Procurement Information Circular
USE OF PROJECT LABOR AGREEMENTS FOR CONSTRUCTION PROJECTS
PURPOSE: To encourage Contracting Officers (COs) to consider using Project Labor Agreements to the extent appropriate when acquiring large construction projects.
BACKGROUND: Federal Acquisition Circular (FAC) 2005-41 was published on April 13, 2010 and effective on May 13, 2010. This FAC revised the FAR to implement Executive Order (EO) #13502 which requires Federal agencies to consider the use of Project Labor Agreements (PLAs) on large-scale construction projects valued over $25 million. Subpart 22.5 of the FAR prescribes policies, requirements, and solicitation provisions and contract clauses for the use of PLAs on large-scale construction projects. Agencies may decide to use a PLA on a construction project if the PLA will achieve economy or efficiency in federal acquisitions by producing labor-management stability, ensuring compliance with laws and regulations governing safety and health, equal employment opportunity, labor and employment standards, etc. FAR 22.503(c) establishes factors to consider in determining if using PLAs is appropriate for a particular construction project.
Construction is a complex industry comprising building and renovation projects on governmental facilities as well as highways, bridges, and airports. General construction firms commonly depend upon subcontractors to supply workers with specialized skills. It is not uncommon that a single project may require integration of different activities of workers under diverse wage and benefit structures. Therefore, the construction industry faces challenges of maintaining a workforce of disparately skilled workers in a highly variable labor market. Employment is sometimes short-term or project-based, and fluctuates according to season and the larger nationwide economic cycles. Collective bargaining agreements have traditionally been widely pursued by construction workers in such unstable industries seeking to ensure fair and stable wages and benefits. However, recent decades have witnessed a sharp decline in the percentage of construction workers belonging to unions. As a result, the construction industry remains particularly vulnerable to labor-management conflict because of the rivalries between union and nonunion workers, as well as between various craft unions themselves.
GUIDANCE: Contracting Officers are required, when planning large-scale constructions projects valued over $25,000,000, to consider the use of PLAs and to document the decision in the contract file. Like most Federal Agencies, NASA does not have any recent experience with using PLAs on construction contracts. Nonetheless, we recommend that when NASA personnel consider using PLAs, their decision be based upon sound reasoning. Information is provided below to assist in making the decision whether or not to require a PLA. The decision may not be arbitrary, and the contract file must include a detailed analysis of both the positive and negative impacts of this requirement (examples of each listed below.) When planning an acquisition, COs are reminded to include sufficient time in their acquisition schedules for considering the use of PLAs. Also, when a PLA is used on a construction project, it is important to share the results or lessons-learned with the rest of NASA’s acquisition community. In addition, Frequently Asked Questions (FAQs) are enclosed to this PIC as Enclosure 1.
A. Consideration of PLAs during Acquisition Planning
Section 7.103(v) of the FAR requires the CO, Contracting Officer Technical Representative (COTR), and the Center Industrial Labor Relations Officer (IRO) to determine on a project-by-project basis whether a PLA is appropriate. COs are encouraged to consider the use of PLAs if such an agreement will advance the interests of NASA in achieving economies or efficiencies for each specific construction project valued over $25 million. FAR 22.503(b) and (c) outlines factors for consideration in making this decision and it is important for the CO to document the consideration of each of these factors in the contract file. Additional factors the CO, COTR, and Center IRO may consider are as follows:
· The unique and compelling schedule requirements of a particular project. In this regard, projects that are tied to court-imposed deadlines or mission-critical schedules may also provide a basis for a PLA requirement.
· Skilled labor shortages might be anticipated for projects located in a remote location where a contractor may encounter difficulties in recruiting and retaining a skilled workforce for an extended period.
· Skilled labor shortages may also result where there may be competition within the contractor community for skilled labor arising from concurrent large-scale construction contracts in the project vicinity.
