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U.S. Department of Transportation Federal Highway Administration

MEMORANDUM

EXECUTIVE ORDER ENCOURAGING THE USE OF PROJECT LABOR AGREEMENTS:

On February 6, 2009, President Obama issued Executive Order 13502 (the Order) on the use of a project labor agreement (PLA) for Federal construction contracts.  A copy of the Order is attached.  The Order revoked two Executive Orders issued under President Bush, which required any executive agency issuing grants, providing financial assistance, or entering into cooperative agreements for construction projects to ensure that no project specifications were used that either required or prohibited bidders from utilizing PLAs.  

Under the terms of the Order, the Federal Highway Administration (FHWA) may grant requests by States to use PLAs.  The Order specifically permits the use of project labor agreements in projects receiving Federal financial assistance, including projects financed by the FHWA.  The Order establishes that the policy of the Federal Government is to encourage the consideration of PLAs for large-scale construction projects due to the benefits that PLAs can offer by promoting the efficient and expeditious completion of such projects. 

The FHWA may approve a request by a State department of transportation (State DOT) to use PLAs on a project-by-project basis so long as the PLA is consistent with applicable law.  Division Offices should review and respond to State requests to use PLAs in a manner consistent with the interim guidance described in more detail below.  Division Offices are directed to take appropriate steps to communicate this guidance to their respective State DOTs.

INTERIM PLA GUIDANCE:

Section 7 of Executive Order 13502 directs the Office of Management and Budget (OMB) to provide the President with recommendations with respect to the use of PLAs in construction contracts receiving Federal financial assistance.  The OMB has not yet released that guidance.  When OMB issues its recommendations regarding the use of PLAs, we expect that we will issue additional guidance to conform to those recommendations.  In the interim, you should use the guidance outlined below when you receive a request to use a PLA on a Federal-aid project.  This guidance supersedes FHWA’s October 5, 2001, Guidance (Decision on Woodrow Wilson Bridge PLA Request) regarding PLAs. 

State DOTs may require the use of a PLA by a contractor on a project if they are able to present evidence that the use of such an agreement on the relevant project will (i) advance the government’s interest in reducing construction costs and achieving economy and efficiency, producing labor-management stability, and ensuring compliance with laws and regulations governing safety and health, equal employment opportunity, labor and employment standards, and other matters as appropriate and (ii) be consistent with law.  Moreover, while the terms of the Order apply only to "large-scale construction projects" with a total cost of $25 million or more, State DOTs may require the use of PLAs on projects totaling less than $25 million if the project would otherwise comply with this guidance.

The use of a PLA may be approved if the State DOT has made a reasonable showing that the use of a PLA on the project will advance the interests of the government.  In determining whether the use of a PLA is in the interest of the government, a State DOT may consider many factors.  Those factors include, but are not limited to:

• The size and complexity of the project;
• The importance of the project and need to adhere to a certain timeline;
• The risk of labor unrest on the project and the circumstances that are present that may lead to a heightened risk of labor disruption, such as the history of labor unrest in the area, the anticipated working conditions of the project relating to the environment or work schedules, and the expiration of one or more collective bargaining agreements that could lead to jurisdictional disputes;
• The impacts of a labor disruption to the users, the operation of the facility, and the region;
• The costs of a delay should a labor disruption occur; and
• The available labor pool relative to the particular skills required to complete the project.

A showing of any one or more of these factors may be adequate to justify the use of a PLA in particular project.  This list is not exclusive—other factors may reasonably permit a State to conclude that the use of PLA is appropriate for a given project.

A State DOT applying for the use of a PLA should provide a written statement to the Division Office asserting that the use of PLA in the relevant project advances the interest of the government.  The State DOT should describe the basis for that determination and provide reasonable documentation demonstrating its factual underpinnings.  If the State DOT has provided evidence that the Division Office believes is reasonably adequate to satisfy the decision of the State DOT to use a PLA on a particular project, the Division Office may accept that evidence as satisfying the first requirement for the use of a PLA unless it is concerned that the State DOT’s conclusion or the information supporting it is incomplete or inaccurate.

In addition to furthering the interest of the government, PLAs must be consistent with law.  Division Offices must ensure that PLAs are used and structured in a manner so as to be effective in securing competition, as required by 23 U.S.C. 112¹.  First, the PLA must not prohibit any contractor from submitting a bid or working as a subcontractor on the project.  Second, in order to be consistent with the competition mandate of 23 U.S.C. 112, the use of a PLA must lead to a more cost effective use of Federal funds.  Note that this second requirement may be satisfied by the same showing required by the State DOT in order to demonstrate that the PLA is in the interest of the government, as described above.

Division Administrators must ensure that the use of a PLA for a particular project is in compliance with all title 23 and 49, United States Code and Code of Federal Regulation, requirements.  Those requirements include compliance with DOT’s disadvantaged business enterprise (DBE) program at 49 CFR Part 26, FHWA’s restrictions on the use of labor employment preferences under 23 CFR 635.117(b) and the FHWA’s Equal Employment Opportunity Requirements under 23 CFR Part 230.

If a State DOT requests that a PLA be used, the Division Office must also review the terms of the PLA.  A valid PLA must:

1. bind all contractors and subcontractors on the construction project through the inclusion of appropriate specifications in all relevant solicitation provisions and contract documents;
2. allow all contractors and subcontractors to compete for contracts and subcontracts without regard to whether they are otherwise parties to collective bargaining agreements;
3. contain guarantees against strikes, lockouts, and similar job disruptions;
4. set forth effective, prompt, and mutually binding procedures for resolving labor disputes arising during the PLA;
5. provide other mechanisms for labor-management cooperation on matters of mutual and concern, including productivity, quality of work, safety, and health; and
6. fully conform to all statutes, regulations, and Executive Orders.

For additional questions regarding this Interim Guidance or PLAs, please contact Mr. Gerald Yakowenko in the Office of Program Administration (HIPA-30) at 202-366-1562 or Mr. Michael Harkins in the Office of Chief Counsel (HCC-30) at 202-366-4928.

Attachment (.pdf)

¹Section 112(a) of title 23, United States Code, applies to all highway projects using Federal-aid highway funds "where construction is to be performed by the state transportation department or under its supervision."  Section 112(a) provides that the Secretary shall require such plans and specifications and such methods of bidding as shall be effective in securing competition.  Additionally, Section 112(b) provides that "construction of each project...shall be performed by contract awarded by competitive bidding." These provisions have governed the process for awarding Federal-aid highway contracts since 1938 and 1954 respectively.