their products for voluntary submission for biobased content testing and for the BEES analytical tool. Based on these results, USDA will then propose new items for designation for preferred procurement. USDA plans to create and chair an ``interagency council,'' with membership selected from among Federal stakeholders to the FB4P. USDA will use this council to provide consultation in identifying the order of item designation, manufacturers producing and marketing products that fall within an item proposed for designation, performance standards used by Federal agencies evaluating products to be procured, and warranty information used by manufacturers of end user equipment and other products with regard to biobased products. Finally, USDA plans to identify approximately 10 items in each future rulemaking. USDA has developed a preliminary list of items for future designation. This list is available on the FB4P Web site. While this list presents an initial prioritization of items for designation, USDA cannot identify with any certainty which items will be presented in each of the future rulemakings. Items may be added or dropped and the information necessary to designate an item may take more time to obtain than an item lower on the prioritization list. III. Discussion of Comments USDA solicited comments on the proposed rule for 60 days ending on September 6, 2005. USDA received comments from 31 commenters by that date. The comments were from private citizens, individual companies, industry organizations, one foreign government, and various Federal agencies. With few exceptions, the commenters supported the goals of section 9002 and the designation of the six items. Most of the commenters, however, had specific questions, concerns, or recommendations regarding some aspect of the designation of these items. Several comments related to the process USDA has established for designating items, and other comments were relevant to the January 11, 2005, Guidelines for Designating Biobased Products for Federal Procurement. Several procuring agencies expressed concerns in their comments that the effect of designating an item for which only one manufacturer of a biobased product is currently available would result in a sole source situation that would diminish competition. The two items of concern are water tank coatings and bedding, bed linens, and towels. Accordingly, while USDA is designating these items for preferred procurement, it is deferring specifying the date by which agencies must give preferred procurement to these two items under this program. For both items, a preferred procurement effective date will be identified when two or more manufacturers of products within the item have been identified. USDA actively seeks additional manufacturers of biobased products under these two items so that the items can be re-proposed for preferred procurement quickly. Specific comments, and the USDA responses to them, are addressed below. General Comments Comment: A number of commenters stated that the Federal Register notice lacks detail on the names, manufacturers of the products, the performance tests, and, in the case of bedding, bed linens, and towels, the names of the biobased fibers, and that the information is not available on the Web site. Three of the commenters expressed concern over the lack of technical information in the preamble (e.g., lack of information on availability, relative price, performance and performance standards, BEES results, and environmental and public health benefits of products, as required by section 9002) and on the Web site and that, without this information, it is not possible to evaluate the effects of the proposed designations and to ascertain the technical performance of these products. One commenter stated that the preamble does not discuss how well the product performs when compared to what is available as a non-biobased alternative and, if Federal agencies cannot determine the performance characteristics of biobased products, they cannot reasonably call for them to be purchased. Another commenter was concerned that the lack of information on performance tests could lead to duplication of effort by agencies separately testing products to determine suitability and conformance with their specifications. Response: USDA agrees that the information the commenters are requesting (names, manufacturers of the products, and performance tests) is useful and much of it is needed to make [[Page 13688]] decisions concerning the purchase of products within a designated item. Therefore, USDA will provide information on the standards and performance tests for those products that have been tested for purposes of designation on its FB4P Web site at the time of publishing future proposed rules, and will at the same time make that information available in the proposed rules. However, USDA has reached an agreement with manufacturers not to publish their names in the Federal Register when designating items. This agreement was reached to encourage manufacturers to submit products for testing to support the designation of an item. Once an item has been designated, the manufacturers of products within the designated item may elect to post their names and other contact information on the USDA FB4P Web site. USDA will also link its Web site to Defense Standardization Program and GSA-related standards lists used as guidance when procuring products. Instructions on accessing these lists on USDA's FB4P Web site will be included in its designation rules. Further, USDA also will invite and actively encourage manufacturers of qualifying products within a designated item to post, on USDA's password-protected Web site, performance standards by which qualifying products' performances have been evaluated. Comment: One commenter stated that USDA should encourage manufacturers to submit all relevant health and environmental data (key environmental attributes, environmental standards met, etc.) and post this information on the Web site. Response: USDA agrees with the commenter that the posting of such information on the FB4P Web site is important. Among the information that section 2902.6 of the Guidelines requests manufacturers to post to the FB4P Web site are environmental and health benefits. Sections 2902.6 and 2902.8 additionally state that manufacturers and vendors are to provide relevant information to a procuring agency upon the agency's request concerning product characteristics, life cycle costs, and environmental and health benefits. Both the BEES analytical tool and ASTM D7075, which a manufacturer may use in lieu of the BEES analytical tool, take the environmental and health impacts, as well as other parameters, of biobased products into account. USDA is working with manufacturers and vendors to post all this information on the FB4P Web site before a procuring agency asks for it, in order to make the preferred program more efficient. Steps