[Federal Register: May 22, 2003 (Volume 68, Number 99)]
[Rules and Regulations]
[Page 28101-28105]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22my03-28]
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Part IV
Department of Housing and Urban Development
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24 CFR Part 5
Open Competition and Government Neutrality Towards Government
Contractors' Labor Relations on Federal and Federally Funded
Construction Projects; Interim Rule
[[Page 28102]]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 5
[Docket No. FR-4695-I-01]
RIN 2501-AC98
Open Competition and Government Neutrality Towards Government
Contractors' Labor Relations on Federal and Federally Funded
Construction Projects
AGENCY: Office of the Secretary, HUD.
ACTION: Interim rule.
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SUMMARY: This interim rule provides for codification of the
requirements of Executive Order 13202 (the Executive Order), entitled
``Preservation of Open Competition and Government Neutrality Towards
Government Contractors' Labor Relations on Federal and Federally Funded
Construction Projects.'' The Executive Order provides that, to the
extent permitted by law, agencies may not permit inclusion of contract
conditions requiring or prohibiting entering into or adhering to
agreements with a labor organization, or otherwise discriminating
against parties entering into or adhering to such agreements, as a
condition for award of any federally funded contract or subcontract for
construction. The purpose of this rule is to ensure compliance by all
HUD grantees, recipients of financial assistance, parties to
cooperative agreements, contractors, and subcontractors with the
requirements of open competition and government neutrality in awarding
federally funded contracts or subcontracts for construction.
DATES: Effective Date: June 23, 2003.
Comment Due Date: July 21, 2003.
ADDRESSES: Interested persons are invited to submit comments regarding
this rule to the Rules Docket Clerk, Office of General Counsel, Room
10276, Department of Housing and Urban Development, 451 Seventh Street,
SW., Washington, DC 20410-0500. Communications should refer to the
above docket number and title. Facsimile (FAX) comments are not
acceptable. A copy of each communication submitted will be available
for public inspection and copying between 7:30 a.m. and 5:30 p.m.
weekdays at the above address.
FOR FURTHER INFORMATION CONTACT: Aaron Santa Anna, Assistant General
Counsel for Regulations, Office of General Counsel, Department of
Housing and Urban Development, 451 Seventh Street, SW., Washington, DC
20410-8000; telephone (202) 708-3055 (this is not a toll-free number).
Hearing-or speech-impaired individuals may access this number via TTY
by calling the toll-free Federal Information Relay Service at (800)
877-8339.
SUPPLEMENTARY INFORMATION:
I. Background
On February 17, 2001, President George W. Bush signed Executive
Order 13202, entitled ``Preservation of Open Competition and Government
Neutrality Towards Government Contractors' Labor Relations on Federal
and Federally Funded Construction Projects'' (Executive Order 13202 was
published in the Federal Register on February 22, 2001, at 66 FR
11225). The Executive Order prohibits the inclusion of requirements for
affiliation with a labor organization as a condition for award of any
federally funded contract or subcontract for construction.
Executive Order 13202 was amended by Executive Order 13208, issued
on April 6, 2001. The amendment was to add a paragraph (c) to section 5
of Executive Order 13202. New paragraph (c) addresses exemption of a
project from the provisions of sections 1 and 3 of the Executive Order.
(Executive Order 13208 was published in the Federal Register on April
11, 2001, at 66 FR 18717.)
In issuing Executive Order 13202, the President revoked Executive
Order 12836 of February 1, 1993, and the Presidential Memorandum of
June 5, 1997, entitled ``Use of Project Labor Agreements for Federal
Construction Projects.''
The purposes of Executive Order 13202 are to:
[sbull] Promote and ensure open competition on federal and
federally funded or assisted construction projects;
[sbull] Maintain government neutrality toward government
contractors' labor relations on federal and federally funded or
assisted construction projects;
[sbull] Reduce construction costs to the federal government and to
the taxpayers;
[sbull] Expand job opportunities, especially for small and
disadvantaged businesses;
[sbull] Prevent discrimination against government contractors or
their employees based upon labor affiliation or lack thereof; thereby
promoting the economical, nondiscriminatory, and efficient
administration and completion of federal and federally funded or
assisted construction projects.
The Executive Order is intended to improve the internal management
of the Executive Branch. The Executive Order provides that agencies may
not require or prohibit bidders, offerors, contractors, or
subcontractors from entering into or adhering to agreements with one or
more labor organizations. The Executive Order also permits agency heads
to exempt a project from its requirements under special circumstances,
but the exemption may not be related to the possibility of or an actual
labor dispute.
