The Truth About Project Labor Agreements

Hawaiians can say a hui hou to fair and open competition for contracts to build a multi-billion dollar transportation project in Oahu.

On November 17, 2009,  Honolulu Mayor Mufi Hannemann required a union-favoring project labor agreement (PLA) for a controversial $5.5 billion rail transit project.

(Click here to read the Mayor’s “State of Rail Transit” statement from 10/29 for background on this project, which has been in the planning stages for years.)

In an effort to avoid the stigma attached to discriminatory and costly union-favoring schemes commonly known as PLAs, this agreement was re-branded and sold to the public as a Rapid Transit Stabilization Agreement (RTSA).

If you don’t have time to digest the PLA Rapid Transit Stabilization Agreement’s 141 pages worth of light reading linked above,  The Honolulu Advertiser explains some provisions that are typical of most PLAs found in the RTSA  (“Rail Gets No-Strike Promise,” 11/18):

Non-union contractors working on state projects already must pay union-level wages. Under the agreement, roughly one-third of non-union worker wages will go into union trust funds. That money will then be used to provide non-union workers with union-type vacation, health care, pension and other benefits while they work on the project.

Of course, it is likely nonunion workers will never see those benefits unless they join a union and/or meet vesting schedules.

Here is a truth-bending assessment of the PLA from a union officials:

Ron Taketa, financial secretary of the 7,200-member Hawaii Carpenters Union, said yesterday’s agreement does not force any contractors to pay higher wages, nor does it does not force them to unionize. What the agreement does is assure cost certainty by eliminating the risk of labor disruptions, Taketa said.

“The unions have agreed that there will be no work stoppages or slowdowns for the duration of the project so the city can expect that the project will proceed uninterrupted by any disruptions or slowdowns on the part of the union,” he said.

Yep, a classic scheme typical in PLAs: Big Labor promises not to strike (unions employees strike, nonunion employees do not) in exchange for an agreement that gives union contractors an advantage over competitors, i.e., quality and local nonunion contractors and their employees.

This Alice in Wonderland-style logic is exactly why PLAs are reviled as legalized extortion rather than sound public policy.

While Hawaii has one of the highest percentages of construction workforce union membership in the nation – 38.6 percent in 2008 – it is a shame that government officials are limiting nonunion employees to these false choices via the PLA requirement:

1. Nonunion employees can join a union and hope the union dispatches them to the jobsite ahead of other union members on the “out of work” bench that likely have seniority and preference over them.
2. Nonunion employees can work on this project as long as they pay fees and dues to a union and forfeit their benefits unless they join a union and/or meet vesting schedules.
3. Qualified nonunion employees can choose not to work on a project funded by their own tax dollars if they don’t like the PLA.

Of course, all of these false choices are available to a nonunion employee ONLY if their nonunion employer contractor decides to sign a PLA (this rarely happens) AND successfully submits the lowest and most responsive bid when competing against other contractors for construction contracts.

It is virtually impossible for nonunion contractors to win a contract on a PLA project because the deck is heavily stacked in favor of unionized contractors. For example, nonunion firms shoulder double fringe benefit costs (while union firms have to pay only one set of benefits) because PLAs force nonunion contractors to pay into existing fringe benefit plans and into union benefit plans to keep nonunion employees happy. Combined with the cost of complying with unfamiliar and inefficient union work rules mandated by union collective bargaining agreements, it’s easy to see why nonunion firms don’t bother to invest resources to compete for contracts on PLA jobs.

…to build Honolulu’s Rail project via a PLA. Big Labor, don’t forget to be my Valentine on Election Day! Love, Mayor Hannemann

Here is more on the project from The Honolulu Star Bulletin (City Signs $483M Rail Contract, 11/18):

At a news conference yesterday, city officials and executives from contractor Kiewit Pacific Co. signed a $483 million contract to build the first 6.5 miles of the 20-mile rail transit system, which would eventually stretch from East Kapolei to Ala Moana Center.

The project is funded by federal funds and an increase in the state general excise tax by half a percentage point on Oahu.

An environmental impact statement for the project – which still has not received state and federal approval – could prevent it from being built, but that isn’t stopping politicians from plowing ahead:

The Hannemann administration plans to issue a request for proposals today for the second phase — a 3.9-mile project from Pearl Highlands Shopping Center to Aloha Stadium, with construction scheduled to start in 2011.

Let’s hope that Mayor Hannemann reconsiders the PLA on the Honolulu Transit Rail Project. It is not too late to remove the provisions in a PLA that discriminate against nonunion employers and employees. Everyone benefits when projects are procured using a level playing field where all contractors can compete to give taxpayers the best project at the best price.