Use of Project Labor Agreements for Federal Construction Projects

Background

Executive Order 13502, instituted by President Barack Obama in 2009, established a framework that encouraged the use of Project Labor Agreements (PLAs) by federal agencies in large-scale construction projects. These agreements were pre-hire collective bargaining agreements with labor organizations that outlined terms and conditions of employment for a given project. This order was a shift, marking a return to policies that had been abandoned during President George W. Bush's administration. Prior to its revocation, the order created an organizational environment where federally funded construction projects over $25 million could mandate PLAs, theoretically ensuring a harmonious labor-management dynamic that minimized the risk of strikes and similar disruptions.

The Federal Acquisition Regulatory Council amended the Federal Acquisition Regulation to incorporate these directives, ensuring compliance across all relevant federal projects. In practice, this meant that agencies like the Department of Defense and the General Services Administration introduced PLAs into their procurement processes. Such agreements aimed to stabilize labor relations and mitigate potential legal disputes related to employment terms. Moreover, this framework often favored unionized labor, thereby increasing the prevalence of skilled labor employment on federal projects. It essentially integrated labor considerations into federal project planning, although critics argued whether it resulted in genuine procurement efficiency.

Furthermore, the order influenced social policy by attempting to set federal standards for labor practices. It intertwined employment conditions with broader policy goals, such as improved safety and health compliance, equal employment opportunities, and adherence to labor standards on large construction projects. Various directives ensured that these aspects were administratively feasible without formal rulemaking. The emphasis was not only on economic outcomes but also on a certain elevation of labor conditions in the construction sector, aligning with broader social welfare objectives. However, the direct impact on cost savings and efficiency outcomes remained debated among stakeholders, varying with specific project contexts.

Reason for Revocation

President Joseph R. Biden Jr.'s revocation of Executive Order 13502 in February 2022 was likely driven by a broader ideological pivot toward strengthening labor rights and union presence in the American workforce. The revocation was part of a comprehensive strategy to empower workers and promote fair wages, aligning with Biden's public commitment to building the middle class and improving structural labor conditions across various sectors. The administration's broader policy vision emphasizes worker empowerment, in stark contrast to the less union-friendly policies of the previous administration. By revoking this particular order, Biden aimed to further calibrate federal procurement policies to his administration’s commitments to reinforce labor presence and ensure a more expansive inclusion of unions in government-funded projects.

The revocation was also embedded in a larger regulatory framework aimed at reversing remnants of policies from the Trump administration that favored deregulation and minimized union roles. Biden's approach emphasized reinstating union strength within the federal government’s contracting practices, countering years where union influence had diminished, especially in construction and logistical sectors. This shift demonstrates a clear departure from the economic efficiency rationale to a more inclusive economic growth perspective that embraces socioeconomic equity alongside economic objectives.

Additionally, this action might reflect Biden's recognition of the changing landscape of labor markets and the construction industry. There was anticipation that empowering unions could foster better working conditions and potentially more sustainable economic growth. By revoking the executive order, Biden effectively removed the discretionary power of executive agencies to mandate PLAs, potentially allowing a more diverse range of labor arrangements that could embrace non-unionized workers.

Ultimately, the rescission can be seen as a strategic realignment towards fostering a labor market ecosystem where federal procurement reflects the ethos of contemporary labor rights, driving future policy-making to embrace changes in labor-management negotiation dynamics. It also aligns with Biden’s broader agenda of strengthening domestic labor practices at a time when increased protectionism and labor law reforms are gaining traction globally.

Winners

The revocation of Obama's executive order predominantly benefits non-union contractors and firms that previously faced competitive disadvantages due to PLAs. Organizations that operate primarily with non-unionized labor are likely to find new opportunities to bid on federally funded projects without the constraints of adhering to predefined labor agreements with unions. This change facilitates open and potentially more competitive bidding environments, particularly advantageous for small to medium-sized construction companies which lacked the resources to manage union labor demands as effectively.

Industries heavily relying on flexible labor arrangements, such as construction technology firms and logistics managers within the construction supply chain, stand to gain significantly. These sectors could benefit from reduced administrative burdens and greater latitude in project management without the mandated oversight or delays that PLAs sometimes entailed. The flexibility in labor management could result in improved cost efficiencies and project delivery timelines for companies like Turner Construction and Bechtel, which might now more freely structure their workforce on a project-by-project basis.

Moreover, this policy change could also disentangle some complexities for federal agencies who previously needed to balance procurement requirements with mandated PLA stipulations. By easing these constraints, agencies can potentially streamline decision-making processes and focus on project-specific needs without PLA involvement, enabling responsive adjustments to project-specific labor needs or unforeseen circumstances.

Losers

The revocation negatively affects construction trade unions, as their guaranteed role and influence in federally funded projects are subdued. These organizations, which have traditionally used PLAs to safeguard employment terms and gain leverage in contract negotiations, may witness weakened bargaining power. As a result, unionized workers might experience increased competition from non-union labor pools, potentially undermining wage standards and employment conditions that had previously been strengthened through PLAs.

Additionally, the order's rescission could disproportionately impact skilled tradespeople who are part of these unions. By diminishing the overarching requirement for PLAs, there is a risk of increased labor disputes and a decline in advantageous employment terms, particularly impacting workers who benefited from the predictable employment conditions and dispute resolution processes that PLAs provided. This environment might lead to greater instances of labor unrest and dissatisfaction amongst highly skilled, unionized employees who were previously assured of quality compensation through these agreements.

The loss of PLAs might also negatively affect law firms and consultancy businesses specializing in labor compliance and contract negotiations linked to PLAs. These entities had cultivated markets around facilitating compliance and ensuring dispute resolution on projects with PLAs. The shift could result in diminished demand for their specialized services, forcing them to adapt swiftly to the new landscape or face potential loss of business.