USDA has implemented, or will implement, include: Making direct contact with submitting companies through email and phone conversations to encourage completion of product listing; coordinating outreach efforts with intermediate material producers to encourage participation of their customer base; conducting targeted outreach with industry and commodity groups to educate stakeholders on the importance of providing complete product information; participating in industry conferences and meetings to educate companies on program benefits and requirements; and communicating the potential for expanded markets beyond the Federal government, to include State and local governments, as well as the general public markets. All of these efforts are intended to educate the manufacturers and other stakeholders on the benefits of this program and the need to post this information to make it available to procurement officials. Comment: One commenter stated that it is illogical to require Federal agencies to purchase items, when it is only voluntary for the vendors to furnish the information for agencies to use in making the key purchase decision about the items. The commenter stated that the Web site USDA is developing to contain information on the availability, relative price, performance, and environmental and public health benefits of such products will be a useful tool for Federal agencies, but its efficacy depends on the voluntary submittal of product information by the manufacturers. The commenter, therefore, recommended that it be mandatory that manufacturers place relevant information on the Web site if the manufacturers are to participate in the preferred procurement program. Response: USDA agrees that there appears to be an ``illogical'' aspect between ``requiring'' agencies to purchase biobased products within designated items, while the manufacturers ``voluntarily'' post on the FB4P Web site information that is needed in making purchasing decisions. USDA points out that procuring agencies are not required to purchase products if one of three conditions exist, including the inability of a product to meet performance standards. If a manufacturer fails to make this information available to a procuring agency, then the procuring agency may choose not to purchase the manufacturer's product. Thus, it is in the best interest of manufacturers and vendors to make all product performance information available to procuring agencies, whether through the FB4P Web site or through some other means. Comment: Two commenters requested that manufacturers and consumers be provided with more information on the selection of the proposed items and the process used to determine which items are likely to be designated next. One of the commenters stated that the designation process appears to be somewhat arbitrary and that manufacturers have little idea as to which products will be designated, how they will be categorized, or how they will be selected. This commenter stated that the current proposal provides little information on why USDA selected these six items, as opposed to other items currently available that will satisfy the procurement requirements. This commenter believes that manufacturers and consumers would be better served by a more transparent process. The other commenter also stated that the process and criteria for product designation have not been communicated, which results in industry and start-up companies not knowing which products will be selected next for designation. This commenter also stated that there is very little background or rationale on why these six products were selected. Response: USDA agrees that it has not provided enough information on the selection process used or the order in which USDA intends to pursue designation. USDA will correct this problem by placing information on the model used by USDA and its contractor, Iowa State University, to select items for designation on the FB4P Web site. In general, the items were developed and prioritized for designation by evaluating them against program criteria established by USDA and by gathering information from other government agencies, private industry groups, and independent manufacturers. These evaluations begin by asking the following questions about the products within an item: Are they cost competitive with non-biobased products? Do they meet industry performance standards? Are they readily available on the commercial market? In addition to these primary concerns, USDA then considers the following points: Are there manufacturers interested in providing the necessary test information on products within a particular item? Are there a number of companies producing biobased products in this item? [[Page 13689]] Are there products available in this item? What level of difficulty is expected when designating this item? Is there a Federal demand for the product? Are Federal procurement personnel looking for biobased products? Will an item create a high demand for biobased feed stocks? Does manufacturing of products within this item increase potential for rural development? As noted earlier, USDA will also identify the latest set of items being considered for designation and the order in which USDA plans to pursue their designation. However, the list may change, with items being added or dropped, and the order in which items are proposed for designation is likely to change because the information necessary to designate an item may take more time to obtain than an item lower on the list. Further, as noted earlier, USDA plans to create and chair an interagency council, made up of Federal agencies, to consult with USDA with respect to identifying the order of items for future designations. With regard to the comment concerning why these six items were selected first for designation, the preamble to the proposed rule for these six items noted that they were selected because ``USDA was able to expeditiously identify and analyze these items.'' USDA will continue to make every effort to target those items most used by the Federal procurement sector. USDA will attempt to follow the model in prioritizing the order in which items are proposed for designation, but, to some extent, all future sets of items proposed for designation will depend on when sufficient information is made available by manufacturers of products within a designated item. Comment: One commenter stated that the time frame for designating these first items has been too long, the process is overly complex and burdensome, and the paperwork burden required for manufacturers is unduly burdensome, especially for smaller manufacturers. The commenters urged USDA to quickly designate other items that will have the greatest impact on the biobased marketplace and to streamline the designation process. A second commenter also stated that the program is taking too long in its implementation and that additional products with big marketplace