The Truth About Project Labor Agreements

Opposition continues to mount against the Metropolitan Washington Airport Authority’s (MWAA) April 6 resolution mandating a union-favoring project labor agreement (PLA) that contractors are required to agree to in order to win construction contracts on the $3.5 billion Phase 2 Dulles Metro Rail Silver Line project in Northern Virginia.

(See previous blog posts from TheTruthAboutPLAs.com on this project and MWAA’s resolution here).

Originally estimated to cost $2.5 billion, Phase 2’s price tag has ballooned to more than $3.5 billion and the project has not even broken ground yet. Financial support from Virginia stakeholders (Loudoun County, Fairfax County, the Commonwealth of Virginia and Dulles Toll Road users) footing the bill for this project is unraveling because MWAA has not done enough to control escalating project costs.

The controversy has grabbed headlines and forced local, state and federal officials to develop cost-cutting solutions and investigate the questionable decision-making and planning of MWAA.

On Saturday, a Washington Post editorial suggested MWAA should abandon the Phase 2 PLA mandate as a solution to trim “skyrocketing price projections” that threaten to derail this project (“Containing Costs on the Silver Line,” 6/23):

One focus should be the airport board’s insistence that any general contractor bidding on the project be bound by a pro-union labor agreement. Already, Ken Cuccinelli II, Virginia’s attorney general, has threatened to sue if the deal turns out to violate the state’s labor laws.

The airports board was pushed to adopt the “project labor agreement” by board member Dennis Martire, who, in his day job, is a senior official in the Laborers’ International Union of North America, which represents hundreds of thousands of construction workers. Mr. Martire had an obvious conflict of interest, as his union would be a direct and major beneficiary from a labor deal. He should have had the common sense to recuse himself from the decision, even if his vote did not technically violate the board’s narrowly drawn ethics policy.

There is serious debate about whether a labor pact would drive up expenses. The airports authority says a similar pact for the project’s first phase, under construction from Falls Church to Reston, has helped contain costs and enhance efficiency by ensuring a steady supply of workers and avoiding labor trouble. But that agreement was adopted voluntarily by the contractor. There are concerns that a mandatory labor agreement for the second phase could dampen competition and drive up costs by discouraging bids from some large contractors, and by imposing cumbersome union rules. In an era of belt-tightening, the airports authority must go the extra mile to ensure that the Silver Line’s construction is managed as frugally as possible.

Attorney General Ken Cuccinelli’s expressed opposition to the Phase 2 PLA during this June 3 radio interview on WMAL 630 (listen to discussion of the Phase 2 Silver Line PLA at 2:49 of the clip) when he said the Phase 2 PLA mandate may be subject to a legal challenge if it violates Virginia’s Right to Work law.

The Washington Examiner reported that Virginia delegates Tim Hugo, Barbara Comstock and Thomas Greason sent a letter requesting that Cuccinelli investigate the Phase 2 PLA mandate and the possible ethics violation of the MWAA board member and Laborers International Union of North America (LIUNA) official Dennis Martire because he advocated for the Phase 2 PLA mandate that financially benefits his employer (“Virginia lawmaker calls for probe of Dulles Rail labor pact,” 5/28).

Martire’s possible MWAA ethics violations have drawn interest from other sources, including the Chantilly and Oakton Patch and the Bacon’s Rebellion Blog. (Check out the nice piece at Bacon’s Rebellion on the Silver Line PLA controversy (pdf).

The Washington Post reported that Secretary of Transportation Ray LaHood has been called in to mediate the dispute between Virginia’s key financial stakeholders and MWAA (“Transportation Secretary LaHood to try to mend rift over Dulles Metro station,” 5/31) where he has already delivered some reality checks to MWAA board members, according to this WaPo editorial (“Reality check for Dulles rail,” 6/1):

FOR THE PAST couple of months, the handful of unelected officials in charge of building Metro’s $6 billion Silver Line extension to Dulles International Airport and beyond have pushed the idea that federal loans — not serious cost-cutting — will make the project’s numbers work. On Wednesday they got a harsh reality check.

It came in a meeting called by Transportation Secretary Ray LaHood, who convened project stakeholders, including members of the Metropolitan Washington Airports Authority, which is in charge of building the 23-mile extension. In response to suggestions from the airports board that the feds could shore up the Silver Line’s shaky finances with a huge loan, Mr. LaHood delivered an unusually blunt message, according to several people who attended the meeting. The federal government “is not a cash cow,” he said; it’s not going to ride to the project’s rescue.

The Fairfax Times reported that the U.S. Department of Transportation announced it will audit MWAA (“Inspector General will audit MWAA,” 6/24):

U.S. Inspector General of the U.S. Department of Transportation Calvin L. Scovel III announced Tuesday that his office will audit the Metropolitan Washington Airports Authority.

The audit, according to a letter to MWAA from Scovel, will determine if the authority’s policies and procedures comply with the law and whether its board of directors has been transparent and accountable in its decisions related to the now controversial Dulles Rail Project.

U.S. Reps. Frank Wolf (R-Dist. 10) and Tom Latham (R-Iowa) asked for the investigation earlier this year.