Determining Whether to Use a PLA: Deciding whether to use PLAs should be done on a project-by-project basis for the particular construction project involved, using the six factors listed in FAR 22.503(c). The decision should be made jointly between the CO, COTR, facilities personnel, and the Center IRO. In addition to the factors in FAR 22.503(c), the benefits of using PLAs may be:
· PLAs may provide uniform work rules for different crafts on the same project by providing a mechanism for coordinating wages, hours, work rules, and other terms;
· PLAs may be effective in creating structure and stability through the use of broad provisions for grievance and arbitration of any disputes that may arise on site, including procedures for resolving jurisdictional and other disputes between the construction crafts;
· PLAs may avoid work stoppages, slowdowns, or strikes for the duration of a project to prevent any threats of disruptions of work that might arise;
· PLAs may permit access to trained skilled labor force through union referral systems for all contractors at the construction site, whether union or non-union.
· PLAs may allow union and non-union contractors to employ union-trained apprentices at the apprentice rates (which are lower than journeyman rates) representing a potential cost savings for non-union contractors.
· PLAs may increase competition by including in the pool of offerors union contractors who might not have otherwise submitted a proposal.
In contrast, the potential negative impacts associated with using PLAs could be:
· While some argue that work force stability is derived from the existence of a PLA, others argue that such stability comes at a higher price in the form of higher union labor rates and more expensive benefit packages. Therefore by increasing average wage and fringe benefit packages costs, labor agreements may adversely affect or increase the costs of the project.
· PLAs may have an adverse impact on smaller businesses which tend to have smaller profit margins, particularly small disadvantaged businesses. By contributing to increased labor costs and decreased profitability, union labor agreements also may slow the growth of these businesses.
· PLAs may decrease competition. PLAs may discourage competition by being perceived to favor union companies, and so non-union shops may not propose, resulting in a reduced number of bidders.
· Requiring PLAs may discourage non-union shops from participating in some construction projects.
· PLAs that include rigid requirements on staffing and labor rates may be inconsistent with firm-fixed price contracts which are supposed to allow the contractor maximum flexibility and the ability to obtain staffing and rates as they deem most efficient to accomplish the work.
The appropriate stage to make the decision is during acquisition planning. If the acquisition involves a Procurement Strategy Meeting (for negotiated contracts), the PSM should address whether or not a PLA will be required, and the PSM minutes should explain the basis for this decision. If there is no PSM, the written acquisition plan or other documentation in the contract file should address whether a PLA will be required, address the factors in FAR 22.503, and explain the basis for this decision.
Optional Use of PLAs: A solicitation also may make the submission of a PLA optional, allowing the marketplace to help determine whether a PLA makes sense in that particular acquisition. Making a PLA optional would involve including solicitation provisions that are effective only if a PLA is proposed by an offeror and determined by the Government to be the successful offer (selected for award of a contract). Making PLAs optional requires the Contracting Officer to determine whether a PLA is likely to produce greater advantages than disadvantages for the particular construction project involved. Typically this approach contains an evaluation incentive for electing to use the PLA (e.g. GSA assigns 10 percent of their technical points to proposals that include PLAs based on their conclusion that PLAs could result in greater advantages than disadvantages to the Government.).
B. Selecting When PLAs Are Submitted
FAR 22.505 identifies three times Federal Agencies may require the submission of PLAs as follows: 1) as part of the contractor’s initial proposal, 2) as a document required after selection but before contract award, or 3) as a post-award deliverable. The following guidance may be used to determine which phase is best to require submission of a PLA.
1. Require submission of PLA with each Offeror’s Proposal: Although this does not appear to be the optimum stage for submitting of PLA, this is an approach which should be used when the use of PLA is made optional. When PLAs are required at this stage, a decision must be made regarding evaluation. One method of evaluation is to assign mission suitability points assessing the quality of the PLA. At least one Federal Agency assigned 10 percent of the assessment (e.g. 10% of the available evaluation points.) The second method is to make the PLA an eligibility criterion where an offeror is required to submit an acceptable plan to be considered for award. Other examples of eligibility criteria include: where a competitive acquisition is set-aside for small businesses; meeting the requirements of the Stafford Act in contracts responding to national emergencies, and proposing an acceptable plan to address organizational conflicts of interest.
The benefits of requiring PLAs with the proposal are:
· Helps ensure that the costs or cost savings of the PLA are included in the proposed prices.
· Helps facilitate having the costs of the PLA subjected to competitive forces. At a minimum, the costs of the PLA would be part of the selection process since the cost/price factor must always be included in evaluations.
