The Truth About Project Labor Agreements

As part of our ongoing series publishing the truth about government-mandated projects labor agreements (PLAs), here is a chapter documenting Reduced Competition on PLA Projects from Maury Baskin’s Government-Mandated Project Labor Agreements: The Public Record of Poor Performance (2011 Edition).

III.       Reduced Competition on PLA Projects

According to a number of published sources, a contributing factor to the increased costs of government-mandated PLAs is the reduced competition evident on these projects. Published reports about government-mandated PLAs reveal a substantial number of projects in which the competition among bidders has been less than expected. These reports tend to confirm the results of numerous surveys of construction contractors, who overwhelmingly have indicated they are less likely to bid for work that includes a PLA requirement.[1] When asked, the contractors (and subcontractors) have explained that PLAs injure competition by discriminating against the majority of the industry whose employees do not want to be represented by any union.[2] As further explained in a 2009 study, PLAs on government projects covered by prevailing wage laws typically discriminate against nonunion contractors and their employees with respect to benefit contributions—in effect reducing the take-home pay of nonunion workers while increasing the fringe benefit costs of nonunion contractors, with no benefit to either group.[3]

Numerous published reports on specific PLA projects have reflected dramatic reductions in the number of bidders/offerors when government agencies have included PLA requirements in their bid solicitations, including the following examples.

In 1995, as noted in Section I, a published study examined the impact of a government-mandated PLA on the bidding for a construction project on the Roswell Park Cancer Institute in New York.[4] Portions of the project were first bid under a PLA before being re-bid without the PLA. The study found that the number of bidders correlated to whether there was a PLA, and that the number of bidders on the project further correlated to whether the project came in under budget. Thus, projects that were bid without a PLA had 21 percent more bidders and were more than 10 percent under budget. The projects bid with a PLA had fewer bidders and were 10 percent over budget.  “Those packages that were bid under budget had 45 percent more bidders than those that were bid over budget.” The study concluded that PLA projects attract fewer bidders, thereby causing a decrease in competition for the construction work and an increase in costs.[5] Elsewhere in New York, in 1997 the City of Oswego Sewer project attracted no bids after the city imposed a union-only PLA.[6]

In 1995, Boston officials administrating the union-only Central Artery/Tunnel (CA/T) (“Big Dig”) project predicted intense competition for the award of work on the project.  The project director, Peter M. Zuk, said: “previous history indicates intense competition for the jobs, with all bids generally coming in below engineers’ estimates.”[7] Only one year later, however, after a PLA was imposed, Zuk said that, “given the size of the project we are surprised at the relatively small number of bidders to date.”[8] He also said that, “the bid packages are big enough that they should be attractive.” Zuk eventually was forced to pursue bidders for the remaining $2 billion in construction work that had not been awarded. As discussed later in the report, all of the Central Artery project bids were awarded at costs higher than the engineers’ estimates.[9]

The San Francisco International Airport experienced a similar adverse impact on competition when the Airport Authority implemented a union-only PLA in 1996. Only four bids were submitted and all of them were higher than the undisclosed estimates.[10] Due to the high bids, the project designers were forced to “backtrack to cut costs.”[11]

In another similar case in 1998, the town of Middletown, Conn., distributed 72 sets of bid specifications containing a PLA for a local school.  Only four responses were received, and the lowest bid submitted by a union contractor for the school renovation was $9.1 million, $600,000 over the project’s $8.5 million budget.  When the PLA was removed and the project re-bid, 10 responses were received, including a $7.8 million bid from a nonunion contractor that saved local taxpayers more than $1.5 million dollars.[12]

In 2000, the Polk County, Iowa, Board of Supervisors imposed a PLA mandate on construction of the Iowa Events Center in downtown Des Moines. The project suffered from a “lack of bids,” which in turn inflated costs.[13] Though the project was broken up into 22 individual bid packages in order to increase the number of potential bidders, the county received an average of fewer than three bids per package, and four packages received only one bid.

