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Executive Order Encourages Project Labor Agreements on Federal Projects

By: Edward V.A. Kussy
04/29/09

On February 6, 2009, President Barack Obama issued Executive Order 13502[1] (the Obama Order) encouraging the use of project labor agreements (PLAs) binding the contractor and all subcontractors on large Federal projects. The Obama Order is effective for contract solicitations commencing 120 days from the date of issuance. By its own terms, the Obama Order only applies to Federal construction contracts, not Federally funded construction contracts carried out by states, local governments and other recipients of Federal assistance. However, the Obama Order explicitly repeals two executive orders issued by former President George W. Bush that barred the use of PLAs on both Federal and Federally assisted contracts, thus removing the restrictions imposed by those executive orders.[2]

What Is a Project Labor Agreement?

Under the National Labor Relations Act (NLRA), an employer may generally enter into a collective bargaining agreement with a union only if the union represents a majority of the employer's employees in a "bargaining unit" as determined by the NLRB or agreed upon by the parties. This means that "pre-hire agreements" between the owner or contractor and the union(s) that set work rules for a specific project or contract (rather than an employer-based collective bargaining agreement) are generally prohibited.[3] However, typical collective bargaining agreements do not work well in the construction industry because construction projects are temporary in nature, and construction industry employers frequently hire a new work force for every project.

Accordingly, construction contracts are excluded from the general prohibition on the use of pre-hire agreements.[4] Based on the unique circumstances of the construction industry, the NLRA permits pre-hire agreements, called PLAs, under which the owner or general contractor signs an agreement with the union(s) representing the crafts necessary for the project, before the work force is hired. The agreement governs the terms and conditions of employment for those employees. Such an agreement usually provides for union wage rates and fringe benefits and designates the unions as the exclusive bargaining representatives of the covered employees.

Terms of the Obama Order

The Obama Order encourages Federal agencies to consider requiring PLAs on their large construction projects (those where the total cost to the Federal Government exceeds $25 million), on a case by case basis. PLAs are not required. Prior to this order, Federal agencies were prohibited from requiring PLAs on Federal construction projects.

Under the Obama Order, a Federal agency wishing to require a PLA must find that using 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," and be otherwise consistent with applicable law.

PLAs authorized by the Obama Order must:

  • Bind all contractors and subcontractors on the construction project through the inclusion of appropriate specifications in all relevant solicitation provisions and contract documents. The order deals only with PLAs imposed by the agency (the "owner"). PLAs used by a contractor at its discretion have never been prohibited;
  • Allow all contractors and subcontractors to compete for contracts and subcontracts without regard to whether they are otherwise parties to collective bargaining agreements. PLAs on Federal and Federally assisted projects may not prohibit open shop contractors from bidding on a job;
  • Contain guarantees against strikes, lockouts, and similar job disruptions. The primary benefit of PLAs is labor peace for the life of the project;
  • Set forth effective, prompt, and mutually binding procedures for resolving labor disputes. The PLA may make use of procedures typical of collective bargaining agreements, but must make them available to both union and non-union labor;
  • Provide other mechanisms for labor-management cooperation on matters of mutual interest and concern, including productivity, quality of work, safety, and health; and
  • Fully conform to all statutes, regulations, and executive orders.

The order does not require a Federal agency to use a PLA on any construction project, but it also does not preclude the use of a PLA in circumstances not covered by the order.

Policy Justifications

President Obama offered a number of policy justifications for his executive order, centering on his conclusion that large-scale construction projects pose special challenges to efficient and timely procurement by the Federal government:

  • Labor issues are more likely to threaten the efficient and timely completion of large construction projects undertaken by Federal contractors, as they are generally more complex and of longer duration.
  • Construction employers typically do not have a permanent workforce, which makes it difficult to predict labor costs for contract bids and to ensure a steady labor supply when working on projects.
  • Construction projects typically involve multiple employers at a single location. A labor dispute involving one employer can delay the entire project. A lack of coordination among various employers, or uncertainty about the terms and conditions of employment of various employee groups, can create frictions and disputes in the absence of an agreed-upon resolution mechanism.
  • PLAs may prevent these and other labor problems from developing by providing structure and stability to large-scale construction projects, thereby promoting the efficient and expeditious completion of Federal construction contracts.

History of Project Labor Agreements

The use of PLAs on Federal and Federally assisted construction contracts has long been a source of contention between those who believe that PLAs make construction more efficient by bringing labor peace and providing for the orderly resolution of labor disputes, and those who see PLAs as discriminating in favor of union contractors and labor and increasing labor costs.

For example, the Federal Highway Administration (FHWA) does not permit states to discriminate among contractors on the basis of whether they are open or closed shops. FHWA has interpreted such provisions as violating the requirements for fair and open competition under 23 U.S.C. §112.[5] However, FHWA decided in the 1980s that a PLA did not violate this requirement unless it restricted employment of non-union members or excluded open shop contractors. Based on this interpretation, a number of Federal-aid projects were implemented with PLAs, perhaps most prominently the $14.5 billion Central Artery/Third Harbor Tunnel project (the "Big Dig") in Boston.

