The Truth About Project Labor Agreements

With Ohio Gov. Ted Strickland’s appointed director of the Ohio School Facilities Commission (OSFC), former Big Labor boss Richard Murray, under investigation for pushing school districts to use union-favoring project labor agreements (PLAs) as a condition of receiving funding from the OSFC, the media stands ready scrutinize these corrupt and wasteful agreements.

A recent Columbus Dispatch points to evidence that PLAs in Ohio increase the cost of construction (“Value of Labor Agreements Open to Debate,” 6/26):

The state Legislative Service Commission seemed to vindicate the Republicans when, in 2002, it determined that state taxpayers saved $487.9 million – or almost 11 percent – because there was no prevailing wage on state-funded school projects. Although that study did not directly address the effect of PLAs, all PLA projects pay the prevailing union wage.

Here is a link to that study.

After a commission meeting Thursday, Murray declined to answer any questions about how PLAs affect prices. Murray is under investigation by the Ohio inspector general’s office over accusations that he pressured some school districts to sign PLAs.

Even the previous OSFC director, Mike Shoemaker – who was ousted from his OSFC position after Strickland’s Big Labor cronies complained that he wasn’t promoting PLAs and steering enough contracts to Big Labor – says that PLAs increase the cost of construction:

Mike Shoemaker, who was Gov. Ted Strickland’s first director of the facilities commission, said his rule of thumb was that prevailing wage adds about 5 percent to 7 percent to the cost of a job. A PLA, because of benefits payments and union dues, adds roughly an additional 5 percent to 7 percent, he said.

You never know what a project is going to cost until it’s done, said Shoemaker, who was forced out of his job last fall. Change orders, the tool that contractors use to demand more than they bid, were equally common among union and nonunion firms, Shoemaker said.

TheTruthAboutPLAs.com readers know that pro-PLA claims by Fred Kotler, who until last year was an associate director at Cornell University’s AFL-CIO-affiliated Union Leadership Institute, are bogus.

Kotler said there is no evidence to support claims that project labor agreements either limit the pool of bidders or drive up final construction costs, particularly on jobs already paying the prevailing union wage.

Owners enter into PLAs “for the promise of sustained work, which is a powerful incentive,” said Kotler, who now lectures at the Cornell program, which trains high-level union officials.

Plenty of anecdotal evidence and peer reviewed research contradicting Kotler’s obvious pro-Big Labor bias is available here.

For example, the three Beacon Hill Institute (BHI) studies evaluating the cost impact of PLAs on school construction in prevailing wage states of Massachusetts, Connecticut and New York all demonstrate a robust correlation between PLAs and increased costs.

However, Big Labor’s allies, like Kotler, have done everything possible to discredit BHI’s research.

BHI Professor David Tuerck responded to attacks on BHI studies in a September 2009 BHI study “Project Labor Agreements on Federal Construction Projects: A Costly Solution in Search of a Problem” which we blogged about here. (See page 24-29, where BHI refutes Kotler’s study, as well as other critics such as Belman, Bodah and Phillps).

BHI’s article in the Cato Journal, “Why Project Labor Agreements Are Not in the Public Interest,” dismantles some of the methodology and false logic often employed in studies (such as Kotler’s) promoting PLAs as a mechanism to reduce construction costs. (See pages 53-62 of the report).

Academic squabbles aside, here is the key point in the OSFC corruption probe that taxpayers need to remember in order to hold appointed officials and the Strickland administration accountable:

“Our state potentially faces an $8 billion budget shortfall next year,” state Rep. Kris Jordan, a nonvoting member of the commission, wrote Murray in a letter last week. “Why is the commission not going with the lowest and best bidders for every project?”

Meanwhile, according to the Sidney Daily News, the OSFC decided to reverse its decision to deny a local nonunion contractor a waiver request regarding the Hardin-Houston School District’s K-12 building project (“State approves school project,” 6/26). Denying the waiver request would have ensured a union contractor would get the work but would have added costs.

The nonunion contractor was a victim of Murray’s zealous modus operandi to do everything possible to “find something wrong with nonunion contracts,” according to Shoemaker, and steer contracts to union contractors.

Read the Columbus Dispatch article to get the full details on the OSFC shenanigans.  According to the Sidney Daily News article, the corruption probe appears to have loosened Murray’s grip on the OSFC.

Ohio school children and taxpayers are already better served.