President Biden recently issued an Executive Order (E.O.) on Use of Project Labor Agreements for Federal Constructions Projects that will require contractors on large-scale federal construction projects to enter into Project Labor Agreements (PLAs), a pre-contract commitment by employers to enter into a collective bargaining agreement with at least one labor organization. The effort furthers several broader goals of the administration — improving the efficiency of federal procurement, rebuilding the nation's infrastructure, and promoting the use of organized labor — and could have significant impacts on construction contractors bidding on large-scale federal projects.

Specifics of the Order

The E.O.'s PLA mandate applies to all "large-scale construction projects," defined as a domestic federal construction project "for which the total estimated cost of the construction contract to the Federal Government is $35 million." Construction projects financed through federal grants to non-federal entities are excluded from coverage, but agencies maintain the discretion to require PLAs in circumstances not covered by the E.O., including construction projects that fall under the $35 million threshold or "projects receiving any form of Federal financial assistance (including loans, loan guarantees, revolving funds, tax credits, tax credit bonds, and cooperative agreements)."

Once implemented, agencies will require every contractor and subcontractor engaged in construction on a large-scale project to negotiate or become a party to a PLA with one or more labor organization, as defined in 29 U.S.C. 152(5). PLAs, or umbrella collective bargaining agreements, define employment terms and conditions such as work conditions, wages, and hours for all workers — union and non-union — on a construction project. Every PLA entered into pursuant to the Order will have certain minimum characteristics, such as to (1) bind all contractors and subcontractors on the construction project; (2) contain guarantees against strikes, lockouts, and similar job disruptions; (3) set forth prompt, effective, and binding labor dispute processes; and (4) provide other labor management mechanisms to ensure cooperation on issues such as quality of work, health, and safety. 

While rather encompassing, the E.O. does provide senior agency officials with the authority to grant exemptions from the PLA mandate. Circumstances justifying an exemption include the following: 

• Requiring a PLA would not "advance the Federal Government's interests in achieving economy and efficiency," based on the following factors: 
  1. The project is short in duration and lacks operational complexity
  2. The project will only involve one craft or trade
  3. The project will involve specialized work that is only available from a limited number of contractors
  4. There is a compelling urgency for the project that would make a PLA impracticable
  5. There are other similar factors deemed appropriate in regulations or guidance issued by the FAR Council pursuant to the E.O.
• "Based on an inclusive market analysis, requiring a [PLA] on the project would substantially reduce the number of potential bidders so as to frustrate full and open competition."
• Requiring a PLA would otherwise "be inconsistent with statutes, regulations, Executive Orders, or Presidential Memoranda."  

Directives for Implementation

The E.O. directs the Federal Acquisition Regulation (FAR) Council to propose regulations to implement the order by June 4, 2022. The E.O. will apply to all solicitations and contracts issued on or after the effective date of the final regulations issued by the Council. In the meantime, agencies are strongly encouraged to comply with the E.O.'s PLA mandate. The Department of Defense (DoD), the Department of Labor (DOL), and the Office of Management Budget (OMB) are directed to develop a training strategy by May 4, 2022 for the 40,000 contracting officers (COs) in the federal government to effectively implement the E.O.'s policy. 

Goals of the E.O.

According to the E.O., by providing stability and structure, the use of PLAs can avoid disputes, prevent work stoppages such as strikes and lockouts, and secure commitments from all stakeholders. The E.O. aims to "improve timeliness, lower costs, and increase quality of federal construction projects." The administration's fact sheet further explains that the E.O. "will help alleviate management and coordination challenges that can stymie progress on major construction projects" and ultimately waste time and taxpayer dollars. According to the administration's analysis, the E.O. is estimated to affect up to $262 billion in federal government construction and nearly 200,000 federal construction workers. Other enumerated benefits include:  

• Raise quality standards. The administration believes the E.O. will cause contractors to raise their standards to compete with other high-wage, high-quality federal contractors and that contractors with well-trained workers will be "more likely to bid for and win federal contracts."
• Reduce uncertainty. By standardizing work rules, compensation costs, and dispute settlement processes, the government and contractors will have more certainty in the contracting process.
• Increase training. The CO training directed by the E.O. will allow for a more knowledgeable contracting workforce and will lead to a more uniform and accessible experience for contractors interacting with federal agencies. 

Conclusion and Takeaways

The E.O. rescinds President Obama's E.O. on Use of Project Labor Agreements for Federal Construction Projects, which merely encouraged the use of PLAs. President Obama's E.O. was met with resistance and was subject to several lawsuits and state laws that limited its impact and it remains to be seen whether President Biden's E.O. will have more success. The FAR Council's proposed regulations on the Biden E.O. will be published in the next couple of months. Contractors, industry groups, trade associations, and others effected by the E.O. should consider how they will be impacted by the E.O. and submit comments on the proposed regulations when they are published. We will continue to monitor and report on the E.O. and its implementation. In the meantime, if you have any questions about the E.O. or how it will impact your company, please contact the Miller & Chevalier attorneys listed below: 

Alex L. Sarria, asarria@milchev.com, 202-626-5822

Connor W. Farrell, cfarrell@milchev.com, 202-626-5925

Elizabeth J. Cappiello*

*Former Miller & Chevalier attorney

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