[Federal Register: January 11, 2005 (Volume 70, Number 7)] [Rules and Regulations] [Page 1792-1812] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr11ja05-2] ----------------------------------------------------------------------- DEPARTMENT OF AGRICULTURE Office of Energy Policy and New Uses 7 CFR Part 2902 RIN 0503-AA26 Guidelines for Designating Biobased Products for Federal Procurement AGENCY: Office of Energy Policy and New Uses, Office of the Chief Economist, USDA. ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: The U.S. Department of Agriculture is establishing guidelines for designating items made from biobased products that will be afforded Federal procurement preference, as required under section 9002 of the Farm Security and Rural Investment Act of 2002. DATES: This rule is effective 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; telephone (202) 401-0532. Information regarding the Federal Biobased Products Preferred Procurement Program is available on the Internet at http://www.biobased.oce.usda.gov. SUPPLEMENTARY INFORMATION: I. Authority These guidelines are established 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. Overview of Section 9002 Section 9002 provides for preferred procurement of biobased products by Federal agencies. Federal agencies are required to purchase biobased products, as defined in regulations to implement the statute (i.e., this final rule), for all biobased products within designated items costing over $10,000 or when the quantities of functionally equivalent items purchased over the preceding fiscal year equaled $10,000 or more. Procurements by a Federal agency subject to section 6002 of the Solid Waste Disposal Act (42 U.S.C. 6962) are not subject to the requirements under section 9002 to the extent that the requirements of the two programs are inconsistent. Federal agencies must procure biobased products unless the biobased products within designated items are not reasonably available, fail to meet applicable performance standards, or are available only at an unreasonable price. The Office of Federal Procurement Policy (OFPP) and the USDA will work in cooperation to ensure implementation of the requirements of section 9002 in the Federal Acquisition Regulation (FAR). In this document, 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, to provide context, these guidelines address, but do not specifically implement, the procurement specific aspects of section 9002. USDA consulted with the Environmental Protection Agency (EPA), the General Services Administration (GSA), and the Department of Commerce's National Institute of Standards and Technology (NIST) in preparing the proposed guidelines that it is finalizing in this rule. To provide context, these guidelines include the statutory requirement that Federal agencies have in place, within one year of the publication of final guidelines, a procurement program that assures biobased products within designated items will be purchased to the maximum extent practical. Those procurement programs will have to contain a preference program for purchasing biobased products within designated items, an agency promotion program, and provisions for the annual review and monitoring of an agency's procurement program. In addition to establishing a preferred procurement program, as items are designated, Federal agencies may need time to adjust procurement practices. In accordance with section 9002(c) and (d), designation rules will specify the time frames within which such adjustments must occur. 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. Section 9002 provides that USDA, in consultation with the Administrator of the EPA, shall establish a voluntary program authorizing producers of biobased products to use a ``U.S.D.A. Certified Biobased Product'' label. In a subsequent rulemaking, USDA intends to establish that voluntary program and provide eligibility criteria and guidelines for the use of the ``U.S.D.A. Certified Biobased Product'' label. Section 9002 provides funds to USDA to support the testing of biobased products to carry out the provisions of [[Page 1793]] the section. This rule addresses how USDA will use these funds. The legislative history of Title IX of FSRIA suggests that Congress had in mind three primary objectives that would apply to section 9002. The first objective is to improve demand for biobased products. This would have a number of salutary effects, one of which would be to increase domestic demand for many agricultural commodities that can serve as feedstocks for production of biobased products. Another important effect would be the substitution of products with a possibly more benign or beneficial environmental impact, as compared to the use of fossil energy based products. As a second objective, Congress wants to spur the development of the industrial base through value-added agricultural processing and manufacturing in rural communities. Since biobased feedstocks are largely produced in rural settings and, in many cases 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 of the Nation. This trend would help to create new investment, job formation, and income generation in these rural regions. The third objective is to enhance the Nation's energy security by substituting biobased products for fossil energy-based products derived from imported oil and natural gas. The growing dependence of the Nation on imported oil and natural gas, along with heightened concerns about political instability in some of the oil rich regions in the world, have led the Congress to place a higher priority on domestic energy and biobased product resources. To assist manufacturers and vendors and Federal agencies in understanding the steps they will need to follow in participating in this program, USDA has included the following brief listing of steps under the item designation process, manufacturer and vendor guidance, and the procurement process. Item Designation Process: 1. USDA gathers product data and vendors may voluntarily provide product information on: a. Technological and economic feasibility (functional performance, commercially available, etc.). b. Samples for testing for biobased content. c. Information to determine environmental and public health benefits and life cycle costs (through BEES analysis). 2. USDA extrapolates the data to describe an Item. 3. USDA issues a proposed rule to designate an Item. 4. The public comments on the proposed rule. 5. USDA takes comments into consideration. 6. USDA issues a final rule designating an Item. 7. Designated Items are posted on Web site. 8. Manufacturers/vendors are invited to post on the Web site their specific product information under a designated Item. Manufacturer and Vendor Guidance: 1. Manufacturers/vendors must certify the biobased products content of their products. 2. Manufacturers/vendors may post products on Web site and may market products with claims for: a. Biobased products content: (1) Must meet minimum content as defined by the designated Item description. (2) Content must be verified upon request from Federal agency. (3) Verification must be based on testing by an independent testing entity using ASTM D6866. b. Life cycle cost information: (1) Must be verified upon request from Federal agency. (a) Verification must be based on testing by an independent testing entity using (i) BEES analysis or (ii) either a third-party analysis or an in-house analysis using ASTM D7075 standard for evaluating and reporting on environmental performance of biobased products, including life cycle costs. c. Performance data, materials safety data sheets, etc. d. Contact information. Procurement Process: 1. The Federal agency identifies procurement need for a biobased product that falls within a designated item. 2. The agency conducts search for qualifying biobased products meeting this need; one tool is the informational Web site. 3. The agency issues a solicitation or uses another procurement procedure. 