On February 4, 2022, President Biden signed an Executive Order on the use of project labor agreements (PLAs) for federal construction projects. This is a move to support Biden’s statement that he will be the most pro-union president.
The basics of the order are that “large-scale construction contracts”, defined as contracts at or above $35 Million, will require PLAs to move forward. Early estimates expect this to affect $262 Billion in federal construction, having an impact on almost 200,000 workers. It is worth noting that the recently passed $1Trillion+ Infrastructure Investment and Jobs Act will be directly impacted by this new requirement.
To be clear, this order is not a requirement for contractors to unionize. The requirement is that a federal contractor’s employees comply with terms of a PLA, which always include:
- Guarantees against lockouts/strikes, etc.
- Procedures to resolve labor disputes.
- Mechanisms for labor management cooperation for things like productivity / quality / safety.
- Terms that conform to federal law.
Further, in the Executive Order, it specifies that if this requirement substantially reduces potential bidders or would result in inefficiencies, there are exceptions to be made. As of yet, there are no formal procedures for granting an exception.
While the impact will not be immediate, as implementation will take some coordination with various offices of the government, this will certainly have an impact on upcoming work.
For those wanting to compare with the prior conditions, under President Obama’s executive order in 2009, PLAs were encouraged, but not required, for federal contracts over $25 Million.
Associated Builders and Contractors (ABC), which represents non-union construction, released a statement in reaction on February 7th, with Ben Brubeck, ABC Vice President of regulator, labor and state affairs saying the Executive Order, “is of great concern, especially for Americans who expect the government to create and support policies ensuring fair and open competition on taxpayer-funded federal and federally assisted construction projects” and warned of the impact that it will have in reducing competition and driving up project costs by a range he quoted from 12% to 20%.
CEO of open-shop association Associated General Contractors of America (AGC), Stephen Sandherr reacted with skepticism with statements including, “Imposing project labor agreements also discriminates against the more than 85 percent of construction workers who choose not to belong to a union. That is because open shop firms that are subjected to a project labor agreement are required to pay both their employees’ benefits and those of the unions involved in the agreement. Since few firms can be competitive while paying two sets of benefits, the order effectively locks out most workers from participating in federal construction projects.”
The Association of Union Constructors (TAUC) has made it clear their group is supportive of the order. Their CEO, Daniel Hogan’s statement included, “TAUC is pleased the Biden Administration will utilize project labor agreements for federal construction projects over $35 million. PLAs are relied upon every day in the private sector because they deliver substantial safety and productivity advantages. Now, large federal infrastructure projects will be able to reap the same benefits. That's a win for everyone, especially taxpayers.”
The extent of the Executive Order’s impact on the construction industry will depend on several factors: whether there will be any trickle through to non-federal government work if federal funds are utilized for budgeting, how the exceptions are granted, how the government offices handle the change moving forward, etc. Our advice as your surety agent is to keep this change in mind for planning your future backlog and follow the updates as they progress closely. Be sure to communicate with your agent and surety to plan ahead for how this impacts your operations, be they union, open-shop or non-union.