January 28, 2025

Court Finds Project Labor Agreement Mandate Unlawful

The Future of FAR 52.222-34 Is Uncertain and May Be Revoked by New Trump Administration
Holland & Knight Alert
Jeremy D. Burkhart | Bailey Carolyn McHale

Highlights

  • A federal court declared President Joe Biden's policy requiring project labor agreements (PLAs) on federal construction projects of $35 million or more to be unlawful.
  • On Jan. 19, 2025, Judge Ryan T. Holte of the U.S. Court of Federal Claims ruled in favor of federal contractors who challenged the requirement to enter into a collective bargaining agreement with labor organizations regarding the terms and conditions of employment for all large-scale construction projects. Judge Holte found the policy violated the Competition in Contracting Act (CICA) because it excluded responsible offerors capable of performing the contract.
  • Although the court found that the requirement was unlawful, it did not issue an injunction. Thus, for now, contractors with PLA requirements in their contracts (FAR 52.222-33 and 34) should continue to follow the rule.
  • As President Donald Trump already revoked numerous acquisition-related executive orders (EOs) put in place under former President Biden, it remains to be seen whether EO 14063 from Feb. 4, 2022 (Use of PLAs For Federal Construction Projects) will be revoked in the coming days.

Judge Ryan T. Holte of the U.S. Court of Federal Claims ruled on Jan. 19, 2025, in favor of federal contractors who challenged a requirement to enter into a collective bargaining agreement with labor organizations regarding the terms and conditions of employment for all large-scale construction projects.1 Judge Holte found the policy violated the Competition in Contracting Act (CICA) because it excluded responsible offerors capable of performing the contract.

Background

The use of project labor agreements (PLAs) – a prospective contractor's collective bargaining agreement with unions to for a specific project – has been the subject of Executive Orders (EO) for decades.2 On Feb. 4, 2022, President Joe Biden issued EO 14063, requiring contractors and subcontractors engaged in construction projects of $35 million or more to execute a project labor agreement, the impact of which was analyzed by Holland & Knight. (See Holland & Knight's previous alert, "Project Labor Agreement Requirement for Large-Scale Construction Becomes Effective Jan. 22," Jan. 12, 2024.)

Pursuant to Section 8 of EO 14063, the Federal Acquisition Regulatory (FAR) Council promulgated a final rule implementing EO 14063 through FAR 22.505, 52.222-33 and 52.222-34 (collectively, the Rule or PLA requirement). A PLA is defined as "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 and is an agreement described in 29 U.S.C. 158(f)."3

The Court's Decision in MVL USA, Inc. v. United States

Solicitations for seven different federal projects for the U.S. Army Corps of Engineers, Naval Facilities Engineering Systems Command and General Services Administration (GSA) each contained the PLA requirement by incorporating FAR 52.222-33 and 52-222-34. Twelve construction companies challenged the authority of federal agencies to mandate that they enter into PLAs. These seven protests were consolidated before Judge Holte in MVL USA, Inc. v. United States.

In holding that FAR 52.222-33 violated CICA's fair and open competition requirement, Judge Holte made the following findings:

  • CICA's "full and open competition" requirement means that all responsible sources must be allowed to compete for contracts.4 The PLA requirement in solicitations hindered responsible sources from competing for contracts because the requirement "has no bearing on whether plaintiffs can perform the contract at issue," according to the court.5 Accordingly, the automatic requirement to implement a PLA on every large-scale construction project violates CICA's full and open competition requirement.
  • FAR 22.504 violates CICA because it allows agencies to reduce competition to PLA-contractors, a limitation that has no relation to the substance of the solicitation or performance at issue. There is no statutory exception permitting this blanket restriction of full and open competition.
  • The agencies' decision to proceed with a PLA requirement that was contradictory to their market research was arbitrary and capricious. On this point, Judge Holte reasoned as follows: "The Court finds GSA's decision to proceed with the Alternative II PLA requirement as a mandate based solely on the President's policy – wholly disregarding the post-PLA market survey recommendation to remove the PLA entirely because a PLA would increase price and reduce competition – is arbitrary and capricious as it runs counter to any evidence presented to the agency."
  • The court pointed out that during the notice and comment period "numerous" public comments from industry had expressed concern that the Rule violated CICA's requirement for full and open competition. Because the FAR Council did not need to address these concerns in the Final Rule (aside from quoting CICA's definition of "full and open competition"), the court's analysis relied on the U.S. Court of Appeals for the Federal Circuit's CICA framework in National Government Services, Inc. v. United States, 923 F.3d 977 at 985 (Fed. Cir. 2019).