impacts must be designated immediately. The commenter also stated generally that the implementation seems to be rather complex, time consuming, and expensive. Response: USDA agrees that it has taken longer than planned to propose the first set of items for preferred procurement. Because information required to designate items is being submitted on a voluntary basis, USDA is working with manufacturers, as discussed earlier, to facilitate obtaining the information required to designate items more quickly. USDA is also working with manufacturers to facilitate the process by which items are designated for preferred procurement and is striving to reduce, where feasible, the cost and burden to manufacturers associated with designating items. Efforts to accomplish this include, but are not necessarily limited to, developing a simplified BEES survey to encourage company input; funding the development of basic production data for several common agricultural feed stocks; providing assistance to manufacturers submitting BEES information to support item designation, including identifying potential sources for questionnaire data and helping manufacturers calculate specific inputs; contacting and urging material suppliers to provide necessary life-cycle, environmental, and human health data not typically maintained by end- product manufacturers; and considering the potential benefit of intermediate material BEES analysis as a means of reducing further a manufacturer's input burden (e.g., a BEES analysis on a biobased polymer could possibly reduce the burden on manufacturers using that polymer to produce water bottles, thereby making the bottle manufacturer only responsible for reporting on their specific process). In addition to these actions, USDA is covering the costs of both the biobased content testing and the actual BEES analyses used in the designation of items. USDA welcomes suggestions for further reducing the burden to manufacturers, while providing the level of information necessary to designate items. Comment: One commenter stated that USDA should judge the performance of biobased materials against their intended application and avoid performance criteria that discriminate against biobased alternatives. According to the commenter, industry performance criteria may frequently discriminate against biobased alternatives when such criteria are designed in the absence of a biobased alternative. The commenter, therefore, urged USDA to consider alternative criteria when such discrimination is evident. Response: USDA agrees with the commenter that the performance of biobased materials should be judged against their intended applications and that performance criteria should not be biased against biobased alternatives. To assist procurement agencies in evaluating products within designated items against their intended applications, USDA is providing a forum on its FB4P Web site for manufacturers to publish all performance standards for their products. USDA will also be providing information on its Biobased Affirmative Procurement Program (APP), which is USDA's preferred procurement program. In the APP, USDA will provide guidance to procuring agencies on how to structure their preferred procurement program in order to carry out section 2902.4 of the Guidelines, which requires procuring agencies to reexamine their performance requirements and specifications to ensure they are not unfair against the procurement of biobased products and that they are still necessary and relevant. Comment: One commenter stated that USDA needs to provide clarification on how the FB4P will take into account the international obligations of the U.S. under NAFTA and the World Trade Organization (WTO) Agreement on Government procurement. Two other commenters stated that, under NAFTA and the WTO Agreement on Government Procurement, the treatment of Canadian-sourced goods shall be no less favorable than that of U.S.-sourced goods and, therefore, no U.S. domestic preference is permitted. The commenters proposed that USDA cancel the proposed designation of these items, give preference to goods produced by signatories of NAFTA and the WTO, or modify the application of the preference so that it only applies to procurements that fall below the thresholds of NAFTA and the WTO agreement. Response: Section 9002 requires Federal agencies to develop procurement programs that ensure the purchase of designated biobased products to the maximum extent practicable and that are ``consistent with applicable provisions of Federal procurement law.'' In making such purchases, Federal agencies are to give a preference to the procurement of items ``composed of the highest percentage of biobased products practicable, consistent with maintaining a satisfactory level of competition.'' A procurement program that treats biobased products from designated countries (as that term is defined in the Federal Acquisition Regulation (FAR) Sec. 25.003)) no less favorably than U.S.-sourced biobased products: (1) Maintains a preference for biobased [[Page 13690]] products over non-biobased products; (2) maintains a satisfactory level of competition; and (3) ensures consistency with Federal procurement law, including Part 25 of the FAR. FAR part 25 sets out the policies and procedures for acquiring foreign products and services and implements the Buy American Act, trade agreements, and other laws and regulations regarding the acquisition of foreign products and services. Accordingly, biobased products from any designated country would receive the same preference extended to U.S.-sourced biobased products. In order to clarify and make this policy applicable to all biobased designations, USDA plans to propose a broad-based revision to the USDA biobased procurement guidelines (7 CFR part 2902) in its next proposed rule designating additional items. Comment: One commenter stated that USDA should explain how it intends to be sure that biobased products are made from domestic and not imported feedstocks. The commenter provided an example in which janitorial cleaners commonly have a linear alcohol ethoxylate surfactant that can be made from plant or petrol. However, the plant- derived material is from palm kernel or coconut oil, neither of which is a U.S. domestic product. Thus, the commenter asked: (1) How will USDA verify that the organic molecules come from U.S. grown material? and (2) how will USDA be certain that, when a product can be made from a U.S. crop, it is indeed being made with a U.S. crop and not imported material (e.g., D-limonine can come from the U.S., Brazil, and other citrus growing countries)? The commenter concludes by stating that the real intent of the law is not being met by the present testing outlined in the proposed rule. Response: USDA intends that manufacturers will self-certify that each product being offered as a biobased product for preferred procurement contains qualifying feedstock. As