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New Regulation Proposal Would Require Project Labor Agreements for Federal Construction ‎Projects

August 24, 2022

Overview

On Thursday, August 19, 2022, as mandated by Executive Order 14063, issued by President Biden February 4, the Federal Acquisition Regulatory Council proposed a rule to amend the Federal Acquisition Regulations (FARs) to require that federal contractors and their subcontractors enter into project labor agreements (PLAs) with unions as a condition to receiving federal construction contracts worth $35 million or more. The new regulations, if adopted, would apply to solicitations issued after the effective date of the final regulations issued by the FAR Council. Comments on the proposed regulations are due October 18, 2022, such that, if the proposed regulations are enacted as drafted, federal contractors may begin to see the PLA requirement in new solicitation issued at the end of 2022 or the first quarter of 2023. 

As discussed in our prior update on Executive Order 14063, a PLA is a pre-hire collective bargaining agreement between an employer and one or more trade unions that establishes terms and conditions of employment for a specific construction project. Under the current version of FAR 22.505, federal agencies have the discretion to require PLAs on construction contracts by including FAR 52.222-33 in the solicitation. That clause currently states:

Notice of Requirement for Project Labor Agreement (May 2010)

(a) Definitions. “Labor organization” and “project labor agreement,” as used in this provision, are defined in the clause of this solicitation entitled Project Labor Agreement.

(b) Consistent with applicable law, the offeror shall negotiate a project labor agreement with one or more labor organizations for the term of the resulting construction contract.

(c) Consistent with applicable law, the project labor agreement reached pursuant to this provision shall-

(1) Bind the offeror and all subcontractors engaged in construction on the construction project to comply with the project labor agreement;

(2) Allow the offeror and all subcontractors to compete for contracts and subcontracts without regard to whether they are otherwise parties to collective bargaining agreements;

(3) Contain guarantees against strikes, lockouts, and similar job disruptions;

(4) Set forth effective, prompt, and mutually binding procedures for resolving labor disputes arising during the term of the project labor agreement;

(5) Provide other mechanisms for labor-management cooperation on matters of mutual interest and concern, including productivity, quality of work, safety, and health; and

(6) Fully conform to all statutes, regulations, Executive orders, and agency requirements.

(d) Any project labor agreement reached pursuant to this provision does not change the terms of this contract or provide for any price adjustment by the Government.

(e) The offeror shall submit to the Contracting Officer a copy of the project labor agreement with its offer.

Under the proposed rule, federal agencies would be required to include revised 52.222-33 and 52.222-34 FARs in solicitations for construction projects estimated to cost the government $35 million or more. This means that federal contractors working on construction projects costing $35 million or more, would need to enter into PLAs for those projects. Federal agencies will retain their discretion under FAR 22.505 to require PLAs (by including FAR 52.222-33 in the solicitation) for projects below the $35 million mark. For IDIQ (indefinite delivery, indefinite quantity) contracts, only individual task orders will be considered when calculating the size of the contract for purposes of applying the proposed revised 52.222-33 and 52.222-34 FARs. There is no exception for small businesses, such that if a small business receives a construction contract award of $35 million or greater, or is a subcontractor on such an award, the small business may be required to enter into PLAs if the contract award includes the proposed revised 52.222-33 and 52.222-34.

The proposed rule revises FAR 52.22.505 to require agencies to include revised versions of FAR 52.222-33 and FAR 52.222-34 in applicable solicitations. The revised FAR provisions permit contracting officers to elect to require submission of a project labor agreement prior to or after contract award. 

The proposed revised FAR 52.222-33 would state:

Notice of Requirement for Project Labor Agreement (Date)

(a) Definitions. As used in this provision, the following terms are defined in clause 52.222-34 of this solicitation entitled Project Labor Agreement: “construction,” “labor organization,” “large-scale construction project,” and “project labor agreement.”

(b)(1) Offerors shall negotiate or become a party to a project labor agreement with one or more labor organizations for the term of the resulting construction contract.

(2) The Offeror shall not require subcontractors to enter into a project labor agreement with any particular labor organization when the project labor agreement includes multiple signatory labor organizations representing the same trade.

* * * * *

Alternate I

(Date) * * *

(b)(1) The apparent successful offeror shall negotiate or become a party to a project labor agreement with one or more labor organizations for the term of the resulting construction contract.

(2) The Offeror shall not require subcontractors to enter into a project labor agreement with any particular labor organization when the project labor agreement includes multiple signatory labor organizations representing the same trade.

* * * * *

Alternate II

(Date). * * *

(b)(1) If awarded the contract, the Offeror shall negotiate or become a party to a project labor agreement with one or more labor organizations for the term of the resulting construction contract.

(2) The Offeror shall not require subcontractors to enter into a project labor agreement with any particular labor organization when the project labor agreement includes multiple signatory labor organizations representing the same trade.

Alternate III

(Date). As prescribed in 22.505(a)(4), substitute the following paragraph (b) in lieu of paragraphs (b) through (e) of the basic provision:

(b)(1) If awarded the contract, the Offeror may be required by the agency to negotiate or become a party to a project labor agreement with one or more labor organizations for the term of the order. The Contracting Officer will require that an executed copy of the project labor agreement be submitted to the agency—

(i) With the order offer;

(ii) Prior to award of the order; or

(iii) After award of the order.

(2) The Offeror shall not require subcontractors to enter into a project labor agreement with any particular labor organization when the project labor agreement includes multiple signatory labor organizations representing the same trade.

The proposed revised FAR 52.222-34, defining the terms of the required PLA, would require PLAs that:

  1. Contain guarantees against strikes, lockouts, and similar job disruptions;
  2. Set forth effective, prompt, and mutually binding procedures for resolving labor disputes arising during the term of the project labor agreement;
  3. Provide other mechanisms for labor-management cooperation on matters of mutual interest and concern, including productivity, quality of work, safety, and health; and
  4. Fully conform to all statutes, regulations, Executive orders, and agency requirements.

The proposed rule also specifies that federal agencies may not require contractors or subcontractors to enter into a PLA with any particular labor organization when “the PLA includes multiple signatory labor organizations representing the same trade.” Subcontractors on affected projects also do not need to negotiate their own PLAs, but are generally required to review and sign on to the PLA negotiated by the prime contractor.

The proposed rule does contain a number of exceptions to the PLA requirement that may be granted by the senior procurement executive, so long as they issue a written explanation. Those exceptions include:

  • Requiring a PLA on the project would not advance the federal government’s interest in achieving economy and efficiency in federal procurement.
  • Market research indicates that requiring a PLA on the project would substantially reduce the number of potential offerors to such a degree that adequate competition at a fair and reasonable price could not be achieved.
  • Requiring a PLA on the project would otherwise be inconsistent with statutes, regulations, Executive orders, or presidential memoranda.

The FAR Council determined that there are approximately 119 construction awards of $35 million or greater issued annually, and that exceptions may be granted for 10% to 50% of covered contracts. The FAR Council therefore estimates that 60 to 107 construction contract awards each year will be subject to the new PLA requirement.

Comments on the proposed rule are due on or before October 18 and can be submitted to the Regulatory Secretariat online or by mail with a citation to “FAR Case 2022-003.” The new PLA requirements will become effective upon issuance of a final rule following the comment period. Aspects of the final rule could differ from the proposed rule. Federal contractors engaged in construction work may want to review the proposed rule and determine if submitting comments proposing a different approach to implementation of the Executive Order is appropriate. We will continue monitoring the matter and publish updates once the final rule is issued.

This articles summaries aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney.

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