A Project Labor Agreement Reduced Competition and Increased Costs on the Wilson Bridge
The D.C. Council is considering legislation, the District Resident Employment and Trade Stimulus Act of 2010 (Bill 18-650), that would mandate project labor agreements (PLAs) on all government-assisted projects costing more than $200,000 in Washington, D.C.
Yesterday’s blog post discussed a report about the failed record of government-mandated PLAs in Washington, D.C., “The Problem with PLAs in the District of Columbia,” released yesterday. Focusing specifically on the D.C. construction market, ABC Chief Economist Anirban Basu’s report examines the existing data indicating whether government-mandated PLAs make sense in the District of Columbia. They don’t.
One project not discussed in the report was the $2.4 billion Woodrow Wilson Bridge, a federally assisted project replacing the bridge spanning the Potomac River between Maryland and Virginia and updating four major bridge-related interchanges.
The Wilson Bridge, spanning the Potomac River between Maryland and Virginia, is a prime example of how government-mandated PLAs increase costs and reduce competition.
The project’s superstructure contract was temporarily subjected to a union-favoring PLA requirement by former Maryland Governor Parris Glendening (D). Originally estimated to cost $450 million to $500 million, in Dec. 2001 the Wilson Bridge’s superstructure contract received just one bid at a price pf $860 million – more than $370 million more than engineering estimates, a 78 percent cost overrun.
The project was subjected to a union-led legal challenge to a White House executive order prohibting government-mandated PLAs and controversy between elected officials in Maryland and Virginia. Eventually, the Wilson Bridge superstructure project was rebid without the government-mandated PLA into three smaller bid packages. In Oct. 2002, multiple bids were received on each of the smaller contracts, and the winning bids came in significantly below the engineering estimates. While the bridge was delayed more than a year for re-bidding, it was eventually completed below the original budget and completed on-time, free from a government-mandated PLA.
The Wilson Bridge controversy demonstrates how government-mandated PLAs can reduce competition and increase costs on major infrastructure projects in the Washington, D.C., metropolitan area.
With poor results like this, why is DC Council trying to pass 18-650?
Here are some editorials from the Washington Post, Richmond Times Dispatch, Baltimore Sun and the Washington Times in support of fair and open competition on the Wilson Bridge. These opinions are just as relevant today as they were a decade ago.
UPDATE: Following a June 30 hearing and a damaging fiscal impact statement from the DC CFO, bill 18-650 eventually died. See all coverage here.
Learn how legal challenges, reduced competition and increased costs resulting from the PLA mandate initially harmed the Wilson Bridge project below.
The Wilson Bridge Legal Controversy
Maryland originally submitted a request to the the Federal Highway Administration (FHWA) to require a PLA on the Woodrow Wilson Bridge project in Jan. 2001.
Maryland’s request was denied by FHWA following President George W. Bush’s issuance of Executive Order 13202, 66 Fed. Reg. 11225 (Feb. 22, 2001).
Maryland renewed its request to FHWA on August 20, 2001, after the U. S. District Court for the District of Columbia issued a preliminary injunction in August enjoining the FHWA from enforcing President George W. Bush’s Executive Order 13202, as amended by Executive Order 13208, 66 Fed. Reg. 18717 (April 22, 2001), with respect to construction contracts for projects like the Wilson Bridge project. See Building and Construction Trades Department, AFL-CIO, et al. (BCTD) v. Allbaugh, et. al., Civ. Action No. 01-0902 (EGS) (D. D. C., Aug. 13, 2001).
Pursuant to the Court’s order, Maryland announced that a PLA would be required on the bridge, pending approval from the FHWA.
Maryland initially advertised the superstructure contract on August 14, 2001 and set a bid opening date of Oct. 18, 2001. No PLA was included in the Aug. 14 bid specifications, although the pending FHWA approval (and ongoing legal proceedings) would determine if a PLA could be mandated by Maryland. In short, everyone expected a PLA mandate to be included in Maryland’s RFP.
Meanwhile, the Court issued a permanent injunction on Nov. 7, 2001, blocking enforcement of President Bush’s executive order, ruling that President Bush had “exceeded his constitutional and statutory authority” by issuing this executive order.
The Justice Department immediately appealed the U.S. District Court for the District of Columbia’s injunction against EO 13202.
Meanwhile, the contracting community interested in building the Wilson Bridge was all but certain Maryland would mandate a PLA on this project.
After receiving requests from several major contractors for an extension of the bid opening date, Maryland extended the bid opening date to November 29, 2001, after receiving permission from the FHWA. Maryland subsequently requested a second extension to Dec. 13, 2001, and FHWA again granted Maryland’s request.
