SALEM | Gov. Tina Kotek is under fire from Oregon’s construction industry after issuing an executive order on Dec. 19 that mandates project labor agreements (PLAs) for nearly all state-funded construction projects.

The executive order requires PLAs for any state contract where labor costs make up 15% or more of the total budget. This threshold is expected to encompass the majority of large-scale construction projects in the state, including city and county infrastructure and affordable housing projects. Contractors and subcontractors must now "negotiate or become a party to a project labor agreement with one or more appropriate labor organizations."

Criticism from the construction sector was swift.

“In our view, this is bad policy for the state,” said Mike Salsgiver, executive director of the Associated General Contractors’ (AGC) Oregon-Columbia chapter, in an interview.

Concerns About Costs and Competition

Construction groups argue that the mandated agreements will drive up costs and limit competition.

“While we respect the right of workers to organize and collectively bargain, mandating union-only agreements on every major project adds costs, reduces competition, and shuts out small minority and emerging contractors who are vital to Oregon’s economy,” Salsgiver said in a statement.

The Associated Builders and Contractors’ (ABC) Pacific Northwest chapter echoed these concerns, estimating that the PLA mandate will increase construction costs by 12% to 20%.

“The PLA policy will needlessly inflate the cost of state government-procured and -funded construction projects … and discourage competition from local quality contractors and their skilled workforce who have successfully built public works projects in Oregon for decades,” said Laurie Kendall, president of ABC’s Pacific Northwest chapter.

Minority Contractor Groups Push Back

Even Oregon’s largest organization representing minority contractors has voiced opposition.

“Sweeping changes like this harm minority contractors, exacerbating systemic disparities, and leaving many businesses shut out of opportunities they’ve worked hard to access,” said Nate McCoy, president and CEO of the National Association of Minority Contractors, Oregon chapter.

While the order includes provisions requiring state agencies to set targets for utilizing firms certified by the Certification Office for Business Inclusion and Diversity (COBID), critics argue that the mandate will still harm small and disadvantaged contractors.

Broader Implications of the Executive Order

Some industry observers have highlighted the influence of organized labor on Oregon’s Democratic leadership, noting that only 14.9% of the state’s construction workforce is unionized.

“Kotek’s anti-competitive and inflationary executive order ensures that taxpayer-funded construction projects are steered to union-signatory firms and will be built by union labor — including out-of-state union labor,” Kendall stated.

This criticism comes in contrast to decisions made by other Democratic leaders. California Gov. Gavin Newsom recently vetoed a similar proposal, citing concerns over increased costs.

“While I am generally supportive of PLAs as an option for public works projects, the new requirements proposed in this bill could result in additional cost pressures that were not accounted for in this year’s budget,” Newsom wrote in his veto letter.

Kotek Defends the Policy

Gov. Kotek has defended the PLA mandate, describing it as a tool to ensure efficient use of public funds while supporting local communities.

“Oregon will soon embark on multiple large-scale infrastructure projects across the state,” Kotek stated in December. “With the broad use of PLAs across state projects, Oregonians will know that public dollars are spent efficiently and benefit the communities in which they’re spent.”

Legal Challenges Under Consideration

Salsgiver indicated that AGC Oregon-Columbia is exploring legal options in response to the executive order.

“We’re evaluating the situation and determining what our options are,” he said. “I don’t think there’s much I can or should say before that process is completed.”

The controversy surrounding Kotek’s order underscores a growing divide over labor policies in Oregon, with construction groups and minority advocates calling for a reconsideration of the mandate’s impact on costs, competition, and equity.