Government Contracts - Project Labor Agreements

On February 6, 2009, President Obama made a significant change in federal policy concerning project labor agreements, or PLAs, on federal projects and government contracts. PLAs require all contractors and subcontractors on a construction project to have a labor contract with unions.

Until, February 6, federal agencies could not require the use of PLAs on any government projects. The new Executive Order reverses that policy. While not requiring the use of PLAs, it encourages federal agencies to consider requiring PLAs on all federally-funded construction projects greater than $25 million. It makes PLAs permissible if their use advances the policies of the government's labor-management stability and compliance with safety and employment laws. The Office of Management and Budget has 180 days to make recommendations as to whether the new Order should be broadened.

The Executive Order should result in an increase in the use of unionized labor on federal construction projects. PLAs will likely result in higher wages and require negotiation with construction unions in order to obtain federal work. While unions are pleased with the Executive Order, which reverses a non-union trend of several decades, non-unionized Contractors are not, as it impacts their ability, or desire, to bid on federal projects.

The specific language of the executive order can be found at www.whitehouse.gov/the_press_office/ExecutiveOrderUseofProjectLaborAgreementsforFederalConstructionProjects/.