noted in the response to the previous comment, qualifying feedstocks for biobased products can be from ``designated countries'' as well as from the United States. Comment: Two commenters stated that USDA should publish its model Biobased Products Procurement Preference Program so that agencies can understand the recommended acquisition strategy. One of the commenters stated that understanding the acquisition strategy is necessary to enable evaluation of the effects of the proposed designations on Government procurement processes or general operations. Response: USDA agrees with the commenters and is continuing to develop its policies and its Biobased APP for designated items to support its own procurement practices. USDA is also working to develop outreach and education programs, based on the USDA Biobased APP, to assist other procuring agencies in complying with the requirements of this program. USDA has issued the first generation of its Biobased APP, which includes several procurement tools, such as sample contract language for biobased procurement. As additional documents become available, USDA will publish them to the biobased Web site at http://www.usda.gov/biobased . Additionally, USDA will continue to work with OFPP and the Office of the Federal Environmental Executive (OFEE) to coordinate and implement Federal biobased procurement policies. Comment: One commenter urged USDA to work aggressively to bring all Federal agencies on board to implement the program within the one-year transition period indicated in the proposed rule. Another commenter expressed concern that the one-year effective date may not be adequate, especially where product testing is needed and in particular for coatings, including roofing system coatings. The commenter recommended that USDA lengthen the implementation period to 18 months, at least for the first set of designated items, and up to 5 years for product testing and revision of performance specifications. The commenter pointed to the following as reasons for the need to extend the implementation period: The timeline for availability clauses in the FAR that are in development for biobased products; the process lengthening or even being stopped due to vendor protests, depending on the language in the FAR; the time for vendors to incorporate biobased provisions in a logical way, without the pressure to take shortcuts that could negatively affect agencies; product testing of coatings that could take several years if the procedures include corrosion or durability testing; revision of procurement specifications may require additional years to pass through various reviews and be finalized; and changes in specifications would lead to new product verifications, which require money to be allocated through the Planning, Programming, and Budgeting System process that may take several years. Response: In response to the first commenter, USDA's Departmental Administration is working with OFEE and OFPP, and through the interagency council, to assist all Federal agencies in accomplishing the goal of implementing the program in a timely manner. The second commenter expressed concerns about the implementation period not being long enough. Agencies have one year from the effective date of the Guidelines to implement procurement preference programs for designated items. This is consistent with the legislative requirement found in Section 9002(d) of FSRIA, which states that ``Federal agencies shall, within one year after the date of publication of applicable guidelines under subsection (e), or as otherwise specified in such guidelines, assure that such specifications require the use of biobased products consistent with the requirements of this section.'' USDA proposed the one-year time frame in the proposed Guidelines (69 FR 70730, December 19, 2003, proposed section 2902.5), but in the Guidelines (70 FR 1792, January 11, 2005, section 2902.4(c)), USDA indicated each designated-item rulemaking would specify the time frame for each item. In the proposed designated-item rulemaking (70 FR 38612, July 5, 2005), USDA proposed a one-year time frame for each of the six items. Once the final rule is published, Federal agencies have up to one year to comply with these requirements (i.e., revise their procurement requirements and specifications for implementing the preferred purchasing of biobased products within these six items). At the time these items are promulgated for designation, Federal agencies will have had a minimum of 18 months (from when these designated items were proposed) up to 27 months (from when the Guidelines were first proposed and these requirements were first laid out) available to them to implement these requirements. This time frame is at minimum equivalent to or longer than that requested by the commenter for this first set of designated items. It is USDA's position that this is a sufficient time frame for procuring agencies to identify biobased items meeting agency performance standards and to take the actions necessary for incorporating designated items into their preferred procurement program. USDA also notes that, from the time the Guidelines were first proposed, agencies will have longer time frames to implement these requirements for items proposed for designation in future rulemakings. In response to the commenter's concerns about the amount of time required for product testing, USDA reemphasizes that procuring agencies [[Page 13691]] are not required to purchase biobased products that do not meet the reasonable performance requirements of the agency. In cases where biobased products have not undergone the necessary performance testing within the one-year implementation period, procuring agencies would not be expected to purchase the products. USDA will post to its FB4P Web site information on performance standards against which products have been tested. In addition, USDA will identify what tests appear to be relevant and, through working with OFEE and OFPP, what standards procuring agencies require for a given item. To help manufacturers conduct performance testing, USDA is making funds available through section 2902.9 of the Guidelines. In conclusion and for these reasons, USDA continues to believe that a one-year effective date for the implementation of the procurement preference for the items designated in this final rulemaking is reasonable and is not extending the time frame for these requirements. Comment: One commenter pointed out that the Federal Register notice is silent with regard to how Federal agencies should treat existing contracts, and stated that the cost of terminating contracts would make the cost for the biobased products unreasonable. Response: Agencies have one year from the effective date of the Guidelines to implement procurement preference programs for designated items and the products within those designated items. Therefore, agencies should have sufficient time to