San Diego Unified School District PLA Reduced Competition and Increased Costs

0 December 9, 2011  School Construction, State & Local Construction

On Dec. 7, 2011, explained how government-mandated project labor agreements (PLAs) reduce competition and increase costs.

Yesterday, the Free Enterprise Coalition released this press release (see below) about documents recently obtained from the San Diego Unified School District (SDUSD). They prove government-mandated PLAs reduce competition and increase costs.

Note: SDUSD calls these union agreements Project Stabilization Agreements (PSAs) instead of Project Labor Agreements (PLAs). There are a number of alternative names used to describe union agreements that are essentially PLAs, such as Community Workforce Agreements, Site Stabilization Agreements, etc. but they will continue to be referred to as PLAs in this post.

The press release says union-favoring PLA project bids were 9.7 percent less than the SDUSD’s budget. However, internal data reveals the projects bid without the imposition of the union-favoringPLA were 31.6 percent below budget…a significant cost difference even though both groups of projects are under budget.  If this trend continues, the imposition of the union-favoring PLA could cost taxpayers more than $200 million in unnecessary construction costs on planned projects.

The PLA reduced competition too. For union-favoring PLA projects, SDUSD was able to interest an average of five responsive general contractor bidders, compared to 10 responsive general contractor bidders on school projects where contractors were not forced to agree to a government-mandated PLA.  General contractors complained projects received only about 50 percent of the subcontractor bids that the non-PLA projects received.

It is no surprise the SDUSD-mandated PLA reduced competition and increased costs.

It will be interesting to see how local Big Labor bosses and school district officials beholden to special interests try to spin these numbers at today’s press conference, where officials were expected to engage in the deceptive manipulation of taxpayers in support of their anti-competitive pro-PLA agenda. (The press conference was planned prior to the public release of these damaging documents. A consultant was expected to present a report in support of the SDUSD PLA policy.)

Opposition to government-mandated PLAs on the $2.1 billion bond measure funding SDUSD projects, Proposition S,  has been covered numerous times here at the

In 2009, the SDUSD sneakily introduced the PLA-mandate policy, which passed May 26 by a 3-2 vote. A number of projects funded by Prop S did not have PLAs mandated on them because of an inter-union dispute. In July 2009, AGC filed a lawsuit against the SDUSD PLA mandate policy. A second lawsuit was filed by the National Right to Work organization in October.  The AGC lawsuit was dismissed in California Superior Court in December 2009. An appeal was rejected in California’s 4th District appeals court in May 2011. The California Supreme Court declined to review the case in September 2011 . In February 2010, bids for the first project subject to the new PSA-mandate policy came in 35 percent more than initial estimates.  In July 2011, SDUSD documents revealed the PSA policy has failed to meet its local hiring goals.

The San Diego region has been a hotbed of government-mandated PLA controversy with Californians taking action in opposition to government-mandated PLAs.

San Diego County voters approved a Fair and Open Competition charter amendment with 76 percent of the vote in November 2010.

In June 2010, 56 percent of voters in the City of Chula Vista approved a Fair and Open Competition ordinance, and 54 percent of voters in the City of Oceanside approved a charter containing a Fair and Open Competition provision.

In response to the passage of similar local fair and open competition measures passed throughout California in 2011, Big Labor pushed the California legislature and Gov. Jerry Brown (D) to pass SB 922, which was signed into law Oct. 2, 2011, under odd circumstances through a gut and amend bill. It is a fine example of how Big Labor’s control of California’s elected officials is harming taxpayers and attacks the will of the people. Learn more here.

We will be following this San Diego story closely. Here is the press release.

Internal Documents Show San Diego Unified School District’s Union-Only Construction Program Costing Taxpayers Millions of Dollars

San Diego, CA – In documents obtained from the San Diego Unified School District’s Facilities Department, the construction industry has found that the District’s union-only Project Stabilization Agreement (PSA) for construction projects financed by the $2.1 Billion Proposition S bond measure has been a dismal failure. The document, prepared at the request of the firm hired by the District to “conduct a study of the impact and effect of the Projects Stabilization Agreement (PSA),” covers the bidding results of all construction projects bid utilizing Proposition S funding since its inception in 2009.

The PSA was negotiated between the San Diego Building and Construction Trades Council and the District in 2009. The first project imposing the terms of the PSA was bid in February 2010. Ten Proposition S projects were bid in 2009 before the PSA was implemented, and six other projects were bid in 2010 and 2011 that were not covered by the terms of the PSA. 17 projects were bid under the terms of the PSA in 2010 and 2011.

One of the documents, “Proposition S Construction Contracts Bidding Review,” shows that on average the District is paying a 21.9% premium for projects bid under the union-only terms of the PSA. This 21.9% premium amounts to approximately $16 million in additional construction costs that the District has incurred in the two years in which they have imposed the union-only condition on the projects. The document shows that while PSA project bids were 9.7% under the District’s budget, the projects bid without the imposition of the union-only PSA were 31.6% under budget…a 21.9% difference. If this trend continues, the imposition of the union-only PSA could cost taxpayers over $200 million in unnecessary construction costs.

Jim Ryan, Executive Vice President of the Associated General Contractors of America, San Diego Chapter, Inc., stated that “the reason for the 21.9% premium is obvious. On the union-only Prop S PSA projects, the District has only been able to interest an average of 5 responsive general contractor bidders, compared to 10 responsive general contractor bidders on Proposition S projects in which the PSA was not a condition of the contract. General contractors also tell us that the union-only PSA projects receive only about 50% of the subcontractor bids that the non PSA projects receive. When there are more bidders, the District receives better construction bids. It’s that simple.”

Scott Crosby, CEO of the Associated Builders and Contractors, San Diego Chapter, noted that “the District has also spent several hundred thousand dollars to administer the PSA. This includes additional staff to administer the numerous grievances and jurisdictional disputes on the union-only PSA projects, pay consultants to conduct seminars to explain the complex provision of the PSA to the industry, and market the bid opportunities to contractors in areas throughout the Southwest. These expenses were incurred because the local contractors have shown little interest in bidding the union-only PSA projects.”

Eric Christen, Executive Director of the Coalition for Fair Employment in Construction, expressed hope in the unlikely chance that the school board may use this as an opportunity to rid themselves of the PSA. “We now have two years worth of data in which every metric the district set forth has failed to be met. This disastrous study now gives the school board one more opportunity to put the interest of students and taxpayers ahead of Big Labor special interests who fund their campaigns.”

Another failure of the union-only PSA relates to local workers. The Building Trades promised that 70% of the craft workers would be residents of the San Diego Unified School District. As of December 1, 2011, only 40% of the craft workers working on the projects reside in the District.

The District will hold a “closed to the public” news conference Friday, December 9 to detail the results of a study by Rea & Parker Research, which was commissioned by the District’s Board of Trustees at the cost of $71,825.

The news conference will be held at Hoover High School’s Woodshop Building, which was the first Proposition S project bid under the union-only terms of the PSA. The project had to be bid twice. Only five bidders bid the first time, and the low bidder from Stanton, California was 35% over the District’s budget. All bids were rejected, and the District rebid the same project. This time there were only four bidders, and the low bid was about 26% over budget. A comparable project was bid about the same time by another school district that does not impose a union-only PSA on its projects. 17 bids were received, and the low bid was about 25% under budget.

Source Documents: Proposition S Construction Contracts Bidding Review & Project Specific Budget/Estimates/Bids


CONTACT: Brad Barnum

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