Type: Law Bulletins
Date: 02/22/2022

Biden Administration EO Brings Major Changes for Federal Construction Contractors

On Feb. 4, 2022, President Biden issued Executive Order 14063 — Use of Project Labor Agreements for Federal Construction Projects (EO), which mandates the use of Project Labor Agreements (PLA) on large-scale federal construction projects valued at $35 million or more. According to the Biden administration, the EO is intended to promote economy and efficiency in the administration and completion of federal construction projects. 

Labor organizations say the EO will streamline the negotiation process for contractors at all tiers, and give employers access to a pool of highly skilled workers. In contrast, construction industry associations say that, due to low union participation and severe labor shortages, the EO will limit competition on federal construction projects and inflate project costs for both employers and federal agencies. Regardless of its policy merits, this EO represents a significant change in federal construction procurement policy and deserves careful attention from federal construction contractors and subcontractors.

What is a PLA and to Whom Does the EO Apply?

The EO requires contractors to agree, for the project, to negotiate or become a party to a PLA with one or more appropriate labor organizations. A PLA is defined by the EO as “a pre-hire collective bargaining agreement with one or more labor organizations that establishes the terms and conditions of employment for a specific construction project and is an agreement described in 29 U.S.C. 158(f).” PLAs generally require contractors to comply with union rules regarding working conditions, and that employees hired for a project be referred through union hiring halls, or nonunion employees pay union dues when working on the project. The EO requires the PLA to be binding all contractors and subcontractors on a particular construction project, even if they are already parties to a collective bargaining agreement. The terms of the PLA supersedes any existing collective bargaining agreements. And, the EO requires that the PLA contain guarantees against strikes, lockouts, and similar job disruptions and that it include binding procedures for resolving any labor disputes which arise during the term of the PLA.

Importantly, the EO applies to all construction contractors and subcontractors, at any tier. “Construction” is defined as “construction, reconstruction, rehabilitation, modernization, alteration, conversion, extension, repair, or improvement of buildings, structures, highways, or other real property.” The EO does not appear to apply to federally funded state and local government projects, projects financed through grants or loans, or to projects funded by the recent infrastructure bill. Whether material suppliers or vendors will qualify as subcontractors and therefore be required to enter into a PLA is unknown. Hopefully, this and many other questions about this EO will be resolved during the rulemaking process later this year.

Are There Any Exceptions?

The EO permits federal agency senior officials to grant exceptions to the EO when:

  1. Requiring a PLA would not advance the federal government’s interests in achieving economy and efficiency;
  2. An inclusive market analysis indicates that requiring a PLA would substantially reduce the number of potential bidders so as to frustrate full and open competition; or,
  3. Requiring a PLA would otherwise be inconsistent with statutes, regulations, other EOs, or Presidential Memoranda.

While such flexibility is desirable from an industry and federal agency perspective, other parts of the EO suggest the Biden administration intends for agencies to avoid using this exception authority whenever possible. For instance, the EO requires agencies to publish data on the use of PLAs and to describe all granted exceptions on a centralized public website, on a quarterly basis.

When Does the EO Take Effect?

While the EO technically became effective as soon as it was issued, the Federal Acquisition Regulation (FAR) Council has until June 6, 2022 to propose implementing regulations. Once that occurs, there will be a public notice and comment period followed by the publication of a final rule implementing the EO, presumably by the end of this calendar year. 

Agencies will not be required to include PLA requirements in solicitations until after the effective date of the final regulation. However, federal construction contractors and subcontractors should carefully review any federal solicitations issued after Feb. 4, 2022 because the EO “strongly” encourages agencies to comply with the order immediately. As a practical matter, doing so will be difficult for federal agencies until more details are addressed through rulemaking.

This is a complex and fast-changing development in federal procurement policy that has the potential to impact a wide range of employment and compliance matters relevant to federal construction contractors. If you have any questions about this EO or the resulting implementing regulations, please contact a member of the Taft Government Contracts team.

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