AGC is Suing the Federal Government

Going to court over mandatory project labor agreements

By Alicia Amberg

hy take this drastic step? In two words, fairness and flexibility. Let’s get right into the details.

New federal rules affecting the construction industry are unrealistic for many of our members. The Federal Acquisition Regulation, or FAR, Council has issued a final rule that mandates the use of Project Labor Agreements, or PLAs, for federal construction projects valued at $35 million or more. This significant change, effective for solicitations issued on or after January 22, seeks to standardize labor relations on large federal projects. This is a complicated subject. I’ll try to break it down into simpler terms.

A PLA is a pre-hire collective bargaining agreement with one or more labor organizations that establishes the terms and conditions of employment for a specific construction project. Until now, contractors could choose whether to enter into PLAs. However, under the new rule, choice is eliminated. PLAs are mandated for certain federal projects, altering the landscape for how contractors engage with labor agreements.

As an organization, Associated General Contractors, or AGC, respects the value PLAs can offer to a project; we do not oppose PLAs per se. Our concern lies with the mandatory imposition of PLAs on publicly funded projects. We believe in the principle of fair and open competition, allowing contractors to decide the best approach for their project and workforce needs. Mandating PLAs, in our view, restricts this freedom and could introduce inefficiencies and increased costs—especially for publicly funded projects that may not benefit from a one-size-fits-all labor agreement.

Mandatory PLAs: The rule changes the discretionary use of PLAs to a requirement for federal projects over $35 million, with limited exceptions.

Dollar threshold increase: The applicable project value threshold has been raised from $25 million to $35 million, and it expands the range of projects affected.

Small business consideration: The rule acknowledges the impact on small businesses, promising assistance from the US Office of Management and Budget, or OMB, and the US Department of Labor, or DOL, though details of this support remain unclear.

Effective date and exceptions: The mandate applies to solicitations from January 22, 2024 onward, with very limited exceptions available.

Project cost: Mandating PLAs could lead to higher operational and labor costs, affecting overall project affordability.

Legal costs: The requirement introduces potential legal complexities, as contractors navigate compliance and potentially challenge unfair conditions.

Negotiation dynamics: With the government stepping back from direct negotiation roles, contractors are left to negotiate PLAs from scratch, often without prior experience or established frameworks, increasing the risk of unfavorable terms.

Like so many other industries in our state, Alaska’s construction industry is different. It requires a nuanced approach to labor agreements. The broad application of PLAs may not adequately address our state’s unique construction challenges, underscoring the need for a more tailored and flexible approach to ensure project success.

Recognizing the potential challenges this mandate poses, AGC of America filed a lawsuit on behalf of the membership. This legal action aimed to challenge the compulsory nature of PLAs for federal projects, advocating for the preservation of contractor choice and competitive fairness. We’re not just fighting for the principle of choice but also addressing concerns over increased project costs and potential ineffi ciencies. However, as of March 12, it was announced that a federal judge disagreed with AGC’s claim that the mandate to require PLAs on major federal construction projects harms the construction industry and that a nationwide preliminary injunction should be issued. While AGC disagrees with the court’s analysis, it is clear that the implementation of the PLA mandate by federal agencies—and whether exceptions are granted—will be weighed heavily in judicial review. Additionally, AGC is consulting with legal counsel to determine the appropriate path forward.

We urge our members to stay informed and engaged. If you receive any guidance related to the new federal PLA mandate, please share it with us. Your insights are invaluable as we navigate this change together. This eff ort is not just about confronting the immediate challenges but also about safeguarding our industry’s future. As we move forward, we will keep members posted and ask that we all share information and guidance as we receive it. We are committed to ensuring that our members’ voices are heard and that Alaska’s construction industry can continue to thrive on principles of fairness and choice.