On December 22, 2023, the Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) published a final rule that could have consequential effects for federal construction contractors and subcontractors. The rule, which implements President Joe Biden’s Executive Order 14063, directs agencies awarding “large scale construction contracts” to require the use of project labor agreements (PLA). 

Stated simply, a PLA is a type of pre-hire collective bargaining agreement that establishes the terms and conditions of employment for a specific construction project. Under the final rule, agencies generally must require the use of PLAs on construction contracts costing the government $35 million or more. This rule applies to both contractors and subcontractors on a project, subject to limited exceptions.

But that’s not all. An agency can require the use of PLAs on projects where the value is less than $35 million in “appropriate” circumstances. Factors the agency will consider when determining if the use of a PLA is “appropriate” are whether: (i) the project will require multiple construction contractors and/or subcontractors employing workers in multiple crafts or trades; (ii) there is a shortage of skilled labor in the region in which the construction project takes place; (iii) it will take an extended period of time to complete the project; (iv) PLAs have been used on comparable projects undertaken by governmental or private entities in the geographic area of the project; (v) a PLA will promote the agency’s long term interests, such as facilitating the training of a skilled workforce to meet the agency’s future construction needs; and (vi) any other factors the agency deems appropriate. 

So the final rule will not only affect contractors and subcontractors on large scale construction contracts, but it also could impact contractors and subcontractors working on smaller projects.

The rule is expected to go into effect on January 22, 2024. All companies engaged under a federal contract or contemplating the same should consult with experienced labor counsel to understand the implications of any PLA requirement. By way of example: those responsible for negotiating a PLA should be sure to avoid provisions that conflict with other contractual obligations; subcontractors could be subject to certain staffing requirements that result in higher costs and less flexibility than anticipated; and, there may be legal grounds for challenging the PLA requirement itself. Construction contractors should carefully evaluate the increased costs and additional burdens as it proceeds with procuring covered construction contracts and subcontracts.