The Biden administration has released a proposal that would require project labor agreements (PLAs) on large federal construction projects. It would give contracting officers at federal agencies some latitude to opt out of adopting a labor agreement through a variety of exceptions, but industry groups say the mandate could raise the costs of construction and discourage contractors who choose not to affiliate with a union from bidding on larger projects that use federal dollars. 

The proposed rule, published in the Federal Register August 19, would modify the U.S. Federal Acquisition Regulation (FAR) for projects valued at $35 million or more. The action by the FAR Council, whose members include representatives from the Office of Management and Budget, the Dept. of Defense and the General Services Administration, is in response to a Feb. 4 executive order by President Joe Biden stating that PLAs should be mandatory on federal projects, with some exceptions.

It differs from a similar order by former President Barack Obama early in his first term that encouraged, rather than required, PLAs on federal projects, and raises the threshold to $35 million, compared to $25 million during the Obama administration. 

Tensions between labor unions and predominantly non-union trade groups such as the Associated Builders and Contractors are perennial, and tend to wax and wane depending on who is in the White House. Unions contend that the private sector has voluntarily adopted PLAs for decades because they work, and that the agreements ensure a cadre of well-trained, qualified workers, most of whom have gone through rigorous training in registered apprenticeship programs. 

Stanley Kolbe, executive director of government and political affairs at the The Sheet Metal and Air Conditioning Contractors’ National Association (SMACNA), which represents signatory contractors, told ENR, “I would say it’s like professional baseball. You want to have the best team on the field … and performance really is the bottom line in construction.” Union workers, whether a journey person or a master plumber or other tradesperson, typically have gone through rigorous training through a registered apprenticeship program at great expense to their employers,” Kolbe said. “It’s like the gold standard.” 

Open-shop employers, which have substantial apprenticeship training programs of their own, would disagree. What characterizes open-shop craft labor is cross-training that allows one worker to do tasks associated with different crafts—an advantage for employers not available where union work rules apply.

Some primarily non-union groups, such as the Associated Builders and Contractors, or groups with both union and non-union members, such as the Associated General Contractors of America, say PLA requirements discriminate against contractors that choose not to affiliate with a union, which they note is the majority of construction employers.

The latest data from the Bureau of Labor Statistics shows that 13.6% of construction workers are represented by unions, and 12.6% of those were members of unions. Both ABC and AGC do have some members that are signatory to unions or which regularly sign PLAs on private projects.

SMACNA’s Kolbe notes that the governing statute underlying FAR states very clearly that “You cannot discriminate against employers based on union or non-union status.” And many PLAs have non-union firms working on them. 

Officials at the National Electrical Contractors Association support the proposal, noting in a statement, “PLAs have proven to be a time-tested method for ensuring that projects exceed quality construction standards, are completed on-time and under budget, and save taxpayer dollars.”  

PLAs Used on Prior Megaprojects

PLAs also have been used on many megaprojects in the private sector for decades. Some of these projects have been for industry giants like Toyota, Apple and Intel, Kolbe says. 

Stephen Sandherr, CEO of the Associated General Contractors of America, told ENR he doesn’t have a quibble with private owners who choose to have PLAs on their projects. They are using their own funds for these projects and can do whatever they want, he says.

What he finds troubling is the use of PLAs on federal projects that are using tax dollars. 

Moreover, if an open shop contractor decides to bid on a contract with a PLA and receives a contract award, that firm will be forced to pay into benefit contributions, pensions, health and welfare on their employees' behalf with “the likelihood that their employees will not ever get those benefits,” Sanherr said, while still continuing to pay into the employee’s 401(k) plan. 

In February 2022, AGC released the results of its own analysis of Freedom of Information Act requested reports by contracting officers at federal agencies between 2009-2016 during the Obama Administration, when PLAs were encouraged, but not required. AGC found that of about 317 cases where a PLA was considered, contracting officers decided approximately 99% of the time to forgo requiring a PLA on the project, for a variety of reasons, including higher costs and concerns about finding enough skilled workers.

Most of these contracts were at the US Dept. of Defense and related agencies, AGC said. 

Ben Brubeck, ABC vice president of regulatory, state and labor affairs, said in an interview that the FAR proposal is the latest in a series of pro-labor White House actions. He notes that the Inflation Reduction Act not only requires workers to have gone through registered apprenticeship programs, but it also includes prevailing wage requirements in some of the tax credits requirements for privately funded energy and emission reduction construction projects.

“They are pushing this through the tax code, which I don’t think has ever been done before,” he says. 

Comments on the proposed rule are due by Oct. 18. “I think the industry will be curious to see how restrictive these requirements are going to be” in the final rule, Brubeck says.