Last week, President Biden issued Executive Order 14063 (“EO 14063”), requiring Project Labor Agreements (“PLA”) for domestic federal construction projects with estimated construction costs of $35 million or more.  What are PLAs? How does this from President Obama’s prior executive order? And, are there exceptions to this requirement?

A PLA is a form of collective bargaining that imposes wage and benefit requirements on construction firms competing for public contracts. The specific wages, benefits, and terms and conditions are imposed by local unions’ private collective bargaining agreements. EO 14063 seeks to increase pay and benefits available to employees working on large federal projects, a long-term goal of Democratic lawmakers in Washington.

President Obama issued a similar order, Executive Order 13502, in 2009. EO 14063 is very similar to its predecessor with a few key distinctions. President Obama’s order was permissive, permitting PLAs on federal construction projects of $25 million or more. In contrast, EO 14063 requires PLAs on federal construction projects of $35 million or more.  EO 14063 states:

Agencies shall require every contractor or subcontractor engaged in construction on the project to agree, for that project, to negotiate or become a party to a project labor agreement with one or more appropriate labor organizations.

EO 14063 also contains an additional public disclosure requirement, requiring agencies to publish data showing the use of PLAs and any descriptions of granted exceptions.

There are exceptions to the PLA requirement, which a “senior official within an agency” may grant after providing a written explanation of why one of the three enumerated exceptions listed in the Executive Order warrant such an exception. Those three exceptions are as follows.

1.    When a PLA “would not advance the Federal Government’s interests in achieving economy and efficiency in Federal procurement.” That determination must be based on:

– whether the project is “of short duration” and “lacks operational complexity;”
– whether the project “will involve only one craft or trade;”
– whether the project “will involve specialized construction work that is available from only a limited number of contractors or subcontractors;”
– whether requiring a PLA “would be impracticable” in light of the project’s “unusual and compelling urgency;” or
– whether the project “implicates other similar factors deemed appropriate in regulations or guidance” issued in accordance with the EO.

2.    When a PLA would “substantially reduce the number of potential bidders so as to frustrate full and open competition,” or

3.    When a PLA “would otherwise be inconsistent with statutes, regulations, Executive Orders, or Presidential Memoranda.”

Pursuant to EO 14063, the Federal Acquisition Regulatory Council (the “FAR”) will propose regulations by June 4, 2022 to implement the PLA requirement. However, EO 14063 “encourages” agencies to comply with the PLA requirement even before the FAR issues its regulations.

Undoubtedly, EO 14063 will be met with many legal challenges. As observed with the legal challenges to the federal vaccine mandates, the Supreme Court has cast a critical eye on whether the federal agencies vested with writing regulations and enforcing them have the statutory power to do so. With the outcome of the anticipated legal challenges not yet certain, contractors bidding on large federal contracts would be well advised to review EO 14063, not just to determine whether any of the three exceptions apply, but also to determine whether the pricing being developed takes into account the higher wage and benefit structure that PLAs will impose.

Construction projects are complex, particularly, large-scale federal construction projects. With EO 14063 and other recently enacted federal regulations, managing your risk requires first understanding them.  The attorneys in our Dallas and Austin offices are available to answer any questions you may have and help you navigate this constantly evolving area of your business.  You may contact us at info@gstexlaw.com.

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