The Truth About Project Labor Agreements

Philadelphia Mayor Michael A. Nutter issued Executive Order 15-11 on Nov. 29, 2011, re-establishing the use of anti-competitive and costly union-favoring government-mandated project labor agreements (PLAs) on city projects costing more than $5 million.

According to Philly’s press release, the order does not mandate PLAs on all projects, but it creates a PLA evaluation procedure that opens the door to waste and discrimination during procurement of city construction contracts:

“City departments and agencies will refer projects appropriate for a PLA above five million in estimated construction costs to the Mayor’s Office, which will determine the feasibility of a PLA. The executive order establishes the Advisory Committee for Project Labor Agreements, which will monitor and review all PLAs and will make periodic evaluations of the use of PLAs. The members of the Committee are the Mayor’s Chief of Staff, the City Solicitor, Managing Director, Director of Finance, Deputy Mayor for Transportation and Utilities, and Deputy Mayor for Economic Development.”

The press release claims the executive order will lead to government-mandated PLAs that can prevent strikes, save taxpayer dollars and lead to increased minority and Philadelphia resident participation on construction projects funded by local tax dollars.

A press release (pdf) issued yesterday by ABC Eastern Pennsylvania opposed Mayor Nutter’s pro-PLA executive order. And for good reason. TheTruthAboutPLAs.com readers know how government-mandated PLAs do not prevent strikes, reduce costs, increase competition from qualified bidders or, encourage employment of minorities and women tradespeople. Instead, they serve as a barrier to contracts for minority and disadvantaged businesses, and fail to create meaningful local hiring.

More from ABC Eastern PA’s press release:

ABC objects to the use of government-mandated PLAs on any taxpayer-funded construction project.

”Mayor Nutter’s executive order is discriminatory and costly. Government-mandated PLAs effectively preclude a majority of qualified contractors and their local employees from building construction projects funded by their tax dollars,” said Jeff Zeh, president and CEO of ABC Eastern Pennsylvania. “PLAs are only promoted by construction trade unions and their allies in an effort to end open, fair and competitive bidding, thereby providing unions with a workforce monopoly on construction projects.”

“This is nothing more than play to pay politics at its best in Philadelphia,” said Zeh. “The public should hold the Mayor and new Advisory Committee on PLAs accountable for any PLA mandates as these schemes will undoubtedly restrict competition, increase costs and unfairly cater to narrow special interests.”

Why the Reversal in PLA Policy, Mayor Nutter?
Few media outlets have covered this new executive order or questioned the reasoning behind Mayor Nutter’s sudden reversal of his position on government-mandated PLAs.

Journalists need to ask if this is the best solution for taxpayers, minorities and residents. Is this flip flop the result of Philly trade unions becoming more inclusive and less discriminatory, or is this standard Philly pay-to-play politics now that Mayor Nutter was elected for a second term?

Big Labor Causes Discrimination, Waste and Headaches for Philly
For years, Philadelphia was subjected to a pro-PLA bias on city-funded construction projects, starting with Executive Order No. 5-95, signed by Mayor Ed Rendell (D), who served as Pennsylvania’s governor for two terms and pushed government-mandated PLAs on construction projects built and funded by the commonwealth through the Department of General Services.

Taxpayers are also hurt by Big Labor’s presence in Philly’s residential construction market.  To put the negative impact of Philly’s construction unions on city residents into perspective, a 2010 construction industry report suggested modular homes as a solution to Philadelphia’s urban blight and run down neighborhoods because of Philly’s high construction labor costs.

The report said:

“Philadelphia’s construction costs are the fourth highest of any major city in the nation and 18 percent above the national average for all United States communities. The city’s house values—the price for which homes can be sold —are the third lowest of any major city in the nation and are 40 percent below the national average. As a result, construction costs often exceed the prices of new homes. This makes government subsidy a prerequisite for home building in most Philadelphia neighborhoods to fill the gap between building costs and the sales price of a home. High labor costs, 39 percent above the national average, drive the construction industry’s out-of-scale cost structure. These labor costs make up over half the total cost of an average project in Philadelphia.”

Big Labor’s stranglehold on Philly’s government and construction market also has wasted billions of dollars in the commercial and publicly funded construction markets.