plan for upcoming procurements. Agencies are not expected to terminate or modify existing contracts; however, they are encouraged to add requirements for the purchase of biobased products when options are exercised, especially to long-term contracts. This is consistent with other green procurement preference programs. Comment: One commenter stated that, because the intent of section 9002 of FSRIA is largely to stimulate the production of new biobased markets and to energize emerging markets, USDA should establish a periodic review of biobased product qualification criteria and market availability of each listed item to determine when they have achieved market ``maturity.'' Response: USDA believes that the intent of section 9002 is not only to stimulate new biobased markets, but to maximize the use of biobased substitutes for petroleum-based products on a continuing basis. Given this intent, USDA believes it is unnecessary to reevaluate the status of designated items that have reached market maturity. Comment: One commenter stated that information on current usage statistics and specific potential markets for biobased products are essential to establish a baseline for an annual review of the effectiveness of agencies' preference programs. Response: USDA agrees with the comment and, as owner of this program, is committed to working with OFPP and OFEE in developing a system, including reporting requirements, to monitor the effectiveness of the biobased preferred procurement program. Additionally, each agency is required to develop baselines, as appropriate, and assess the effectiveness of their individual-based preference procurement program. Comment: One commenter stated that USDA should add ``number or dollar value of biobased products purchased'' to the Resource Conservation and Recovery Act (RCRA) or similar reports as a way to track FB4P. Response: To this end, USDA has worked with OFPP and OFEE personnel to insert biobased data elements into the RCRA Data Call starting in fiscal year 2005. USDA will continue to work with OFPP and OFEE to identify methods to collect data on the dollar value of biobased products purchased. Comment: One commenter stated that the Federal Register notice does not provide any information on the enforcement of the rules and on the possibility of citizen suits against the government. The commenter explained that punitive measures for noncompliance and the possibility of citizens' complaints and lawsuits would be problematic for agencies. Response: Section 9002 does not provide USDA or anyone else with the authority for the ``enforcement'' of the procurement preference or for suits against the government by citizens. Without such statutory authority, USDA cannot add enforcement requirements to the preferred procurement program. However, OFPP will report to Congress on the progress, or lack thereof, that agencies are making in purchasing biobased products. This report could provide an indirect boost in encouraging procuring agencies to give the necessary preferred procurement to biobased products. Further, given the experience of the EPA program under RCRA, which the language of section 9002 almost completely duplicates, USDA foresees little likelihood of litigation brought by the public. Comment: One commenter suggested that USDA clarify whether the preferred procurement requirement is applicable to just singular high- dollar amount, agency-wide purchases. (According to the commenter, there is little incentive to small procuring agencies because they do not have large-scale purchases.) Response: The Guidelines were revised to clarify that ``[t]he $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.'' (See section 2902.3(a).) Thus, small purchases by subagencies are included in the $10,000 cutoff. Comment: One commenter requested that USDA provide an exception for ``incidental purchases;'' that is, purchases that are incidental to the purpose of Federal funding. The commenter referred to EPA's original procurement guidelines (48 FR 4230) and believes the same interpretation should be made for the biobased products purchasing program. To illustrate, the commenter stated that, under the incidental purchases rule, a construction contractor would not have to purchase biobased hydraulic fluid for use in its equipment because hydraulic fluid is incidental to the purpose of the construction contract, but that a contractor maintaining equipment for Federal agencies would be required to use biobased hydraulic fluids in the maintenance of the equipment. The commenter, therefore, suggested that USDA provide an exception for incidental purchases in the final rule. Response: USDA agrees that ``incidental purchases'' are not covered by the definition of ``procuring agency.'' The definition of ``procuring agency'' in FSRIA section 9001, as amended by the Energy Policy Act of 2005, makes it clear that the requirements of section 9002 apply to ``indirect purchases;'' i.e., purchases by contractors. However, the requirements to purchase biobased products do not apply to such purchases if they are unrelated to or incidental to the purpose of the Federal contract. For example, when a construction contractor purchases hydraulic fluid for maintenance service of construction equipment being used in the performance of a Federal building construction contract, that purchase is incidental to the purpose of the construction contract. The hydraulic fluid purchase would not be subject to the requirements of section 9002 or the guidelines issued today, even though some of the monies received under the contract might be used to finance the purchase. USDA will propose an amendment to the Guidelines at 7 CFR part 2902 to clarify that incidental purchases are excepted. Agencies may, however, [[Page 13692]] encourage contractors to purchase or test biobased products in order to further develop markets for these products. Comment: One commenter stated that USDA should provide definition or guidance for what constitutes a price that is ``not reasonable'' compared to the cost of a non-biobased product. Response: It is the responsibility of each procurement agency to establish, through its policies, cost reasonableness for any products procured under Federal contract. While the law provides the ``unreasonable price'' exemption, ``unreasonableness'' could be based on a comparison of product price, life-cycle costs, and other benefit information. USDA encourages procuring agencies to consider all facets of a product when evaluating prices. Additionally, through the FB4P Web site and other initiatives, USDA will provide as much relevant information as possible to the individuals responsible for purchasing items and to the program officials who are developing specifications for the procurement of products and services. For example, information from the BEES analytical tool provides information on the first cost of a product and on the product's