Impact

Just like the sun rises in the East and sets in the West, one can always count on the Associated Builders and Contractors (ABC) and other opponents of Project Labor Agreements (PLAs) to dutifully disseminate the falsehood that PLAs on state and local public projects will increase project budgets and waste taxpayer money.  Unfortunately for them, the real-world experience of PLAs does not back up their claims.

Yet, they continue to promulgate such fantasies…perhaps as a smokescreen to prevent them from having to defend a business model advocated and promoted by the ABC and its members that is predicated upon winning bids by assembling the cheapest, most exploitable workforce possible – regardless of the socio-economic damage that causes to communities throughout the United States – as well as eschewing any interest in, or responsibility for, providing career training opportunities that elevate citizens and communities and provide solutions to the continuing need for skilled workforce development across the United States.

It seems somewhat strange that the ABC and others never seem to mount a legal or public relations attack on PLAs in the private sector – which have constituted the largest proportion of all project labor agreements in the past decade.  Toyota Motor Corporation, Boeing, Disney, Inland Steel, ARCO, Harvard University, Phizer, as well as a host of paper, electric utilities, chemical and oil and gas refinery owners – indeed hundreds of projects in the past decade – have voluntarily used PLAs for their construction needs.  The ABC is fond of saying that the Executive Order signed by President Barack Obama is nothing more than a “payback” to building trades unions.  Well, that begs the question of what’s the payback for these private entities.  Other than the fact that the business model represented by PLAs is one they choose to associate themselves with because it’s good for both their bottom line and their corporate image.

Many of the private owners are repeat users of Project Labor Agreements. By virtue of their increasing use in the private sector, it is apparent that Project Labor Agreements have met the cost and efficiency (e.g. “on-time…on-budget”) test. In fact, Toyota – which has used project labor agreements for the construction of all of its North American manufacturing facilities – has indicated that its construction costs are one-third less than their competitors who shun the use of PLAs.  Thus, the private experience would seem to validate the public use of Project Labor Agreements for appropriate new construction projects and to override much of the criticism, particularly that based on costs, economy and efficiency.

Moreover, it has long been federal policy on public construction, or federally financed construction, to standardize wage and benefit rates, requiring bidding contractors to compete on the basis of efficiencies rather than on variation in wage and benefit rates. Many states have adopted similar policies. These policies eliminate considerable variation in bidding prices that arise on privately financed construction work where government pre-determinations of wage rates and benefits do not apply.

Another criticism leveled at Project Labor Agreements on public projects, it is argued, is their adverse impact on competition by reducing the number of bidders, particularly non-union contractors, willing to submit bids under Project Labor Agreements. The smaller number of bidders (due to the unwillingness of non-union contractors to work under the terms of Project Labor Agreements), it is said, results in higher prices to public owners. The more contractors you can bring to a bid opening, the better your chances of saving money.

But this general argument is of very limited application and does not well fit the circumstances of Project Labor Agreements in most communities.

PLAs, as has been observed, are applied to large-scale and complex projects of considerable duration, and major bid offerings attract contractors from a wide area, if not nation-wide. The pool of contractors is typically larger than for a routine project in an area. There is considerable evidence that some nonunion contractors do in fact bid, win work on Project Labor Agreements and perform the contract. The Port of Oakland is an example.  The records of the Boston Harbor Project and the Southern Nevada Water project are incontrovertible that a significant number of nonunion contractors have been successful bidders and performers on these projects, although the precise numbers may be in dispute.

The analytical argument is not supported in practice. While there is merit in the view that more than a few qualified contractors are essential for a competitive market, it does not follow that the more the number of bidders – beyond a number – the lower the bid prices particularly where wage rates, benefits, and working conditions have been standardized and where all contractors are typically authorized to use their regular supervision under project agreements. On public projects with federal or state funds, the prevailing wage statutes apply, that also are applicable to some benefits, tending to standardize labor costs. The dispersion in bids arises on ordinary projects more from the disparities in factor prices than from the efficiencies and varying financial aspirations of bidders. Therefore, there is no analytical reason to believe that increasing the number of bidders beyond some relatively small number tends to reduce prices unless one advances the heroic assumption that nonunion contractors are inherently more efficient (with common factor prices) than all other contractors.

A public relations attack on Project Labor Agreements has included comparing final costs for a specific public project with estimated or originally bid prices for that project. But as is well known, change orders by owners and their architects, after estimates and bids, are a major source of variation and cost “overruns.” The Construction Industry Institute of Austin, Texas in its research study, Change Orders and Their Cumulative Impact, found “a strong correlation between the number of change items on a project and some loss of labor productivity.”  The methodology of this criticism of project agreements is fundamentally flawed. Without detailed information on change orders and other external factors, a comparison of bid prices and final costs permits few conclusions on any project, or between projects, be its labor policy a project labor agreement, a conventional or local area agreement, a mixed policy, or totally nonunion.

Much of the public discourse on Project Labor Agreements presumes that their provisions are identical, a single template imposed on a local project. But this is not an accurate picture. A comparison of even the standard heavy and highway agreement, the several maintenance and renovation agreements, the National Construction Stabilization Agreement and the May 1997 standard agreement reflect the various markets in which construction is bid and performed. Moreover, a review of provisions of Project Labor Agreements on new construction, signed recently by national presidents, and the Building and Construction Trades Department and certainly agreements signed only locally, reflect adaptation to local conditions, aside from wages and benefits and operating conditions. Among such items are the provisions relating to supervision and “core employees” a contractor may utilize on the project from previous employment, and how defined, rather than to hire solely through the union hiring halls. The penalties for any violation of the no stoppage of work provisions, and defined, vary from significant fines to measures solely directed to return to work and elimination of the volatile practices such as slow downs. Further, Project Labor Agreements may differ in the extent to which local or area craft agreements are applicable to the project. Some Project Labor Agreements provide for preference in employment to local residents, the disadvantaged and minority contractors. There is in practice a range on issues to be negotiated rather than a single standard form.