· Does not delay award of the contract
The disadvantages to requiring a PLA with the proposal are:
· Increases bid and proposal costs (B&P costs) for all offerors
· Probably increases time needed to prepare bids/proposals.
· May involve additional work for the Source Evaluation Board responsible for evaluating all PLAs even though the PLA may not result in being a significant discriminator between potential offerors.
2. Require a PLA as a Pre-Award Deliverable from apparent awardee: Under this approach, the solicitation notifies offerors that the selected offeror would be required to provide a signed PLA and that the award is contingent upon providing an acceptable PLA.
The benefits of requiring PLAs as a pre-award deliverable are:
· Only one offeror required to incur costs of negotiating a PLA
· Integrity of the source selection process protected; each offeror controls the dissemination of proposal information
The disadvantages of requiring a PLA as a pre-award deliverable are:
· May delay actual award until terms of the PLA are reached.
· Proposal prices may need to contain a contingency for potential costs associated with the PLA. However, market forces would likely limit the significance of the costs proposed by the contractor for contingencies. All offerors may need to engage in preliminary discussions with the union on the PLA to determine size of contingency and prior to award.
3. Require a PLA as a Post-Award Deliverable before construction begins: This appears to be the optimal stage to require submission of a PLA since it produces the potential benefits of smoother labor relations with the least amount of disruption to the procurement process. Under this approach the PLA is a contract deliverable, subject to NASA approval. To ensure the PLA is developed sufficiently early in the process, NASA personnel may wish to consider requiring approval of the PLA before issuing a Notice to Proceed with the construction project.
The benefits of requiring PLAs as a post-award deliverable are:
· Only one offeror required to incur costs of negotiation a PLA.
· Does not delay award or submission of proposals.
· More flexibility since PLA becomes a matter of contract administration. For example an Agency could increase the price of the contract via an equitable adjustment after contract award to accommodate costs associated with a PLA taking contingency out of offeror’s proposals. An Agency could also delete the requirement for a PLA.
· Integrity of the source selection process is best protected since PLAs are taken out of the evaluation and selection process.
The disadvantages of requiring a PLA as a post-award deliverable are:
· Increases contract administration efforts.
· This option may not be viewed as best supporting the use of PLAs.
· Lack of competition at this stage may result in negotiation disadvantages or a failed opportunity by the Government to realize any advantages or benefits that could be achieved by a PLA as compared to what may be realized if PLAs are required as a part of an offeror’s proposal under a competitive environment.
C. PLA Template or PLA Requirements with the Solicitation
FAR 22.504(b) outlines the minimum requirements that a PLA must contain. FAR 22.504(c) authorizes the agency to go further and to specify additional terms and conditions that the PLA must contain. At this time, NASA has not determined any additional terms and conditions that should be implemented agency-wide in any PLAs on NASA contracts. However, Center personnel have the flexibility to determine whether additional terms and conditions are required (whether with or without exchanges with prospective bidders and union representatives, and whether such additional terms and conditions will be required for all projects or just specific projects).
REPORTING REQUIREMENTS: On July 10, 2009, the Director of the Office of Management and Budget (OMB) issued Memorandum M-09-22 to the Heads of Executive Departments and Agencies regarding the Implementation of Executive Order 13502. This Memorandum requires each Agency to submit a quarterly report on their use of PLAs on February 1st, May 1st, August 1st and November 1st of each year. The report must include the following details on each “large scale construction project”:
a. Contract Number;
b. Dollar Value of the total contract award;
c. Product and Service Code describing the project;
d. Whether a PLA was required in the solicitation;
e. Brief explanation of the considerations in deciding whether a PLA was appropriate for the project; and
f. The organizational level at which the decision was made.
Each Center shall use the enclosed form (Enclosure 2 to this PIC) to prepare these reports and forward them quarterly to the Office of Procurement, Contract Management Division, fifteen days prior to the submission dates outlined above for incorporation into an Agency-level quarterly report.
EFFECTIVE DATE: This PIC is effective as dated and shall remain in effect until canceled or superseded.
HEADQUARTERS CONTACT: Marilyn J. Seppi, Contract Management Division; 202-358-0447, email: email@example.com.
James A. Balinskas
Director, Contract Management Division
Frequently Asked Questions in Using Project Labor Agreements (PLAs)
No. PLAs have been successfully used on all types of contracts in the public and private sector.
