A Defense Federal Acquisition Regulation Supplement final rule published May 7, 2026, prohibits Department of Defense contracting officers from requiring nontraditional defense contractors to disclose greenhouse gas emissions inventories as a condition of contract award, and bars consideration of such disclosures during source selection. The rule, DFARS Case 2024-D021 (Federal Register document 2026-09038), took effect immediately upon publication and implements a congressional mandate from the FY2024 National Defense Authorization Act.

What the Rule Does

The final rule adds new DFARS Subpart 223.5, titled "Greenhouse Gas Emissions," and establishes two core prohibitions for DoD acquisitions involving nontraditional defense contractors:

First, contracting officers may not require nontraditional defense contractors to disclose a greenhouse gas inventory — a measurement of direct and indirect emissions from the contractor's operations — as a condition of receiving a DoD contract award. This prohibition applies throughout the acquisition process, from solicitation requirements through award.

Second, contracting officers may not consider greenhouse gas emissions disclosures submitted by any offeror during the source selection process — meaning GHG data cannot be used as an evaluation factor or sub-factor, even if voluntarily provided.

The rule includes a narrow waiver authority: a contracting officer may seek a contract-by-contract waiver if the GHG emissions information is directly related to the performance of the specific contract being awarded. This exception is expected to apply in limited circumstances — for example, a contract for environmental consulting services where the contractor's own emissions profile is germane to the work — and requires documented justification.

Statutory Basis: Section 318 of the FY2024 NDAA

The rule implements Section 318 of the National Defense Authorization Act for Fiscal Year 2024, Public Law 118-31, enacted in December 2023. Section 318 directed the Secretary of Defense to issue regulations prohibiting GHG disclosure requirements for nontraditional defense contractors within 180 days of enactment. The rule is approximately 18 months behind that statutory deadline — the delay reflects the time required for coordination across DoD components and reconciliation with concurrent Biden administration ESG-related FAR rulemaking that was ultimately reversed by executive order in early 2025.

The term "nontraditional defense contractor" is defined in 10 U.S.C. § 3014 as an entity that is not currently performing and has not performed, for at least one year prior to solicitation of a DoD contract, any contract or subcontract subject to full coverage under the cost accounting standards prescribed under 41 U.S.C. § 1502. In practice, this covers a large share of commercial technology companies, startups, and other firms that engage with DoD on an other-than-traditional basis — the very companies DoD has been trying to attract through Commercial Solutions Openings, Section 804 OTAs, and the Defense Innovation Unit's procurement authorities.

Context: Reversal of ESG Contracting Requirements

The rule is one of several regulatory actions rolling back the Biden administration's effort to embed environmental, social, and governance metrics into federal contracting. In March 2022, the Biden administration proposed a FAR rule that would have required major federal contractors to publicly disclose greenhouse gas emissions and set science-based emissions targets. That rule was never finalized — it drew over 24,000 public comments, many from industry objecting to the compliance burden, and was ultimately rescinded after the 2025 change in administration.

A parallel SEC rule requiring public companies to disclose climate-related risks in securities filings was challenged in court and vacated by the Eighth Circuit in 2025. The DFARS rule represents the DoD-specific implementation of the legislative backstop that Congress put in place through the NDAA to ensure that even if the executive branch had moved forward with GHG disclosure requirements, the defense industrial base — particularly nontraditional contractors — would be protected.

Practical Impact for Traditional Contractors

The rule's prohibitions apply specifically to nontraditional defense contractors. Large traditional defense contractors — those performing under cost-accounting-standards-covered contracts for at least a year — are not covered by the rule's prohibitions and could still be subject to GHG disclosure requirements if those requirements were to appear in a future FAR rule or specific solicitation provision applicable to traditional contractors.

However, the current administration has made clear through executive orders issued in early 2025 that it has no intention of imposing GHG disclosure requirements on any federal contractors. The DFARS rule is therefore partly prophylactic — it provides a statutory backstop that would survive a future administration's attempt to reinstate ESG-related contracting requirements for DoD, at least as applied to nontraditional contractors, unless Congress amends Section 318.

What It Means for Contractors

  • Nontraditional defense contractors — commercial tech firms, startups, first-time government contractors — can now engage with DoD solicitations and OTA opportunities without concern that their lack of a GHG inventory will disqualify them or create a competitive disadvantage.
  • Traditional defense contractors should review any existing contract provisions or solicitation requirements that reference GHG emissions disclosure; while the rule directly protects only nontraditionals, contracting officers should not be including such provisions in DoD solicitations under the current policy environment.
  • Firms operating in states with mandatory GHG disclosure requirements (California, New York) should understand that state obligations are unaffected — the DFARS rule only limits what DoD can require in federal contracts, not what state law requires of publicly traded or large private companies.
  • The waiver authority for contracts where GHG emissions are directly related to performance is narrow; if your firm performs environmental monitoring, climate modeling, or sustainability consulting for DoD, understand that GHG-related requirements might still appear in your contract under a properly documented waiver.

Sources