Richard Arnholt | Bass, Berry & Sims
On January 21, in MVL, Inc., et al. v. United States, the U.S. Court of Federal Claims (COFC) struck down a 2022 Executive Order (EO), as well as the implementing Federal Acquisition Regulation (FAR), signed by then-President Biden that required government contractors to enter Project Labor Agreements (PLAs) in order to compete on federal construction projects valued at over $35 million.
In a blow to the Biden administration’s efforts to enact social policy through leveraging the buying power of the federal government, COFC concluded the requirement violated the 1984 Competition in Contracting Act (CICA). Below we summarize the tortured history of PLA EOs, the reasons why COFC held it violated CICA, and what it means for government contractors going forward.
History of PLA Requirements
Beginning in 1992, presidents have issued EOs related to PLAs—pre-hire agreements negotiated between the government contractor and workers on a specific project. President George H.W. Bush issued the first EO related to PLAs when he prohibited government agencies from requiring that government contractors enter into PLAs for federal construction projects. President Clinton then revoked President Bush’s EO and issued his own EO that “encouraged” agencies to consider PLAs “as another tool . . . [on] a project-by-project basis.” In 2001, President George W. Bush issued two EOs that prohibited government-mandated PLAs but stated that contractors were free to enter into PLAs on their own. President Obama flipped again, issuing an EO encouraging the use of PLAs, a policy that President Trump maintained. Until President Biden, no president has ever mandated the use of PLAs.
As we discussed in our February 2022 blog post, on February 4, 2022, President Biden issued EO 14063, pursuant to his authority in “the Constitution and the laws of the United States of America, including the Federal Property and Administrative Services Act (FPASA),” mandating that agencies include PLAs with labor organizations in all government construction projects exceeding $35 million.
EO 14063 included an exception allowing a senior agency official to exempt a contract from the PLA requirement if the following is true:
- The requirement “would not advance the Federal Government’s interests in achieving economy and efficiency in Federal procurement.”
- “Based on an inclusive market analysis, requiring a [PLA agreement] on the project would substantially reduce the number of potential bidders so as to frustrate full and open competition.”
- “Requiring a [PLA] on the project would otherwise be inconsistent with statutes, regulations, [EOs], or Presidential Memoranda.”
On December 22, 2023, the FAR Council promulgated a final rule implementing the EO. In response to the inclusion of the new requirement in solicitations, MVL USA Inc., Harper Construction Company, Inc., Hensel Phelps Construction Company, Inc., Environmental Chemical Corporation and JCCBG2 filed protests challenging the lawfulness of the requirement. These protests were consolidated in the present lawsuit.
PLA Mandate Violates CICA’s “Full and Open Competition” Requirements
Plaintiffs argued that the PLA requirements violate CICA’s “full and open competition” requirements by disqualifying otherwise responsible offerors who do not have a PLA with a labor union. Rather than the PLA requirement being part of an evaluation criteria, plaintiffs argued they were simply “an exclusionary policy unlawfully restricting full and open competition.” Under CICA, Congress generally requires procuring agencies to “obtain full and open competition through the use of competitive procedures.” CICA defines “competitive procedures” as “procedures under which an executive agency enters into a contract pursuant to full and open competition.”
The government argued that the PLA was not a violation of CICA because contractors could choose whether or not to compete. The government took the position that if the plaintiffs did not want to compete for contracts based on the terms set out by the government, that did not change the fact that the solicitation permits “all responsible sources . . . to submit sealed bids or competitive proposals on the procurement.” Further, the government contended that “[w]here a solicitation permits all prospective contractors to submit bids or proposals, the solicitation’s capability and experience requirements do not cause the solicitation to provide for less than full and open competition simply because those requirements render some prospective contractors ineligible for award.”
The COFC found “the PLA mandates 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.’” Further, “full and open competition” means that “all responsible sources are permitted to submit sealed bids or competitive proposals on the procurement.”
In addition, the COFC found that the government lacked any statutory basis to deviate from CICA. When asked by the COFC to identify a statutory authority that provided legal support for the PLA requirement, the government pointed to Section 3306 of the U.S. Code, which “authorizes agencies to specify their needs.” The COFC disagreed that Section 3306 was an adequate authority, arguing it “falls short of the express statutory authorization mandated by Congress [in CICA].”
Going Forward
For years, presidents have used the federal government’s purchasing power to enact social reforms. From hiking the minimum wage to enacting a vaccine mandate, the Biden administration was just the latest to use government contractors as a test bed for policies that lacked sufficient support to be applied to the market more broadly by legislative action. Here, although the COFC declined to conclude that the president has “authority under FPASA to issue expansive construction industry labor policies,” the decision is another hit to social policy experimentation by the executive branch.
Contractors should understand that while the COFC found the PLA requirement unlawful, it did not issue an injunction. Instead, the COFC “afforded a short period of time [for agencies] to reassess their PLA decision on an individual basis.” Therefore, in the short term, contractors with PLA requirements in their contracts should continue to follow them. Those contractors who would like to challenge the requirement may want to consider asking the government to modify their contracts. Further, contractors considering submitting proposals should review solicitations for the PLA requirement and evaluate whether to file pre-award protests to challenge the clause prior to the date of proposal submission.
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