II. This Interim Rule
This interim rule provides for the codification of the requirements
of Executive Order 13202 for HUD programs. The interim rule adds a new
Sec. 5.108 to HUD's regulations in 24 CFR part 5, subpart A. The
regulations in subpart A of part 5 contain the definitions and federal
requirements generally applicable to all of HUD's programs. By placing
the requirements of the Executive Order in those HUD regulations that
contain across-the-board requirements, HUD is ensuring the broadest
applicability of the requirements of Executive Order 13202. The
specific regulatory amendments that are being made by this interim rule
are as follows:
A. Scope of Interim Rule Limited to Federally Funded Contracts
As noted above, Executive Order 13202 applies to both construction
contracts awarded by a federal agency as well as to federally funded
construction contracts awarded by the recipient of federal financial
assistance. This interim rule codifies the requirements for HUD-funded
construction contracts, but not for construction contracts awarded by
HUD. The Federal Acquisition Regulatory (FAR) Council has issued
government-wide regulations implementing the requirements regarding
federal construction contracts contained in Executive Order 13202 (see
the final rule published on November 22, 2002, at 67 FR 70518). The
regulations issued by the FAR Council apply to construction contracts
awarded by federal agencies, including those awarded by HUD. Interested
readers should refer to the November 22, 2002, final rule for
additional information regarding the requirements applicable to federal
construction contracts.
B. Neutrality Towards Government Contractors' Labor Relations on
Federally Funded Construction Projects
The new Sec. 5.108 provides that, to the extent permitted by law,
the bid specifications, project agreements, or other controlling
documentation for a construction contract awarded by a HUD grantee,
recipient of financial assistance from HUD, or party to a cooperative
agreement with HUD for a
[[Page 28103]]
construction project (or a construction manager acting on their behalf)
shall not:
1. Require or prohibit bidders, offerors, contractors, or
subcontractors to enter into or adhere to agreements with one or more
labor organizations on the same or other related federally funded
construction project; or
2. Otherwise discriminate against bidders, offerors, contractors,
or subcontractors for becoming or refusing to become or remain
signatories, or otherwise adhere to agreements with one or more labor
organizations, on the same or other related federally funded
construction project.
C. Definitions
The Executive Order defines several of the terms used throughout
the Order, such as ``construction contract'' and ``labor
organization,'' and the interim rule adopts these definitions.
Accordingly, the new Sec. 5.108 provides that the term ``construction
contract'' means a contract for the construction, rehabilitation,
alteration, conversion, extension, or repair of buildings, highways, or
other improvements to real property, including any subcontracts awarded
pursuant to such a contract. The interim rule also provides, in
accordance with the Executive Order, that the term ``labor
organization'' has the same meaning it has in 42 U.S.C. 2000e(d).
The Executive Order, however, does not establish a definition of
the term ``financial assistance.'' The term ``financial assistance'' is
a key term used throughout the Executive Order, and HUD believes that a
definition is required to ensure the clarity and uniform enforcement of
the new Sec. 5.108. HUD is adopting, for purposes of Sec. 5.108, a
definition of the term ``federal financial assistance'' that is based
on the definition of that term contained in other HUD regulations.
These other regulations include 24 CFR part 1, regarding
nondiscrimination in HUD programs under title VI of the Civil Rights
Act of 1964 (see 24 CFR 1.2), 24 CFR part 3, regarding
nondiscrimination on the basis of sex in education programs or
activities receiving federal financial assistance (see 24 CFR 3.105),
and 24 CFR part 8, regarding nondiscrimination based on handicap in
federally assisted HUD programs and activities (see 24 CFR 8.3). HUD
believes that the adoption of a similar definition will help to ensure
consistency throughout HUD's programs and facilitate compliance with
the new regulatory requirements.
The interim rule defines the term ``financial assistance'' to
include:
1. Grants, loans, and advances of federal funds; or
2. Proceeds from loans guaranteed under section 108 of the Housing
and Community Development Act of 1974, as amended (42 U.S.C. 5301 et
seq.) and title VI of the Native American Housing Assistance and Self-
Determination Act of 1996 (25 U.S.C. 4101 et seq.). The term
``financial assistance'' does not include any other contract of
insurance or guaranty.
Under the section 108 and Title VI loan guarantee programs,
recipients must pledge a portion of their block grant formula
allocations as security for the guaranteed loans. Accordingly, the
proceeds from the loan guarantees are appropriately considered part of
the recipient's grant, and within the scope of the definition of
``financial assistance.'' Other HUD loan insurance programs (such as
those of the Federal Housing Administration) are not dependent on the
provision of a HUD grant, and therefore not considered to be
``financial assistance'' for purposes of this interim rule.
D. Exemptions
As noted above in this preamble, the Executive Order authorizes HUD
to exempt a construction project from the requirements under certain
circumstances, and the interim rule contains comparable provisions
tracking this language.