4. Manufacturers/vendors respond to the solicitation. 5. The agency gives preference to qualifying biobased products under a designated item. a. Agencies have three exceptions to giving preference to biobased products: (1) Not available within a reasonable time. (2) Does not meet performance standards. (3) Unreasonable price. 6. The agency makes a purchase. The product information requirements contained in these guidelines are intended to establish standards to guide Federal agencies and manufacturers and vendors when such information is relevant in the context of a specific procurement. Other than certification of biobased content, Federal agencies should request information or verification of information only when such information will be of use to the agency in the context of the specific procurement. The discussion of product information in the guidelines is not intended to suggest that such information will be relevant to all procurements. Only self- certification of biobased content is required for all procurements of designated items. III. Background On December 19, 2003, USDA published in the Federal Register (68 FR 70730) a proposed rule to establish guidelines implementing the provisions of section 9002. As described in the proposed rule, the guidelines would be contained in a new 7 CFR part 2902, ``Guidelines for Designating Biobased Products for Federal Procurement.'' The new part would be divided into two subparts, ``Subpart A--General,'' and ``Subpart B--Biobased Product Eligibility for Federal Preference.'' Subpart A would address the purpose and scope of the guidelines and their applicability, provide guidance on product availability and procurement, define terms used in the part, and address affirmative procurement programs and USDA funding for testing. Subpart B would address communicating information on qualifying biobased products and characteristics required for obtaining designated item status, and would set out the initial categories of designated items and minimum content. USDA solicited comments on the proposed rule for 60 days ending on February 17, 2004. USDA received 271 comments from 64 commenters by that date. The comments were from private citizens, consultants, individual companies, industry organizations and trade groups, nonprofit organizations, universities, a Member of Congress, and State and Federal agencies. With few exceptions, the commenters supported the goals of section 9002 and the proposed guidelines, although nearly all of the commenters had specific suggestions for changes to the proposed guidelines or raised issues related to the implementation of the program. These suggestions and issues are addressed below by topic. [[Page 1794]] IV. Discussion of Comments Many comments evidenced confusion regarding how the program would work. In an effort to address that confusion, USDA has reorganized the final rule into a more reader-friendly format. Along with the reorganization, the final rule also uses more descriptive section titles and more paragraph headings to enable readers to locate information efficiently. Because individuals commented on specific sections of the proposed rule, USDA is addressing the comments based on the section numbers of the proposed rule. However, the final rule section number is indicated after each proposed rule section number. Applicability (Proposed Rule Sec. 2902.2; Final Rule Sec. 2902.3) Paragraph (a) of Proposed Rule Sec. 2902.2 (Final Rule Sec. 2902.3(a)) explains that part 2902 applies to all procurements by Federal agencies of biobased products falling within items designated by USDA in this part, where the Federal agency purchases $10,000 or more worth of one of those 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 procuring agencies as a whole rather than to agency subgroups such as regional offices or subagencies of a larger department or agency. One commenter stated that USDA should clarify that the $10,000 trigger for purchasing biobased products is an agency-wide requirement. Similarly, another commenter stated that the $10,000 trigger for purchasing biobased products must be understood by Federal agencies to apply to the agency level and not an individual unit within an agency or credit card holder level. In response to these comments, USDA is revising the text of Sec. 2902.3(a) to change the word ``procuring'' to ``Federal'' and insert ``Federal'' in the phrase ``larger department or agency.'' The final rule provides that ``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.'' Some commenters raised points regarding the scope of the $10,000 threshold's applicability, with one commenter suggesting that USDA should educate agencies on how the $10,000 minimum purchase threshold is to be applied. With respect to who is making the purchases, one commenter stated that the $10,000 level is reasonable if it includes purchases made by contractors of the respective agency from outside vendors, and another commenter suggested that the guidelines should be applicable to State agencies and other governmental and quasi- governmental entities that receive Federal funding. With respect to what is being purchased, a fourth commenter stated that the $10,000 buying threshold for a product category is appropriate as long as it applies to the product category and not to the individual product. With respect to educating agencies on how the $10,000 minimum purchase threshold is to be applied, USDA is developing a model procurement program that will incorporate an educational element. USDA anticipates that as the program enters its operational phase, the designation of items available for procurement will naturally tend to lend greater clarity to the program as it is practically applied. Section 9002 does not authorize extending the guidelines to State and local agencies using appropriated Federal funds to procure qualifying biobased items, or to persons contracting with such agencies with respect to work performed under such contracts. In response to the fourth commenter, the $10,000 threshold is determined at the item level, which is the level of designation, and not at the individual product level. Some commenters recommended that Federal agencies be required to report all purchases, including government credit card purchases, subject to the $10,000 threshold on a single purchase or cumulative purchase of a single product type of $10,000 worth in the preceding year for the purposes of monitoring the program's impact and agency compliance. The resulting purchase reports could be made available in a searchable database on the program Web site to allow manufacturers to determine whether any of their products qualify for procurement preference and identify any opportunities or incentives to develop specific biobased alternatives. As noted in the proposed rule, OFPP is required to prepare and submit a report to Congress every 2 years on the actions taken by Federal agencies in the implementation of the biobased product procurement program. OFPP's report will, of course, be a public document available for review by the public, including interested manufacturers. Also, a manufacturer seeking information that would help it to identify any opportunities or incentives to market or develop specific biobased alternatives may consult the Federal Business Opportunities Web site maintained by the GSA (http://www.FedBizOpps.gov ), which provides, among other things, Federal agency recurring procurement forecasts. One commenter stated that there should be ``flow down'' procurement preference to the subcontractor level, maintaining that subcontractors are often unaware of item preferences in Federal procurements and that such a ``flow down'' preference would ensure that small producers always get a bid opportunity. This comment is outside the scope of this rulemaking. It relates