Will proposed project labor agreement rule help or hurt construction?

By Jenny LescohierAugust 30, 2022

The construction industry is proving resilient in the face of problems with supply chains, rising material costs and a shortage of workers The construction industry is proving resilient in the face of problems with supply chains, rising material costs and a shortage of workers (Photo: AdobeStock)

Project labor agreements are back in the news and construction officials are speaking out in response to the publication of a proposed rule that would implement President Biden’s executive order requiring federal construction contracts of $35 million or more to be subjected to PLAs.

The proposed rule, Federal Acquisition Regulation: Use of Project Labor Agreements for Federal Construction Projects (FAR), was published Aug. 19 by the Department of Defense, General Services Administration, and National Aeronautics and Space Administration. It stems from the President’s Feb. 4 executive order directing that agencies use project labor agreements on federal projects with some exceptions. 

Construction leaders have voiced concern the measure will hurt taxpayers and construction job creators.

“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, vice president of regulatory, labor and state affairs for Associated Builders and Contractors (ABC). “The FAR Council’s proposed rule will hand over construction contracts to powerful special interests at the expense of hard-working taxpayers and the principles of free enterprise and fair and open competition in government contracting.”

Brubeck continued, “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. ABC will continue to fight for quality, experienced contractors harmed by this proposal and the 87.4% of construction workers who have already made the choice not to belong to a union and want a fair opportunity to participate in local federal infrastructure projects - but cannot do so because of PLA schemes.”

According to ABC estimates, the 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.

Stephen E. Sandherr, chief executive officer of Associated General Contractors of America (AGC), echoes the sentiment.

“Today’s proposed rules requiring procurement officials to impose project labor agreements for federal construction projects will prevent most contractors from bidding and will harm the disadvantaged firms that contracting rules are meant to help,” he said in a statement.

Sandherr stated the proposed rule would cause most federal construction contractors to stop bidding on federal projects, citing a survey the AGC conducted in response to the president’s executive order.

“The survey found that nearly three-quarters of federal contractors report they will stop bidding on federal projects if the Biden administration follows through on its plans to impose government-mandated project labor agreements,” he said. “While 73% of surveyed firms report they are currently bidding on federal construction projects valued at $35 million or more, the same percentage, 73%, report they would not bid on those projects if a project labor agreement were required.

“Moreover, the federal mandate will make it harder for contractors to partner with small, veteran, minority or disabled-owned firms,” Sandherr added. “Government-mandated project labor agreements require every general contractor or subcontractor performing work to negotiate with or become a party to an agreement with one or more unions. Eighty-two percent of firms report this 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.”

In addition to limiting competition for federal projects, the survey found that imposing project labor agreements will make it harder for firms to find enough workers to hire. According to the AGC, nearly 40% of the survey respondents operate under a collective bargaining agreement. Of these respondents, 83% said there are not enough union workers to guarantee completion of the project on time and on budget. Among firms that have worked on a project that involved a government-mandated project labor agreement, 67% said the agreement made it harder to find workers to hire.

Some say there is misunderstanding of the proposed rules effects. James Terry, partner at construction law firm Zetlin & De Chiara LLP, said it’s true union shops will have an advantage under the new rule, however no one can be kept out of the process by virtue of not being a union shop.

“The law can’t discriminate between union and the non-union shops. Everybody gets a chance to compete,” he stated. “There are exceptions in the executive order. If an agency finds that the PLA would be non-competitive in a specific circumstance, the burden is on the opponent to show that. The idea is that you’re basically signing this one-off contract in order to be able to derive the benefits of landing that contract.”

He continued, “There’s a fairly clear quality enhancement that comes from union labor, that’s been pretty well documented. The apprenticeship programs over the last couple of decades have generated a more efficient and qualitative labor force. So it’s likely you’re going to have a better project built for the work, which will help you get the next project.”

The new rule basically aims to prevent work stoppages due to labor disagreements.

“What PLAs have been focusing on over the years is the ironclad ‘no work stoppage provisions, no strikes, no lockouts.’ That is what owners negotiating these

James Terry, partner at construction law firm Zetlin & De Chiara LLP, said it’s true union shops will have an advantage under the new rule, however no one can be kept out of the process by virtue of not being a union shop

agreements will be laser focused on.

“With the PLA, even if a given trade’s collective bargaining agreement is about to expire, it’s not going to hurt you because the PLA takes the place of that collective bargaining agreement for the purposes of this project, and ensures that no matter how long it takes the two sides to hammer out a new CBA, the project covered by the PLA is not going to be adversely impacted.”

Terry said it’s important for contractors to understand that they are already bound under the federal Davis Bacon Act to pay prevailing wages, which are generally in line with union wages in a given area.

“The question of how much it’s going to cost the project in terms of labor, there may well be an upward tick, but there should not be a dramatic increase because contractors have to abide by Davis Bacon anyway,” he said.

For its part, AGC said in a statement it neither supports nor opposes contractors’ voluntary use of project labor agreements on federal projects but strongly opposes any government mandate or prohibition of contractors’ use of project labor agreements.

“Such a choice should not be imposed as a condition to competing for, or performing on, a publicly funded project,” Sandherr at AGC said. “The proposed rules will result in ‘build back fewer’: fewer firms, hiring fewer people to build fewer projects.”

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