On Feb. 4, President Biden issued Executive Order 14063 mandating the use of Project Labor Agreements (or PLAs) for certain federal construction projects in excess of $35 million.
EO 14063 will not be effective until after the Federal Acquisition Regulatory Council (FAR Council) issues final regulations implementing EO 14063. The FAR Council is directed to issue proposed regulations, which will then be subject to a notice and comment period, in the next 120 days. In the interim, EO 14063 provides that federal agencies are “strongly encouraged” to use PLAs on federal construction projects.
EO 14063 is welcome news for signatory contractors, particularly after passage of the 2020 Infrastructure Investment and Jobs Act, Pub. Law 117-58 (“2020 Bipartisan Infrastructure Law”), which allocated billions of dollars for infrastructure-related construction projects.
What is a PLA?
A PLA 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. In addition to addressing employment conditions (such as wages, benefits, and safety), the PLA also forbids work stoppages (such as strikes and lockouts) during the project.
In terms of their practical effect, PLAs raise the wage and benefit standards that contractors (and subcontractors) must pay workers by pegging the wages and benefits to local CBAs. PLAs promote peace by banning work stoppages and facilitating timely completion of projects. PLAs also increase training opportunities for workers because the local CBAs typically include payments to training funds.
Currently, PLAs Are “Voluntary” on Federal Construction Projects
In February 2009, President Obama issued Executive Order 13502, which encouraged, but did not require, federal agencies to use PLAs when awarding construction contracts of at least $25 million. Indeed, President Obama’s Executive Order expressly stated that “[t]his order does not require an executive agency to use a [PLA] on any construction project…”
President Biden’s Order Mandates PLAs on Certain Federal Construction Projects
EO 14063 provides that, subject to limited exemptions, federal agencies awarding any contract in connection with a “large-scale construction project . . . shall require every contractor or subcontractor engaged in construction on the project to agree, for that project, to negotiate or become a party to a project labor agreement with one or more appropriate labor organizations.”
EO 14063 defines “large-scale construction project” to mean “a Federal construction project within the United States for which the total estimated cost of the construction contract to the Federal Government is $35 million or more.” In this EO, “Construction” is defined to mean “construction, reconstruction, rehabilitation, modernization, alteration, conversion, extension, repair, or improvement of buildings, structures, highways, or other real property.”
Construction projects falling below the $35 million threshold are not subject to the PLA requirement. In addition, EO 14063 provides that the PLA requirement does not apply to “projects receiving any form of Federal financial assistance (including loans, loan guarantees, revolving funds, tax credits, tax credit bonds and cooperative agreements).”
For projects covered by EO 14063, the required PLA must include the following elements:
- 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.”
- The PLA must “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.”
- The PLA must “contain guarantees against strikes, lockouts, and similar job disruptions.”
- The PLA must “set forth effective, prompt, and mutually binding procedures for resolving labor disputes arising during the term of the project labor agreement.”
- The PLA must “provide other mechanisms for labor-management cooperation on matters of mutual interest and concern, including productivity, quality of work, safety, and health.
- The PLA must “fully conform to all statutes, regulations, Executive Orders, and Presidential Memoranda.”
Exceptions to PLA Mandate
Even if the construction project is covered, EO 14063 provides three potential exceptions to the PLA mandate:
- Mandating a PLA on a covered project “would not advance the Federal Government’s interests in achieving economy and efficiency in Federal procurement.”
EO 14063 will be effective after the FAR Council issues final regulations implementing EO 14063. At that time, it will also repeal and replace President Obama’s 2009 “voluntary PLA” Executive Order.
The FAR Council is directed to issue proposed regulations within 120 days (i.e., June 2022). Then, the proposed regulations will be subject to a public notice and comment period before final regulations can be issued. In the interim, though, EO 14063 provides that federal agencies are “strongly encouraged” to comply with EO 14063.
EO 14063 will exponentially increase the number of PLAs on federal construction projects. Union contractors (and their employees) stand to benefit. PLAs will prevent low-wage, non-union competition from undercutting union contractors on large federal construction projects. As a result, in addition to more construction work being available, union contractors will be more competitive in their bids for these projects.
As we await implementing regulations from the FAR Council, we anticipate that EO 14063 will be subject to legal challenges from non-union contractors. Thus, we will continue to monitor this situation as it develops.