to the implementation of the procurement procedures for this program, which will be accomplished through the Federal Acquisition Regulation (FAR). Paragraph (b) of Proposed Rule Sec. 2902.2 (Final Rule Sec. 2902.3(b) and Sec. 2902.5(c)(1)) identifies two exceptions to the applicability of the guidelines, i.e., the guidelines do not apply to: --Any procurement by any Federal agency that is subject to the regulations issued by the EPA under section 6002 of the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 (RCRA) (40 CFR part 247), to the extent that the requirements of the guidelines are inconsistent with those regulations; or --The procurement of motor vehicle fuels or electricity. One commenter noted that in addition to these two exceptions to the applicability of the guidelines, paragraph (e) of Proposed Rule Sec. 2902.11 (Final Rule Sec. 2902.5(c)(2)) also contains an exclusion from the program for products having mature markets. The commenter suggested that all the program exclusions be located in one place. USDA agrees with the essence of this comment. To that end, items excluded from consideration for designation are consolidated in Final Rule Sec. 2902.5(c). However, because an inconsistency with regulations implementing Section 6002 of the Solid Waste Disposal Act is an applicability factor, and not a blanket exclusion from this program or consideration for designation, USDA has retained that provision in the applicability Section, now Final Rule Sec. 2902.3(b). Additionally, because the regulations implementing section 6002 of the Solid Waste Disposal Act are popularly known as the RCRA regulations or RCRA guidelines, USDA revised Final Rule Sec. 2902.3(b) to acknowledge the connection between RCRA and the Solid Waste Disposal Act. One commenter stated that the proposed rule was ambiguous as to whether the proposed procurement [[Page 1795]] requirements constitute a mandatory purchasing program or a preferential program. This commenter asked if agencies would be required to buy only biobased products unless one of the identified circumstances applies, or would the biobased program be subject to some sort of evaluative preference that goes into the procurement decision. Section 9002 provides for preferred procurement of biobased products by Federal agencies, and the guidelines in this final rule reflect the statutory requirement that agencies must establish a procurement preference program. In developing the required preference program, Federal agencies are expected to adopt a policy that will maximize the purchase or use of biobased products to the extent practicable, with exceptions being made only when they: (1) Are not available within a reasonable time; (2) fail to meet performance standards set forth in the applicable specifications, or the reasonable performance standards of the Federal agency; or (3) are available only at an unreasonable price. To help clarify this and other aspects of the program, USDA will develop a model procurement policy and program for designated items to support its own procurement practices. The FAR also will be amended to implement the procurement aspects of the program. One commenter stated preferred procurement programs like the proposed program are not the most effective mechanisms for changing or driving environmental behaviors. This commenter maintained that product claims regarding environmental and performance attributes could mislead public and private sector buyers and lead to less efficient, more costly, buying practices that would not assure more environmental benefits. Based on this position, the commenter recommended that USDA reconsider the ``must procure'' aspect of the program, which goes beyond simply encouraging new markets and could lead to undue substitution of viable products. Section 9002 sets the basic parameters for this program. USDA must consider the economic and technological feasibility of using items, including life cycle costs, in designating items under this program. Additionally, vendors must provide information about product environmental and public health benefits, if so requested by the procuring official (see Final Rule Sec. Sec. 2902.6 and 2902.8). In most situations, self-certification should be satisfactory for Federal agencies. Manufacturers and vendors are expected to verify this information only in specific procurements where a Federal agency expressly requires verification of environmental benefits, public health benefits, or life cycle costs. Such information must be verified using an analytical method authorized in these guidelines. USDA, through these guidelines, requires verification with (a) a third-party test using the NIST Building for Environmental and Economic Sustainability (BEES) analytical tool or (b) either a third-party or an in-house test using the ASTM International (ASTM) standard for evaluating and reporting on environmental performance of biobased products, including life cycle costs. Both BEES and the ASTM standard are in accordance with International Organization for Standardization (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. Such information will empower the procuring official to consider all relevant factors and make determinations that best meet the Federal agency's needs. USDA Guidance on Item Availability and Procurement (Proposed Rule Sec. 2902.3; Final Rule Sec. 2902.6) Proposed Rule Sec. 2902.3 (Final Rule Sec. 2902.6) contained a discussion of the voluntary Web-based information site USDA intends to maintain for manufacturers and vendors of designated items produced with biobased products and Federal agencies. Through this Web site, USDA intends to provide access to information as to the availability, relative price, performance and environmental and public health benefits of the designated items. In the proposed rule, USDA solicited comments on the kinds of contact and product information that should be made available on the Web-based information system, as well as comments on the appropriate components of a model procurement program for biobased items. With respect to the model procurement program, one commenter asked that, in the final rule, USDA better spell out how it will use its model procurement program or other assistance to help other Federal agencies in complying with section 9002. One suggestion made in this vein by two commenters was that USDA should provide sample solicitation and contract language that Federal agencies can insert into support services solicitations and performance-based contracts. USDA is in the process of developing the model procurement program referred to in the proposed rule. It is the USDA intention to have the model procurement program in place prior to designation of the first items under the program. The USDA Office of Chief Economist has forwarded these comments to USDA Departmental Administration for its consideration in developing the model procurement program. With respect to the provision of sample solicitation and contract language, this comment and many similar comments reflect a misunderstanding of how these requirements will be implemented into the Federal procurement framework. To address this point in the guidelines, USDA added a new paragraph (a) in Final Rule Sec. 2902.4 stating that: ``The Office of Federal Procurement Policy, in cooperation with USDA, has the responsibility to coordinate this policy's implementation in the Federal procurement regulations. 