Project Labor Agreements (PLAs) got a big boost in December with the announcement of a final rule implementing President Biden’s Executive Order 14063 requiring PLAs for most large-scale federal construction projects.
The White House announced a final rule implementing the executive order, which will require the use of PLAs—a prehire collective bargaining agreement unique to construction—for large federal construction projects, where total estimated cost to the federal government is $35 million or more, with limited exceptions.
“By requiring all parties—contractors, subcontractors, and unions—to negotiate set terms that govern project construction, the rule will lead to increased efficiency,” according to a December 2023 White House press release announcing the implementation of the executive order.
The rule will require contracting officers to provide a market analysis on a project basis that must be current and proactive—18 months in advance—to reflect current market conditions. It makes clear that union and nonunionized contractors are to be included in the market research and be able to bid on projects.
The rule encourages the use of Community Benefit Agreements that help with the local economy. It also allows agency flexibility of a PLA, whether it is prebid or postbid, based on the offerors’ experience with a PLA.
There is an exemption clause that an agency does not require a PLA, based on one or more of the following factors:
- The project is of short duration and lacks operational complexity.
- The project will involve only one craft or trade.
- The project will involve specialized construction work that is available from only a limited number of contractors or subcontractors.
The agency’s need for the project is of such an unusual and compelling urgency that a PLA would be impractical.
The rule will require agencies to publish, on a centralized public website, data showing the use of PLAs on large-scale construction projects, as well as descriptions of the exceptions granted, to the extent permitted by law and consistent with national security and executive branch confidentiality interests.
Ahead of the December announcement, IBEW and NECA in October 2022 submitted joint comments on the proposals by the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council to amend the Federal Acquisition Regulations to implement Biden’s Executive Order 14063.
“IBEW and NECA have long partnered with construction owners, managers, contractors and state and local building and construction trades councils to negotiate and implement PLAs to successfully deliver complex construction projects in both the public and private sectors,” the joint letter stated. “Our experience with PLAs demonstrates these agreements promote economy, efficiency, and project quality, and offer substantial benefits to the communities where construction is located.”
PLAs reduce administrative costs, improve coordination and consistency, and prevent cost overruns and project delays that can be fatal to successful project completion, according to the joint letter. PLAs also ensure that projects are completed to the highest quality standards, minimizing the need for work to be redone later.
“In addition, PLAs often contain provisions requiring participation in registered apprenticeship programs and pre-apprenticeship programs to help recruit women, people of color and other underrepresented individuals into the construction industry to provide family-sustaining careers working on the projects that impact their communities,” according to the joint letter.
In the private sector, PLAs have been used extensively by major corporations, including many Fortune 500 companies, according to the joint letter. Some of the major construction projects with PLAs include:
- The New York City 2009 Economic Recovery Project Labor Agreement. This PLA was designed to “save construction jobs and financially distressed private sector projects from the severe impact of the 2008-2009 economic downturn to New York City’s construction and real estate markets.” The ERPLA is estimated to have reduced the cost of unionized construction by between 16% and 20%.
- Dominion Cove Point LNG Terminal. A PLA was used for this 2013 $3.4 billion LNG (liquid natural gas) export terminal led by IHI/Kiewit, which required 1,500 construction workers. This state-of-the-art facility included a 1.25-mile underwater tunnel connecting the onshore facilities to the offshore platform in Chesapeake Bay. It was the first facility of its kind on the East Coast.
- The Shell Beaver County Cracker Plant. This 2016 massive energy project built under a PLA required 6,000 construction craft workers.
- Honda of America in 2016 signed a PLA for a $210 million project to build a new, state-of-the-art 300,000-square-foot paint facility that can handle 229,000 vehicles per year. The facility was deemed the company’s most energy-efficient paint facility, utilizing several new technologies to significantly reduce energy consumption, water usage and emissions while also shortening Honda’s painting process.
- Malta GlobalFoundries Manufacturing Facilities. This 2014 project was subject to one of the largest private sector PLAs in IBEW/NECA history to build a semiconductor manufacturing facility. GlobalFoundries invested nearly $8 billion and the total annual work hours on the project averaged over 2 million per year during construction.
- Marcus Hook Industrial Complex. In 2019, a $200 million PLA was announced with the Philadelphia Building Trades to expand the capabilities of the Marcus Hook natural gas liquids processing facility. The project created approximately 1,200 construction jobs, including 300 IBEW members from local unions in the surrounding area.
- Citizens Imperial Solar, LCC Project. The 2019 IID/Citizens low-income community solar project was built under a PLA. The project will serve upwards of 12,000 electric customers in an economically distressed desert area of California. It is one of the nation’s largest low-income community solar projects, and unique among community solar energy projects in its structure and implementation.
- The Oregon Clean Energy Center North America Project Development, LLC, a joint venture of CME and Pure Energy, in 2014 utilized a PLA to build the Oregon Clean Energy Center. The Center is an 869-MW (peak: 951 MW) natural gas-fired electric power plant in Oregon, Ohio, that uses state-of-the-art technology to capture exhaust heat to generate enough electricity to power more than 700,000 homes. About 1,500 skilled construction craftspeople worked on the project.
- The joint letter cited a 2004 report by the Iowa Policy Project: “The existence of PLAs on private-sector construction projects demonstrates confidence in the private sector that PLAs produce significant net benefits and are useful as an engineering management tool. Since the owners of private projects are out to make money, the widespread use of PLAs on these projects over long time spans is a good indication that PLAs, especially on large, and/or complex projects, most often produce noticeable positive net benefits.”
In short, “PLAs must be cost effective and productive, or they would not be used so widely by the private sector entities adopting them.”
Biden’s Executive Order 14063 was effective immediately and applies to all solicitations for contracts issued on or after the effective date of the final regulations issued by the FAR Council, expected Jan. 22.