MWAA was the subject of a 2002 report from the Government Accountability Office (GAO) that investigated MWAA’s controversial contracting policies.

Virginia Delegates Tim Hugo, Barbara Comstock and Jim Lemunyon sent a letter June 11 to MWAA Chairman Charles Snelling objecting to the $330 million in additional costs resulting from MWAA’s decision to build an above ground metro stop at Dulles Airport. The letter also strongly opposed the Phase 2 PLA:

We also find it fiscally reckless for MWAA to adopt the unnecessary resolution directing MWAA staff to include a PLA in the procurement documents for Phase 2 of the project. As you know, we raised the issue of PLAs in a hearing of the House Transportation Committee, held by Chairman May, in March.  We never received satisfactory answers about the added costs from PLAs.  Instead, this decision was made hastily with little discussion.  If MWAA mandates a PLA in the specifications of Phase 2 bidding documents, it will harm local and Commonwealth taxpayers, increase costs for Dulles Toll Road users, and discourage competition from Virginia’s qualified construction firms.  It will also put the funding path for this project on an unsustainable path that our constituents simply will not accept.

Further, the logic MWAA board members used to mandate a PLA on Phase 2 is based on misinformation provided by special interests serving on the MWAA board. MWAA member Dennis Martire is the Vice-President of The Laborers International Union of North America (LiUNA). A Phase 2 PLA mandate will result in LiUNA, the labor organization employing Mr. Martire, receiving a financial windfall worth tens of millions of dollars resulting from an estimated 10 million man hours of labor supplied by LiUNA members. What are the potential conflicts of interest here?  The public needs to know more about this situation.  MWAA board members and staff cannot ignore such an appearance of conflict.

What’s worse, is the potential economic consequences for Commonwealth taxpayers. Studies estimate PLA mandates increase the cost of construction by 12 percent and 18 percent compared to similar non-PLA projects, and these could very well be low estimates.  MWAA’s financial stakeholders can’t afford the $300 million to $450 million in crony contracting costs added to the $2.5 billion construction budget.

In addition, this is unfair to Virginia workers.  Virginia can’t afford the job losses resulting from this PLA, as 96 percent of Virginia’s private construction workforce does not belong to a union, and they deserve a fair shot at these high paying jobs. Pro-PLA Board Members claimed that a PLA provides a steady workforce, implying that there was some type of worker shortages in today’s economy. This has no basis in fact. A PLA mandate will ensure that the majority of construction jobs created by Phase 2 will go to out-of-state businesses and union members, yet Virginia stakeholders are picking up the tab.  Of course it is no small irony that the majority of those voting for this option that puts the tab on Virginia taxpayers don’t live in the area that will be impacted. Such an outcome simply will not stand.

Perhaps MWAA board members have been misled into believing a PLA mandate is needed for Phase 2, as the Phase 1 PLA is credited for positive Phase 1 construction performance. But the fact remains that the PLA on Phase 1 was a voluntary PLA entered into by Dulles Transit Partners after they were awarded the Phase 1 contract, and it specifically exempted merit shop (nonunion) subcontractors. In short, it is fallacious reasoning to assume that the Phase 1 agreement and a PLA mandated on Phase 2 will produce the same results.

On June 23, a coalition of 13 of Northern Virginia’s leading business groups and associations held a press conference highlighting a letter they sent to MWAA that offers solutions to reduce costs and get the Phase 2 project back on track.

The five areas where Northern Virginia business leaders are seeking cost reductions are:

1. Eliminate the requirement that the primary contractor implement a mandatory Project Labor Agreement (PLA) on Phase II.
2. Approve the aboveground station at Washington Dulles International Airport, cutting more than $300 million, with minimal inconvenience to airport passengers.
3. Reduce the scope of the Dulles Airport rail yard and seek ways to finance it separately or in conjunction with WMATA, saving $50 million to $100 million.
4. Ask Fairfax and Loudoun Counties to assume responsibility for funding and construction of the parking structures, similar to the public-private partnership at the Wiehle Avenue station.
5. Seek additional financial help from Virginia and the Federal Government, neither of which has any meaningful financial participation in Phase II.

TheTruthAboutPLAs.com reported May 20 that the following Northern Virginia groups and elected officials publicly opposed the government-mandated PLA on Phase 2 of the Silver Line:

Herndon Mayor Steve DeBenedittis
Loudon County Board of Supervisors
Fairfax County Board of Supervisors
Fairfax Chamber of Commerce
Dulles Regional Chamber of Commerce
Women Construction Owners and Executives, USA (WCOE)
Washington Examiner

Finally, the Washington Examiner reported that former Postmaster General John E. “Jack” Potter has been named CEO of MWAA (“Former postal chief to oversee airports,” 6/22).

Expect more headlines and controversy this summer.

As ABC Virginia wrote to MWAA in April, TheTruthAboutPLAs agrees that MWAA should abandon the PLA mandated by MWAA for construction of Phase 2 of  the Silver Line. Virginia taxpayers, businesses, employees and metro riders would benefit from fair and open competition.

Check TheTruthAboutPLAs.com for updates and feel free to contact us if you would like additional information.