Is President Obama’s Pro-PLA Executive Order Even Legal?

0 May 12, 2009  Federal Construction

The Federal Acquisition Regulation (FAR) Council is in the process of issuing regulations to implement President Obama’s Executive Order 13502, which declares that executive agencies awarding contracts on “large scale construction projects” (having a total cost to the federal government of $25 million or more) “may, on a project-by project basis, require the use of a project labor agreement (PLA)” by a contractor (binding all subcontractors). This is the first time that the federal government has issued a rule with the force of law imposing union-only requirements on federal construction projects. Serious questions have been raised about the legality of the new Executive Order and it should not go unchallenged.

85% of all construction workers have chosen not to be represented by labor unions; they do not want any union to act as their bargaining agent. But where the government imposes a PLA, all employees working on that project become subject to the union’s authority and typically must pay dues to the union, regardless of what they want. In other words, under a PLA the government forces employees to become associated with a labor organization against their will.

Even worse, government-mandated PLAs typically take money out of non-union workers’ paychecks and force employers to send that money to union benefit trust funds, from which the non-union workers receive no benefits. All workers on federal projects are supposed to be guaranteed the “prevailing wage” on federal projects; but PLAs often cause a reduction in the take-home pay of non-union workers, i.e., the amount of money that is forcibly taken from the workers and paid to the union benefit funds.

PLAs also discriminate against non-signatory employers, including many minority contractors, by imposing foreign work rules and administrative costs on them, and by forcing them to contribute to the union benefit funds, even where the contractors already pay for equivalent benefits. PLAs may also deprive contractors of the ability to use their own workforce, forcing them to use strangers referred by a union hiring hall.

As a result of these discriminatory effects of PLAs, among others, PLAs create huge disincentives for most employers who are not already parties to union agreements; so a great many such employers do not bid on government projects where PLAs are required. This is not a “philosophical” choice, but an economic one. Employers are rightly concerned that signing a PLA will undermine their businesses and negatively impact their employees.

Numerous studies have shown that imposing PLAs on government construction projects reduces the number of bidders willing to perform the work. PLAs thus undermine the competitive bidding laws, whose purpose is to maximize competition for the benefit of taxpayers. PLAs instead promote favoritism for the small group of contractors who have signed union agreements.

Additional studies have shown that PLAs increase the cost of government construction, either because of the smaller number of bidders or because of the added costs of dealing with unions. The increased costs have not produced any proven increases in construction quality, safety, or timeliness. To the contrary, many government projects that have been subjected to PLAs have encountered problems with construction defects, delays, and workplace injuries.

During the past eight years, an executive order was in place prohibiting government-mandated PLAs on all federal and federally assisted construction projects. Thousands of construction contracts were awarded and $147.1 billion worth of federal construction projects were spent by the federal government, all without any “assistance” from PLAs, during this time period. If there were any truth to the notion that PLAs are needed on government construction projects, then the past eight years should have witnessed significant increases in labor disputes, labor shortages, and/or contractor coordination problems on federal construction sites, resulting in delays and cost increases. To the contrary, published reports, contractor testimony, and federal documents all confirm that there were no significant labor-related problems with federal construction projects, let alone any that PLAs would have addressed.

The results of the past eight years of federal construction procurements utterly belie the claims put forward in the new Executive Order 13502 to the effect that PLAs are needed to “ensure a steady supply of labor” on federal contracts, to avoid “delays caused by labor disputes” and to ensure the “efficient and timely completion of construction on federal  projects.” Again, none of these adverse effects have occurred on any significant number of federal projects over the last eight years, even though no federal PLAs were permitted.

President Obama’s statutory authority to issue procurement-related executive orders is restricted to those orders that are necessary to achieve greater “economy and efficiency” in the procurement process. It is clear that Executive Order 13502 does not meet that objective and will in fact have the opposite result. Nor does the Executive Order create any sound criteria for federal agencies to apply in deciding whether to impose PLAs on specific projects, an omission which will inevitably lead to arbitrary and discriminatory results. The Executive Order is contrary to law and injures workers, employers and taxpayers.

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