The public comment period on the proposed federal rule requiring project labor agreements (PLAs) on federal construction projects valued at or above $35 million has officially opened.
Publication last week by the Federal Acquisition Regulation Council – the Department of Defense (DOD), the Government Services Administration (GSA), and the National Aeronautical and Space Administration (NASA) – of the Notice of Proposed Rulemaking that that would formally implement President Biden’s Executive Order 14063 relating to the PLA requirements has once again stirred controversy within the construction industry. A PLA is 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. They are often required on state or federally funded construction projects.
Critics of the proposed rule say PLAs decreases competition and discourages smaller non-union contractors from bidding on the potentially profitable federal projects. Also, they suggest that it drives up costs and can delay projects, rather than save money.
“The Biden administration continues to move forward with its steady drumbeat of burdensome, inflationary and anti-competitive policies that will needlessly raise costs on taxpayer-funded construction projects and steer contracts to unionized contractors and workers,” said Ben Brubeck, Associated Builders and Contractors vice president of regulatory, labor and state affairs. “The FAR Council’s proposed rule will hand over construction contracts to powerful special interests at the expense of hardworking taxpayers and the principles of free enterprise and fair and open competition in government contracting.”
Since the original executive order was issued, ABC and more than 1,200 members and a coalition of 19 organizations within the construction industry have opposed the order, arguing that “a fair and open bidding process for federal construction projects would guarantee the best value for hardworking taxpayers located in all geographies and regions across the United States.”
Members of Congress and 18 Republican governors have supported ABC’s stance against the PLA mandate, suggesting that it “will undermine taxpayer investment in billions of dollars of forthcoming public works projects financed by the Infrastructure Investments and Jobs Act of 2021 and additional bipartisan legislation passed by Congress, all of which was signed into law free from language requiring or encouraging the use of PLAs.”
However, as presented, the new rule would not affect state and local government projects, even those that receive federal funding. Specifically, it would not impact state and local government projects that are initiated under the Infrastructure Investment and Jobs Act.
Data shows that the government issues an average of 119 large-scale construction awards annually. It is estimated that 60 to 107 of those would require a PLA, with about a third requiring all offerers (general and subcontractors) to provide a PLA and two-thirds requiring only one. Combined, approximately 120 to 215 entities would be required to submit PLAs annually, according to federal data.
“ABC estimates this proposal, once finalized, could impact 120 federal contracts valued at $10 billion, which is roughly 40% of the value of federal construction put in place on an annual basis,” Brubeck said, adding that when mandated by governments, PLAs increase construction costs to taxpayers by 12% to 20%, reduce opportunities for qualified contractors and their skilled craft professionals and exacerbate the construction industry’s worker shortage of 650,000 workers.
He said ABC will continue to challenge the policies and urge stakeholders to submit comments to the proposed rule.
The document now has an open comment period that ends Oct. 18.
A survey conducted by the Associated General Contractors of America (AGC) conducted in response to the president’s executive order found that three-quarters of federal contractors will stop bidding on federal projects if the PLA rule is mandated.
According to AGC CEO Stephen Sandherr, 73% of surveyed firms reported they are currently bidding on federal construction projects valued at $35 million or more. In addition, he noted that the same percentage reported they would not bid on those projects if a PLA were required.
The AGC survey also found that 82% of firms reported the mandate will make it harder for general contractors to subcontract with small, disadvantaged businesses — such as women-owned, HUBZone, and service-disabled veteran-owned small businesses — because those firms typically are not accustomed or prepared to operate on a union basis.
Sandherr said nearly 40% of AGC’s survey respondents operate under a collective bargaining agreement. Of those, 83% said there are not enough union workers to guarantee completion of a project on time and on budget. Also, he said, 67% of surveyed construction firms that have worked on federal projects requiring PLAs said the agreement made it harder to find workers.
“AGC neither supports nor opposes contractors’ voluntary use of PLAs on federal projects but strongly opposes any government mandate or prohibition of contractors’ use of PLAs,” Sandherr said. “Such a choice should not be imposed as a condition to competing for, or performing on, a publicly funded project. The proposed rules will result in ‘build back fewer’: fewer firms, hiring fewer people to build fewer projects.”
Light the way
Conversely, the National Electrical Contractors Association (NECA) has long championed the use of PLAs and supports the Biden administration’s swiftly moving forward to craft the proposed rule.
“President Franklin Roosevelt instituted PLAs for his New Deal infrastructure plan,” said Marco Giamberardino, NECA vice president of government and public affairs. “Some of the resulting projects included the Shasta Dam, Hoover Dam, Kitsap Naval Base, Beaver Valley Nuclear Power Plant, LAX Airport, and countless educational institutions.”
In addition, he noted that private businesses such as Disney, the NFL, Walmart and Toyota have all used PLAs on their signature projects.
“NECA is excited to translate these benchmarks to perform on a federal level for government buildings, construction, installation, maintenance and more,” Giamberardino said. “The order provides a pathway for increased job opportunities that NECA contractors of all sizes are willing and able to perform at the highest level.”
How does it work?
The existing rule on PLAs dates to President Obama’s executive order that encouraged the use of PLAs for federal projects valued at $25 million or more.
According to data collected by the Office of Business and Management, between 2009 and 2021 approximately 2,000 federal construction projects were eligible for PLA involvement but only 12 included PLAs. Based on those numbers, there was an average of 167 eligible projects per year with only an average of one that included a PLA.
Among the changes under the proposed role is the definition of “construction.” As published “construction” will include “construction, reconstruction, rehabilitation, modernization, alteration, conversion, extension, repair, or improvement of buildings, structures, highways or other real property.”
As proposed, a PLA will no longer be discretionary for large-scale federal construction projects over $35 million. Federal agencies will be required to use a PLA for large-scale federal construction projects unless an exception applies.
The rule states that the exceptions are:
- Requiring a PLA would substantially reduce the number of potential bidders
- Requiring a PLA would be inconsistent with federal law
- Requiring a PLA would result in inefficiency in federal procurement.
Agencies may continue to require PLAs for projects that do not meet the $35 million threshold at their discretion. As a result, smaller entities may be required to negotiate and become a party to a PLA, as a prime or subcontractor.
The intent of Biden’s executive order, originally issued in February, is to make it easier to manage multi-million-dollar projects, including coordinating multiple contractors and subcontractors and their employees and preventing disputes between subs.
Federal officials say the PLAs will help in raising the quality standards by weeding out contractors that pay low wages and have not properly trained their workers. To be eligible for the project, such contractors would have to raise their standards. In addition, per the government officials, the agreements create more certainty for workers as to what they will be paid and their benefits and would keep projects on schedule and save money.