By: Joseph A. Hackenbracht

On April 13, 2010, the FAR Council published in the Federal Register a Final Rule that adds a new section to the Federal Acquisition Regulation – Subpart 22.5 – Use of Project Labor Agreements for Federal Construction Projects. The Final Rule implements Executive Order 13502, which President Obama signed on February 6, 2009, encouraging Federal agencies to consider the use of a project labor agreement (“PLA”), on large construction projects. Use of project labor agreements by Federal agencies had been curtailed by an Executive Order issued by President Bush in 2001. (See earlier blog article dated February 10, 2009 for more information).

As of May 13, 2010, Contracting Officers can include in solicitations for construction projects clauses FAR 52.222-33 and FAR 52.222-34 that will require an offeror to negotiate a PLA and that will “bind the offeror and all subcontractors engaged in construction on the project to comply with the PLA.” Use of the FAR provisions concerning PLAs, however, is limited to projects where the total cost to the Federal Government is $25 million or more. The Alternate clauses are to be used if the Contracting Officer determines to only require the “apparent successful offeror” or the awardee of the contract to negotiate the PLA.

In deciding whether or not to require a PLA, agencies must conclude that use of a PLA will “advance the Federal 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.” Agencies can also consider other factors in determining whether a PLA is appropriate, such as: (1) the project involves multiple contractor or subcontractors employing multiple crafts; (2) a shortage of skilled labor exists in the project area; (3) the project has a relatively long performance time; (4) PLAs have been used on comparable projects, public and private, in the project area; and (5) a PLA promotes the agency’s long term program interests.

Jared Bernstein, Chief Economic Advisor to Vice President Biden, reports that “Project Labor Agreements have also been used by the private sector for a variety of construction projects that are similar in nature to those undertaken in the public sector, including for manufacturing plants, power plants, parking structures, and stadiums. The executive order and the final rule now enable Agencies to consider whether their projects might gain some of the benefits found in the private, state and local construction sectors as well.” Mr. Bernstein quoted the Secretary of Labor, Hilda Solis, as saying, “Project labor agreements are a win-win; they benefit businesses, workers and taxpayers.” Simon Brody, with the National Association of Government Contractors, however raises the question whether the Federal government’s PLA initiative is pro-labor and anti-small business. Mr. Brody suggests that the use of PLAs will “put more Federal contracts out of reach for the mid-sized and small contractors who are best able to infuse the crippled job market with immediate opportunities.” He reported that Representative John Kline, member of the House Education and Labor Committee, observed that “PLAs are an antiquated approach to federal contracting designed to favor large, unionized contractors at the expense of smaller employers,” and that “PLAs reduce competition, increase costs for taxpayers, and add layers of bureaucracy and red tape to federal construction projects. Creating a formal federal process for imposing these Depression-era mandates on construction projects may be a win for special interests, but it’s a loss for workers, taxpayers, and small businesses hoping to compete for federal jobs.”

The use of PLAs has always been controversial, and has been the subject of contentious litigation. It can be expected that challenges to their implementation will continue, particularly in light of Mr. Bernstein’s comment that “[m]any agency contracting offices have little knowledge of or experience with PLAs.” However, he did note that an Inter-Agency PLA Working Group had been convened to provide technical assistance to agencies. With the soon-to-go into effect FAR provisions, we will need to wait and see what types of, and how many, solicitations Contracting Officers decide are appropriate for a Project Labor Agreement.