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.'' The USDA Office of Chief Economist has forwarded these comments to USDA Departmental Administration for its consideration in developing the model procurement program. One commenter was concerned that the program's procedures are too complicated for acquisitions under the Simplified Acquisition Threshold as defined in Sec. 2.101 of the Federal Acquisition Regulation. This commenter was also concerned that procurement automation efforts would be negatively affected due to the potential need to manually procure biobased items. This comment is outside the scope of this rulemaking. It relates to the implementation of the procurement aspects of this program, which will be accomplished through the FAR. One commenter, noting that procuring agencies will be looking for articles such as truck bed liners and chairs, not ``molded plastics and composites,'' recommended that the program Web site include links so that products that fall under designated item groupings can be cross referenced or displayed by product categories in a manner that will be useful to Federal buyers. USDA appreciates the emphasis on purchasing of end products and will take that into account in future item designation. USDA intends to design the program Web site to be as user- friendly as possible, which would include providing features such as those described by the commenter. Two commenters suggested that USDA should work closely with the Biobased Manufacturers Association [[Page 1796]] (BMA) and use BMA's ``Biobased Supercenter'' as a model for the USDA Web-based information center. One of these commenters also suggested that USDA work with BMA to coordinate product sub-categories, classes, and codes. USDA will work to identify opportunities to coordinate its efforts under the biobased preference program with the efforts of other public and private entities with which the program has shared or overlapping interests. One commenter noted that procurement agencies such as the Defense Logistics Agency (DLA) are tasked with purchasing materials identified by their customers as necessary to perform the customers' mission and stated that, while DLA and similar agencies can facilitate making alternative products available and visible, the decision on product choice will rest with the end user. This commenter recommended that the final regulations provide that customers (end users) should specify biobased products when ordering from Federal Supply Schedule or prime vendor type contracts. Section 2902.4(c) in this final rule provides that after the publication 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 that item composed of biobased products, consistent with the guidelines. USDA will specify the allowable time frame in each designation rule. The proposed rule preamble stated, ``Information on relative price, performance, and environmental and public health benefits that USDA is required to provide to Federal agencies will be gathered from manufacturers and vendors at the individual product level. This information, to be of maximum value to Federal agencies in making procurement decisions, must be considered at an individual product level.'' One commenter objected to the notion of gathering environmental and public health information directly from vendors of biobased products. Instead, this commenter stated, USDA must establish a set of standards that must be met by vendors who want their products to qualify. The commenter asserted that, to be truly useful, those standards must address safety and health effects on workers, performance, costs (of purchase, use, and disposal), and environmental impact. As noted in the proposed rule, we intend to gather information on the relative price, performance, and environmental and public health benefits of specific products from industry using a Web site to which manufacturers and vendors of products that fall within designated items will be invited to voluntarily provide information, including availability of the products with biobased content that they offer to Federal agencies. Final rule Sec. 2902.6(a) also includes biobased content among the information to be provided on the Web site. The Web site will employ a standardized format with interactive capabilities that will permit manufacturers and vendors to enter information into the Web site. Final rule Sec. 2902.6(a) clarifies that the Web site will provide instructions for the posting of information. USDA will periodically audit the information displayed on the Web site and, where questions arise, contact the manufacturer or vendor to verify, correct, or remove incorrect or out-of-date information. In addition, USDA added to Final Rule Sec. 2902.6(a) a general requirement that manufacturers and vendors, when requested, be able to verify any relevant product characteristic information provided to Federal agencies. USDA believes that these procedures, along with the fact that the designation process for each item will provide USDA and the public with an opportunity to consider the economic and technological feasibility, including life cycle costs, of items and the types of products that would fall within each item grouping, will ensure that the factors identified by the commenter are adequately considered. Definitions (Proposed Rule Sec. 2902.4; Final Rule Sec. 2902.2) With respect to the definition of biobased product, one commenter noted the use of the term ``renewable domestic agricultural materials'' and asked for clarification of the ``domestic'' qualifier. Does it refer to the origin of the agricultural materials, or to where the agricultural materials were turned into usable feedstock? The commenter stated that agricultural materials are sourced from all around the world, and that producers may be unable to certify that a particular raw material is ``domestic.'' On this same subject, one commenter noted that in section 9002, the qualifier ``domestic'' appears to apply only to renewable agricultural materials, and not to biological products, and asked that USDA clarify whether that is indeed the case. The statutory definition refers to ``biological products or renewable domestic agricultural materials (including plant, animal, and marine materials) or forestry materials.'' 7 U.S.C. 8101(2). USDA considers the qualifier ``domestic,'' as well as the qualifier ``renewable,'' to apply to both agricultural materials and forestry materials. Given that the statute refers to the materials themselves and not to, for example, domestically processed materials, USDA construes an intent to promote the use of U.S. origin agricultural and forestry materials. Also with respect to the definition of biobased product, one commenter noted there was no reference to products manufactured primarily from ``naturally occurring microorganisms'' and asked if such products were being considered for inclusion in the program. To the extent that these products would be composed in whole or in part of biological products, such products would fall within the definition of biobased product. One commenter stated there appeared to be an inconsistency between the definition of ``biobased content'' and the provisions of Proposed Rule Sec. 2902.11(d)(1) (Final Rule Sec. 2902.7(c)). The proposed definition of ``biobased content'' stated, in part, ``[t]otal product weight may be calculated exclusive of water or other inactive ingredients, fillers and diluents,'' while Proposed Rule Sec. 2902.11(d)(1) stated ``[b]iobased content shall be determined based on the weight of the biobased material (exclusive of water and other non- active ingredients, fillers, and diluents) divided by the total weight of the product and expressed as a percentage.'' The commenter stated it was confusing as to whether total product weight is determined with or without inactive ingredients, including inorganic materials. On this same subject, another commenter stated that, in order to realistically promote the introduction of biobased products, the biobased content should--not ``may'' as in the definition--be defined exclusive of water, pigments, fillers, rheology modifiers, additives, and other inactive materials. USDA agrees that the definition of ``biobased content'' needs clarification. In order to be consistent with the ASTM International Radioisotope Standard Method that USDA is requiring for determining and