With a divided U.S. Congress and presidential and congressional elections looming in 2024, U.S. President Joe Biden looks to boost labor protections using available executive and regulatory mechanisms within his control. Notably, one White House initiative will soon come into greater focus for large-scale, federally-funded construction projects – President Biden’s Executive Order (E.O.) 14063. Signed on February 22, 2022, the E.O. mandates Project Labor Agreements (PLAs) for federal construction projects valued at $35 million or more. This will include construction projects related to schools, waterways, housing, military bases, and airports, in addition to traditional road and bridge improvements.
Although the E.O. was issued last year, its impact is now being felt across construction sectors, as funding flows for infrastructure projects across the country. The E.O. specifically noted: “[I]t is the policy of the Federal Government for agencies to use project labor agreements in connection with large-scale construction projects to promote economy and efficiency in Federal procurement.” It is therefore expected that federally-funded, local infrastructure projects would be subject to E.O. 14063, but other federally-funded projects can also fall within the PLA requirement.
The E.O. will apply to provisions in the Bipartisan Infrastructure Law (Infrastructure Investments & Jobs Act – “IIJA”) that are direct federal procurement, such as federally-funded highway projects. PLAs (and other workforce requirements) also crept into new funding allocated by the bipartisan CHIPS and Science Act for the semiconductor industry. Among other things, CHIPS funding can be used for constructing new semiconductor facilities. The U.S. Department of Commerce released guidance for the first CHIPS funding opportunity in February 2023, specifically noting the following as a key priority:
“Companies seeking CHIPS funding will be required to submit workforce development plans for the workers who will operate their facilities and the workers who will build them, including plans to meet the Department of Commerce’s and the Department of Labor’s Good Jobs Principles. Applicants requesting over $150 million in direct funding must also submit plans to provide both their facility and construction workers with access to affordable, accessible, reliable, and high-quality child care. In addition, applicants are strongly encouraged to use project labor agreements for construction projects.”
Even the U.S. Environmental Protection Agency got the memo, encouraging its agency to take into consideration President Biden’s E.O. on PLAs as it designs programs to be funded by the Inflation Reduction Act (IRA). The IRA has significant funding for green construction projects.
In the past, a balance was struck by prior administrations where PLAs were encouraged but remained generally optional for federal agencies. In contrast, President Biden introduced his E.O. mandating PLAs with a nod to boosting unions in the performance of federal construction contracts. This occurs in the backdrop of declining union membership in the construction industry. The Department of Labor’s (DOL) Bureau of Labor Statistics (BLS) reported that the percentage of union workers in the construction industry nationally was only 12.6 percent in 2022 – a decline from 2005 when the BLS reported unionized construction workers nationally was about 16 percent.
While the Biden Administration argues PLAs help with costs and ensure a timely completion of federally-funded projects, opponents argue such agreements are anti-competitive and add costs to projects. In jurisdictions where PLAs are fairly common in public works projects, opponents also argue that the federal mandate is an added and potentially burdensome layer to the procurement process. It also remains to be seen how this will play out for public works projects in states such as Florida, where PLAs are disfavored. Legal challenges over controversial terms, such as requiring open shop employees to pay union dues, continue to reshape the purpose and nature of PLAs to align them more squarely with a neutral policy goal of avoiding costly disputes and work stoppages.
With E.O. 14063’s broad application, it is imperative for contractors to carefully review any request for proposal (RFP) in both traditional and less traditional construction sectors to be clear on the requirements, as well as the economic and operational impact of agreeing to a PLA. Identifying the source of federal funding streams, understanding any applicable federal PLA requirements, and navigating both federal and applicable state law requirements, while also spotting policy changes on the horizon – including the U.S. DOL’s proposed rule to extend Davis-Bacon Act prevailing wages to certain off-site construction workers (to be discussed in a future post) – are all issues that contractors will have to consider before bidding on covered federal construction projects.
Squire Patton Boggs is uniquely positioned to help those in the construction, real estate, and infrastructure sectors to understand the intersection of law, policy, and politics, particularly as you consider bidding or preparing a bid for a federally-funded construction project.