[Federal Register Volume 68, Number 99 (Thursday, May 22, 2003)]
[Rules and Regulations]
[Pages 28102-28105]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-12798]



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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

  Federal Register / Vol. 68, No. 99 / Thursday, May 22, 2003 / Rules 
and Regulations  

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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