Although the federal government has previously prohibited the requirement that project labor agreements (“PLAs”) be used on federally-funded projects (see Executive Order 13202, signed by President Bush), on February 6, 2009, President Obama issued Executive Order 13502 (“E.O.”), revoking the prior Bush Executive Order and declaring that executive agencies awarding contracts on “large scale construction projects” (i.e., greater than $25 million) “may, on a project by project basis, require the use of a project labor agreement” by a contractor, which will have the effect of binding all subcontractors on the project as well.
While the E.O. was effective immediately upon its signing, on April 13, 2010, the Federal Acquisition Regulation (“FAR”) Council issued its final rule implementing the same. Pursuant to the E.O., federal agencies are “encouraged” to consider the use of PLAs, “as they may decide appropriate…in order to promote economy and efficiency in Federal procurement.”
In effect, according to this rule, federal agencies can require that every contractor and subcontractor on a particular project agree to negotiate or become a party to a PLA if the agency decides that use of the PLA will (1) advance the government’s interest in achieving economy and efficiency in federal procurement, producing labor-management stability, and ensuring compliance with laws and regulations governing safety and health, equal employment opportunity, labor and employment standards, and other matters; and (2) be consistent with the law.
According the FAR Council’s final rule, certain minimum requirements and standards must be met by Federal agencies when using PLAs. Specifically, the PLA must (1) bind all contractors and subcontractors through the inclusion of appropriate specifications in all relevant solicitation provisions and contract documents; (2) allow all contractors and subcontractors to compete for contracts and subcontracts without regard to whether they are otherwise parties to collective bargaining agreements; (3) contain guarantees against strikes, lockouts, and similar job disruptions; (4) set forth effective, prompt, and mutually binding procedures for resolving labor disputes arising during the PLA; (5) provide other mechanisms for labor-management cooperation on matters of mutual interest and concern, including productivity, quality of work, safety, and health; and (6) fully conform to all statutes, regulations, and executive orders.
In terms of the practical effects of this final rule issued by the FAR Council, federal agencies are now given broad discretion in considering the appropriateness of a PLA on a given project. While neither the E.O. nor the final rule require federal agencies to consider certain factors, they also do not limit the consideration of a number of factors. Such factors include the following:
(1) The lack of a permanent workforce, thereby making it difficult both to predict labor costs when bidding on contracts and to ensure a steady supply of labor on contracts being performed;
(2) The involvement of multiple contractors and subcontractors at a single project location;
(3) The potential for a labor dispute involving one or more contractors, which could delay the entire project;
(4) The potential lack of coordination among various contractors and subcontractors;
(5) Uncertainty about the terms and conditions of employment of various groups of workers, thereby creating frictions and disputes in the absence of an agreed-upon resolution mechanism;
(6) The potential that any of the above problems could be more pronounced on more complex projects and projects which are longer in duration; and
(7) Any other problem that can threaten the efficient and timely completion of the construction project.
Thus, according to the E.O. and the FAR Council’s final rule, if the federal agency considers the above factors and determines that the use of a PLA may prevent any of the perceived problems from developing, the agency has the ability to require such use. Basically, if the federal agency believes that the use of a PLA will provide structure and stability to the project, thereby promoting the efficient and expeditious completion of the Federal construction contracts, contractors and subcontractors may be required to utilize a PLA.
If the federal agency chooses to impose a PLA, this final rule also sets forth the options with which the agency can proceed with the PLA. In short, contractors and subcontractors may be required to submit to a PLA (1) when offers are due; (2) prior to award, by the apparent successful offeror; or (3) after award.
In the event the PLA is executed after award, the contractor or subcontractor “will be required to submit an executed copy of the agreement to the contracting officer.” It is important to point out that this requirement differs greatly from the previously-issued proposed rule, which merely required that the contractor “bargain in good faith to a PLA.” Under the final rule, organized labor may have the upper-hand in terms of bargaining position because the contractor now is required to execute the PLA or else it will be in breach of its contract with the federal government.
One other distinction from the original proposed rule is the fact that the federal agency is now able to include specific terms and conditions pertaining to the PLA and the agency can require the successful offeror to become a party to a PLA containing such terms and conditions. Previously, the FAR Council had prohibited the agency from participating in the negotiations of any PLA. Now, the agency “may seek the views of, confer with, and exchange information with prospective bidders and union representatives as part of the agency’s effort to identify appropriate terms and conditions of a [PLA]…”
On the other side of the coin, the final rule does clarify that a federal agency must notify contractors of a PLA mandate prior to contract award and that they are prohibited from initiating a PLA mandate after contract award. In addition, federal agencies are encouraged to make evaluations about whether to impose a PLA mandate early in the acquisition process of a given project.
While federal agencies were already attempting to require PLAs on applicable public projects prior to the issuance of the FAR Council’s final rule, the extent of requiring PLAs on federally-funded projects remains to be seen. However, contractors and subcontractors can probably expect an uptick in the use of PLAs now that the final rule has been issued. Undoubtedly, some states and local governments will likely follow the lead of the federal agencies and start requiring use of PLAs on public projects as well.