certifying biobased content, the term ``biobased content'' is defined in this final rule as the amount of biobased carbon in the material or product as a percent of the weight (mass) of the total organic carbon in the product. This calculation excludes all inorganic material in the product. USDA similarly revised Final Rule Sec. 2902.7(c) to be consistent with the revised definition in Final Rule Sec. 2902.2. [[Page 1797]] One commenter suggested that, to eliminate confusion, a definition of ``biodegradable'' should be added to the definitions section of the guidelines, as well as a note elsewhere in the guidelines that a biobased product is not necessarily a biodegradable product, i.e., that biodegradability is a characteristic that must be addressed and qualified separately. As biodegradability is a characteristic that will be a consideration in the designation of some items but not others, USDA does not think that it is necessary to add a definition of the term in this final rule. USDA will, however, propose to define the term in a future rulemaking when it is appropriate in the context of the item or items being considered for designation, which will give the public an opportunity to comment upon the proposed definition. The same commenter suggested that a definition of ``total manufactured value'' be added to the guidelines to help clarify the use of the term in Proposed Rule Sec. 2902.11. As discussed later in this document, USDA has removed the ``5 percent of total manufactured value'' criterion from the guidelines in this final rule. Thus, it is not necessary to define the term. One commenter stated that the definitions in the final guidelines should be inclusive rather than exclusive, thus food crops and food waste should have equal footing and utilization of agricultural and animal waste should be given equal, if not special, consideration over virgin agricultural food crops. USDA considers the definitions in the guidelines to be inclusive. The statute and the guidelines focus on promoting the use of biobased products generally, without special emphasis on any particular class of biobased product. In addition to the above changes made in response to specific comments, USDA is making several other minor technical or stylistic changes to the definitions of ``Biobased product,'' ``Designated item,'' and ``Sustainably managed forests.'' USDA is substituting ``USDA'' for ``Secretary'' in the definition of ``Biobased product'' to reflect the fact that the Secretary has delegated this authority within USDA and need not make such determinations personally. USDA revised the definition of ``Designated item'' to replace the term ``category'' with ``generic grouping'' because the use of the term ``category'' in the proposed rule generated confusion. In that same definition, USDA added ``biobased'' to modify ``products'' to clarify that the generic group was of ``biobased products.'' Also in that definition, because of the reorganization from the proposed rule to the final rule, USDA replaced the reference to ``Sec. 2902.12'' with ``subpart B.'' Regarding the definition of ``Sustainably managed forest,'' USDA added ``Refers to the'' at the beginning of the definition. Finally, in addition to these minor changes, USDA wants to clarify the origin of the definition of ``Small and emerging private business enterprise.'' That definition is based on the USDA Rural Business Service definition of the same term used in the Rural Business Enterprise Grant Program (see 7 CFR 1942.304). Preferred Procurement Program (Proposed Rule Sec. 2902.5(b); Final Rule Sec. 2902.4(b)) Under Proposed Rule Sec. 2902.5(b) (Final Rule 2902.4(b)(1)), agencies would be required to develop a procurement program that will assure that products that fall within designated items composed of biobased products will be purchased to the maximum extent practicable, consistent with applicable provisions of Federal procurement laws. Such programs would provide for preferential purchasing of products that fall within designated items unless the items are not available within a reasonable time, fail to meet performance standards, or are available only at an unreasonable price. Several commenters focused on the ``unreasonable price'' criterion. Some of the commenters simply stated that USDA must provide guidance to Federal agencies as to what constitutes an ``unreasonable price'' or, conversely, what a ``reasonable price'' would be. Other commenters suggested that USDA should formulate a quantifiable ``allowable premium'' that procurement officials may pay, similar to that allowed for the purchase of recycled paper, that takes into account the socioeconomic and environmental benefits of using biobased products instead of petrochemical or mineral products. Flat 10, 15, and 20 percent premiums were suggested, as was a one percent premium for each 10 percent of biobased content. The reasonable/unreasonable assessment, which the statute and the guidelines offer for consideration with respect to both the price of a product and the amount of time in which it would be available, is an assessment that USDA thinks must be made by the procurement official in the context of a specific procurement. Through the biobased program Web site and other initiatives, USDA will attempt to provide as much relevant information as possible for those procurement officials to consider. In the end, however, it will be agency procurement officials, acting in accordance with their agencies' particular procurement programs and the FAR, who will have to decide how to best meet the procurement needs of their agencies. Other commenters sought a greater emphasis on value, rather than price. One of those commenters suggested that Federal agencies should be required to purchase biobased products despite initial price differentials, unless they can demonstrate through a full life-cycle analysis that the non-biobased product is a better value. Another commenter stated that USDA should clarify, quantify, and incorporate the concept of ``best value'' in its guidelines for Federal purchasing. In identifying the ``best value,'' some commenters stated, USDA should quantify the benefits of creating a new economic sector in rural America, the environmental benefits of using biobased products, and the national security and economic benefits of reduction of dependence on imported fossil fuels. One of these commenters concluded by suggesting that information by suppliers that documents ``best value'' should be included on the program Web site and a maximum allowable premium for biobased products should be set at 10 percent over a non-biobased alternative after a best value comparison. The above comments relate to the implementation of the procurement aspects of this program, which will be accomplished through revisions to the FAR. The law provides the ``unreasonable price'' exemption, but application of this exemption will likely be based on a comparison of product price, price of alternative products, life cycle costs, and other benefits. In many, perhaps most, cases this will involve nonquantifiable determinations or determinations that can only be made by the procuring agency. Therefore, USDA believes that the degree to which such factors are incorporated into the procurement system can best be addressed through the implementing regulations in the FAR. One commenter was concerned that the proposed program may be too cumbersome and too easily circumvented by unwilling procurement specialists. Similarly, other commenters were concerned that price and availability considerations may provide loopholes allowing purchasing agents to circumvent the original intent of section 9002 and suggested that exceptions to the purchasing requirement should be kept to a minimum. Some of these commenters stated that USDA needs to [[Page 1798]] provide explicit guidance to agencies to ensure that agencies do not