life-cycle cost. The BEES results also provide information on the environmental and health benefits of the products, which will assist procuring agents in assessing the benefits of a product when determining the reasonableness of costs. Similar information will also be provided if the ASTM standard D7075 for evaluating and reporting on the life-cycle assessment and costs of biobased products is used. Comment: One commenter questioned whether Federal agencies will be expected to provide proof if they determine that biobased alternatives do not meet established performance standards. Response: Procuring agencies should follow their procurement rules and OFPP guidance on buying non-biobased products when biobased products exist and should document exceptions taken for price, performance, and availability. Designation of ``Single Product'' Items and Limited Number of Manufacturers Comment: Three commenters expressed concerns regarding the designation of items for which only one product has been identified or where a limited number of manufacturers have been identified. The issues and questions raised by the commenters are as follows: USDA needs to explain what constitutes a ``sufficient'' number of products to be ``adequate'' for designation and how sufficient competition can be maintained where only one product is identified; Designating single source products would place the Government, at least initially, in a position of sole source procurements and it could place the manufacturer in the position of not being able to meet demand; and With a limited number of manufacturers of biobased products, there is a possibility that competition will be limited and Federal agencies will pay more for biobased alternatives. Response: USDA agrees that designating items for which there is only one manufacturer of a biobased product under this item is problematic for the reasons discussed previously. Of the six biobased items proposed for designation, two (water tank coatings, and bedding, bed linens, and towels) are currently known to have a single manufacturer. USDA believes that the best way to address the problem of a single-known manufacturer of a biobased product within an item is to designate that item for preferred procurement, but to defer the effective date that procurement agencies would be required to give procurement preference until such time that there are two or more manufacturers of products within the item. Therefore, USDA is designating all six items, including items for which there is a single known manufacturer, but determination of the effective date for the single source items will be deferred indefinitely. USDA believes that it is beneficial to proceed with the designation of these two items, despite the delayed effective date, because it will encourage more manufacturers to produce products within these two items and alerts manufacturers of these items to an opportunity to sell their products. These effects, in turn, further the statutory goals of the program. With respect to those items for which preferred procurement is being deferred, USDA will specify the item's effective date in a future document in the Federal Register when it identifies two or more manufacturers of products within the item. Until such a document is published in the Federal Register, USDA will not permit manufacturers to post product, performance, and contact information on the FB4P Web site for those items with only one manufacturer. In future proposed designation rules under the FB4P, USDA intends to propose for designation only items for which there is more than one manufacturer. Relationship to Other Federal Programs Comment: One commenter requested that USDA and EPA work together to identify items (or products) that may be covered by section 9002 of FSRIA and by section 6002 (Comprehensive Procurement Guideline) of the Resource Conservation and Recovery Act, Pub. L. 94-580 (RCRA). The commenter pointed out that roofing materials, hydraulic fluids, and penetrating lubricants all may be qualified for procurement preference under both section 9002 of FSRIA and under section 6002 of RCRA. The commenter requested that if overlap is identified, USDA work with the Office of Federal Procurement Policy at the Office of Management and Budget (OMB), OFEE, and EPA to resolve any conflict. Another commenter stated that USDA needs to provide additional clarification on how these two sections relate to each other, indicating that the language in the Guidelines (section 2902.3(b)) is vague. Response: USDA agrees that procurement agents might find themselves in the position of having to choose between giving procurement preference to a product that qualifies for preferred procurement under section 9002 of FSRIA or to a competing product that qualifies for preferred procurement under section 6002 of RCRA and that guidance is required. USDA plans on working with the interagency council (discussed earlier in this preamble) to determine product choices amongst the various preferred procurement programs for future procurements. To the extent that products within items designated in this notice and in future notices under section 9002 of FSRIA are alternatives to products that are to be given preferred procurement under section 6002 of RCRA, USDA acknowledges that the comprehensive procurement guidelines under section 6002 of RCRA take precedent. That is, everything else being equal about a product that qualifies for preferred procurement under section 9002 of FSRIA and a competing product that falls under section 6002 of RCRA, a procurement agent would give preference to section 6002 of RCRA when making a purchase decision between the two products. USDA believes the language in section 2902.3(b) is sufficient to determine when section 9002 yields to section 6002. However, for performance reasons, a biobased product might be more appropriate for a given use. USDA offers the following example: If a procurement agent has the choice of purchasing [[Page 13693]] either an EPA-designated recovered content product (in this case, lubricating oil containing re-refined oil) for use as a fluid in a hydraulic system or a competing biobased mobile equipment hydraulic fluid, where both fluids are used for the same purposes and meet the same requirements, the procurement agent must give procurement preference to the EPA-designated recovered content product. If, on the other hand, a biobased hydraulic fluid can meet certain environmental or health requirements that the EPA-designating recovered content product would not meet, then the procuring agent should give purchase preference to the biobased hydraulic fluid, subject to cost, availability, and performance. Additionally, designation of items under this program not only qualifies the item for a Federal procurement preference, but also makes biobased products under that item eligible to use the biobased label in the commercial marketplace, as