The plaintiffs also argued that the president lacked authority under the Federal Property and Administrative Services Act (FPASA)6 to issue the PLA directive. Though Judge Holte agreed with the plaintiff's argument, the court did not resolve this issue, instead choosing to "leave[] to Congress the matter of addressing the President's authority under FPASA to issue expansive construction industry labor policies."7 Recent rulings have indicated a potential limit to executive authority in this area. Holland & Knight wrote about how the U.S. Court of Appeals for the Ninth Circuit recently found that President Biden had exceeded his authority under FPASA in directing a government contractor minimum wage, although the U.S. Court of Appeals for the Tenth Circuit came to the opposite conclusion last spring when it determined that the president was within his authority to issue minimum wage regulations on contractors.8 Prior to that, multiple federal appellate courts found that the president lacked authority under FPASA to issue the government contractor vaccine mandate.9

Although the court ruled in favor of the protestors, it did not issue an injunction, instead ordering the agencies to file a status report in early February regarding their plans moving forward.

Looking Forward

The impact of this ruling is not yet certain. Key to the court's holding was the fact that the agencies' 2024 implementation of EO 14063 ignored their own market research, which had concluded that project labor agreements would be anti-competitive. Instead, the agencies relied solely on President Biden's EO, which the court found to be arbitrary and capricious. Thus, perhaps the result would have been different if the agencies' market research had shown that PLAs would not have negatively impacted competition.

In a separate protest, the U.S. Government Accountability Office (GAO) was recently presented the question of whether the requirement to submit a PLA was reasonable. However, the GAO did not address the merits of that challenge, instead finding that the challenge was untimely because the protester had not raised it until after award had been made.10

On Jan. 20, 2025, President Trump signed an EO titled, Initial Rescissions of Harmful Executive Orders and Actions, which revoked numerous EOs issued by President Biden, including EO 14055, Nondisplacement of Qualified Workers Under Service Contracts, and more than a dozen other acquisition-related directives. 

Though President Trump has not commented specifically on EO 14063, Use of Project Labor Agreements for Federal Construction Projects, there is a possibility that he will revoke this EO (which would have the effect of abrogating the Rule) in the near future.  

Next Steps for Contractors

Although the court found that the requirement was unlawful, it did not issue an injunction. Instead, the court decided that "the agencies [should] be afforded a short period of time to reassess their PLA decision on an individual basis." Noting the different circumstances surrounding the individual solicitations, the court directed the parties to file a joint status report by Feb. 3, 2025, explaining the agencies' plan for each solicitation moving forward.

Following this decision, contractors should do the following:

  • Contractors with PLA requirements in their contracts (FAR 52.222-33 and 34) should continue to follow the Rule. The PLA mandate has not been rescinded and remains in effect for any large-scale construction procurements not covered by MVL USA, Inc. et al. v. United States.
  • If a contractor would like to discuss options to challenge the inclusion of the Rule, it should consult legal counsel to discuss strategies on approaching the government to modify the contract to remove that clause. If the government is unwilling to do so, a contractor has the option of filing a pre-award protest challenging the terms of the solicitation. Bear in mind that any such challenges often must be filed by the deadline for proposal submission. It is also possible that actions short of litigation could persuade the government to voluntarily withdraw the Rule from solicitations, such as engaging counsel to communicate with the agency.

Holland & Knight will continue to monitor developments regarding the contractor minimum wage and provide updates. Please contact the authors if you have specific questions for your business.

Notes

1 MVL USA, Inc. et al. v. United States, Nos. 24-1057, 24-1077, 24-1144, 24-1219, 24-1398, 24-1433, 24-1461 (Fed. Cl. Jan. 21, 2025).

2 EO 14063, 87 FR 7363 (President Biden's EO requiring PLAs, the mandate); EO 13502, 74 FR 6985 (President Barack Obama's EO allowing agencies to require PLAs, the opt-in approach); EO 13202, 66 FR 11225 (President George W. Bush's EO neither banning or requiring PLAs, the neutrality policy); EO 12818, 57 FR 48713 (President George H.W. Bush's EO prohibiting agencies from requiring PLAs, the prohibition).

3 FAR 52.222-34(a).

4 Id. at 34 (citing National Government Services, Inc. v. United States, 923 F.3d 977 at 985 (Fed. Cir. 2019)).

5 MVL USA, Inc., No. 24-1057 at 34, citing Tr. at 87:25–88:8.

6 40 U.S.C. §101 et seq.

7 MVL USA, Inc., No. 24-1057 at 25.

8 Bradford v. United States DOL, 2024 U.S. App. LEXIS 10382 (D. Colo. Apr. 30, 2024).

9 See Kentucky v. Biden, 23 F.4th 585 (6th Cir. 2022); Louisiana v. Biden, 55 F.4th 1017 (5th Cir. 2022); and Georgia v. President of the United States, F.4th 1283 (11th Cir. 2022).

10 4K Global-ACC JV, LLC, B-423092, Jan. 15, 2025.


Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.


Related Insights