use price to avoid their obligation to ``buy biobased,'' with one commenter stating that cost, in and of itself, is no excuse not to purchase biobased products. These commenters suggested that USDA guidance provide for the consideration of a variety of factors, such as product lifespan, energy savings, reduced disposal costs, reduced health and safety costs, environmental benefits, and compliance with other governmental ``green'' initiatives. The guidelines in this final rule reflect the statutory parameters for making procurement decisions. That is, agencies must give a preference to designated biobased items unless the items: --Are not reasonably available within a reasonable period of time; --Fail to meet the performance standards set forth in the applicable specifications or fail to meet the reasonable performance standards of the procuring agencies; or --Are available only at an unreasonable price. In addition to the statutory parameters, USDA has set forth recommended procurement practices in these guidelines. Those recommended procurement practices include acceptable standards for determining biobased content and product attributes. USDA encourages procurement officials to consider a product's life cycle costs and environmental and public health benefits when appropriate in the context of a specific procurement, but USDA is not in a position to mandate consideration of and establish specific qualifying standards for all possible products for all procurements. Proposed Rule Sec. 2902.5(a) (Final Rule Sec. 2902.4(c)) stated, in part, that ``Within 1 year 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 that their specifications require the use of designated items composed of biobased products, consistent with the guidelines in this part.'' One commenter offered that it may be possible for agencies to conduct a review of their specifications within the specified year, but that the development of new or revised specifications resulting from such reviews may not be possible within that time frame. USDA expects that the required reviews and revisions of specifications will be an ongoing process, and certainly not a one-time effort that would overwhelm most agencies. USDA agrees with the commenter to the extent that the comment expresses that the one-year time frame might not be appropriate in all instances. To that end, USDA has revised Final Rule Sec. 2902.4(c) to remove ``Within 1 year'', insert ``within a specified time frame'', and indicate that ``USDA will specify the allowable time frame in each designation rule.'' One commenter stated that the guidelines need to take into account the fact that more Government purchasing organizations are using methods involving long-term contracts, often in the 5- to 10-year range, in order to ensure supply continuity and realize savings. The commenter pointed out that some items that may be designated in the future will likely have non-biobased competition that is already on a long-term contract, and that the guidelines need to provide some flexibility in such cases, as changing those contracts would entail substantial time, effort, and costs. Along these same lines, one commenter stated that biobased procurement should become a mandatory feature of any new contracts or contract renewals, but simply encouraged in the context of existing contracts. These comments relate to the implementation of the procurement aspects of this program, which will be accomplished through the FAR. Funding for Testing (Proposed Rule Sec. 2902.6; Final Rule Sec. 2902.9) As discussed in the proposed rule, section 9002 provides to USDA $1 million per year for each of the fiscal years 2002 through 2007 to support the testing of biobased products to carry out the provisions of the section. Section 9002 further provides that USDA, at its discretion, may ``give priority to the testing of products for which private sector firms provide cost sharing for the testing.'' In the proposed guidelines, Sec. 2902.6 (Final Rule Sec. 2902.9) described the manner in which available funds for testing would be allocated and the priority-setting mechanism USDA would use to evaluate proposals for cost sharing. Under Proposed Rule Sec. 2902.6(a) (Final Rule Sec. 2902.9(a)), USDA will use these funds directly for biobased content testing and environmental/public health benefits testing using the BEES Analysis. Once USDA begins the cost sharing programs, USDA will provide cost sharing under Proposed Rule Sec. 2902.6(b) (Final Rule Sec. 2902.9(b)) for environmental and public health benefits testing, using the BEES Analysis, and for performance testing. One commenter stated that while funding for testing was desirable, such funding should not be ``wasted on frivolous testing of products that are not already well down the path for qualification.'' This commenter stated that the funding should instead be directed toward simplifying the process so that the maximum number of vendors can perform the testing necessary to qualify products in the most cost- effective manner. The commenter encouraged USDA to use the funding to fill in limited data gaps to expedite designation of items, as discussed in the proposed rule. USDA thinks that both the USDA-supported testing described in Proposed Rule Sec. 2902.6(a) (Final Rule Sec. 2902.9(a)) and the cost sharing criteria described in Proposed Rule Sec. 2902.6(b) (Final Rule Sec. 2902.9(b)) address directly the points raised by the commenter. With limited funding for testing, USDA is keenly aware of the need to maximize the usefulness of those resources. With respect to the setting of priorities for the distribution of testing funds described in the proposed rule, one commenter encouraged USDA to give priority to products with a higher minimum biobased content, while another commenter stated that priority should be given to the funding of testing for products developed by small companies located in rural areas. Once USDA has concluded that a critical mass of items has been designated, USDA will exercise its discretion to make cost sharing a more determinative factor in product testing. Paragraph (b)(3) of Final Rule Sec. 2902.9 provides that cost-sharing proposals will be considered first for high priority products of small and emerging private business enterprises, which would include the small companies in rural areas identified by one of those commenters. Proposals for cost sharing will be prioritized, with rating points assigned based on the product's market readiness, the potential size of the market for that product in Federal agencies, the financial need for assistance of the manufacturer or vendor, the product's prospective competitiveness in the market place, and the product's likely benefit to the environment. If funds remain available, proposals from other than small and emerging private business enterprises will be considered, based on those same priority factors. These factors will allow USDA to give favorable consideration to products with higher biobased content and products developed by smaller companies. In response to these and the previous comments, USDA reorganized and revised Final Rule Sec. 2902.9(b)(2) and (3) to clarify these points. Final Rule [[Page 1799]] Sec. 2902.9(b)(2) and (3) make clear that USDA will use these criteria to rank the priority of both small and emerging private business enterprise proposals and other producer proposals. Final Rule Sec. 2902.9(b)(3) also clarifies that USDA will consider first only ``high priority'' products of small and emerging private business enterprises before considering proposals for products of other producers of biobased items. In other words, after considering all ``high priority'' proposals for products of small and emerging private business enterprises, USDA will consider all remaining cost sharing proposals together, including both the remaining proposals for products of small and emerging private