2. Should NASA Center personnel be discussing this with potential offerors?
Yes, FAR 22.504(c) and EO 13502 encourage seeking the views of both prospective bidders and union representatives in an effort to identify and facilitate agreement on appropriate terms and conditions for a particular PLA. Field personnel are in the best position to do this when working on a particular acquisition.
3. What kind of documentation should be generated?
The Contracting Officer shall document the rationale for using or not using a PLA on a particular construction project. This can be in the form of a separate memorandum to file or as part of other file documentation (e.g. acquisition strategy meeting presentation or notes).
4. What about using a Master PLA, as part of the solicitation?
We understand that some Federal agencies routinely use Master PLAs and have found them very helpful in achieving economy and efficiency. However, at this point, we don’t believe any NASA Center or Headquarters has sufficient experience to develop a Master PLA to be added to their solicitations as a requirement to which all offerors are to respond. Nonetheless, each NASA Center may consider this possibility and recommend any terms and conditions beyond FAR 22.205(b) that could go into a Master PLA.
5. Is it even legal to use PLAs?
Yes. Federal Acquisition Circular 2005-14 authorizes using PLAs on large-scale Federal construction contracts. In addition, PLAs may lawfully be used on construction projects consistent with Sections 8(e) and (f) of the National Labor Relations Act. Agencies should ensure that their actions are tailored to reflect their proprietary interests and do not prescribe how government contractors and subcontractors handle their labor relations beyond performance of the specific government construction project involved. PLAs are legal so long as they do not exclude or limit competition. See Building and Trades Council v. Associated Builders, 113 S. Ct. 1190 (1993) (“Boston Harbor”); Chamber of Commerce of U.S. v. Reich, 74 F.3d 1322 (D.C. Cir. 1996), rehearing denied, 83 F.3d 439 (1996); rehearing en banc denied, 83 F.3d 442 (1996) (“Reich”); Building and Construction Trades Dept., AFL-CIO, et al. v. Allbaugh, et al., 295 F.3d 28, 30 (D.C. Cir. 2002).
6. Where can I find additional PLA information:
A library of additional resources for agency personnel concerning use of PLAs can also be accessed via OMB’s Max Homepage available at: https://max.omb.gov/community/x/_oFjFQ. Also, the NASA Headquarters’ Contractor Industrial Relations Officer, Mr. Rex Elliott can assist personnel with obtaining additional information about PLAs.
7. Should NASA be signing the PLA or participate in part of the negotiations?
No. Federal Agencies shall not be a party to a PLA or be in the actual negotiations regarding a PLA. However, section 22.504 of the FAR provides that “an agency may seek the views of, confer with, and exchange information with prospective bidders and union representatives as part of the agency's effort to identify appropriate terms and conditions of a project labor agreement for a particular construction project and facilitate agreement on those terms and conditions.”
8. Besides the items in FAR 22.204(b), what could NASA additionally require be put into a PLA?
Although the contractors, as employers, negotiate the terms and conditions of a PLA, NASA may require that a contractor negotiate a PLA containing additional requirement(s) that are consistent with NASA’s interests as the proprietor of the project, that otherwise contribute to the efficiency and economy in attaining NASA’s mission, or that reflect legitimate socio-economic factors. Also see responses to questions 17 and 20.
Executive Order 13502, as implemented by section 22.502 of the FAR, provides that it shall be the policy of the Federal Government to encourage use of PLAs in connection with large-scale construction projects (defined as projects where the total cost to the Federal Government of the project is at least $25 million) as appropriate to promote economy and efficiency in Federal procurement.
No. Executive Order 13502 applies to the award of a “large-scale construction projects” which are defined as costing more than $25 million. OMB is considering whether to extend the policy to projects that are less than $25 million.
11. Do we have to make separate determinations for each of a series of similar or related projects?
Yes. The FAR directs agencies to determine whether use of a PLA will contribute to efficiency and economy in Federal procurement on a project-by-project basis as separate determinations.
No. PLAs in connection with public-sector construction contracts are structured to allow all contractors, whether union or non-union, to participate in the acquisition. Union hiring halls through which applicants must ordinarily pass to obtain work on a particular project must be operated in a manner that does not discriminate on the basis of union membership.
