On February 4, 2022, President Biden released Executive Order 14063 (“EO”) requiring the use of project labor contracts for major federal construction projects. The EA requires that a contractor or subcontractor offering to work on a federal construction contract valued over $35,000,000 negotiate or enter into a “project work agreement” (“PLA”) with one or more “appropriate labor organizations” in the offeror’s offer. Sections 2(c) and 3 of the EO.
Once the regulations are released, the EO will revoke Executive Order 13502 issued in 2009, which authorized (but did not require) the use of PLAs for federal construction projects costing $25,000,000 or more. EO Section 10. The use of PLAs under the 2009 Executive Order was quite rare, making EO 2022 a significant pro-union change in how major federal construction projects will be proposed and staffed by contractors and subcontractors.
In EO, a PLA is defined as a pre-employment collective agreement with one or more labor organizations that establishes the terms and conditions of employment for a proposed project. EO applies to federal contracts for domestic “large-scale construction projects” with an estimated total construction cost of $35,000,000 or more. EO Section 2(c).
The EA requires that each PLA: (a) binds all contractors and subcontractors through the inclusion of appropriate specifications; (b) permit all contractors and subcontractors to compete for contracts and subcontracts whether or not they are otherwise party to collective bargaining agreements; (c) contain safeguards against strikes, lockouts and similar labor disruptions; d) establish effective, prompt and mutually binding procedures for resolving labor disputes arising during the term of the Project Labor Agreement; e) provide other mechanisms for labour-management cooperation on matters of mutual interest and concern; and (f) fully comply with all rules and regulations. EO Section 4.
The EO includes exceptions. A federal agency may grant an exception to the PLA requirement if it finds that requiring a PLA: (a) would not serve the interests of the federal government in achieving economy and efficiency in federal procurement (the OE identifies several factors relevant to this exception, including: “projects of short duration”, projects requiring “specialist construction work” available from a limited number of companies and “of unusual and compelling urgency”), ( (b) substantially reduce the number of potential bidders in order to prevent full and open competition; and (c) be inconsistent with other rules and regulations. EO Section 5. Exceptions must be documented no later than the solicitation date with a written explanation. EO Section 5.
This OS is effective immediately and applies to all contract solicitations issued after June 4, 2022 (or 120 days after the date of this OS, provided the FAR Board timely issues implementing regulations) . EO Sections 8, 12. Agencies are “strongly encouraged” to include the PLA requirement for federal construction contracts issued before June 4, 2022. EO Section 12. The EO appears to give agencies discretion to include PLA requirements in least-cost construction projects and in projects receiving any form of federal assistance” including loans, loan guarantees, revolving funds, tax credits, tax credit bonds, and cooperation agreements”. Section 7 of the EO.
For federal construction projects in North Carolina, agencies may seek to avoid the PLA requirement by applying one or more of the Section 5 exceptions, particularly if the relatively small number of labor organizations in the Southeast “reduces the number of potential bidders” available to bid. Along the same lines, and somewhat unexpectedly, there is no express exception to the PLA requirement if the price of the project were to increase due to OE. The EO requires agencies to publish their use of PLAs and describe when exceptions are granted. EO Section 6.
It is unclear how cumbersome the PLA exception process will be until regulations are released; contractors and affected industry groups should consider submitting comments on proposed regulations when they are released. President Biden has described himself as a “union president” during Remarks made when he signed the EO, and he said the EO was designed to “ensure that federal construction projects are staffed with well-paying union jobs.” As a result, exceptions to the PLA requirement can be narrowed down narrowly. EO compliance will be key to success for federal contractors bidding on any applicable federal construction contract, and bidders will need to take additional steps to ensure compliance with these new requirements.