President Joe Biden has signed Executive Order (EO) 14005, which requires federal agencies that award contracts for large-scale construction projects to ensure their contractors agree to enter into a project labor agreement (PLA) in compliance with laws and regulations. The purpose of this article is to provide a deep dive into how this Executive Order impacts the construction industry and to outline what contractors should anticipate when the final rule on the matter comes into effect.
Overview of the Executive Order on Project Labor Agreements
The Executive Order mandates federal agencies to require project labor agreements on large-scale construction projects. This represents a significant change from previous policy, as the previous Executive Order 13502 under President Obama recommended the use of project labor agreements. The new EO aims to establish stability in labor-management relations and ensure compliance with laws and regulations.
Project Labor Agreements (PLAs) are contracts between a contractor or subcontractor and one or more labor organizations. These agreements establish the terms and conditions for employment on a specific construction project, including wages, benefits, and working conditions. While unions are usually party to these agreements, sometimes even non-union or signatory contractors may also enter into these agreements.
Exceptions to the project labor agreement requirement
Although the Executive Order requires agencies to ensure project labor agreements are entered into, it also provides some exceptions. The exceptions are limited, and a senior agency official is required to grant them on specific contracts. The exceptions include contracts that are:
– Below the simplified acquisition threshold.
– Awarded to small businesses.
– For the employment of apprentices, trainees, or journeypersons.
– Awarded on the basis of events or information not reasonably foreseeable.
Comparison to previous Executive Order on Project Labor Agreements under President Obama:
Under President Obama’s Executive Order, agencies were encouraged to use project labor agreements on large-scale construction projects, but it was not a requirement. In contrast, President Biden’s Executive Order now mandates the use of project labor agreements on most large-scale construction projects and provides a limited set of exceptions.
Overview of public comments on the proposed rule
The proposed rule was open for public comment until October 18, 2023. The comments from the larger construction industry were generally critical of the project labor agreement mandate. Some of the concerns raised included whether the use of PLAs would limit the number of bidders, increase contracting costs, and limit the potential for fair competition. Other organizations, such as the International Brotherhood of Electrical Workers and the National Electrical Contractors, were supportive of the mandate.
Support and criticism of the project labor agreement mandate
Critics argue that project labor agreements restrict competition by requiring contractors to adhere to union labor policies. This, in turn, may result in higher costs and fewer bidders. Proponents of the mandate, however, claim that project labor agreements ensure construction projects are completed faster, within budget, and without labor disputes.
Importance of preparing for the final rule and staying competitive
Contractors engaged in larger-scale federal construction projects should begin preparing for the final rule mandating project labor agreements and ensure they conform to the limited exceptions set out in the Executive Order. By doing so, they can remain competitive in the federal construction space, which rewards companies that comply with policies and regulations.
Overall, the new Executive Order will have a significant impact on the construction industry and the way contractors conduct their work. While there is criticism from some quarters, there are benefits to using project labor agreements on larger projects. However, with the right preparation, contractors can comply with the mandate and continue to be competitive, ensuring that compliance with laws and regulations is good business practice.