Tying Labor to Public Cash Will Cost Biden, Industry Warns (2)

A top labor official says employers should go beyond the Biden administration’s new wage and labor requirements on federal infrastructure and green energy projects, setting up a potential clash with construction industry groups who complain the rules will shut out certain businesses.

“We really want to make sure that people understand that there’s opportunity to do more than pay the prevailing wages, that they can also provide good benefits on top of those wages,” said Wage and Hour Administrator Jessica Looman of President Joe Biden’s most recent executive order on wage and labor priorities for federal agency investments.

Earlier this month, Biden issued a directive requiring that federal agencies consider these principles when doling out money from the various infrastructure and green energy laws passed over the past four years. That follows other orders and federal agency rules mandating federal contractors to pay a $15 minimum wage, expanding prevailing wage requirements, and requiring project labor agreements or union pre-hiring pacts on large federal construction projects.

Looman says it’s the first time an administration has set a policy “focused on using federal project dollars to raise people into good jobs.”

“It helps contracting agencies think about their community impacts and their investments. It helps make sure that we’re creating uniformity on how we raise the floor on job quality,” she said.

Contractor industry groups say the growing number of requirements surrounding the procurement process is discouraging non-union companies from bidding for government work, leading to less competition and driving up costs on taxpayer-funded projects.

“The administration is shooting themselves in the foot to some degree,” said Ben Brubeck, vice president of regulatory, labor and state affairs at the Associated Builders and Contractors, “because the prices are going to go up, there’s not going to be enough labor, there’s going to be delays, and that really ultimately means less construction projects and less infrastructure improvement.”

But, unions and the Biden administration say these efforts amount to a re-envisioning of how the federal government contracts out work and awards funding opportunities, one that’s no longer a race to the bottom, or awarding the cheapest bidder.

“This is the greatest form of capitalism,” said Sean McGarvey, president of the North America’s Building Trades Unions. For “the legitimate players in the industry, it’s not an issue, because they’re already doing these things. It’s the bad actors that they have to compete against who cheat and lie and steal that hurt the entire industry.”

Prevailing Wages

Depending on whether the project is public or private, as well as how much money is involved, can trigger different wage requirements under federal law.

For projects that include the construction, alteration, or repair of public buildings or public works that cost more than $2,000, contractors who receive federal funds to complete the work are required to pay their workers a “prevailing wage” under the Davis-Bacon Act. Prevailing wages are calculated by looking at the local wage rate plus fringe benefits, and are specific to zip code and the type of work being completed.

“One of the best things about Davis-Bacon is that it really makes sure that local wages are reflected in what the expectation is for federal contractors when they’re building federal infrastructure,” Looman said in an interview.

The Biden administration has also worked to expand the instances where prevailing wages apply, like adding incentives for companies to pay these rates in the private sector.

Under the 2022 Inflation Reduction Act, companies can qualify for beefed up tax credits if they pay their workers prevailing wages on certain private-sector green energy projects, even though they wouldn’t normally be required to under Davis-Bacon. On the other hand, companies that receive funding under the 2022 CHIPS and Science Act would be subject to prevailing wage requirements for laborers or mechanics on their project.

The executive order issued Sept. 6 also called on agencies to consider “incentivizing” high-wage standards when awarding manufacturing grants under the infrastructure and green energy laws that go “beyond” Davis-Bacon rules that only apply to construction.

Looman noted that just because a wage is “prevailing,” doesn’t mean it’s necessarily the limit.

Last year, the DOL released a final rule that updated the formula the agency uses to set prevailing wage rates, a change that it estimated would lead to higher wages for 1 million construction workers on federal projects.

That rule is currently being challenged in federal court, and parts of the rule that expanded its application to include suppliers and truck drivers, as well as a provision that incorporates prevailing wage language into covered contracts that are silent on it, were blocked by a judge this summer. The DOL has appealed that ruling.

The Associated General Contractors of America, an industry group that brought the lawsuit against the Davis-Bacon rule, said that the expansion of requirements bidders must meet to remain competitive for federal projects will ultimately result in less competition.

“There’s already a lot of requirements placed upon federal contractors,” said Claiborne Guy, director of employment policy and practice at the AGCA. “In the situation of Davis Bacon, it’s not just a pay the prevailing wage, there are a lot of legal liabilities, record keeping requirements. It’s not as simple as just picking out the prevailing wage.”

“The more complex it gets, the less people are going to play in that space,” he said.

Project Labor Agreements

Federal construction contractors working on public projects worth more than $35 million also face requirements to negotiate pre-hire collective bargaining agreements with unions.

A final rule released by the General Services Administration last year implemented a Biden executive order calling on federal agencies to require these project labor agreements for large-scale federal construction projects. PLAs are negotiated with a union to set the terms and conditions for all workers on specific federal projects.

Democrats, unions, and the Biden administration say that such agreements lead to fewer disruptions to federal projects, and lead to better outcomes for the communities where the projects are located, because they allow for negotiating higher wages and benefits, child care opportunities, and job training.

“Through President Biden’s executive order on project labor agreements, the federal government is promoting effective mechanisms for controlling costs, ensuring efficient completion of projects, and establishing fair wages and benefits for all workers on those projects,” said Margaret Poydock, a senior policy analyst at the Economic Policy Institute.

Not all agree. The rule has been challenged in court by ABC, who says it goes beyond the president’s authority and violates federal procurement laws, the National Labor Relations Act, and the First Amendment.

“Prior to the issuance of the PLA Rule, no President had ever claimed authority to impose a restrictive government-wide mandate requiring federal construction contractors to sign project labor agreements with labor unions as a condition of performing work on federal contracts,” their complaint in Florida federal court argues.

Similarly, AGCA officials say that because contractors now need to have a project labor agreement with a union in order to compete on these projects, unions have significant leverage over the company when setting the terms of the agreement.

As part of the executive order earlier this month, Biden also directed federal agencies to prioritize such agreements when awarding money from the infrastructure and green energy laws enacted during his administration.

But, members of the construction industry like ABC say the policies are more efforts to tilt federal work towards unions and will ultimately drive up the costs of federal projects. They said they are exploring legal options to challenge the order.

“The thing that’s frustrating, I think, for lawmakers and for contractors in general, is Congress didn’t pass these policies attached to the funding for a lot of cases,” Brubeck said. “So, the argument can be made that this is an end-around Congress and maybe illegal, which is something we’re looking into a little bit more closely.”