13. Will a Contractor be able to use its existing work force on the project?
Yes, PLAs may contain provisions permitting contractors to bring their existing workers to a particular construction project with them.
Not necessarily. See Associated Builders and Contractors, Inc. v. Southern Nevada Water Authority, 159 Nev. 151, 159 n. 1, 979 P.2d 224 (S. Ct. Nev. 1999). In some instances, using PLAs could increase the pool of potential bidders by encouraging participation by offerors who might otherwise believe their bid or proposal would not be competitive in terms of price (e.g., union shop contractors).
Yes. PLAs are legal in states with Right-to-Work laws prohibiting agreements requiring employees to become full union members so long as the union security provisions are written to be consistent with the particular requirements imposed by the statutes in question. However, certain Federal construction projects will take place on property where NASA or another agency has exclusive federal jurisdiction and State Right-to-Work legislation would not normally be applicable in those circumstances. See Lord v. Local Union No. 2088, International Brotherhood of Electrical Workers, 646 F.2d 1057 (5th Cir. 1981), rehearing denied 654 F.2d 723 (1981), cert. denied 458 U.S. 1106 (1982).
If the solicitation makes PLA use optional, then you should determine that the offeror has provided evidence that it has agreed to be bound by a PLA. If the solicitation requires a PLA as part of the proposal, you should evaluate it consistent with the way the solicitation evaluation criteria are written (i.e. either assign technical points to the PLA) or include having a PLA in an eligibility determination.
17. Is it possible for an offeror to gain a competitive advantage by proposing a “better” PLA than another offeror, or are all offered PLAs treated the same during source selection?
The requirement for a PLA is no different from requirements in the statement of work. Some offerors’ PLAs may have higher qualitative merits in meeting the solicitation requirements and be rated higher than other offerors. For example, a solicitation requiring a PLA may give an offeror a competitive advantage if the solicitation provides that preference will be given to offerors that propose expanded apprenticeship programs encouraging training and employment of minority or disadvantaged populations, or other lawful socio-economic objectives. Otherwise, all offered PLAs meeting the requirements of the solicitation should be treated equally.
18. What role should we play in managing a PLA during contract performance? What additional actions will we need to take as part of administration of a contract involving a PLA that we would not otherwise have to take?
Careful contract administration is very important to be sure that the PLA is properly and lawfully implemented and to be sure that the PLA succeeds in providing the economies and efficiencies in procurement anticipated when the determination to require use of a PLA was made. The CO should approve the terms of the PLA for purposes of establishing that contract costs associated with performing under the PLA will be considered allowable costs under the NASA contract. How the approval is documented will depend on which stage of the acquisition process calls for the submission of the PLA. If the PLA is part of the offeror’s proposal, then selection of that offer includes acceptance of that PLA. If the PLA is submitted post-selection, then a separate letter of approval would be appropriate. The final PLA may also be included as an enclosure to the contract.
In addition, since NASA typically acts as its own construction manager, it is appropriate that it also be involved in ensuring compliance with the terms of the PLA. Care must be taken to ensure that contract administration action does not give rise to claims of Government interference which usually occur when the Government restricts the manner of performance or requires the contractor to perform in a specific way. See Heritage Cos, VABCA 3004, 91-1 BCA¶ 23,482 and Murdock Constr. Co., IBCA 1050-12-74, 77-2 BCA ¶ 12,728.
Centers should review the project at issue and particularly the schedule and anticipated need for the end delivery of the construction in order to determine the sensitivity of the project to any delays in project completion and the value in preventing disruptions of work and resolving disputes that may arise on site. To determine the efficiencies and economies that a PLA might bring to a particular project, you should assess the complexity of the project involved, and particularly the number of workers, labor organizations, and employers expected to participate and the value in those circumstances of coordinating wages, hours, work rules, position classifications, dispute resolution, and other terms of employment at the project. If the budget is very tight, the certainty of labor costs provided by a PLA may be particularly important. Similarly, if studies indicate there may be a concern about possible shortage of labor with the needed skills and capabilities in the area where the project is being conducted, there could be a significant advantage to obtaining access to union hiring halls.
