FY 2024 Defense Act: GHG Emissions, Subcontracting, and AI Considerations for US Government Contractors

December 29, 2023

US President Joseph Biden recently signed the National Defense Authorization Act for Fiscal Year 2024 into law. Implications for government contractors range from new restrictions on greenhouse gas emissions certifications to potential new opportunities for contractors that develop artificial intelligence and cybersecurity solutions.

New Restrictions on Greenhouse Gas Emissions Reporting Requirements

In late 2022, the Federal Acquisition Regulation (FAR) Council proposed a new amendment to the FAR that would create new and detailed emissions disclosure requirements for all prospective contractors that earned at least $7.5 million in federal contract funds during the prior fiscal year. The FAR amendment would also require contracting officers to presume prospective contractors are not responsible—and are therefore ineligible to receive federal funds—unless they meet the disclosure requirements. The proposed amendment was published in the Federal Register in November 2022 and interested parties were invited to submit comments. Those comments remain under review.

The National Defense Authorization Act for Fiscal Year 2024 (NDAA), signed into law on December 22, could complicate the promulgation of the proposed FAR amendment because it prohibits US Department of Defense (DoD) subagencies from requiring defense contractors to disclose greenhouse gas inventories or make any other report on greenhouse gas emissions as a condition of receiving a contract award.

Although the US secretary of defense may waive the requirement to disclose emissions information, the NDAA notes that such waivers must be issued on a contract-by-contract basis and the information required to be disclosed must be directly related to contract performance. These new restrictions apply to DoD contracts only, and the FAR amendment could move forward to impose certification requirements that contracting officers from other agencies may use to inform their acquisitions. However, this restriction could further delay the amendment’s promulgation—or even halt it entirely.

Implications for Small Business Subcontractors

The NDAA also makes several amendments to the Small Business Act to (1) provide enhanced payment protections for small business subcontractors, (2) increase the goal for service-disabled veteran-owned small business (SDVOSB) participation, and (3) impose new certification requirements for SDVOSBs.

First, the NDAA revises the Small Business Act to enforce stricter requirements on prime contractors, ensuring they make timely payments to small business subcontractors. The NDAA revisions also shorten the time period—from 90 days to 30 days—that prime contractors have to notify a contracting officer in writing of past-due payments to subcontractors.

The NDAA also grants contracting officers new discretion to enter or modify a prime contractor’s past performance information based on an unjustified failure to make a full or timely payment to a subcontractor before or after close-out of the contract at issue. Once a contracting officer determines there was an unjustified failure to make full or timely payment to a subcontractor according to those provisions, the prime contractor must cooperate with the contracting officer to correct and mitigate such failure.

These changes provide new protections for small business subcontractors. The NDAA also directs the FAR Council to propose revisions to regulations as necessary to carry out the changes within 180 days of the NDAA’s enactment.   

The NDAA also amends the Small Business Act by increasing the government-wide goal for SDVOSB participation from a minimum of 3% to 5% of the total value of all prime and subcontract awards for each fiscal year. The NDAA directs the Small Business Administration (SBA) to promulgate regulations that will gradually eliminate self-certification for SDVOSBs and will require these businesses to apply for certification with the SBA in order to claim SDVOSB preference.

Artificial Intelligence & Cybersecurity

In keeping with government-wide initiatives to expand agency use of artificial intelligence (AI)—especially in light of President Biden’s recent AI executive order—the NDAA promotes the use of AI by DoD subagencies. Specifically, the NDAA creates new opportunities for the use and development of AI emergent technologies in connection with defense operations. Government contractors can expect the further integration of AI into defense operations to lead to new contract opportunities.

Unsurprisingly, the NDAA strengthens cybersecurity and critical infrastructure protections through the creation of new programs dedicated to expanding cybersecurity tactics and operations. These programs may create new opportunities for contractor involvement in cybersecurity protections and may also result in enhanced cybersecurity requirements for defense contractors.


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