On Dec. 7, 2001, the FHWA again denied Maryland’s request for a PLA (here is the decision), meaning that Maryland could not mandate a PLA even though the Courts ordered an injunction against EO 13202. FHWA said the PLA mandate did not meet criteria established by the FHWA and federal regulations that would permit a PLA.
Five days later, on Dec. 12, 2001, in the face of the FHWA’s decision, Maryland announced they would abandon their controversial effort to mandate a PLA.
On Dec. 13, Maryland opened the budget-busting bid for the Wilson Bridge superstructure contract. According to the Washington Post (“Wilson Bridge Called Budget Buster,” 12/14/01):
The only contractor to bid on building the two spans of the new Woodrow Wilson Bridge said yesterday that the job would cost almost $860 million — 75 percent more than the highest earlier estimates. Maryland engineers in charge of the project said yesterday that they have no choice but to either redesign the bridge or repeat their request for bids, hoping to attract competitors. But either step would throw bridge construction several months behind schedule. With foundation work already underway, the next building phase was set to begin in the spring. State highway officials said they were stunned by the $859.9 million bid by Kiewit, Tidewater & Clark to build the “superstructure” — the parts of the two six-lane spans above water. Estimates ranged from $450 million to $500 million. Maryland State Highway Administrator Parker F. Williams said State engineers could not remember a bid ever coming in so high above estimates.
Maryland is responsible for building the bridge and must pay for any cost overruns on it. Members of Congress have said repeatedly that the project will not getmore than $1.5 billion in federal money. Maryland and Virginia have each promised to pay $200 million. The total project, including rebuilding four interchanges, was estimated to cost $2.4 billion. “This is a budget buster, absolutely,” said John Undeland, a spokesman for the bridge project. “This is way outside the bounds of the financial plan.”
The article notes while the project did not technically have a government-mandated PLA included in the superstructure contract’s bid specs, contractors opposed to a government-mandated PLA were discouraged from bidding on the project because of the pending litigation and the strong likelihood a PLA would be mandated on the project:
“Even though this contract did not technically require such a labor agreement, some contractors said that even talk of one so close to a bid deadline could have prevented more companies from bidding.”
It was no surprise that the PLA and related controversy resulted in delays, weak competition and increased costs.
Maryland decided not to award the contract and sought additional time to find ways to reduce costs and increase competition.
Eventually, Maryland removed the government-mandated PLA, resulting in reduced costs and increased competition, as expected.
After the FHWA denied Maryland’s request for a PLA in Dec. 2001 and after the original lone superstructure bid was rejected, the Wilson Bridge superstructure contract was rebid into three smaller bid packages not subject to a government-mandated PLA. On Nov. 7, 2002 and Feb. 13, 2003, respectively, multiple bids were received for the three bid packages, and the winning bids came in significantly below the engineering estimates. General contractors who won the bidding on two out of three contracts voluntarily entered into a PLA, as all general contractors are entitled to do on a voluntary basis as permitted by the National Labor Relations Act, i.e., without such private contracting arrangements being mandated by the government. The third winning bidder successfully completed its portion of the project without needing any PLA, and without any delays or cost increase caused by labor disruption of any kind on the project.
Meanwhile, in July 2002, the U.S. Court of Appeals for the DC Circuit overturned the lower court and upheld the Bush executive order. The court said that President Bush did have authority under Article I of the Constitution to issue an order that “expresses a proprietary policy that is not subject to preemption” by the NLRA. The appeals court ordered the lower court to remove the injunction.
In October 2002, the AFL-CIO challenged the U.S. Court of Appeals for the DC Circuit Ruling in Support of EO 13202 to the U.S. Supreme Court, contending that EO 13202 conflicts with the NLRA.
The U.S. Supreme Court announced Jan. 27, 2003, that it denied certiorari in the case: Building and Construction Trades Department, AFL-CIO et al., v. Joe M. Allbaugh, Director, Federal Emergency Management Agency, et al., upholding the U.S. Court of Appeals for the District of Columbia Circuit decision which upheld President Bush’s Executive Order 13202.
President Bush’s executive orders prohibtied government-mandated PLAs on federal and federally assisted construction projects through the rest of his two terms in office.
Resources:
http://www.fhwa.dot.gov/wwbpla.htm
http://www.capital-beltway.com/Woodrow-Wilson-Bridge-Const.html
http://enr.construction.com/features/transportation/archives/050131-1.asp