Big Government Projects, Big Labor Expectations

A final rule amending the Federal Acquisition Regulation, 48 C.F.R. 22.503, which governs “project labor agreements” on “large-scale construction projects,” is expected in the near future. The Rule will incorporate President Biden’s Executive Order 14063, signed on February 4, 2022. Under the Order, large-scale construction projects are defined as federal construction projects within the United States whose total estimated cost is $35 million or more, adjustable with inflation. Under the Order, a federal agency awarding contracts for large-scale construction projects is now required to ensure contractors or subcontractors engaged in the project agree to enter into a project labor agreement. 

Project labor agreements are a tool to help provide labor-management stability and ensure compliance with laws and regulations such as those governing safety and health, equal employment opportunity, and labor and employment standard. Contractors are not required to unionize. Instead, the project labor agreements are pre-hire collective bargaining agreements. Essentially, they are contracts between the contractor and one or more labor organizations that establish the terms and conditions for employment on a specific construction project.

Along with conforming to all federal statutes, regulations, and executive orders, the labor agreements must include the following requirements:

• bind all contractors and subcontractors through the relevant solicitations and contract documents;
• allow any contractor or subcontractor who is a party to a collective bargaining agreement to compete for contracts and subcontracts;
• provide guarantees against, strikes, lockout, and similar job disruptions;
• provide Alternative dispute resolution procedures to resolve labor disputes arising during the term of the project; and
• Provide mechanisms for labor-management on matters concerning mutual interest such as productivity, quality of work, safety, and health. 

The Executive Order provides limited exceptions to the use of project labor agreements and the Final Rule is expected to contain the same exceptions. Specifically, a senior agency official may grant exceptions to the project labor agreement requirement on specific contracts if:

• the project labor agreement would not advance the Federal Government’s interest in achieving economy and efficiency in federal procurements;
• based on market analysis, requiring a project labor agreement would substantially reduce the number of potential bidders so as to frustrate full and open competition; and/or
• Requiring the project labor agreement would be otherwise inconsistent with other federal statutes and regulations. 

President Biden’s Executive Order parallels President Obama’s 2009 Executive Order 13502. However, under the 2009 Executive Order, Agencies were merely encouraged, but not required, to use project labor agreements on large-scale construction projects.  

On August 19, 2022, The Department of Defense, General Services Administration, and National Aeronautics and Space Administration published the proposed rule to amend 48 C.F.R. 22.503 to reflect the new mandate. The public comment period ended on October 18, 2022, and the comments from the larger construction community on the proposed rule were generally critical of the project labor agreement mandate. Some organizations such as the International Brotherhood of Electrical Works and the National Electrical Contractors Association were supportive of the mandate.

Nevertheless, a Final Rule, in substantially the same form as the proposed rule, is expected soon. Contractors engaged in large-scale Federal Government construction projects should prepare now for a final rule mandating project labor agreements to stay competitive when a Final Rule is implemented.