What Every Federal Government Contractor and Subcontractor Needs to Know
Key Takeaways
- As of January 22, 2024, project labor agreements (“PLAs”) are required on direct federal construction projects of $35 million or more, with limited exceptions.
- Every federal contractor and subcontractor is required to comply with the new PLA requirements.
Background
The roots of the newest PLA mandate can be found in President Obama’s Executive Order 13502 which encouraged, but did not require, government agencies to use PLA’s in large-scale federal construction projects where the total cost to the government is $25 million or more. Executive Order 13502 was implemented through a final rule issued on April 13, 2020.
Many years later, President Biden picked up the mantle and issued Executive Order 14063 mandating the use of PLAs on direct federal construction projects valued by the government at $35 million or more. Executive Order 14063 was implemented through a final rule issued on December 22, 2023 (the “Final Rule”).
As of January 22, 2024, PLAs are required on direct federal construction projects of $35 million or more, with limited exceptions.
Industry Reaction
Since its inception, the PLA mandate has been met with strong reactions on all sides. The Association of Union Constructors, which represents 1,800 contractors, stated that requiring the use of PLAs will “streamline[] the negotiation process and give[] employers access to a highly skilled pool of craftworkers.” However, industry leaders, such as the Associated General Contractors of America (“AGC”) and the Associated Builders and Contractors (“ABC”), have expressed opposition to the new measure, stating concerns that the PLA mandate will worsen the current nationwide labor shortage and will restrain competition. Both the AGC and the ABC have lodged legal challenges to the new PLA mandate.
PLA Mandate Requirements
What is Required?
Every federal prime contractor and subcontractor are required to engage in negotiation and agree to a PLA for any direct federal construction stand-alone or IDIQ contract valued by the government at $35 million or more.
What is a PLA?
A project labor agreement is a pre-hire collective bargaining agreement with one or more labor organizations that establishes the terms and conditions of employment for a specific construction project.
The PLA must:
- bind all contractors and subcontractors on the construction project through the inclusion of appropriate specifications in all relevant solicitation provisions and contract documents;
- allow all contractors and subcontractors on the construction project to compete for contracts and subcontracts without regard to whether they are otherwise parties to collective bargaining agreements;
- contain guarantees against strikes, lockouts, and similar job disruptions;
- set forth effective, prompt, and mutually binding procedures for resolving labor disputes arising during the term of the project labor agreement; and
- provide other mechanisms for labor-management cooperation on matters of mutual interest and concern, including productivity, quality of work, safety, and health.
When Does the New PLA Mandate Take Effect?
The PLA mandate applies to new solicitations that are issued on or after January 22, 2024.
Who is Required to Comply?
Direct federal contractors and subcontractors, including all subcontracts with subcontractors, i.e. contractors with prime contracts or subcontracts with the federal government, must comply with the new PLA mandate.
Additionally, the Final Rule requires all subcontractors to become a party to the PLA negotiated by the prime contractor. Of note, federal agencies are not signatories to the PLA.
Are There Exceptions?
The PLA mandate does not apply to:
- federally assisted projects;
- projects located outside of the 50 United States.
Additionally, the Final Rule establishes a new procedure under which a contracting officer may request an exception to the PLA requirement from a Senior Procurement Executive. Of note, this waiver must be issued prior to the solicitation for the project.
How is the $35 Million Threshold Determined?
The $35 million threshold is determined by the government’s estimate of construction costs at the time of solicitation.
If the government’s estimate of constructions costs is less than $35 million at the time of solicitation and responsive bids are in excess of $35 million, a PLA will not be required. If the government’s estimate of constructions costs is $35 million or more at the time of solicitation and responsive bids are less than $35 million, a PLA will be required.
How Many PLAs Should There Be Per Project?
According to the Final Rule, all entities required to enter into a PLA for a project should enter into a single PLA per project.
When Should the PLA be Submitted?
The final rule permits the submittal of PLAs with an offer, prior to award, or after award. Contracting officers have the discretion to select the most appropriate option for the particular procurement. Pre-award, if a contractor cannot submit a satisfactory PLA, that contractor will not be awarded the job. If the contracting officer requires the PLA submittal after award and the awardee is unable to provide a satisfactory PLA, the contractor will be terminated.
How Do PLAs interact with Davis Bacon Act Requirements?
All federal construction projects exceeding $2,000, as well as almost all federally assisted construction projects, require government-determined prevailing wage and benefits to be paid on an hourly basis to construction workers performing work on jobsites covered by the 1931 Davis-Bacon Act and related regulations. Davis-Bacon rates are required with or without a PLA. Of note, PLAs can stipulate that construction workers must be paid the Davis-Bacon rate or a rate consistent with current union collective bargaining agreements for each trade that cannot be less than the Davis-Bacon rate.
Find Out More
Smith Currie Oles’ Federal Government Contracting and Bid Protest team are ready and available to assist you with questions regarding the new PLA mandate or any other federal government contracting legal needs you may have.
Stay up to date on the PLA mandate and other federal government contracting legal issues by subscribing to Smith Currie Oles’ Legal Newsletter on our homepage.
Resources
Final Rule Implementing E.O. 14063
The Department of Labor: Project Labor Agreement Resource Guide
The author acknowledges and appreciates the significant contributions of Smith, Currie Oles legal intern Cortland Walton, in developing this article.
Smith Currie Oles provides comprehensive legal services to all parts of the construction industry across the nation. Smith Currie lawyers have decades of demonstrated success representing construction and federal government contracting clients “From the Ground Up,” including procurement matters, contract formation and negotiation, project administration, claims prosecution and, when necessary, in litigation and other forms of dispute resolution.
The views expressed in this article are not necessarily those of ConsensusDocs. Readers should not take or refrain from taking any action based on any information without first seeking legal advice.