On February 4, 2022, President Biden issued Executive Order (“EO”) 14063[1]. The EO requires that a Project Labor Agreement (“PLA”) be in place for any federal “large-scale construction projects” estimated at $35 million or more. To compete for or perform projects subject to the PLA requirement contractors must agree to be subject to the applicable PLA. For federal projects under $35 million or projects receiving federal financial assistance are not required by the EO to have PLA, but federal agencies will have discretion to require PLAs. The EO will not go into effect until after implementing regulations are finalized, probably after the beginning of June 2022.
Requiring PLAs on federal construction projects is a substantial shift from even the Obama Administration’s policy in favor of PLAs. Biden’s PLA EO will have an impact on federal contractors and likely industry repercussions beyond federal procurement. Only time and experience will tell whether those impacts will all be positive as the Biden Administration insists or will drive up construction costs and give unions more leverage than they have in the market as the critics insist.
Critics argue that the EO effectively unionizes all federal projects subject to the EO, but the White House insists that the EO is not calling for unionization. The impacts will be likely more pronounced on non-union contractors and in geographic markets in which unionization is low.
This article will explain PLAs, describe Obama’s previous EO on PLAs, and consider the impact of Biden’s Executive Order on the future of federal construction projects.
What is a Project Labor Agreement (PLA)?
A PLA is a form of collective bargaining agreement (“CBA”). It binds all contractors and subcontractors on the project. The mandated PLAs as outlined in the EO requires construction firms to comply with the terms and conditions imposed by the union which includes benefits, wages, hours, and mutually binding forms of dispute resolution. Further, PLAs must guarantee against strikes or similar job disruptions. PLAs usually run only for the duration of the project and are applied to specific projects in this case a specific federal project.
Right now, there are no established regulations or procedures to establish the required PLAs and to administer and enforce the implementation of the new EO. Those details are yet to be developed by the Federal Acquisition Regulatory Council (“FAR Council”). The FAR Council assists with the direction and coordination of government contracting and uniform procurement policies and procedures for federal agencies. Per Biden’s EO, the FAR Council is tasked with proposing regulations within 120 days for the implementation of the provisions of the EO. The EO applies to all contract bids, but will not go into effect until the final regulations are finalized by the FAR Council, probably after the beginning of June 2022.
Exceptions to PLA Requirement:
The EO authorizes a “senior official within an agency” to grant an exception to the PLA requirement, but only after “providing a specific written explanation of why”. A PLA will not be mandated if doing so would:
- (1) Substantially reduce potential bidders and frustrates competition,
- (2) Otherwise, be inconsistent with federal law, Executive Orders, Presidential Memoranda, or
- (3) Would result in inefficiency, such as projects of short duration and lacking complexity, only involving one craft or trade, or involving particularly specialized construction work.
In addition, the senior officials tasked with authorizing exceptions can weigh additional factors and permit exceptions to PLAs when certain acceptable circumstances arise that display an unusual and compelling need. At this time, no formal procedure or process has been rolled out to formally determine whether projects may be subject to an exception. Interestingly, this Order will not impact state or local government projects even if those projects receive federal funding.
Policies Behind Biden’s PLA EO
The EO and its supporters say that requiring PLAs on large-scale federal construction projects will help remedy project delays, labor supply, and labor cost challenges. Another benefit of PLAs highlighted in the EO concentrates on promoting small businesses and advancing the interests of contractors and subcontractors. Opponents of the EO point out the “prevailing wage” requirements on federal projects under the Davis-Bacon Act and question what the added benefit is to non-union construction workers of requiring their employer to sign onto a PLA.
Previous Obama PLA EO
In 2009, President Obama’s EO 13502 authorized, but did not require federal agencies to mandate PLAs on projects of $25 million or more. Biden’s EO applicability is more limited (projects greater than $35 million vs. $25 million), however, making PLAs mandatory for projects over $35 million and authorized for all other federal or federally funded projects is a major change and expansion. Comparatively, Biden’s EO upped the ante by requiring federal agencies to implement PLAs on projects of $35 million or more. The reaction in the construction industry to Obama’s EO involved various bid protests and court challenges to the EO’s overall legality. In some cases, the PLA mandates were removed due to the protests. Opponents of PLAs argue that Obama’s PLAs are not the cure and note there is substantial pushback against PLAs. As of 2018, 24 states restricted government-mandated PLAs.
As mentioned above, President Biden’s EO substantially strengthens and expands President Obama’s EO. Biden’s EO further builds on Obama’s EO by expanding federal agency reporting requirements. Biden’s EO adds a new public disclosure requirement. Section 6 of the EO requires “agencies to publish, on a centralized public website, data showing the use of project labor agreements on large-scale construction projects, as well as descriptions of the exceptions granted under section 5 of this order.” And as a result, organized labor will likely appreciate the availability of a structured list of non-union contractors to potentially target for future campaigns.
Impact of Biden’s Order
Biden’s EO requires federal construction contractor’s employees to be bound to the terms of a PLA. The terms and conditions imposed by this Order will likely affect billions of dollars in federal construction contracting for hundreds of thousands of workers. In addition, the EO will monitor and hold agencies accountable by requiring them to report their use of PLAs on large-scale construction contracts, as well as any exceptions granted. Despite the potential benefits posed by Biden’s EO, it is unlikely that it will go uncontested without facing substantial resistance and legal challenges.
Conclusion
Biden’s EO will likely face challenges when legal disputes begin to surface in response to the new PLA requirement for federal construction contracts. It would be wise for any contractors who are unfamiliar with the new union requirements but may have plans to delve into the bidding process on large-scale federal construction projects to educate themselves on PLAs. Further, contractors should weigh the risk factors associated with PLAs while also considering the overall worth of the work to be performed.
[1] Executive Order 14063
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