authorized by FSRIA. USDA currently is developing the labeling program. Thus, duplicate designation of items under this program and the RCRA program is not inappropriate. In conclusion, USDA does not see the need to modify the designation of items in this notice, even when products within an item would be subject to both sections. However, USDA has added language in the final rule for mobile equipment hydraulic fluids, roof coatings, and penetrating lubricants requesting manufacturers to provide information to help procuring agents identify overlap between the two programs. USDA will work with the interagency council to help identify potential overlap between the two programs in future rules. Comment: One commenter stated that USDA has not provided sufficient guidance to avoid potential conflicts in implementing both the biobased and the Energy Star program for roof coatings. The commenter was specifically concerned that there is no guidance on biobased content when one is purchasing Energy Star roofing material and requested that USDA provide guidance in the final rulemaking, including information on whether the minimum biobased content changes for Energy Star roofing material. The commenter recommended that this information be provided in both the preamble and in the regulatory text. Response: With the new Energy Star preferred procurement program, USDA agrees that there might be Energy Star products that procurement officials now will have to consider alongside biobased products in their procurements. Roof coatings is an example. USDA has information on two biobased roof coating products, one of which does not meet the requirements to qualify for the Energy Star rating and one that does. Where a product does meet the Energy Star rating, it does not mean, however, that procurement officials must give preference to Energy Star products over biobased products. To the extent that procurement officials have to choose between products under different preferred procurement programs, procurement officials should look to the FAR part 23 for guidance regarding the relative priority of the various preference programs. USDA will consider whether it is appropriate to establish biobased content levels for Energy Star products that differ from those for non-Energy Star products. BEES Analysis Comment: Two commenters requested that BEES analyses be done for the materials that are to be replaced by the biobased products so that a meaningful comparison of the impacts can be performed. According to one commenter, without making such a comparison, USDA cannot claim to have fully evaluated the extent to which the products proposed for procurement preference actually contribute to the objectives of section 9002 of FSRIA. Using bedding, bed linens, and towels as an example, the commenter states that by encouraging Federal procurement of, for example, towels made of ``unknown'' biobased fibers, cotton may be displaced; and, without making a comparison of the fossil energy inputs (i.e., coal, oil, natural gas) needed to grow, harvest, and process cotton as compared to alternative ``unknown'' biobased fiber, USDA cannot know that substituting the biobased alternative for cotton will contribute to reducing national use of imported oil and natural gas, one of the stated goals. Response: USDA received similar comments during the development of the Guidelines, although those comments focused on replacing petroleum- based products. As noted then, USDA agrees that it would be quite useful to be able to make a point-by-point comparison, using the same standards of measure, between a biobased and a non-biobased product prior to making a procurement decision. USDA also agrees that it would be quite useful to make a comparison between a biobased product given preferred procurement and a cotton or wool product that might not be purchased. However, under section 9002, USDA has neither the authority to require, nor the funding for, testing of non-biobased or other products that do not qualify for preferred procurement. Further, USDA does not believe such a comparison would make any difference in the implementation of the FB4P. The purpose of the FB4P is to open new markets for new emerging biobased products. It is possible that, in achieving this purpose for some of the designated items, biobased products may displace some products that are not qualifying biobased products (such as cotton shirts), as indicated by the commenter. Comment: One commenter suggested that USDA reconsider the candidate biobased product in any case where it does not compare on an equal or better basis to existing products on key attributes, such as fossil fuel depletion or on the overall BEES score. Response: The purpose of the BEES analysis is to provide information to procuring agencies to make informed decisions among biobased products within a designated item, not to disqualify biobased products from a designated item. The commenter is suggesting USDA use the overall BEES score for determining whether or not a product can be afforded preferred procurement over an existing product that scores better when analyzed using BEES. The criteria used by USDA to designate items (groups of products) are identified in FSRIA. The overall BEES score is not one of those criteria. Therefore, USDA declines the commenter's request. Comment: Two commenters recommended that the BEES input data be verified by an independent party. One commenter stated that USDA appears to have relied solely on product manufacturers to supply the basic data from which the BEES score is derived, and does not appear to have performed an independent verification. The other commenter inquired as to how the quality of the data inputs to the BEES life cycle assessment tool were assessed. Response: The commenters are correct in that USDA has not verified the information submitted by the manufacturers on the products submitted for the BEES analysis. That information was, and will continue to be, provided directly to a third party for analysis. The quality of data submitted to the BEES analytical tool should be consistent with relevant and applicable ASTM or other industry test standards. In addition, USDA contractors, when requested, assist manufacturers in preparing the data to be submitted to the BEES analytical tool. Those running the BEES analytical tool are certified by the [[Page 13694]] International Organization for Standardization (ISO) (i.e., they are ISO-certified). As such, they provide a check on the reasonableness of the data submitted. USDA does not otherwise independently verify data submitted by the manufacturers. Comment: One commenter pointed out that the BEES analysis provides a general assessment of environmental benefit and does not particularly focus on fossil fuel use, which is one of the principal goals of section 9002 of FSRIA. The commenter therefore recommended that consideration be given to modifying the