E. Sanctions
The interim rule provides that if HUD determines that a HUD
grantee, recipient of financial assistance from HUD, or party to a
cooperative agreement with HUD (or a construction manager acting on
their behalf), performs in a manner contrary to the requirements of the
Executive Order, HUD will take such action, consistent with law and
regulations, as HUD determines appropriate.
F. Voluntary Project Labor Agreements
In accordance with the Executive Order, the interim rule specifies
that nothing in Sec. 5.108 prohibits contractors or subcontractors
from voluntarily entering into project labor agreements.
III. Justification for Interim Rulemaking
HUD generally publishes a rule for public comment before issuing a
rule for effect, in accordance with its own regulations on rulemaking
in 24 CFR part 10. However, part 10 provides for exceptions to the
general rule if the agency finds good cause to omit advanced notice and
public participation. The good cause requirement is satisfied when
prior public procedure is ``impractical, unnecessary, or contrary to
the public interest'' (see 24 CFR 10.1). For the following reasons, HUD
has determined that it is unnecessary to delay the effectiveness of
this rule in order to solicit prior public comments.
To a large extent, the new Sec. 5.108 repeats the language of
Executive Order 13202, and does not elaborate on or modify these
provisions. The Executive Order contains specific and detailed
requirements concerning the use of project labor agreements in
federally funded construction projects, leaving few areas to the
discretion of individual federal agencies. Accordingly, HUD's authority
to revise these provisions of the interim rule in response to public
comment would be limited. Where Executive Order 13202 provides room for
agency flexibility (such as, for example, in the definition of the term
``financial assistance''), HUD has exercised its discretion narrowly,
in order to ensure consistency throughout its programs and facilitate
compliance with the new regulatory requirements. For example, the
interim rule contains a definition of ``financial assistance'' that is
based on the definition of that term contained in other HUD program
regulations.
Although HUD believes that good cause exists to publish this rule
for effect without prior public comment, HUD recognizes the value of
public comment in the development of its regulations. HUD has,
therefore, issued these regulations on an interim basis and has
provided the public with a 60-day comment period. HUD welcomes comments
on the regulatory amendments made by this interim rule. The public
comments will be addressed in the final rule.
IV. Findings and Certifications
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this rule before publication and by
approving it certifies that this rule does not have a significant
economic impact on a substantial number of small entities. The interim
rule implements Executive Order 13202, which revokes previous
requirements encouraging the inclusion of project labor agreements as a
condition for award of federally funded contracts or subcontracts on
construction projects. The Executive Order directs government
neutrality towards the use of such agreements, thus placing the
decision of whether to enter into a project labor
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agreement with individual contractors and subcontractors.
This applies equally to large and small entities that seek
federally funded construction contracts and does not establish
requirements applicable to entities based on their size. Further, HUD
neither requires nor prohibits the use of project labor agreements on
HUD-funded construction projects. Although some HUD-funded construction
projects are subject to project labor agreements, in many instances
this is due to the voluntary decision of individual contractors and
subcontractors. Therefore, the interim rule will not significantly
revise existing practices or hiring costs for small contractors and
subcontractors participating in HUD's construction programs. To the
extent the rule has an impact on small entities, it should be a
positive economic impact on those small entities that are not union
shops, because the rule may provide additional opportunities to work on
federally funded construction projects by non-union small businesses.
Notwithstanding HUD's determination that this rule will not have a
significant economic effect on a substantial number of small entities,
HUD specifically invites comments regarding any less burdensome
alternatives to this rule that will meet HUD's objectives as described
in this preamble.
Environmental Impact
A Finding of No Significant Impact with respect to the environment
has been made in accordance with HUD regulations at 24 CFR part 50,
which implement section 102(2)(C) of the National Environmental Policy
Act of 1969 (42 U.S.C. 4332). The Finding of No Significant Impact is
available for public inspection between the hours of 7:30 a.m. and 5:30
p.m. weekdays in the Office of the Rules Docket Clerk, Office of
General Counsel, Room 10276, Department of Housing and Urban
Development, 451 Seventh Street, SW., Washington, DC 20410-0500.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) (2
U.S.C. 1531-1538) establishes requirements for federal agencies to
assess the effects of their regulatory actions on state, local, and
tribal governments and the private sector. This interim rule does not
impose any federal mandates on any state, local, or tribal governments
or the private sector within the meaning of the UMRA.
Executive Order 13132, Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits, to the
extent practicable and permitted by law, an agency from promulgating a
regulation that has federalism implications and either imposes
substantial direct compliance costs on state and local governments and
is not required by statute, or preempts state law, unless the relevant
requirements of section 6 of the Executive Order are met. This rule
does not have federalism implications and does not impose substantial
direct compliance costs on state and local governments or preempt state
law within the meaning of the Executive Order.
