What is Section 7 of Executive Order 13502 on Federal Project Labor Agreements?

2 December 15, 2009  Federal Construction

From 2001 until Feb. 6, 2009 Executive Order 13202 protected at least $147.1 billion worth of federal construction projects from discriminatory and costly government-mandated project labor agreements (PLAs).

In addition, the order prohibited PLAs on hundreds of billions of dollars worth of federally-assisted construction projects across the country. Federally-assisted projects are local, state or private construction projects that receive a federal grant, loan, tax-break or other form of financial assistance.

Unfortunately, the practice of guaranteeing free and open competition on federal and federally-assisted construction projects ended when President Obama signed Executive Order 13502, which repealed Executive Order 13202 and encourages federal agencies to require PLAs on projects valued at more than $25 million.

While the construction industry waits for a final rule from the FAR Council implementing Executive Order 13502 into federal procurement standards, it is important to remember that the Obama Administration is evaluating ways to expand the executive order and government-mandated PLAs, which will open the door to waste and government corruption in federal contracting, as directed by Section 7 of Executive Order 13502.

Section 7. 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 the deadline at Aug. 5 but an order hasn’t been issued]

Is Section 7 Coming Soon?

It is clear that Secretary of Labor Hilda Solis is a proponent of PLAs. At the Sept. 14, 2009 AFL-CIO Convention in Pittsburgh, PA, she reaffirmed her support of these special interest giveaways that will kill jobs and exclusively benefit Big Labor while harming American taxpayers, workers and businesses.

“Not only do the President and I support Employee Free Choice Act, we are strong supporters of Project Labor Agreements.

We know that they are a win-win: good for workers and for contractors Project Labor Agreements improve the economy and efficiency of construction projects.

President Obama issued an executive order encouraging the use of PLA’s for large federally funded projects, and we have been working very hard at DOL with Vice President Biden and the Middle Class Task Force to ensure that Project Labor Agreements are really encouraged and used.

Project Labor Agreements help make Good Jobs!”

Office of Management and Budget (OMB) Director Peter Orszag is a fan of PLAs too. July 10, 2009, he signed an OMB memo encouraging federal agencies to require PLAs despite the fact that the FAR Council had only issued a proposed rule implementing Executive Order 13502:

“Accordingly, in light of the benefits that PLAs may offer to Federal agencies in construction projects, agencies are encouraged, during this interim period prior to the FAR Council’s issuance of its final rule, to consider the value of PLAs on a project-by-project basis, and to require the use of PLAs in appropriate circumstances and to the extent permitted by law.”

Despite their clear support for government-mandated PLAs, in May, senior Obama Administration officials graciously invited ABC National to a White House meeting to hear ABC’s contrasting perspective on the expansion of government-mandated PLAs and Executive Order 13502 via Section 7.

ABC National representatives made a strong case that expansion of Executive Order 13502 was not in the best interest of good government, taxpayers, construction procurement officials, or 84.6 percent of the U.S. construction workforce (citizens who do not belong to a construction union) and their employers.

States and local communities should take interest in the expansion of Executive Order 13502 via Section 7. Accepting federal assistance for construction projects with attached strings that favor Big Labor could bust strained budgets. Will states and local communities swallow the 18 percent PLA premium? Can they afford to build four schools, hospitals, bridges and courthouses for the price of five?

A PLA mandate on federally-assisted projects will also cost jobs. The impact of higher labor costs on finite budgets translates into fewer construction projects. Less building means less jobs in an industry that has shed close to one million jobs in the last 12 months and has a national unemployment rate flirting with 20 percent.

In addition, will local and state government understand that PLAs give preference to out-of-state union members ahead of local and qualified nonunion employees? PLA projects in areas with low union density and market share often fall victim to this boneheaded fiscal policy, as local nonunion employees will continue to rely on state services and not pay into the local tax base while out-of-state union members raid jobs through local union hiring halls.

Finally, it is discriminatory and shortsighted public policy for states and communities to tell skilled nonunion labor they can’t work on these projects unless they agree to pay union dues and lose employer contributions to union benefit and pension plans for the life of a PLA project – typical real world consequences of PLAs on nonunion labor and key reasons why nonunion contractors rarely bid on PLA projects.

The public, elected officials, media and construction workforce must realize there is a lot at stake with the expansion of Executive Order 13502 via Section 7.

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 and local governments are not required by the executive order to mandate PLAs on 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.

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2 Responses to What is Section 7 of Executive Order 13502 on Federal Project Labor Agreements?

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Fiscal Insanity January 12, 2010 at 10:38 am

Expensive and special interest strings attached to federal money is not uncommon. Just look at federal prevailing wage laws.

The expansion of Obama’s giveaway to Big Labor via PLAs/Section 7 will harm state budgets and lead to more unemployment for a state’s construction industry workforce – the national construction industry unemployment rate is close to 20 percent). These are folks that are already on unemployment and are relying on public support.

Hopefully states will restore some sanity to their fiscal problems by rejecting PLAs and/or federal money.

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