Collective Bargaining Agreement in Government Contracts

A Collective Bargaining Agreement (CBA) is a written contract negotiated between an employer and a labor union that represents a group of employees. The CBA sets out the terms and conditions of employment, including wages, benefits, overtime rules, grievance procedures, layoff and recall rights, and safety standards. In government contracting, CBAs intersect with federal labor statutes, the Service Contract Act (SCA), and contract continuity obligations in ways that create unique compliance obligations for both prime contractors and subcontractors.

What is a CBA in government contracting?

In general industry, a CBA results from collective bargaining between an employer and a union certified under the National Labor Relations Act (NLRA). The union represents a defined bargaining unit of employees, and the resulting agreement binds both parties for the duration of the contract term, typically two to five years.

For federal contractors, CBAs interact directly with the Service Contract Act (41 USC 6701), which requires contractors performing service contracts above $2,500 to pay wages and fringe benefits no less than those determined by the Department of Labor's wage determinations for the relevant locality and occupation. Where a CBA establishes wage and benefit levels that exceed the SCA wage determination, the CBA governs. Where SCA determinations exceed CBA rates, the SCA floor controls. Contractors must not use a CBA to pay employees below SCA minimums, even with union consent.

Executive Order 13495, implemented through FAR 52.222-17, requires that successor contractors on service contracts offer employment to the predecessor's workers and honor their existing CBA terms for a period when the contract changes hands. This right of first refusal is designed to protect workers during contract transitions and to ensure continuity of a trained workforce. Contractors bidding on recompetes must factor in any existing CBA obligations when estimating labor costs.

FAR 22.1001 through 22.1009 addresses the Labor-Management Relations clause and union notification requirements. Contractors must ensure that any restrictions on employee rights guaranteed under the NLRA, such as the right to organize, are not incorporated into CBA provisions that would conflict with federal law.

Why it matters for contractors

Contractors inheriting a workforce covered by a CBA must account for CBA-specified wages, benefits, and work rules in their proposal pricing. Failure to do so leads to underbidding on labor costs and performance problems once the contract is underway. On recompetes, reviewing the incumbent's CBA is critical to accurate cost estimation.

Grievance and arbitration clauses in CBAs establish procedural rights for employees to challenge management decisions. Contractors must train supervisors on CBA provisions to avoid unfair labor practice charges that can result in NLRB proceedings and contract performance disruptions.

Example

A federal agency recompetes a facilities management contract at a large Army installation. The incumbent contractor's workforce is covered by a CBA with a building services union setting hourly wages of $24.50 and specific vacation accrual rates. A new contractor wins the recompete. Under Executive Order 13495, the new contractor must offer employment to the incumbent's workers and must honor the existing CBA terms during the transition period. The new contractor's proposal had accounted for the CBA wage levels by reviewing the incumbent's publicly available wage determination filings, so the inherited labor costs do not disrupt its budget. The new contractor begins negotiating a successor CBA with the union for the following contract year.