weighting used in the BEES analysis so that the results will consistently select products that meet the program objective of substituting biobased products for fossil energy-based products. Response: The BEES analytical tool includes ``fossil fuel depletion'' as one of its metrics. This metric looks at the amount of fossil fuel consumed in the production of a biobased product. By looking at this metric's score between products within an item, procuring agencies can choose those products that use less fossil fuel. Thus, USDA does not believe it necessary to change the weighting scheme in the BEES analytical tool to achieve the outcome desired by the commenter. To help procuring agencies interpret the BEES results, USDA is coordinating with the National Institute of Standards and Technology (NIST) to develop additional information concerning the interpretation and usefulness of BEES scores and will post this information on the FB4P Web site. Comment: One commenter expressed concern that the BEES analysis is inherently limited in that it focuses on the material rather than the functionality of the material or cost of reapplying the material. For example, with coatings, BEES takes the life-cycle of the coating material into consideration, but not the impact of shorter life-cycles on the asset being protected by the coating. There is no cost consideration for shorter recoat cycles or impact on users. BEES also does not attempt to account for cost incurred if the coating, or a lubricant or hydraulic fluid, does not perform as effectively and the equipment it is protecting does not last as long. Response: USDA believes that the BEES analytical tool provides useful information, even in the areas of concern identified by the commenter as discussed below, and provides USDA with the information necessary to assess products within a designated item. First, with regard to re-applying coatings and the impact to users of such re-applications, BEES takes into consideration the costs of ``initial investment, replacement, operation, maintenance and repair, and disposal.'' Included in ``maintenance and repair'' are consideration of re-applications and the impact to users of such re- applications. Second, the commenter states that BEES does not take into account the ``functionality'' of the product (i.e., whether it performs as effectively as a non-biobased product when used as directed). However, the effectiveness of a biobased product is determined using industry performance standards. Further, USDA is neither using the BEES analytical tool as a method to determine the effectiveness of a product nor to promote a product as being effective because it has been subjected to BEES. Third, the commenter states that BEES does not take into account the shorter life-cycles on the asset (i.e., the equipment it is protecting does not last as long) being protected by the coating. The functional unit for products takes into account products used in different amounts in ``equivalent service.'' By equating comparisons of products to ``equivalent service,'' there is no shortening of life- cycles for the asset being coated. Thus, if a biobased coating does not last as long (i.e., frequency of repainting is higher), the functional unit accounts for that. Fourth, the commenter states that there is no cost consideration for shorter recoat cycles. The functional unit developed under the BEES analysis accomplishes the goal of ``unitizing'' different recoating cycles by incorporating a time frame. For example, if differences in the useful lives of alternative products have been identified, the functional unit will include a time dimension to account for the frequency of product replacement. Comment: One commenter stated that USDA needs to recognize the inherent limitations of the BEES analysis in predicting real-world effects of selection of these products, and should consider implementing a follow-up effort to gather performance information based on use of these products. Response: USDA acknowledges that BEES, and any other similar analytical tool, will have certain inherent limitations in predicting real-world effects. For the biobased preferred procurement program, the goal of the BEES analytical tool is to enable comparisons between products within an item. Given this goal, inaccuracies within any one metric when compared to real-world effects are of lesser significance to this program than would be other uses of the results. NIST, who is responsible for the BEES analytical tool, is striving to provide the best model possible. While USDA believes NIST should take the lead in making any and all improvements to the BEES analytical tool, USDA will work with them by bringing the commenter's concerns to their attention. Comment: One commenter stated that the use of BEES is potentially a barrier to entry into the marketplace because of its cost and questioned the utility of ``requiring'' a BEES analysis for the biobased material. The commenter also noted that it is an additional cost that is not borne by standard petroleum-based products. Response: A BEES analysis is only required when USDA is obtaining information for proposing an item for designation for preferred procurement. As provided for in the Guidelines, USDA will provide some funding for BEES and performance testing of individual products with biobased content, with priority being given to products of small and emerging private business enterprises. This helps offset the cost of the BEES analysis. USDA is requiring the BEES analysis on products because it provides important information on the cost, life-cycle cost, environmental, and human health impacts of specific products. BEES can be used across a wide variety of products and provides a means to compare products. The information it provides will be useful to procuring agencies when making procurement decisions on biobased products and for determining whether such products are available at a reasonable cost. The USDA, thus, considers the BEES analytical tool as an important component in designating items for preferred procurement. Once an item has been designated, procuring agencies may request information from a manufacturer on the environmental and life-cycle costs of a specific product. In this situation, the manufacturer may elect to use either BEES or ASTM D7075, which is less expensive than BEES, to provide this information. Lastly, USDA concurs with the commenter that the cost of BEES or the alternative is not also borne by petroleum-based products. However, the statute does not authorize USDA to require petroleum-based product manufacturers to provide the same information as is being required of biobased product manufacturers. The overall purpose of the statute implementing the preferred procurement program for biobased [[Page 13695]] products is to open new markets to new emerging biobased products. In doing so, it is necessary to develop environmental and li