The Trump administration has confirmed it will maintain a Biden-era mandate requiring project labor agreements (PLAs) on large federal construction contracts, but has introduced new exemptions aimed at ensuring flexibility and cost efficiency.

In a memo issued Thursday by the Office of Management and Budget, federal agencies were advised that the PLA rule will remain in place unless the agreements are found to be impractical or inflate costs. The move ends months of confusion among contractors, agency officials, and industry groups.

“For clarity, the Trump Administration supports the use of PLAs when those agreements are practicable and cost effective, and blanket deviations prohibiting the use of PLAs are precluded,” wrote OMB Director Russell Vought in the memo addressed to department heads and procurement officials.

The updated guidance responds to concerns that mandatory PLA usage could limit contractor competition and inflate project bids. The memo introduces a new framework to evaluate whether a PLA should be applied to a federal project, emphasizing flexibility in specific contracting scenarios.

For example, agencies may now seek exemptions when they believe PLA requirements will hinder competitive bidding. The memo states that “two qualified offers should generally be sufficient to provide adequate price competition for negotiated contracts,” and that “three or more qualified bids is sufficient to provide adequate price competition for sealed bids.”

If only two or more qualified firms express interest, but projected prices exceed the federal budget by more than 10% due to PLA conditions, agencies may be allowed to bypass the mandate.

“Agencies should use PLAs when practicable and cost-effective,” the memo reiterates. “Agencies should rescind any deviations related to PLAs that were issued prior to the date of this guidance. Independent agency interpretation for PLA use should no longer occur.”

The guidance offers a clearer federal stance after a patchwork of court rulings and agency deviations led to widespread uncertainty. In January, a federal judge blocked PLA usage on seven government contracts, citing concerns about anti-competitive effects and “arbitrary and capricious” policymaking. However, the decision applied only to those contracts and left the broader mandate unresolved.

The situation intensified in March when President Trump issued an executive order that reversed Biden-era rulemaking but stopped short of eliminating the underlying 2024 executive order mandating PLA use. By May, after the Department of Defense moved to disregard the PLA rule, a federal judge issued a preliminary injunction forcing the agency to comply.

Industry response to the new OMB guidance was mixed.

“It is hard to see how this is not a return to the conditions that were in place prior to President Biden’s unlawful executive order,” said Brian Turmail, vice president of public affairs and strategic initiatives at the Associated General Contractors of America, in a statement to Construction Dive.

Michael Bellaman, president and CEO of Associated Builders and Contractors, strongly opposed the decision.

“[Thursday’s] decision cannot be reconciled with the president’s philosophies of merit, fairness and nondiscrimination because it inhibits fair and open competition and prioritizes special interests over taxpayers and workers,” Bellaman said.

He emphasized that PLAs often exclude non-union firms and reduce competition, which many ABC members believe undermines free enterprise in the construction sector.

While some industry leaders had hoped for a full repeal of the Biden executive order, others acknowledged the added flexibility in the new guidance.

“In addition, given the recent court decisions, it is hard to see how the administration will be able to impose a mandated PLA without facing a successful bid protest,” Turmail added.

The administration’s approach appears to thread the needle between continuing existing policy and responding to ongoing legal and political pressure. By reaffirming the value of PLAs but allowing targeted exemptions, the White House seeks to balance labor priorities with market concerns over fairness and cost.

Originally reported by Zachary Phillips in Construction Dive.