By Alex Major of McCarter & English
Published February 11, 2022
With Spring Training just a few weeks away it looks like the Biden Administration is stepping up to the plate to ensure the plans in its $1 trillion Infrastructure Investment and Jobs Act can avoid strikes. On February 4, 2022, President Biden signed the Executive Order on the Use of Project Labor Agreements for Federal Construction Projects (the Executive Order), which requires the federal government, in an effort to avoid potential labor disputes and delays in any “large-scale construction contract” (a project valued at over $35 million), to use project labor agreements before awarding a contract. The Executive Order is effective immediately, and construction contractors should begin seeing it applied in future and maybe even pending solicitations or orders. How, exactly, the Executive Order will appear in immediate solicitations is unclear, but the FAR Council is tasked with implementing the Executive Order within 120 days before promptly issuing a final rule. Before that happens, let’s tap the mud off the cleats and make sure you’re ready to play ball.
Who’s on Deck?
For those new to the ballpark, a project labor agreement (PLA) is intended to set standards for wages and other conditions—such as hours, working conditions, dispute resolution methods, and banning work stoppages and strikes—through an arrangement with a labor organization prior to the start of a specific construction project. The White House intends the PLAs to “promote economy and efficiency in Federal procurement” and estimates that they will affect an estimated $262 billion in federal construction contracting for nearly 200,000 workers.
Prior to the award of any contracts or the obligation of any funds in excess of $35 million for “construction, reconstruction, rehabilitation, modernization, alteration, conversion, extension, repair, or improvement of buildings, structures, highways, or other real property,” the government is required to ensure the contractor and/or subcontractor on that project will “negotiate or become a party to a project labor agreement with one or more appropriate labor organizations.”
Notably, neither the Executive Order nor these PLAs expressly require construction companies tackling a “large scale construction contract” to unionize. Rather, the Executive Order simply requires that federal construction contractors/subcontractors agree to a limited collective bargaining agreement with a union or group of unions for the specific project in question that governs wages, hours and terms, and conditions of employment on that project. Under the Executive Order, these terms must include guarantees against strikes, lockouts, and similar work stoppages through the use of a mutually binding and prompt “dispute-resolution processes to resolve worksite disputes.” Further, the PLAs shall:
- 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;
- 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.
How About a Walk?
While the Executive Order directs the use of PLAs, it also recognizes that there will be instances where such agreements may not make sense and for which the contracting agency can seek a waiver. Most notably, such exceptions would be applied when the PLAs risk frustrating full and open competition, violate existing laws or regulations, or otherwise do not “advance the Federal Government’s interests in achieving economy and efficiency in Federal procurement.” Specific examples of these latter instances include projects identified as:
- Short in duration or lacking operational complexity;
- Only involving only one craft or trade;
- Involving specialized construction work that is available from only a limited number of contractors or subcontractors;
- Possessing such an unusual and compelling urgency that a PLA would be impracticable; or
- Noted in to-be-drafted regulations.
The application of these exceptions will undoubtedly be fleshed out in the Executive Order’s version of “spring training” that will be directed at agency contracting personnel and through agencies’ requisite quarterly agency reporting on (i) the use of PLAs on large-scale construction contracts and (ii) the use of exceptions granted.
Although the Executive Order is effective immediately, the FAR Council is granted 120 days, or until June 4, 2022, to propose implementing regulations. As has become standard in recent orders, however, “agencies are strongly encouraged” to comply with the strictures of the Executive Order in solicitations “issued between the date of this order and the effective date of the final regulations issued by the FAR Council.”
Moreover, the Executive Order is not intended to limit the use of PLAs in circumstances not covered by the order, such as in construction projects valued at less than $35 million or projects receiving any other “form of Federal financial assistance (including loans, loan guarantees, revolving funds, tax credits, tax credit bonds, and cooperative agreements).”
Out of the Park
Construction contractors and subcontractors unfamiliar with PLAs should take note to avoid errors or getting hit by a wild pitch. Whenever such rule changeups take place, there is a learning curve on both sides of the plate that needs to be addressed openly and vocally to ensure both teams understand what’s coming. Over the course of the next few months, contractors should be closely examining solicitations and modifications to determine whether they are directed to employ PLAs on newly awarded contracts or even on modifications. While the FAR Council is in the bullpen warming up, to the extent that modifications direct the use of PLAs, contractors and subcontractors should be ready to educate the contracting authority on the possible applicability of exceptions by highlighting the costs or futility associated with compliance. Ultimately, the PLAs are intended to “alleviate the management and coordination challenges that can stymie progress on major construction projects.” But, as with most efforts, it’s going to take time, practice, and perseverance if contractors want to make it through the race for this pennant.