On Feb. 4, 2022, President Biden issued Executive Order 140631 requiring the use of “project labor agreements” (PLAs) on large-scale federal construction projects, effective immediately.
Executive Order Terms
Pursuant to the Order, federal agencies, when awarding any contract in connection with a “large-scale” federal construction project or obligating funds to such project, must require that each contractor or subcontractor engaged in construction on the project agree to negotiate or become a party to a PLA with one or more labor organizations for that project.
A PLA is a pre-hire collective bargaining agreement with one or more labor organizations (i.e., unions) that establishes the terms and conditions of employment for a specific construction project2.
Large-scale construction projects are defined as those where the estimated cost of the construction to the federal government is $35 million or more. This threshold is subject to future adjustment for inflation.3
According to the Order, the PLA for the project must:4
- bind all contractors and subcontractors through the specifications in all relevant solicitation provisions and contract documents;
- allow all contractors and subcontractors 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;
- provide other mechanisms for labor-management cooperation on matters of mutual interest and concern, including productivity, quality of work, safety, and health; and
- fully conform to all statutes, regulations, Executive Orders, and Presidential Memoranda.
There are limited exceptions5 to the PLA requirement where an agency finds that the requirements would:
- not advance the federal government’s interests in achieving economy and efficiency, based upon the following factors:
- project is of short duration and lacks operational complexity;
- project will involve only one craft or trade;
- project will involve specialized construction work that is available from only a limited number of contractors or subcontractors.
- agency’s need for the project implicates other similar factors.
- substantially reduce the number of potential bidders and frustrate full and open competition, based upon an inclusive market analysis; or
- be inconsistent with federal law based upon short duration or complexity, compelling urgency, or potential reduction in potential bidders.
The Order applies only to federal construction projects, and does not apply to projects financed through grant dollars to nonfederal entities.6
It will be implemented through the Federal Acquisition Regulations (FAR), with a timeline of 120 days for the FAR Council to propose such regulations and proceed through the final rulemaking process.7
Federal agencies must, on a centralized public website, publish data showing the use of PLAs on large-scale construction projects as well as descriptions of any exceptions granted.8 Agencies must also report quarterly this information to the Office of Management and Budget (OMB).
President Biden’s Order follows President Barack Obama’s 2009 Executive Order 13502, which revoked President George W. Bush’s 2001 Executive Orders 13208 and 13808, both of which prohibited the required use of PLAs on federal construction projects.
President Obama’s Order did not require the use of PLAs, but only permitted federal agencies to “on a project-by-project basis, require the use of a project labor agreement by a contractor” for projects over $25 million.
The Biden Administration explained the policy consideration behind the Order requiring PLAs:
Large-scale construction projects pose special challenges to efficient and timely procurement by the federal government. Construction employers typically do not have a permanent workforce, which makes it difficult to predict labor costs when bidding on contracts and to ensure a steady supply of labor on contracts being performed. Challenges also arise because construction projects typically involve multiple employers at a single location, and a labor dispute involving one employer can delay the entire project. A lack of coordination among various employers, or uncertainty about the terms and conditions of employment of various groups of workers, can create friction and disputes in the absence of an agreed-upon resolution mechanism. These problems threaten the efficient and timely completion of construction projects undertaken by federal contractors. On large-scale projects, which are generally more complex and of longer duration, these problems tend to be more pronounced.9
The Associated Builders and Contractors (ABC), along with other construction and business associations, issued strong criticism of the Order, saying that “it will exacerbate the construction industry’s skilled workforce shortage, needlessly increase construction costs and reduce opportunities for local contractors and skilled trades people” and require companies to agree to recognize unions as representatives for their employees and follow union requirements. This ultimately discourages competition and increases costs of construction by 12-20%.10
The industry groups also argues that “PLAs steer contracts to unionized contractors and workers at the expense of the best-quality nonunion contractors and workers who want to compete fairly at a price best for taxpayers.”
A legal challenge to the Order is likely, given the stated opposition to the PLA mandate, and particularly in light of the 2018 United States Supreme Court decision in Janus v. Am. Fed. of State, County and Municipal Employees, Council 31, et al.,11 which held that the First Amendment prohibits nonunion public employees from being forced to pay union dues, without their consent, for costs of collective bargaining on their behalf.
This article was originally published on the State Bar of Wisconsin’s Construction and Public Contract Law Section Blog. Visit the State Bar sections or the Construction and Public Contract Law Section webpages to learn more about the benefits of section membership.
2 Id. § 2(e).
3 Id. § 2(c).
4 Id. § 4.
5 Id. § 5.
6 Id. § 7.
7 Id. § 8.
8 Id. § 6.
9 Id. § 1(a).
10 “President Biden’s Pro-PLA Executive Order Will Increase Costs to Taxpayers and Exacerbate Skilled Labor Shortage, Says ABC,” Associated Builders and Contractors, Feb. 3, 2022.
11 138 S. Ct. 2448 (2018).