In the latest Weekly Wright Report:
Federal Government Gives A Big Christmas Gift to Labor Unions By Mandating PLA’s on Certain Government Projects (A lump of coal to non-union shops)
On December 22, 2023, the Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) issued a final rule amending the Federal Acquisition Regulation (FAR) to implement Executive Order 14063, “Use of Project Labor Agreements for Federal Construction Projects,” which was issued February 4, 2022, pertaining to project labor agreements in federal construction projects. Executive Order 14063, and now the new rule, mandates that federal government agencies require the use of project labor agreements (PLAs) for large-scale federal construction projects, where the total estimated cost to the government is $35 million or more, unless an exception applies. Agencies also have the discretion to require PLAs for federal construction projects that do not meet the $35 million threshold. The new rule also directs the Office of Management and Budget (OMB) to issue implementation guidance to agencies on exceptions and reporting.
A PLA is defined as 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 and is an agreement described in 29 U.S.C. 158(f). While the new rule does not require that a contractor enter into a PLA with a specific labor organization, it does require a PLA for the project and all parties, including all subcontractors must become a party to the PLA negotiated by the prime contractor.
According to the data collected by OMB, between the years of 2009 and 2021, there was a total of approximately 2,000 eligible contracts (projects over $35 million) and the requirement for a PLA was only used 12 times. Based on the data, during that time, on average there are approximately 167 eligible awards annually and approximately one award that includes the PLA requirement. Additional data from fiscal year 2019 through fiscal year 2021, shows that the average number of construction awards, including orders against IDIQ contracts valued at $35 million or more, were approximately 119 annually. Thus, the new rule will have a significant impact.
The Associated Builders and Contractors has opposed the new rule noting that “government-mandated project labor agreements discourage quality contractors and the more than 88.3% of U.S. construction workers who choose to not join a union from bidding and working on projects in their own communities.” Similarly, the Associated General Contractors has opposed the new rule stating “AGC strongly believes that the choice of whether to adopt a collective bargaining agreement should be left to the contractor-employers and their employees, and that such a choice should not be imposed as a condition to competing for, or performing on, a publicly funded project. Government mandates and preferences for PLAs can restrain competition, drive up costs, cause delays, lead to jobsite disputes, and disrupt local collective bargaining.” Numerous commenters on the rule echoed the ABC and AGC and raised concerns that the policy shift reflected from discretionary use of PLAs to a mandate, will have a negative impact on agencies’ ability to use competition to achieve best value for the taxpayer. Even if a solicitation is open to all contractors, a Government mandate for use of a PLA will limit the number of competitors able or willing to compete on a project, especially with respect to non-unionized contractors and small businesses. It was also noted that reduced participation would increase costs to the government and, ultimately, the taxpayers.
The government notes that the new rule provides agencies with the authority to grant an exception if the requirement would substantially reduce the number of potential bidders so as to frustrate full and open competition. Agencies may consider criteria in FAR 22.504(d) to determine if the use of a PLA is appropriate for the construction project. In determining whether fair and reasonable pricing may be achieved, FAR 36.104(c)(2) directs contracting officers to undertake a current and proactive examination of the market conditions in the project area to determine national, regional, and local entity interest in participating on a project that requires a PLA, and to understand the availability of unions, and unionized and non-unionized contractors. Because the new rule has not yet become effective, it remains to be seen how often an exception will be invoked.
This new rule becomes effective January 22, 2024. Contractors and subcontractors need to prepare for the impact of the new rule and the requirements of PLA’s and the changes to everything from wage rates and work rules to benefits and reporting requirements. If you have any questions regarding this matter, please do not hesitate to contact any member of the Wright, Constable & Skeen Employment & Labor Law or Government Contracts practice groups.