President Joe Biden has signed an executive order that requires project labor agreements on federal construction projects valued at more than $35 million. The order, which potentially represents a boon for union contractors and a hurdle for non-union firms, was signed Feb. 4 at Ironworkers union Local 5 hiring hall in Upper Marlboro, Md.

In his remarks, Biden said the PLA mandate will help ensure “that we build a better America, we build it right, we build it on-time and we build it cheaper than it would have been otherwise.” He said the order will ensure that federal construction projects get completed on time, save taxpayers money, and are "built to last.”

Based on fiscal 2021 figures, the order could affect about $262 billion in federal government construction and nearly 200,000 workers on those contracts, the White House says. The Biden Administration says the labor pacts could help with coordination of multiple contractors and subcontractors on projects—minimizing work disruptions and getting projects completed on time. 

In a statement, the White House also said quality standards would be raised under PLAs, as “contractors who offer lower wages or do not train their workers will need to raise their standards to compete with other higher-wage, high-quality companies.” Additionally, they would standardize work rules, compensation costs and the dispute settlement process, the White House said. Under the order, the US Depts. of Defense and Labor and Office of Management and Budget will lead a training effort for the federal contracting workforce. 

The executive order comes less than three months after Biden signed the $1-trillion Infrastructure Investment and Jobs Act and while the administration continues to push for passage of the stalled Build Back Better plan in the Senate.

News of the order, which would have a significant impact on a wide swath of contractors, drew praise from unions and pushback from construction industry groups. 

David Long, CEO of the National Electrical Contractors Association, thanked Biden in a statement, adding that the order “prioritizes safety, value, quality, and on-time delivery of our federal projects, built with a highly skilled and trained workforce.”

Stephen Sandherr, CEO of the Associated General Contractors of America, said the administration was trying “to solve a problem that doesn’t exist,” through use of government-mandated PLAs. “Construction workers are among some of the highest paid workers in the economy, earning 10% more than the average worker in the U.S,” he said in a statement. “Their pay rates have continued to climb 5.1% as labor shortages have made this a workers’ market.”

Sandherr said the agreements discriminate against construction workers who choose not to belong to a union, noting that, while non-union companies could work under one, they would be 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,” he said.

As a result, Sandherr suggested that the order could inflate construction project costs “at a time when firms are already struggling with labor shortages and skyrocketing materials prices. It also undermines the bipartisan spirit of the new infrastructure bill.”

Sandherr cited AGC’s own analysis of construction projects where a PLA could have been imposed, reporting that 99.4% of nonpartisan federal officials found no benefit to taxpayers from imposing one.

The Associated Builders and Contractors concurred that the order was anti-competitive, and noted that 87.4% of the construction workforce does not belong to a union. 

“President Biden’s new policy will not help America ‘Build Back Better;’ said Ben Brubeck, its vice president of regulatory, labor and state affairs, "instead, it will exacerbate the construction industry’s skilled workforce shortage, needlessly increase construction costs and reduce opportunities for local contractors and skilled tradespeople.” .

In its own analysis, ABC suggested that government-mandated PLAs increase construction costs by 12% to 20%.