On February 4, 2022, President Biden signed an Executive Order on Use of Project Labor Agreements for Federal Construction Projects (the “Order”) for federal construction projects valued at $35 million or more. The Order instructs federal agencies to require “every contractor or subcontractor engaged in construction” on projects valued at $35 million or more to “agree, for that project, to negotiate or become a party to” a Project Labor Agreement (“PLA”) with “one or more appropriate labor organizations.”

Federal agencies are authorized to grant exceptions to this PLA requirement under certain defined circumstances. The Order supersedes an executive order issued by then-President Obama in 2009, which had encouraged, but not mandated, the use of PLAs on construction projects valued at more than $25 million. The Order is characterized as a measure that will “promote economy and efficiency in Federal procurement” and advance “small business interests” and represents a noteworthy shift in United States federal labor policy, underscoring President Biden’s commitment to fulfilling his campaign promise to be the most labor-friendly President in history.

The Order applies to all “large-scale construction projects,” defined as a “Federal construction project within the United States for which the total estimated cost of the construction contract to the federal government is $35 million or more.” The Federal Acquisition Regulatory Council (“FAR Council”), in consultation with the President’s Council of Economic Advisers, may adjust this threshold based on inflation. “Construction” is defined to mean “construction, reconstruction, rehabilitation, modernization, alteration, conversion, extension, repair, or improvement of buildings, structures, highways, or other real property.” It appears that the Order does not apply to federally funded projects under the control of state and/or local governments.

The Order enumerates various procedural and substantive requirements for PLAs. Agencies awarding a contract with a “large-scale construction project, or obligating funds pursuant to such a contract,” must require every participating contractor or subcontractor “to negotiate or become a party to a [PLA] with one or more appropriate labor organizations.” Upon reaching an agreement, PLAs must bind all contractors and subcontractors in all relevant solicitation provisions and contract documents. Contractors and subcontractors must be allowed to “compete for contracts and subcontracts without regard to whether they are otherwise parties to collective bargaining agreements.” The PLA must also, among other things, “contain guarantees against strikes, lockouts, and similar job disruptions,” and establish “effective, prompt, and mutually binding procedures for resolving labor disputes arising during” the term of the PLA.

The Order authorizes senior officials within an agency to grant an exception to the use of a PLA for a federal construction project. In order for an exception to be granted, the agency must, no later than the date of the solicitation, submit a specific written explanation of why at least one of the following circumstances exists with respect to that contract:

• Requiring a PLA on the construction project would not advance the federal government’s “interests in achieving economy and efficiency in Federal procurement,” based on the following factors: (1) the project is short and “lacks operational complexity”; (2) the project will involve “only one craft or trade”; (3) the project will involve “specialized construction work that is available from only a limited number of contractors or subcontractors”; (4) the “agency’s need for the project is of such an unusual and compelling urgency that a [PLA] would be impracticable”; or (5) the project implicates other similar factors deemed appropriate in regulations or guidance issued by the FAR Council or the Director of the Office of Management and Budget (“OMB”);
• “Based on an inclusive market analysis, requiring a [PLA] on the project would substantially reduce the number of potential bidders so as to frustrate full and open competition”; or
• “Requiring a [PLA] on the project would otherwise be inconsistent with statutes, regulations, Executive Orders, or Presidential Memoranda.”

The Order directs the FAR Council to publish proposed implementing regulations by June 6, 2022. The Departments of Defense and Labor and the OMB must coordinate in designing a training strategy to ensure federal contracting officials across all agencies are aligned regarding PLAs by May 5, 2022. The Secretary of Defense, the Secretary of Labor, and the Director of the OMB have until 180 days of the publication of the proposed regulations to provide a report to the Assistant to the President for Economic Policy and Director of the National Economic Council on the contents of the training strategy.

The Order will apply to all solicitations for contracts issued on or after the effective date of the final regulations to be issued by the FAR Council. Federal agencies are “strongly encouraged” to comply with the Order, “to the extent permitted by law,” for solicitations issued between February 4, 2022 and the effective date of the final regulations issued by the FAR Council, or solicitations that have already been issued and are outstanding as of February 4, 2022.

The FAR Council will be required to resolve, through rule-making, certain ambiguities in the Order. For instance, the Order is unclear as to whether companies that supply only materials to be used at the construction site, but do not engage in “construction” activity, will be required to enter into a PLA.

Crowell & Moring will continue to monitor developments relating to the Order, the FAR Council’s upcoming regulations and any litigation challenging this Order.