On February 4, 2022, President Biden issued Executive Order (EO) 14063 requiring the use of project labor agreements (PLAs) for large federal construction projects. The EO requires contractors or subcontractors proposing to work on a “large-scale” federal construction contract valued at greater than $35 million to negotiate or enter into a PLA with one or more “appropriate labor organizations” as part of the offeror’s bid.
Although effective immediately, the EO will apply to all solicitations for contracts issued on or after the effective date of final regulations issued by the Federal Acquisition Regulatory (FAR) Council. The FAR Council has been given 120 days to propose regulations; following consideration of public comments, it will then “promptly” issue a final rule. Ostensibly, this could affect all large federal construction contract solicitations issued after June 4, 2022.
Once the final regulations are issued, the EO will revoke Executive Order 13502 issued in 2009, which permitted (but did not require) the use of PLAs for federal construction projects costing $25,000,000 or more. The voluntary use of PLAs under the 2009 Executive Order was quite rare; the 2022 EO marks an important pro-union change in how large federal construction projects will be proposed and staffed by contractors and subcontractors.
In the EO, 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 proposed project. Although large-scale construction projects are currently defined as those valued at $35 million or more, the FAR Council (in consultation with the Council of Economic Advisors) may adjust this threshold based on inflation.
According to the EO, each PLA must bind all contractors and subcontractors; allow such parties to compete for contracts without regard to whether they are party to other collective bargaining agreements; include guarantees against strikes, lockouts and similar job disruptions; establish procedures for resolving labor disputes during the term of the PLA; provide other mechanisms for labor-management cooperation on matters of mutual interest; and conform with all laws, regulations, EOs and presidential memoranda.
The EO includes a number of exceptions, including those for short-duration or specialized projects; where the requirement would substantially reduce the number of bidders to the extent that it frustrates full and open competition; or where the PLA would be inconsistent with other rules and regulations. Agencies may also have discretion to require PLAs in lower-cost projects or projects that receive certain federal assistance.
Until proposed regulations are issued, it is unclear how burdensome the EO will be to contractors and subcontractors. Affected businesses and industry groups should consider submitting comments on the proposed regulations when they are published.