Centers may also take into consideration that apprenticeship programs available under a PLA may contribute to economy and efficiency of the project in a manner that assures the largest pool of labor involved and is cost-effective in the long run, as well as the impact of such programs on immediate project costs. In particular, apprenticeship and hiring hall programs may make an expanded pool of qualified workers available more expeditiously and allow the project to get under way faster. Projects at sites involving remediation of significant environmental hazards or involving particularly dangerous work give rise to particularly acute safety and health concerns and the advantage of PLAs in facilitating coordination of work on site may be important in those circumstances. Such considerations may also constitute socio-economic factors appropriate for consideration by NASA.
It may also be helpful if a Sources Sought Synopsis asked industry about the potential value of a PLA in order to better determine the likely impact of use of a PLA on a particular project or in a particular geographic area or market. Alternatively, recommendations from potential offerors could be sought at other times (e.g. during the pre-solicitation phase for a particular project as a part of market research. Performing this interchange of information between the Government and Industry at a pre-proposal conference or site visit could be too late in the process because communication is limited and normally the solicitation would have already been issued.
20. FAR 22.503(c)(6) talks about other factors. What types of other factors should we consider during acquisition planning to determine whether or not to use a PLA? Why would NASA want to promote PLAs?
There are several factors that NASA should consider during acquisition planning in order to determine whether use of a PLA will advance NASA’s interest in achieving economy and efficiency. The Department of Energy and the Tennessee Valley Authority have found that projects covered by PLAs tend to come in on time or early, and on budget or under budget, and that any delays in completion of such projects or any increases in costs that do arise are not due to labor issues. PLAs may significantly contribute to the economy and efficiency of a project by providing a mechanism for coordinating wages, hours, work rules, and other terms of employment across a project. Agencies should consider the complexity of the particular projects involved, particularly with respect to the number of workers and labor organizations and contractors expected to participate, and the value in those circumstances of coordinating wages, hours, work rules, and other terms of employment at the project in contributing to efficiency and economy. Improving coordination of work may also be especially important in projects involving particularly acute safety and health concerns. Further, lack of coordination among various employers, or uncertainties about the terms and conditions of employment of various groups of workers, may create friction and labor disputes. On larger, more complex projects that will be of longer duration, such problems tend to be more pronounced. The use of PLAs may prevent such problems from developing by providing structure and stability to large-scale construction projects, thereby promoting the efficient and expeditious completion of Federal construction contracts. PLAs also generally include broad provisions for grievance and arbitration of any disputes that may arise on site so as to promote the efficient and expeditious completion of Federal construction projects. Moreover, PLAs commonly provide strong prohibitions of work stoppages, slowdowns, or strikes for the duration of a project and may specifically obligate senior union management to use their best efforts to prevent any threats of disruptions of work that might possibly arise. Agencies should therefore consider the sensitivity of the particular projects to delays and the value in the circumstances of preventing disruptions of work and of providing processes for resolving any disputes that do arise on site.
PLAs also commonly include provisions giving employers access to hiring halls maintained by the participating unions. DOE experience has been that projects covered by PLAs have access to a well trained supply of labor available expeditiously, even in remote areas where skilled labor would have otherwise been extremely difficult to find in a timely fashion. Thus, if there is concern about possible shortage of labor with the needed skills and capabilities in the area where the project is being conducted, access to union hiring halls could be important means of obtaining the necessary work force in the most efficient, expeditious, and economical fashion. Apprenticeship and training programs available through a PLA also help meet labor requirements – and do so in a manner that is cost-effective for the duration of the immediate project, that also assures the largest pool of labor involved, and that is cost-effective in the long run. These factors may also constitute socio-economic factors appropriate for consideration by an agency.
21. If some offerors have already negotiated PLAs on projects, why should the Government now require that PLAs be a part of the procurement process?
GSA found that several of its construction contractors had already been negotiating PLAs as part of their preparations for proposing on the project, but that they never told GSA about it. By adding the PLA to the solicitation and resultant contract, it becomes a contractual requirement that all parties must abide by. This helps ensure that the Government receives the full potential benefits of PLA use. In addition, the FAR now requires that we consider using PLAs on our large construction projects over $25M and a project that would have already had a PLA negotiated without the Government’s knowledge or behind the scenes is a logical candidate for a project contractually requiring a PLA.