business enterprises and all proposals for products of all producers of biobased items. These clarifications help ensure that this framework will result in the efficient and cost- effective use of these funds to further the program objectives. In addition, USDA made several minor technical revisions in Final Rule Sec. 2902.9(b). In paragraph (b)(1), USDA revised ``testing of biobased products to carry out this program'' to reference the testing that would be funded under paragraph (b)(4) and the applicable testing standards from Sec. 2902.8. The revised phrase reads ``life cycle costs, environmental and health benefits, and performance testing of biobased products in accordance with the standards set forth in Sec. 2902.8 to carry out this program.'' USDA also revised paragraph (b)(4) to replace the first reference to BEES with the phrase ``life cycle costs and environmental and health benefits'' and to strike the second reference to BEES. These revisions are to make this section consistent with Final Rule Sec. 2902.8, as discussed below. One commenter recommended that USDA should provide opportunities for colleges and universities to gain the necessary funding to develop the capacity to conduct the performance, health effects, and environmental testing necessary for the designation of biobased products; in the future, these institutions could also perform the carbon dating and BEES analyses provided for by the guidelines. USDA agrees that building such capacity would be consistent with the goals of section 9002. However, the funds made available under section 9002(j)(2) are ``to support testing of biobased products.'' These funds are not available for capacity building of colleges and universities, nor is the focus of section 9002 institutional capacity building. Within USDA, the Cooperative State Research, Education, and Extension Service (CSREES) mission includes capacity building. The Office of Energy Policy and New Uses (OEPNU) will discuss this comment with CSREES as part of overall USDA biobased program coordination. Communicating Information on Qualifying Biobased Products (Proposed Rule Sec. 2902.10; Final Rule Sec. 2902.6) As proposed, paragraph (a) of Proposed Rule Sec. 2902.10 (Final Rule Sec. 2902.6) would require that manufacturers be able to verify the biobased content in their products. The level of biobased content in a product would have to be determined using the ASTM International standard that is a Radioisotope Standard Method (D 6866) to distinguish between carbon from fossil resources and carbon from renewable sources. Several commenters weighed in on the use of the ASTM International Radioisotope Standard Method for determining the level of biobased content in a product; however, only one of those commenters fully supported its use. While the one supportive commenter noted that the method can produce results in as little as 2 days at a cost of $305, many other commenters objected to the costs and delays that would be associated with the use of the method, especially with respect to products that are already being marketed. While several commenters referred to the testing as ``costly,'' other commenters simply stated that the costs associated with the testing were unknown and that USDA must provide more cost information before requiring such testing. According to information USDA received from Iowa State University, which is conducting some testing under a cooperative agreement with USDA, test results could be expected in 2 to 4 weeks at a cost of $250 to $500 per sample, depending on the specific methodology used. USDA anticipates that each item designation will address minimum biobased content for that item. Therefore, manufacturers and vendors must know the biobased content of their products in order to know whether the products qualify under a designated item. Manufacturers and vendors must be able to certify that information to the procuring official. Adoption of a standard test method is necessary for the integrity of this program, providing a degree of certainty for Federal agencies, manufacturers, and vendors. A standard test method informs manufacturers and vendors of the standard against which their products and their competitors' products will be judged, and Federal procuring officials of the standard to apply, should questions arise. It is notable that no commenters proposed alternative standard test methods. Because use of a standard test method is essential for successful program implementation, USDA considers the projected costs and testing periods associated with the ASTM International Radioisotope Standard Method to be reasonable. Additionally, given the benefits that could be expected to accrue to a manufacturer or vendor as a result of a product being eligible for the procurement preference, it would appear that a $250 to $500 investment for testing would be viewed as a worthwhile business investment. In response to comments regarding the expense and time required for biobased content, BEES, and performance testing of specific products (the latter addressed in more detail below), USDA revised the final rule to provide alternatives to BEES, simplified the provision addressing biobased content test data for products that are essentially the same formulation and extended this concept to environmental and health effects and life cycle cost test data and in part to performance test data. Final Rule Sec. Sec. 2902.7(d) and 2902.8(a) clarify that biobased content and BEES or the other ASTM biobased product standards test data need not be brand-name specific for products that are essentially the same formulation. Regarding performance test data, Final Rule Sec. 2902.8(b) leaves to the discretion of the procuring official whether such test data must be brand-name specific. The different standard for performance test data recognizes that even minor changes to a formulation may impact critical performance characteristics, and thus the sufficiency of test data for a product that is essentially the same formulation must be determined on a case- by-case basis by the procuring official. Proposed Rule Sec. 2902.11(d)(2) had presented this concept in a more confusing manner and as limited to biobased content testing. Several commenters suggested that USDA should accept manufacturers' self-certification as to biobased content levels, and that the ASTM International Radioisotope Standard Method should be required only if a product's biobased content level was challenged by an agency, competitor, or consumer. To support the idea of self-certification, two of these commenters noted that RCRA regulations (40 CFR part 247) do not require affirmative tests to determine if wastes meet the toxicity characteristics of hazardous waste. Under Proposed Rule Sec. 2902.10(a) (Final Rule Sec. 2902.6(a), Sec. 2902.7(a), and [[Page 1800]] Sec. 2902.8) manufacturers and vendors are expected to provide relevant information to Federal agencies, upon request, with respect to product characteristics. This requirement is essentially the same as the self-certification described by the commenters. The same paragraph goes on to provide that manufacturers and vendors must be able to verify the biobased content in their products, and that the ASTM International Radioisotope Standard Method must be used to determine the level of biobased content in the product. Because biobased content is a key element in the statutory and regulatory framework, procuring officials, when necessary, must be able to request verification of biobased product content of products offered under specific procurements. Statutory requirements of this program differ from those of the program noted by the commenters. To reaffirm this position, USDA revised Final Rule Sec. 2902.7(a) to state that ``Upon request, manufacturers and vendors must provide'' such verification information in lieu of the text in Proposed Rule Sec. 2902.11(b) that ``Federal agencies and USDA may request''. USDA encourages Federal agencies to request such verification only when necessary. Several commenters were concerned about the method itself. Some noted that the Radioisotope Standard Method had not yet been approved by ASTM, and stated that only consensus standards should be used. Other commenters stated that the test is new and untried and the results may not reflect actual biobased content. Two of these commenters stated that the \14\C/\12\C ratio measurement must be used with considerable caution, if at all; if it is required, USDA must allow for test error in setting the minimum content for a product. The Radioisotope Standard Method is now an ASTM consensus standard (ASTM D 6866), thus USDA is confident that it has moved beyond the ``new and untried'' stage. USDA added the ASTM number in the text of Final Rule Sec. 2902.7(c). With respect to the potential for test errors, this ASTM method, like any other test, should produce results that are repeatable, and thus could be verified in the event that a manufacturer or vendor disagreed with the level of biobased content indicated in the test results. As proposed, paragraph (b) of Sec. 2902.10 (Final Rule 2902.8(a)) would require manufacturers and vendors to use the BEES analytical tool to provide information on life cycle costs and environmental and health benefits to Federal agencies, when asked. Some commenters stated that the regulations should provide for the use of other appropriate analytical tools for generating life cycle costs information in addition to BEES, including life cycle costs assessments conducted by product manufacturers or their contractors. Three of these commenters appeared to be basing this suggestion on the existence of other analytical methodologies, with two suggesting ISO14040 and the third suggesting that the EPA Environmental Technology Verification (ETV) Program could be used in place of, or as a supplement to, BEES. Two other commenters suggested that additional tools should be available because, while BEES may be appropriate for some categories and items, it may not be the best alternative for all of them, with one commenter pointing to the differences between traditionally produced biobased products and those produced using biotechnology. One of those commenters stated that while quantitative methods are needed to support environmental attributes, producers should have the flexibility to choose the most appropriate tools, as long as they are scientifically based; recognized by standards organizations, such as ISO or ASTM; and include peer review to ensure accuracy. In a similar vein, one commenter suggested that manufacturers should be able to substantiate claims related to biobased product content and environmental performance themselves using ISO-compliant methodologies, with the BEES life cycle model then being applied to determine life cycle costs. USDA, in response to public comments, has concluded that alternative methods may be used to verify environmental and health effects and life cycle costs. Manufacturers and vendors must provide the necessary information by using either (a) the BEES analytical tool along with the qualifications of the independent testing entity that performed the tests, or (b) either a third-party or an in-house conducted analysis using ASTM D7075, the standard for evaluating and reporting on environmental performance of biobased products, including life cycle assessment and cost analysis for biobased products. 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. USDA believes the above noted tests are particularly well suited for the needs of this program. Several commenters objected entirely to the required use of BEES. The reasons given were: (1) BEES may require the release of confidential trade secret information; (2) BEES testing will be an undue burden on producers, especially small producers, which may eliminate some operations from participation in the program; and (3) other Federal programs, such as RCRA, do not require such testing. One commenter stated that manufacturers should be allowed to use BEES if they believed it would be useful to their own marketing efforts, but that BEES should not be required generally. In response to these concerns, USDA offers the following: (1) The security of confidential trade secret information will be an issue between the manufacturer or vendor and the laboratory performing the BEES analysis. USDA expects that the contractual agreement between the two involved parties would address the issue of business information security. (2) In accordance with the procedures outlined in Final Rule Sec. 2902.9, USDA will provide some funding for BEES, ASTM environmental testing, and performance testing of individual products with biobased content, with priority being given to products of small and emerging private business enterprises. (3) In designating items, section 9002 requires USDA to consider the economic and technological feasibility of using the items, including life cycle costs. Such life cycle costs can be ascertained through the use of the BEES analytical tool and the ASTM environmental testing standard. Several commenters objected to the required use of BEES for biobased products--a requirement termed a burden by some--when there was no similar requirement for competing non-biobased products. These commenters questioned the usefulness of BEES-generated life cycle and other information in the absence of comparable information related to competing products, with one commenter stating the goal of such testing should be to compare biobased products with petroleum-based products. Another commenter suggested that some of the testing funds that would be available should be used to test established, competing products. A third commenter stated USDA should eliminate the use of BEES analyses unless competing non-biobased products are required to have BEES analyses. Finally, one commenter recognized that BEES would result in a level playing field for biobased products, but stated that biobased product manufacturers and vendors should not be required to provide more [[Page 1801]] data than other manufacturers and vendors offering products for sale to Federal agencies. 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. However, under section 9002, USDA has neither the authority to require nor the funding for the testing of non-biobased products. Even absent comparable data for non-biobased products, USDA thinks that BEES test data, or test data from the ASTM standard for evaluating and reporting on environmental performance of biobased products and the ASTM standard for life cycle cost analysis, for biobased products will have utility for the procuring officials in making procurement decisions. Test data from these two alternative sources will facilitate procuring official consideration of non-price factors, such as life cycle costs, in making procurement decisions. To that end, the final rule retains the requirement that manufacturers and vendors provide such information upon request. However, USDA encourages Federal agencies to request verification only when necessary. Regarding the comment advocating allowing manufacturers and vendors to perform environmental attribute tests in-house, USDA is requiring in Final Rule Sec. 2902.8(a) only that, when requested to provide environmental and health effects and life cycle test data, manufacturers and vendors use a third-party BEES analysis or either a third-party or in-house analysis using the ASTM standard for evaluating and reporting on environmental performance of biobased products. Several commenters questioned the need for manufacturers to have BEES testing conducted at the product or item level. Most of these commenters stated that BEES should not be required for each product, with some suggesting that one generic product should be allowed to serve as a