Embarrassments like the construction trade unions almost running MTV’s Real World out of town for using nonunion labor to build the cast’s trendy home, and unions forcing the Comcast Tower developers to install a second set of plumbing pipes because of a union dispute over the use of environmentally friendly PVC pipes and flushless urinals because they require less labor to install and less maintenance during the building’s lifespan, are fine examples of union disputes serving as a barrier to progress.

And then there is the infamous Dec. 2007 incident in which an African-American union construction worker from the Operating Engineers Local 542 in Fort Washington, Pa., (which has a storied history of choking diversity since at least 1971) complained that another construction worker from the glaziers’ union brandished a noose while working at the city’s Comcast Center.

The noose incident sparked a demonstration by African-American construction workers in City Center and compelled the Philadelphia City Council to challenge the unions’ pattern of racism in 2007 and 2008.

City Council members were outraged by constituent complaints, high city unemployment, and the lack of diversity in Philadelphia’s construction trade unions. Minorities and local residents have been shut out of the trade unions for decades (remember Nixon’s Philadelphia Plan of 1967) and weren’t hired on recent union-controlled projects funded by the city.

Despite the fact that almost 80 percent of Pennsylvania’s private construction workforce does not belong to a union, local nonunion contractors and qualified workers complained they’ve been prevented from working on Philadelphia projects because of the city’s pro-PLA policy and other measures designed to steer contracts to union contractors and union labor who have installed pro-union Democrat allies in all levels of government.  At the time, City Council members and Mayor-elect Nutter called it “economic apartheid” for Philly’s constituents.

In early 2008, Tom Ferrick Jr., the Philadelphia Inquirer’s resident investigative journalist, tirelessly researched and bravely brought these facts to light:

“The building-trades unions – despite nearly three decades of effort to the contrary – remain all-male and overwhelmingly white.

Data I have analyzed recently indicate that only one craft is majority black and Latino: the laborers, who are at the bottom rung of the pay scale…

…Under federal regulations, OHCD must keep information on the home addresses, race and sex of workers who work on any government-subsidized project.

The union projects covered by the OHCD data totaled $514 million and involved 10,748 workers.

The nonunion projects – understandably – added up to much less. They totaled $39 million and involved 992 workers.

But the majority of workers in these nonunion projects were minorities: 72 percent, to be exact. And 71 percent lived in the city. Only 2 percent were women.”

This packet of articles, including Ferrick’s columns, document the Philly PLA controversy and tipping point, when Philadelphia City Council members demanded unions put more local and minority residents to work on the then estimated $700 million Convention Center renovation.

The project’s proposed PLA called for 13 percent of the workers to be minorities. The council wanted it at 50 percent. When the unions refused, the city threatened to open the Philadelphia Convention Center renovation project to competition from nonunion contractors by exempting them from having to agree to the union-only PLA as a condition of winning a contract.  The city demanded that trade unions open up their books and reveal the demographics of their membership. Two unions refused, but those that begrudgingly complied (or else they would lose their beloved PLA – their tool to obtain a labor monopoly on the Convention Center project) revealed results supporting Ferrick’s research: Philadelphia construction trade unions are not diverse and their members are not city residents.

The Philadelphia Daily News ran this article Feb. 5, 2008:

A breakdown of building-trades info that ended standoff

Here’s a breakdown of the 11 building-trades unions that provided membership data to City Council:

* Asbestos Workers: 6 percent minorities and women, 19 percent city residents. Among apprentices, 9 percent minorities and women, 35 percent city residents.
* Bricklayers: 20 percent minorities and women, 26 percent city residents. Among apprentices, 25 percent minorities and women, 59 percent city residents.
* Cement Masons: 27 percent minorities and women, 42 percent city residents. Among apprentices, 45 percent minorities and women, 64 percent city residents.
* Elevator Constructors: 5 percent minorities and women, 9 percent city residents. Apprentice data not provided.
* Ironworkers: 19 percent minorities and women, 32 percent city residents. Among apprentices, 24 percent minorities and women, 47 percent city residents.
* Painters: 7 percent minorities and women, 21 percent city residents. Among apprentices, 8 percent minorities and women, 33 percent city residents.
* Plumbers: 5 percent minorities and women, 29 percent city residents. Apprenticeship data not provided.
* Sheet Metal Workers: 14 percent minorities and women, 30 percent city residents. Among apprentices, 23 percent minorities and women, 56 percent city residents.
* Sprinkler Fitters: 6 percent minorities and women, 23 percent city residents. Among apprentices, 11 percent minorities and women, 40 percent city residents.
* Steamfitters: 4 percent minorities and women, 14 percent city residents. Among apprentices, 9 percent minorities and women, 25 percent city residents.
* Laborers: 91 percent minorities and women, 73 percent city residents.

