Today nonunion contractors and their skilled employees that build federal construction projects are preparing for more job losses as a result of a federal government rule promoting special interest schemes that funnel lucrative federal construction contracts to unionized contractors. It is more bad news for the construction industry which is already suffering from 22 percent unemployment. But it is good news for Big Labor.
The schemes are called government-mandated project labor agreements (PLAs) and the Obama administration is encouraging federal agencies to use them on a case-by-case basis when agencies build federal construction projects costing more than $25 million.
April 13, 2010, the Federal Acquisition Regulatory (FAR) Council issued a final rule (pdf), effective May 13 (today), implementing President Obama’s Feb. 6, 2009, pro-PLA Executive Order 13502 into federal procurement regulations.
It’s a controversial White House gift to Big Labor that is likely to increase federal construction costs, reduce competition from quality nonunion contractors and their skilled employees, and deny taxpayers the accountability they deserve from government.
An April 14 Wall Street Journal editorial blasted the final rule and government-mandated PLAs (“Crony Contracts. Want federal business? Better be a union shop.”):
“Only 15% of the nation’s construction workers are unionized, so from now on the other 85% will have to forgo federal work for having exercised their right to not join a union. This is a raw display of political favoritism, and at the expense of an industry experiencing 27% unemployment … It’s also a rotten deal for taxpayers.”
The Regulatory Process
July 14, 2009, the FAR Council issued a proposed rule (FAR Case 2009-005, Use of Project Labor Agreements for Federal Construction Projects) that would implement the content of President Obama’s Feb. 6, 2009, pro-PLA Executive Order 13502 into federal procurement regulations.
TheTruthAboutPLAs.com readers, associations, taxpayers, contractors and hard hat employees answered our call to action in opposition to the proposed rule and submitted almost 1,000 comments to the FAR Council. ABC National’s comments can be viewed here (www.abc.org/plastudies), and every comment submitted to the FAR Council is available for public review here. The final rule can be read here.
Obama Administration Pressures Agencies to Use PLAs
Despite a July 10, 2009 memo from Office of Management and Budget (OMB) Director Peter R. Orszag encouraging the use of government-mandated PLAs, federal agencies and procurement officials have not successfully implemented government-mandated PLAs – partially because they have been waiting for the final rule, and partially because PLAs are bad public policy. Federal agencies know these special interest giveaways increase the cost of construction, discriminate against nonunion contractors and employees and are a form of government corruption. They are not in the public’s best interest.
In fact, a 2009 independent study conducted on behalf of the U.S. Department of Veterans Affairs (VA) confirms that government-mandated PLAs will increase construction costs in numerous construction markets across the country where the VA is planning to build new facilities.
One exception to this government-wide hesitation to implement PLAs was a PLA mandated by the U.S. Department of Labor (DOL) on a Job Corps Center in Manchester, N.H. However, after ABC member North Branch Construction of Concord, N.H., with ABC support and representation, filed a protest against the PLA with the Government Accountability Office (GAO), the U.S. DOL cancelled its solicitation to construct the project.
Here is an explanation from the DOL:
The solicitation was cancelled because DOL believes that it is in the public interest for the Department to further evaluate the issues involved in the PLA requirement. The PLA requirement is a new issue to DOL.
The development was a win for taxpayers and proponents of fair and open competition, but a loss for construction workers, contractors and the community that would benefit from this project. It’s a shame the DOL would rather cancel the project than build it without a discriminatory PLA. In addition, the cancelled solicitation rendered the pending bid protest before the GAO moot. A GAO ruling on the bid protest could have addressed the legality of federal government-mandated PLAs and Executive Order 13502.
[Update 1/16/11: Since May 2010, four bid protests have been successfully filed against federal PLA mandates. Learn more here.]
The U.S. General Services Administration (GSA) is also evaluating the use of PLAs on about $1.25 billion worth of American Recovery and Reinvestment Act-funded construction projects in seven states and Washington, D.C.
To date, none of these contracts have been awarded under a government-mandated PLA, although this Procurement Instructional Bulletin (PIB) 09-02 from the GSA’s Public Building Service (PBS) demonstrates that many of these projects will allow contractors to submit multiple price proposals: one that is subject to a PLA requirement, one that is not or both. The GSA attempted a similar requirement on the Washington, D.C. Lafayette Building project, but the GSA cancelled the solicitation because the GSA faced a GAO bid protest by contractors because of the PLA mandate. Now the GSA is experimenting with new ways to encourage the use of PLAs.
The GSA issued a new solicitation March 24, 2010 that permits contractors to submit bids with a PLA, without a PLA, or both:
“Offerors will be invited to submit a proposal subject to PLA requirements (a PLA offer), a proposal not subject to PLA requirements, or both. If a PLA proposal is accepted by GSA, the awardee shall be required to execute a Project labor Agreement (PLA) with one or more appropriate labor organizations for the term of the resulting contract.”
However, in their technical evaluation section of offerors (Section M), the GSA is giving a 10 percent preference for contractors who submit a PLA bid. The same PLA preference is being used for the 1800 F Street building and a contract on the St. Elizabeth’s Campus Department of Homeland Security project in Washington, D.C.
The GSA has hired a firm to conduct research about the feasibility of PLAs in the various markets identified in the GSA Bulletin. It is unclear if the study results will influence whether a PLA on the identified project(s) is justified.