List of Subjects in 24 CFR Part 5
Administrative practice and procedure, Aged, Claims, Drug abuse,
Drug traffic control, Grant programs--housing and community
development, Grant programs--Indians, Individuals with disabilities,
Loan programs--housing and community development, Low and moderate
income housing, Mortgage insurance, Pets, Public housing, Rent
subsidies, Reporting and recordkeeping requirements.
0
Accordingly, for the reasons described in the preamble, HUD amends 24
CFR part 5 as follows:
PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS
0
1. The authority citation for 24 CFR part 5 continues to read as
follows:
Authority: 42 U.S.C. 3535(d), unless otherwise noted.
0
2. Add Sec. 5.108 to read as follows:
Sec. 5.108 Preservation of Open Competition and Government Neutrality
Towards Government Contractors' Labor Relations on Federally Funded
Construction Projects.
(a) Purpose. This section implements Executive Order 13202 (issued
on February 17, 2001), as amended by Executive Order 13208 (issued on
April 6, 2001), entitled ``Preservation of Open Competition and
Government Neutrality Towards Government Contractors' Labor Relations
on Federal and Federally Funded Construction Projects.''
(b) Definitions. For purposes of this section:
Construction contract means a contract for the construction,
rehabilitation, alteration, conversion, extension, or repair of
buildings, highways, or other improvements to real property, including
any subcontracts awarded pursuant to such a contract.
Financial assistance includes:
(i) Grants, loans, and advances of federal funds; or
(ii) Proceeds from loans guaranteed under section 108 of the
Housing and Community Development Act of 1974, as amended (42 U.S.C.
5301 et seq.) and title VI of the Native American Housing Assistance
and Self-Determination Act of 1996 (25 U.S.C. 4101 et seq.). The term
``financial assistance'' does not include any other contract of
insurance or guaranty.
Labor organization has the same meaning it has in 42 U.S.C.
2000e(d).
(c) Neutrality towards government contractors' labor relations. To
the extent permitted by law, the bid specifications, project
agreements, or other controlling documents for a construction contract
awarded on or after June 23, 2003, by a HUD grantee, recipient of
financial assistance from HUD, or party to a cooperative agreement with
HUD, for a construction project (or a construction manager acting on
their behalf) shall not:
(1) Require or prohibit bidders, offerors, contractors, or
subcontractors to enter into or adhere to agreements with one or more
labor organizations on the same or other related federally funded
construction project; or
(2) Otherwise discriminate against bidders, offerors, contractors,
or subcontractors for becoming or refusing to become or remain
signatories, or otherwise adhere to agreements with one or more labor
organizations, on the same or other related federally funded
construction project.
(d) Exemptions--(1) Exemptions due to special circumstances. HUD
may exempt a particular construction project, construction contract,
subcontract, grant, or cooperative agreement from any requirement of
this section, if HUD determines that special circumstances require an
exemption in order to avert an imminent threat to public health or
safety or to serve the national security. HUD will not base a finding
of ``special circumstances'' on the possibility or presence of a labor
dispute concerning the use of contractors or subcontractors who are
non-signatories to, or otherwise do not adhere to, agreements with one
or more labor organizations, or concerning employees on the
construction project who are not members of, or affiliated with, a
labor organization.
(2) Exemption of construction projects subject to project labor
agreements entered into as of June 23, 2003. HUD may exempt a
particular construction project from any requirement of this section
upon written request from the HUD grantee, recipient of financial
assistance from HUD, or party to a cooperative agreement with HUD (or a
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construction manager acting on their behalf), if HUD determines that:
(i) The HUD grantee, recipient of financial assistance from HUD, or
party to the cooperative agreement with HUD (or a construction manager
acting on their behalf) issued, or was a party to, as of June 23, 2003,
bid specifications, project agreements, agreements with one or more
labor organizations, or other controlling documents with respect to a
particular construction project, that contain any of the requirements
or prohibitions contained in paragraph (c) of this section; and
(ii) One or more construction contracts subject to such
requirements or prohibitions was awarded as of June 23, 2003.
(e) Sanctions. If HUD determines that a HUD grantee, recipient of
financial assistance from HUD, or party to a cooperative agreement with
HUD (or a construction manager acting on their behalf) performs in a
manner contrary to the requirements of this section, HUD will take such
action, consistent with law and regulations, as HUD determines
appropriate.
(f) Voluntarily entering into project labor agreements. Nothing in
this section prohibits contractors or subcontractors from voluntarily
entering into project labor agreements.
Dated: April 30, 2003.
Mel Martinez,
Secretary.
[FR Doc. 03-12798 Filed 5-21-03; 8:45 am]
BILLING CODE 4210-32-P