On January 21, 2025, Judge Ryan T. Holte of the U.S. Court of Federal Claims issued a decision finding now former-President Biden’s February 4, 2022, Executive Order 14063 (EO) and the resulting Federal Acquisition Regulations (FAR) mandating the use of Project Labor Agreements (PLA) on certain federal construction contracts violates federal law. MVL USA, Inc. v. United States, No. 24-1057 (Fed. Cl. Jan. 21, 2025).
BACKGROUND
A PLA is a binding agreement between a contractor and at least one labor union1 establishing the terms of employment, which often include provisions to prevent strikes, lockouts, and other work stoppages. As set forth in the EO and relevant FAR provision, the general requirements of a PLA are:
(b) Requirements. A project labor agreement shall
(1) Bind all contractors and subcontractors engaged in construction on the construction project to comply with the project labor agreement;
(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 term of the project labor agreement;
(5) Provide other mechanisms for labor-management cooperation on matters of mutual interest and concern, including productivity, quality of work, safety, and health; and
(6) Include any additional requirements as the agency deems necessary to satisfy its needs.
FAR 22.504.
With limited exceptions, the Biden EO mandates PLA usage. A PLA mandate is problematic because most of the construction industry is open or merit-shop — not unionized. Likewise, many states have right-to-work laws that impact labor and employment rights.
For many years, federal guidance relating to PLAs has shifted. The Obama administration issued an executive order and regulatory guidance encouraging federal agencies to use PLAs at their discretion. In contrast, Biden’s EO, and the subsequent FAR rules implementing it (FAR Subpart 22.5 and 55.222-33), mandate the use of PLAs on federal construction contracts expected to exceed $35 million.
The issuance of a PLA mandate was met with strong criticism in the federal construction industry. The mandate’s critics pointed to a number of issues, including, as we have argued in various bid protests, that the EO and regulations are vague and inaccurate. To some, this evidences a fundamental misunderstanding of how unions and PLAs function. One perceived inaccuracy is the requirement that only one union must sign a PLA, instead of all trades, either individually, through their unions, or trade counsel. Likewise, in many places in the United States, a PLA is difficult — if not impossible — to obtain. This may be due to the unavailability of organized labor for all applicable trades, which results in significant cost increases.
As a final example, the PLA mandate has resulted in loopholes that create unintended competitive advantages for some contractors. Almost all federal construction projects are covered by the Davis-Bacon Act,2 which requires contractors to pay all trades at least the prevailing wage for their trade. This requirement ensures all trades on a federal project receive fair and equitable pay. PLAs exclude non-union labor, resulting in increased wages caused by a limited unionized workforce with higher bargaining power. This results in contractor attempts to “game the system” by entering into a PLA with only one union or limited labor organization outside the jurisdiction of the project.
THE CASE AT ISSUE
From July 2024 to September 2024, 12 construction companies performing federal construction projects in various states filed bid protests in the U.S. Court of Federal Claims challenging the requirement in the federal agencies’ bid solicitations that contractors bidding on the projects enter into a PLA. In each of those solicitations, the federal agencies’ sole basis for including a PLA requirement was the EO and implementing FAR regulations.3 Those cases were then consolidated for consideration.
Plaintiffs made several arguments against the PLA mandate, including that such a mandate is unconstitutional, arbitrary and capricious, violates the Competition in Contracts Act’s (CICA) “full and open” competition requirement and is otherwise not authorized by statute. In its decision just rendered, the court agreed with plaintiffs and made three key findings:
(1) The government’s decision to implement a PLA mandate based solely on the Executive Order and implementing FAR regulations, and in disregard to the agencies’ own market research results indicating PLA mandates would be anticompetitive, is arbitrary and capricious. See MVL USA, Inc. v. United States, No. 24-1057 (Fed. Cl. Jan. 21, 2025).
(2) The PLA requirement violated CICA’s “full and open” competition requirement. In so finding, the Court stated that the record “teems with examples of how the Biden EO PLA mandate excludes non-PLA offerors on [the basis that they decline to enter into a PLA alone]… [and] have no substantive performance relation to the substance of the solicitations at issue and violate CICA’s requirement that procuring agencies ‘obtain full and open competition through the use of competitive procures.’” Id. at *37.
(3) Third, the government failed to establish that it had the “express statutory authority” required by § 3301 of CICA to violate the “full and open competition” requirement. In so finding, the Court noted that the FAR regulations implementing the Executive Order do not constitute “express statutory authority” and that in making this argument, “the government is, in effect, asking the Court to take a red pen to § 3301 and add a caret to read as ‘expressly authorized by statute or Federal Acquisition Regulations.’” Id. at *38.
In making these findings, Judge Holte emphasized that former-President Biden’s Executive Order and the implementing FAR regulations are a major deviation from previous presidents’ discretionary stances on PLAs and lead to anti-competitive results in violation of CICA. In other words, the Biden EO’s mandate that federal agencies “shall” use PLAs was a key deciding factor.
Importantly, the court did not issue an injunction as part of the relief in this case — at least not yet. Instead, the court afforded the three agency defendants a short period to “reassess their PLA decision” on an individual basis in light of the court’s decision that PLAs violate CICA.
As a result, it is unclear how this decision will definitively impact existing federal construction projects with PLA requirements, including those that have already been awarded. Presumably, moving forward, federal agencies will reevaluate — and, ultimately, avoid — including a PLA requirement in a bid solicitation. It is also highly probable that, with the new Trump administration, we will see executive action in this area following the court decision. In fact, a number of trade groups sent an open letter to President Trump before his inauguration asking that the Biden EO be rescinded although it was not included in the first round of EO recissions issued on January 20, 2025. Nevertheless, it would not be surprising to see President Trump rescind Executive Order 14063 at some point in the near future based on recent similar executive action activity on government contracts labor and employment issues.
With the current uncertainty regarding the short and long-term impacts of this decision and the validity of Executive Order 14063, contractors should raise concerns to the agency when considering federal solicitations containing PLA requirements and remain vigilant for the issuance of Executive Orders that may impact Executive Order 14063. These concerns must be raised prior to submission of a bid or proposal. Otherwise, a bid protest may be necessary.