Federal Contractors Get Relief from PLA and DEI Requirements

This past week, employers received two reprieves from mandatory conditions before winning federal contracts. On January 21, 2025, Federal Claims Court Judge Ryan T. Holte ruled that President Biden’s 2022 Executive Order that federal agencies choose only bidders that agree to enter into project labor agreements (PLAs) with unions for any federal construction contract over $35 million is unlawful. Judge Holt sided with the plaintiff Contractors in ruling that the Executive Order improperly drives up prices and contravenes other laws requiring full and open competition in contract procurement. In sum, he tossed the Order as being arbitrary and capricious.

Past presidents have used Executive Orders to encourage project labor agreements for construction contract bidding, but President Biden’s Order was the first to mandate PLAs, basically freezing out non-union contractors on large government projects. Ending this mandate opens the bidding to union and non-union contractors. With a wider pool of candidates, this may be welcome news for contractors and consumers. It may also bode well for employers challenging similar state mandates requiring PLAs or labor peace agreements with unions before gaining government-issued licenses or government contracts.

In the second boost to federal contractors, President Trump ordered the Office of Federal Contract Compliance Programs to lift regulations regarding “diversity, equity, and inclusion” (DEI) or “diversity, equity, inclusion, and accessibility” (DEIA) preferences. These regulations came under scrutiny after a Supreme Court decision because they subjected the contracting process to undue attention on race and gender at the expense of merit. As part of this Order, any government agency soliciting contract bids must strike all references to DEI and DEIA principles from Federal acquisition, contracting, grants, and financial assistance procedures, and terminate all diversity, equity, advancing equity, and similar mandates.

The new Executive Order criticizes forced DEI and DEIA policies as undermining “traditional American values of hard work, excellence, and individual achievement in favor of an unlawful, corrosive, and pernicious identity-based spoils system.” It further denounces DEI requirements as violating the spirit of civil-rights laws of the country dating back to 1965 and adds that Americans should not be shut out of opportunities because of their race or sex. The new Executive Order sets a 90-day timetable for ending the DEI mandate. Along with requiring an end to DEI in federal contracts, the Order strongly encourages all private employers to end their DEI practices.

Taken together, for the moment at least these two decisions remove onerous obligations on contractors that bid on federal contracts. Many companies felt these were unfunded mandates that added to costs, drove inflationary pressures, and kept them unfairly out of the bidding process. Initially, employer reaction to these changes has been favorable.

Should you have any questions, please contact Counsel Edward J. Bonett, Jr., Esq. at 908.546.6991 or via email here, Partner Patrick W. McGovern, Esq. at 973.535.7129 or via email here, or any Partner in our firm’s Labor Law Practice Group.