The Biden administration has recently announced its plans to increase the already high costs of government infrastructure projects. In a rule finalized on the Friday before Christmas, the government has mandated that large construction contracts include project labor agreements (PLAs). These agreements require contractors to make project-specific deals with labor unions regarding work conditions, hiring, and wages. Despite evidence showing that PLAs raise costs and hinder building, the Biden administration is pushing for their implementation in almost all government projects, including contracts and tax credits.
The new rule will significantly impact federal construction. Prior to Biden’s presidency, only 12 large federal construction projects required PLAs between 2009 and his first year in office. However, the government now expects anywhere from 60 to 107 projects to require these agreements annually. This means that PLAs will be mandated on half to 90% of large projects, amounting to over $13 billion in taxpayer money each year. The administration is also attempting to require labor deals in various programs without congressional approval.
Although the CHIPS Act and the Infrastructure Investment and Jobs Act did not mention PLAs, the Commerce Department and the Biden administration are encouraging their use in groups applying for funding and grants for new railroad construction, surface transportation, airport terminals and towers, rural broadband, and clean-energy initiatives. The Treasury is even pushing companies that take advantage of clean-energy tax incentives to use PLAs. Offshore commercial wind projects also require companies to make efforts to enter into labor agreements.
Despite claims from the Biden administration that the new construction mandate will not lead to higher costs, research on PLAs suggests otherwise. A RAND study on a Los Angeles homeless housing program found that PLAs increased costs by over $40,000 per housing unit, or about 15%, in addition to prevailing-wage requirements. The study also revealed that several units were not built due to the burden of these agreements. Similarly, studies on school construction have shown that PLA requirements can increase costs by up to 30% per square foot.
Biden’s PLA policy is the most aggressive in history. While Presidents George H.W. Bush and George W. Bush banned PLA mandates, Presidents Bill Clinton and Barack Obama allowed them through permissive and loose orders. Trump did not issue any countervailing orders during his presidency. In contrast, the recent Biden rule explicitly states the shift from discretionary to mandatory PLAs. Thousands of contractors and subcontractors may be required to enter labor deals to compete for and win federal contracts.
The government’s focus should be on getting the best value for its infrastructure spending. However, Biden’s mandate forces construction workers to sign wasteful deals and pay union middlemen, which is a recipe for disaster. This decision was made right before Christmas, further adding to the concerns surrounding it.
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