The Truth About Project Labor Agreements

Last Tuesday, Chula Vista, Calif. voters rejected costly and anti-competitive project labor agreements (PLAs) on public works projects by passing Proposition G, which bans PLAs on city-funded construction projects and helps public officials deliver to taxpayers the best possible construction project at the best possible price.

On Monday, the Wall Street Journal editorial board applauded Chula Vista voters for passing Prop G and attacked Big Labor and President Obama’s promotion of government-mandated PLA schemes via Executive Order 13502.

The Fox Business News channel’s “America’s Nightly Scoreboard” covered the story in Chula Vista on June 16. The program called the passage of Prop G “another sharp rebuke for unions.”

Here is video from the program:

Aroun 4:45 in the viedo, Mark Brenner from Labor Notes claims that research indicates that PLAs do not increase the cost of construction. Of course, this isn’t true.  By “research,” Brenner must be referring to a number of studies commissioned by Big Labor that claim PLAs do not increase construction costs.

However, a number of legitimate studies demonstrate the PLAs cut competition and increase the cost of construction between 12 percent and 18 percent when compared to non-PLA projects. Anecdotal evidence suggests the cost increases can be even greater. (Studies can be viewed here.)

Basic economic theory says that less competition leads to higher costs. When a PLA thwarts competition from a pool of qualified and skilled bidders by forcing contractors to use unfamiliar union labor, mandating archaic and inefficient union work rules, and saddling nonunion contractors with “double pension” and benefit costs, it’s not hard to understand how PLAs increase the cost of construction.