In December 2000, the Wyoming County, W.Va., Board of Education experienced similar reductions in bidders and increased costs from its attempt to impose a union-only PLA.  The County Board voted 4-1 to re-bid all PLA contracts, without the union-only requirement, after initial bids came in more than $1.5 million over estimates and with fewer than half the expected number of bidders.  The construction manager stated: “I believe that the labor agreement had a negative impact on the number of bids, as well as the dollar amount of each bid.”[14] Without the PLA, the number of bidders increased by 67 percent and the overall cost of the project decreased by 11 percent.

Also in 2000, a study conducted on behalf of the Jefferson County, N.Y., Board of Legislators found that there was a statistically significant relationship between the number of bidders and the cost of projects, concluding that the relationship between these two factors does not occur by chance.  The study further concluded that a PLA requirement would adversely impact the number of bidders and would thereby increase project costs.[15] Similar conclusions were reached by the Clark County, Nev., School District, which recommended against adoption of any union-only requirements on Clark County schools.[16]

The $2.4 billion project to replace the Wilson Bridge between suburban Maryland and Virginia was temporarily subjected to a union-only PLA requirement in 2001. After the PLA was imposed, only one bidder responded to the RFP for Phase 1 of the project, at a bid price more than $370 million above the state’s $470 million engineering estimate, a 78 percent cost overrun.[17] After President Bush issued an executive order prohibiting union-only PLAs on federally assisted projects like this one, however, [18] Phase 1 of the Wilson Bridge project was rebid without the PLA. This time, multiple bids were submitted and the winning bids came in significantly below the engineering estimates.[19]

As noted above, prior to entering into a PLA the Oakland Unified School District received seven bids on the Burkhalter Elementary School in 2002 and received a low bid of $1.8 million for the construction work, After re-bidding the work under a newly signed PLA, however, the district received only three bids and the low bid was $2.2 million, more than $437,000 (24 percent) higher than the non-PLA bid.[20]

In Hartford, Conn., bid results under a union-only PLA for the renovation of Hartford Public High School were characterized as “pitiful” in April 2004. Some components of the job received few or no bids. The bids that did come in were several million dollars more than the $82 million voters had approved.[21]

In another example from 2004, the City of Fall River, Mass., initially bid three school construction projects under a PLA. When the projects attracted a low number of bidders, the city cancelled the PLA and reopened bidding without the PLA, which immediately resulted in more bidders and reduced bid prices.[22]

In 2008, the Lucas Oil Stadium in Indianapolis “blew out” its budget by more than $75 million under a PLA for the construction project.[23] A similar result occurred on the Indianapolis Public Library, which exceeded its budget under a PLA by $50 million.[24]

In 2010, the Ohio School Facilities Commission was forced to rebid a planned PLA project for replacement of the state’s schools for the deaf and blind after only two firms bid on the general trades contract work, with the lowest bid exceeding the estimated cost by 44 percent. After removing the PLA, 12 firms bid for the general trades work, with a low bid 20 percent under the commission’s estimate.[25]

Also in 2010, the Carter County School Board in Kentucky was forced to reject all bids on the Tygart High School project after the lowest bid under a PLA came in more than $1 million over budget.[26] The PLA also prompted a lawsuit that was settled only after the board voted to withdraw the PLA mandate.

In all, more than a dozen comparisons have been performed on projects on which bids were received for the same work with and without PLAs. In every instance, significantly fewer bids were received under the PLAs than without the PLAs (and the PLA projects suffered from more cost overruns).[27] Finally, it should be noted that there are no published reports of PLA projects resulting in an increased number of bidders compared to non-PLA projects.

NOTE: Click the appropriate chapter from the report:

1. Introduction
2. Increased Costs on PLA Projects

On Monday we will post the chapter, Construction Delays on PLA Projects.
Citations after the jump.

[1] A national poll conducted by Associated Builders and Contractors in Jan. 2011 found that an overwhelming 98 percent of the nearly 600 respondents reported being “less likely” to bid for work under a PLA. A similar poll conducted by ABC in 2009 had almost identical results. See www.thetruthaboutplas.com. In a previous study of infrastructure contractors in the Washington, D.C., area conducted by the Weber-Merritt Research Firm, more than 70 percent of the surveyed contractors stated they would be “less likely” to bid on a public construction project containing a union-only PLA. See The Impact of Union-Only Project Labor Agreements On Bidding By Public Works Contractors in the Washington, D.C. Area (Weber-Merritt 2000), available at www.thetruthaboutplas.com.  In Washington state, another survey of contractors revealed that 86 percent of open shop contractors would decline to bid on a project under a union-only PLA. Lange, Perceptions and Influence of Project Labor Agreements on Merit Shop Contractors, Independent Research Report(Winter 1997).