– Dave Davies

Pitiful.  Plus, the data cannot be independently verified and unions failed to accurately report their exact demographics. For example, nobody knows how many individual black AND local members are in the plumbers union. Two major unions, the IBEW local 98 and the carpenters local union, refused to turn over data. But somehow, it was good enough for the City Council.

Update: An April 2008 report commissioned by the Philly government, Demographic and Geographic Composition of the Philadelphia Building Trades (pdf) by Kevin C. Gillen, PhD, an economist and senior researcher at University of Pennsylvania’s Fels Institute of Government, essentially confirmed Ferrick’s research:

These results seem to confirm widely held local perceptions about the building trades in Philadelphia:

• Most workers live outside Philadelphia.
• Of those that do live in Philadelphia, the majority are non-white minorities.
• The relatively higher-paying jobs of the skilled trades and management are dominated by whites.
• Even in the relatively higher-paying jobs held by minorities, the majority still live in the city.
• The more a construction job pays, the greater the probability it is held by a white male who does not live in Philadelphia.

If anything, this data represents the most favorable depiction of the geographic and demographic composition of the building trades in Philadelphia.

Politics Stifled Real Reform
Eventually, the city was pressured by Gov. Ed Rendell to cut a deal. The unions were granted their anti-competitive PLA and the city received its unenforceable minority and local hiring “goals” on the Convention Center. Unions were forced to make their best efforts to hire a Convention Center workforce in which 50 percent of workers were Philadelphia residents, 25 percent were African American, 10 percent Hispanic American, 10 percent women and 5 percent Asian.

Of course, the Convention Center  exceeded the $700 million estimated cost by at least $86 million when it was completed in late February 2011.  Union labor costs have been blamed for the Convention Center’s difficulty in attracting customers.

It is no surprise that reducing competition and mandating archaic union work rules through a PLA produces results like this. And it is unclear if Philly’s trade unions met the controversial hiring goals.

The deal also led to the creation of a new taskforce to address City Council’s concerns. The Mayor’s Advisory Commission on Construction Industry Diversity (MACCID), packed with union members and Big Labor cronies, was formed and tasked with creating a report that would produce solutions to fix the diversity problem festering within Philadelphia’s construction trade unions.

The MACCID produced this report in March 2009, which glossed over the fact that the power and culture of Big Labor is primarily responsible for preventing minority and local residents from obtaining new construction jobs. It offered few real and effective solutions and did not acknowledge Ferrick’s findings, which documented how the nonunion workforce boasted better diversity and local hire numbers.

The report did not offer this commonsense and cost-effective solution: Philly should open competition from nonunion contractors, creating market pressure on unions to diversify faster, enact real reform and save taxpayers millions of dollars.

The report and creation of the MACCID was mainly political window dressing offered to constituents less powerful than Big Labor to create the appearance of government addressing their complaints.

Have Philly Unions Suddenly Diversified?
That brings us to Mayor Nutter’s sudden appetite for government-mandated PLAs.

Have Philly’s trade unions produced measurable improvement in terms of putting minorities and local residents back to work?

Did Philly trade unions meet their hiring goals for the Convention Center?

Have unions really allowed the victims of discrimination to become members, despite record levels of construction industry unemployment, which peaked at 27 percent in Feb. of 2010?

Have the disenfranchised actually been hired by contractors, or are they toiling on union hiring hall out-of-work benches.

If there has been positive results, where is the data?

Why are local nonunion contractors and their skilled employees treated like second-class citizens in Philly?

Why did Mayor Nutter suddenly reverse course? How much money did the building trades contribute to his campaign in the last election cycle? Is this a tactic to appease one Big Labor constituency while pushing for reforms with public sector unions?