On October 23, 1992, President George H.W. Bush issued Executive Order 12818[6] (the Bush I Order), which rendered PLAs unenforceable by providing that no bid specification, project agreement or other controlling document for a Federal or Federally assisted contract could require that bidders, offerors, contractors or subcontractors enter into or adhere to agreements with labor organizations or become members of labor organizations. This had the effect of prohibiting Federal agencies and recipients of Federal funding from imposing PLAs on their contractors or subcontractors. The Bush I Order further forbade Federal agencies and recipients of Federal funding from discriminating against contractors and subcontractors who declined participation in any labor agreement involved in a Federal or Federally assisted project. Since the Bush I Order applied to Federal agencies and Federal grantees, nothing in the Bush I Order prohibited contractors from voluntarily entering into a PLA on their own. Notably, the Bush I Order did not apply to PLAs already in place, such as the one for the Big Dig.[7]

On February 1, 1993, President Clinton issued Executive Order 12836[8] (the Clinton Order), revoking the Bush I Order. From that date until February 17, 2001, PLAs were once again allowed, subject to the constraints discussed above.

On February 17, 2001, President George W. Bush issued Executive Order 13202 (the Bush II Order), with the stated purpose of maintaining government neutrality towards government contractors' labor relations. The Bush II Order forbade Federal and Federally assisted contracts from requiring PLAs, but expressly permitted contractors to enter into PLAs. This effectively precluded use of PLAs on large projects involving several prime contractors. The Building and Construction Trades Department of the AFL-CIO, however, challenged the Bush II Order, asserting that it violated the NLRA and thus constituted an unconstitutional abuse of executive power. The District Court agreed and enjoined application of the Bush II Order. [9] The Court of Appeals reversed, holding that the President had the authority to impose these kinds of conditions on Federal contracts and Federal grants.[10] Thus, for the remainder of Bush's term, PLAs on projects using Federal funds were effectively prohibited.

The Obama Order encourages Federal agencies to consider PLAs for large Federal construction projects. Moreover, by rescinding the Bush II Order, President Obama removed the prohibition on PLAs for projects using Federal aid funds.

This raises an interesting prospect for FHWA. When the Bush II Order was issued in early 2001, FHWA had before it a request from Maryland to add a requirement to use PLAs to its contract specifications for the Woodrow Wilson Bridge Project in the Washington, D.C. area. Pursuant to the Bush II Order, FHWA turned down Maryland's request. When the Bush II Order was enjoined, Maryland resubmitted its request and FHWA decided to examine this request under its competition in contracting requirements (23 U.S.C. §112), quite independently of the Bush II Order which at the time was under injunction by the District Court in the case discussed above.[11] FHWA issued standards under which the Maryland request would be reviewed. Maryland was then given the opportunity to submit evidence that its request met or could meet these standards. Since Maryland proposed the use of a potentially restrictive specification, the burden was on Maryland to show that the PLA was not anticompetitive. After a thorough review of Maryland's submission and consideration of the potential impact of the State-imposed PLA on the competitive process, FHWA issued a lengthy decision denying Maryland's request to amend its specifications to include a PLA requirement.[12]

Even though the Obama Administration is not bound by the Woodrow Wilson Bridge opinion's reasoning, FHWA will have to address the conclusions reached in this decision in considering any new request for a PLA. FHWA has not been asked to approve the use of a PLA since the issuance of the Obama Order. Should a request to use a PLA be made by a State, FHWA will have to decide whether and to what extent it will apply the process used for the Woodrow Wilson Bridge project. This is especially the case because nothing in the Obama Order actually requires the use of PLAs.

Practical Considerations

In light of the Obama Order, some Federal and State agencies likely will decide to make greater use of PLAs. They will certainly be pressured to do so by labor unions and others who believe that PLAs increase labor stability. Should state and local governments wish to use PLAs on future Federally assisted projects, Federal agencies will no longer have to reject their use out of hand, but will have to ensure the PLAs conform with Federal contracting requirements, as was the case before issuance of the Bush II Order. Contractors bidding on projects that include a PLA will have to consider the impact of a PLA on their bid prices, and non-union contractors will lose the flexibility they normally have to hire employees outside of union hiring halls, to ask their employees to work outside of union work rules, and to deal with disputes independent of established dispute resolution mechanisms. Notably, the types of PLAs discussed here are imposed as part of the contract specifications and thus would apply equally to all bidders or proposers. However, as FHWA found in its analysis of the Maryland application, the impact on ultimate price is difficult to determine. In the case of design build projects, which mix construction and design activities, more careful descriptions of the activities covered by the PLA may be necessary.

Edward V.A. Kussy is the former deputy chief counsel, Federal Highway Administration and specializes in federal transportation policy issues. He can be reached at ekussy@nossaman.com or 202.887.1464.



[1] 74 Fed. Reg. 6985, February 11, 2009.

[2] E.O. 13202, 66 Fed. Reg. 11225, February 22, 2001, as amended by E.O 13208, 66 Fed. Reg. 18717, April 11, 2001. The amendment was required to exclude multi-contract projects that had an existing PLA in place.

[3] 29 U.S.C. §158.

[4] 29 U.S.C. §158(e)-(f).

[5] See 23 C.F.R. §§635.110 and 635.117.

[6] 57 Fed. Reg. 48713, October 28, 1992.

[7] The PLA for this project had actually been approved during the Bush Administration. One of the things that made this executive order particularly controversial was the fact that it was promulgated so close to the 1992 election.

[8] 58 Fed. Reg. 7045, February 3, 1993.

[9] BCTD v. Allbaugh,172 F. SUPP. 2d 138 (D.D.C. 2001)

[10] 295 F.3d 28 (D.C. Cir. 2002), cert. denied 537 U.S. 1171 (2003)

[11] As a general matter, FHWA approves the contract specifications used on Federally assisted contracts. See 23 U.S.C. §106(a) and 23 C.F.R. §630.205.

[12] The determination can be found at: http://www.fhwa.dot.gov/wwbpla.htm

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