In a decision released on Sept. 16, the Government Accountability Office (GAO) held that government contractors could be required to enter into a labor harmony agreement (LHA) with labor unions to qualify for an award. MAXIMUS Federal Services, Inc., B-422676, September 16, 2024. An LHA is an agreement between a labor organization and an employer before the union has been selected or recognized as a collective bargaining representative of the employer’s personnel. In the agreement, the employer makes concessions, such as allowing employees to be recruited, and in exchange, the labor organization gives up their right to strike.

MAXIMUS protested terms in a request for proposal (RFP) issued by the Departments of Health and Human Services, Centers for Medicare and Medicaid Services (the agency), which required offerors to enter into an LHA with labor organizations that expressed an interest in representing the employees that would be performing work under the contract.

MAXIMUS challenged the inclusion of the LHA requirement on various grounds, including that it violates the Labor Management Relations Act (LMRA), is preempted by the National Labor Relations Act (NLRA), is in violation of the FAR, unduly restricts competition, and is vague and ambiguous.

Whether the LHA requirement violates the LMRA or is preempted by the NLRA

The GAO denied MAXIMUS’ arguments that the inclusion of the LHA requirement violates the LMRA or is preempted by the NLRA, finding neither the LMRA nor the NLRA could be viewed as procurement statutes since they do not dictate how the government acquires goods or services.

Whether the LHA requirement violates the FAR

FAR 22.101-1(b)(1) requires agencies to remain impartial concerning any dispute between labor and contractor management and to not undertake the conciliation, mediation, or arbitration of a labor dispute. MAXIMUS argued the agency was failing to remain impartial in accordance with FAR 22.101-1(b)(1) because the inclusion of the LHA requirement effectively confers an enhanced bargaining position on any interested labor organization. MAXIMUS also argued FAR 22.101-1(d) does not authorize an LHA requirement because an agency’s actions in this regard are limited to active labor disputes.

The GAO was unpersuaded with MAXIMUS’ arguments. The GAO found nothing prohibiting the inclusion of this requirement in the RFP and no evidence of impartiality on behalf of the agency because the plain language of FAR 22.101-1(b)(1) contemplates an active labor dispute and mandates that the agency remain impartial and encourage the parties to use dispute resolution services in such a situation. Additionally, the GAO confirmed the agency had the authority to include the LHA clause since FAR 22.101-1(d) requires a broader interpretation, allowing agencies to take action concerning any “labor relation problem.”

Whether the LHA requirement unduly restricts competition

The GAO disagreed with MAXIMUS that the LHA requirement unduly restricts competition, noting that agencies are in the best position to determine their minimum needs. Since the agency provided various examples of previous labor demonstrations that had impacted contract performance, the GAO determined it was reasonable for the agency to include the LHA requirement in an effort to ensure uninterrupted services.

Whether the LHA requirement is vague and ambiguous

The RFP did not require an LHA be submitted with a proposal, but it did require the apparent successful offeror to negotiate and provide a copy of an LHA prior to an award being formalized if there had been demonstrated intent by a labor organization(s) to represent the offeror’s employees. The GAO found the RFP was clear that the apparent successful offeror would be required to enter into a pre-award LHA and that the government would review that LHA for compliance with the solicitation’s requirements. However, the GAO agreed with MAXIMUS that there was no provision in the RFP that explained how long the apparent successful offeror would be required to negotiate with a labor organization before the award would be finalized. According to the GAO, if the agency intended a 120-day negotiating period, it should specify that in the RFP. As a result, the GAO recommended the agency revise the RFP to clarify this issue.

Conclusion

Based on the facts of this case, agencies may include an LHA requirement in a solicitation as long as the requirement is clear with respect to the length of the LHA negotiations prior to the award of the contract.