A New Definition of Construction and More! Changes to Federal Large-Scale Construction Projects

Contractors engaged in federal construction projects are accustomed to navigating the Federal Acquisition Regulation (FAR), particularly Subpart 22.5, which governs the utilization of Project Labor Agreements. Notably, the previously permissive language within Subpart 22.5 has undergone revision, now mandating the inclusion of project labor agreements as a prerequisite for specific federal construction contracts.

On August 19, 2022 the Department of Defense (“DoD”), General Services Administration (“GSA”), and National Aeronautics and Space Administration (“NASA”) published a proposed rule to amend the FAR to implement President Biden’s Executive Order (E.O.) 14063. The public comment period on the proposed rule closed on October 18, 2022. On December 22, 2023, DoD, GSA, and NASA issued their final rule amending the FAR and implementing Executive Order 14063 as it pertains to project labor agreements in federal construction projects. The new rule takes effect January 22, 2024, so what do you need to know?

First and foremost, the new rule alters the definitions outlined in 48 C.F.R. 22.502 to enhance clarity, including a more expansive definition of "construction" which encompasses "reconstruction" and "modernization." At first glance this appears to be a distinction without a difference. However, this undoubtedly arose, as these changes often due, from disputes over the scope of Subpart 22.5. Similarly, the definition of large-scale construction projects has been refined to expressly pertain to federal projects within the United States. Therefore, contractors performing construction work outside of the US will not be subject to the labor agreement requirements. The definition also increases the monetary threshold of a large-scale project from $25 million or more, to $35 million or more.

While agencies were previously encouraged to consider project labor agreements for large-scale construction projects, they are now required to mandate them.. Agencies are also now encouraged to consider project labor agreements on projects with costs below $35 million, if appropriate.

Contractors are not required to unionize. Instead, contractors and subcontractors will enter pre-hire collective bargaining agreements with one or more labor organizations to establish the terms and conditions for employment on the federal project. Such terms and conditions must include a guarantee against strikes, lockouts, and similar job disruptions; provide alternative dispute resolution procedures for labor disputes; and establish mechanisms for labor-management including productivity, quality of work, and health and safety.

The overarching objectives of this rule are to facilitate contractors in predicting labor costs during the bidding process, ensure a consistent labor supply, and mitigate labor disputes that could impede project progress.