President Obama's moves to boost the labor movement suffered a setback this week, when the administration was forced to cancel the first federal construction contract in more than a decade requiring union representation of workers.
The Department of Labor, citing a "need to evaluate the issues" surrounding the union-friendly bidding process, pulled the plug on the competition for a $35 million contract to build a 160,000-square-foot Job Corps Center in Manchester, N.H., after contractors formally challenged the union mandate.
The requirement, known as a "project labor agreement" or PLA, was adopted as one in a series of policy changes by Mr. Obama to strengthen the labor movement, though he has not delivered on unions' top legislative priority, the so-called "card-check" bill that would make it easier to organize workplaces.
"This is a real win for the principle of fair and open competition in government procurement," said Maurice Baskin, an attorney for the business group Associated Builders and Contractors (ABC), which backed the complaint credited with derailing the PLA.
Mr. Baskin said it was no coincidence that the Labor Department decided to shelve the project the day before the agency was required to respond to the bid protest filed with the Government Accountability Office.
"We demonstrated that there was no justification for imposing a PLA on this project and that the PLA mandate violated the Competition in Contracting Act and other long-standing federal procurement requirements," he said.
The Labor Department acknowledged that the PLA, which would have been the first one on a federal construction job since President Clinton was in office, was the reason it called off the bids.
"It is in the public interest for the department to further evaluate the issues involved in the PLA requirement. The PLA requirement is a new issue at DOL," the department said in the cancellation notice Tuesday.
The agency said it has not abandoned the New Hampshire project, but it remained unclear whether a second bid solicitation will have the same union requirements.
Union officials were not available to comment, but they previously defended PLAs as necessary instruments for ensuring construction companies hire highly skilled workers and pay them fair wages.
Labor Department officials also were unavailable during the Veterans Day holiday.
The PLAs, which incorporate collective-bargaining agreements into the contract that require construction companies to agree to recognize union representation of the workers, hire some workers from union halls, follow union work rules and contribute to union pensions.
North Branch Construction, a Concord, N.H.-based general contractor and ABC member, filed the bid protest last month, claiming the PLA "unduly restricts competition."
When the New Hampshire project was announced, critics warned that the union rules would drive up costs, delay the project and force most of the workers to pay union dues and pension contributions for which they likely will never receive benefits.
Just 8.7 percent of construction workers are unionized in New Hampshire.
Nationwide, about 16 percent of construction trades workers were union members or covered by union contracts in 2008, despite union workers generally receiving higher pay and better benefits than their nonunion counterparts, according to the Bureau of Labor Statistics.
An executive order by Mr. Obama in the first weeks of his presidency would make PLAs the norm for all federal contracts on large-scale construction jobs. The order is under review and a final rule is not expected for months, but the Labor Department went ahead and imposed a PLA on the New Hampshire job.
The order replaced one by the Bush administration that discouraged the use of such agreements.
Despite the setback for PLAs, Mr. Obama's policies have largely succeeded in tipping the advantage to the labor movement.
He signed three other pro-union executive orders, including one requiring contractors on large federal projects to post signs informing workers of the right to join a union. The president also has appointed a succession of union loyalists to top spots in the Labor Department and on the National Labor Relations Board, which administers federal law governing the relations between unions and employers.