[2] The Bureau of Labor Statistics’ (BLS) most recent report states that the nonunion private sector workforce in the construction industry comprises more than 84 percent of the total industry workforce. See www.bls.gov,  “Union Members Summary” (Jan. 2009). See also Comments filed by Associated Builders and Contractors, Inc. in the 2009 FAR Council rulemaking proceeding on Executive Order 13502, FAR Case No. 2009-005, available at www.thetruthaboutplas.com.

[3] See McGowan, The Discriminatory Impact of Executive Order 13502 on Non-Union Workers and Contractors (2009), available at http://abc.org/plastudies. According to the study, the take home pay of nonunion workers is reduced by an average of 20 percent, while nonunion contractors’ fringe benefit costs are increased by 25 percent, largely in the form of forced contributions to union trust funds from which the nonunion workers derive no benefits.

[4] Analysis of Bids and costs to Taxpayers in Roswell Park, New York (ABC 1995), available at http://abc.org/plastudies.

[5] Id.

[6] Sewer Project Phase Attracts No Bids, Syracuse Post-Standard, Aug. 20, 1997, E-1.

[7] Big Boston bids in 1996, ENR Nov. 20, 1995 at 26.

[8] More Bidders Wanted For Central Artery Project Work, ENR, Feb 3, 1997, at 1, 18.

[9] Boston Project Tracking Higher, ENR, Jan. 20, 1997, at 27.

[10] Labor Protests Fly, Bids Are High, ENR, July 22, 1996, at 16.

[11] Id.

[12] State’s Dubious Labor Policy, Hartford Courant, Aug. 20, 1998, 3.

[13] Frantz, et al., The PLA for the Iowa Events Center: An Unnecessary Burden on the Workers, Businesses and Taxpayers of Iowa, Policy Study 06-3, Public Interest Inst. At Iowa Wesleyan College (April, 2009),

www.limitedgovernment.org/publications/pubs/studies/ps-06-3.pdf.

[14]  New Wyoming County School to be Rebid, Associated Press, Dec. 20, 2000.

[15] Carr, PLA Analysis for the Jefferson County Courthouse Complex (Submitted to Jefferson County Board of Legislators, Sept. 14, 2000).

[16] School District Should Heed Conclusions of Report, Las Vegas Journal, Sept. 11, 2000.

[17] Lone Wilson Bridge Bid Comes in 70 percent Above Estimate, Engineering News Record, Dec. 24, 2001; see also Baltimore Sun, March 2, 2002.

[18] See discussion above at page 2.

[19] Unexpectedly Low Bid Keeps Wilson Bridge Under Budget, Washington Post, March 2, 2002. See also Thieblot, Review of the Guidance for a Union-Only Project Labor Agreement for Construction of the Wilson Bridge (Md. Foundation for Research and Economic Education Nov. 2000)

[20] School Costs Skyrocket After Labor Pact, San Francisco Chronicle, April 28, 2004.

[21] School Project Back in Limbo, Hartford Courant, April 7, 2004.

[22]Project Labor Agreements and Financing School Construction in Massachusetts , Beacon Hill Institute (Dec. 2006) (www.beaconhill.org).

[23] An Ailing Process, Indianapolis Star, Jan. 24, 2010, available at www.thetruthaboutplas.com.

[24] Id.

[25] New bids drop cost of work on deaf, blind schools (Nov. 10, 2010), www.dispatch.com.

[26] School Board rescinds PLA after latest Tygart bids rejected, Journal-Times, Oct. 8, 2010, www.journal-times.com.

[27] See Examples of Projects Bid With and Without PLAs, available at http://abc.org/plastudies. See also New Study of Boston Harbor Project Shows How PLA Hurt Competition, ABC Today, June 4, 1999; Neil Opfer, Jaeho Son, and John Gambatese, “Project Labor Agreements Research Study: Focus On Southern Nevada Water Authority” (UNLV 2000).