[Update 08/23/10: The GSA has issued a new procurement policy (see the April 30, 2010 GSA Public Buildings Service Procurement Instructional Bulletin (PIB) 10-04) addressing PLAs that gives a preference to contractors submitting “voluntary” PLA offers. It is likely illegal and will be the subject of legal action. Update: On September 24, 2010, the GSA amended the above PIB with a slightly different PIB, PBS Procurement Instructional Bulletin (PIB) 10-04-Revision 1.]
[Update 1/17/11: The GSA’s unwarranted PLA preference policy has led to the award a number of contracts in the District of Columbia, despite evidence indicating that PLAs make little sense in the local construction market. The policy has resulted in the award of about $237.38 million worth of GSA contracts (1800 F Street, the Lafayette Building, and the Adaptive Reuse contract for the DHS HQ at St. Elizabeth’s Hospital) to contractors that submitted a “voluntary” PLA bid versus an estimated $82 million worth of contracts awarded to contractors who submitted non-PLA bids (Security Perimeter, Demolition, and Phase I Tunnel contract for DHS HQ at St. Elizabeth’s Hospital).
The GSA’s PLA preference has led to waste too. In September, the GSA paid an additional $3.3 million for a change order on a $52.2 million contract to force a general contractor to build the Lafayette Building with a union-favoring PLA. As a result, the GSA’s policy has come under recent Congressional scrutiny.]
Future PLA Expansion on Federally Assisted Projects
Finally, the final rule is silent on Section 7 of Executive Order 13502, which could expand PLAs onto federally assisted construction projects. Here is language from Section 7 of Executive Order 13502:
The Director of the OMB, in consultation with the Secretary of Labor and with other officials as appropriate, shall provide the President within 180 days of this order, recommendations about whether broader use of PLAs, with respect to both construction projects undertaken under Federal contracts and construction projects receiving Federal financial assistance, would help to promote the economical, efficient, and timely completion of such projects. [Note: Order was issued Feb. 6; 180 days sets deadline at Aug. 5, 2009 but an proposed rule or order hasn’t been issued]
Learn more about Section 7 here.
If you are concerned about federal PLAs, call or write your senators and representative and ask them to co-sponsor
the Government Neutrality in Contracting Act (S. 90/H.R. 983) in the 111th Congress the Government Neutrality in Contracting Act (H.R. 735/S. 119).
Please visit TheTruthAboutPLAs.com as we continue to provide analysis, commentary and links to media reports about private, local, state and federal PLAs and educate the public about the status of Executive Order 13502 and special interest handouts in federal contracting via government-mandated PLAs.
Update June 14, 2010:
To date, there has been no expansion of the scope of Executive Order 13502. In fact, Part C (4)(d) of the FAR’s final rule implementing Executive Order 13502 (released April13, 2010, effective May 13, 2010) makes it very clear Executive Order 13502 and the FAR final rule does not apply to federally assisted projects:
d. Comments regarding the use of project labor agreements for initiatives other than large-scale Federal construction projects. A number of respondents recommended that the E.O.’s policy for encouraging the use of project labor agreements be broadened….
…Finally, a number of respondents addressed use of project labor agreements in connection with Federally-assisted projects….
Response: Modifying the coverage of the final rule to address expanded consideration of project labor agreements is outside the scope of this rulemaking. This rulemaking is intended to support the implementation of the policy set forth in section 1(b) of E.O. 13502, which is expressly directed at Federal acquisitions involving large-scale construction projects. Under section 5 of the E.O., agencies are not precluded from using project labor agreements on projects not covered by the order. GSA, DoD, and NASA note that this final rule does not limit agencies’ exercise of their authorities to require project labor agreements in appropriate circumstances and to the extent permitted by law. Finally, with respect to recommendations addressing construction projects funded by Federal grants, GSA, DoD, and NASA note that such transactions are outside their policy jurisdiction and the purview of the FAR.
In short, federal agencies cannot require that local, state or private recipients of federal money, grants, assistance etc. mandate a PLA as a condition of receiving federal assistance. The decision to mandate a PLA for a specific project is left up to the recipient of the federal assistance. In addition, contractors are always free to enter into a PLA voluntarily, as permitted and protected by the National Labor Relations Act.
Update July 18, 2011 and May 15, 2012:
Executive Order No. 13502 has not been expanded to cover federal projects below the $25 million threshold or federally assisted projects via Section 7.
Despite the FAR rule clearly establishing the limited scope of the rule, political appointees in federal agencies courting Big Labor on behalf of the White House continue to promote the use of PLAs on federally assisted construction projects.
The Feb. 18, 2011 “Project Labor Agreement Announcement” email to an unknown number of state and local government agencies receiving federal assistance from Peter Rogoff, a political appointee of the Obama Administration who serves as the head of the Federal Transportation Administration (a division of the U.S. Department of Transportation), is a prime example of federal agencies promoting PLAs on federally assisted projects. In his email, Rogoff said:
“I encourage you to read this guidance and to make use of project labor agreements whenever possible.”
Learn more about this memo here.
In addition, the U.S. Department of Housing and Urban Development (HUD) has been promoting government-mandated PLAs on construction projects supported by federal dollars from HUD in Boston, Portland and Oakland. See the remarks from HUD Secretary Shaun Donovan here and here.
These examples demonstrate how PLA mandates are pushed by federal agencies on federally assisted projects. Congress needs to pass legislation restoring neutrality in government contracting. The Government Neutrality in Contracting Act (H.R. 735), introduced by Congressman John Sullivan (R-Okla.) and cosponsored by 176 other House members, essentially codifies into law President Bush’s executive orders ensuring fair and open competition on federal and federally assisted construction projects. It remains in the House Oversight and Government Reform Committee and was the subject of a subcommittee hearing last year.