New documents recently uncovered via a Freedom of Information Act (FOIA) request prove a government-mandated project labor agreement (PLA) initially used on a large-scale federal construction project—the Phase 1 modernization of the General Services Administration (GSA) headquarters at 1800 F Street Building in Washington, D.C.—led to increased costs and needless delays in the procurement process.
Proponents of anti-competitive and costly PLAs claim these schemes deliver economy and efficiency in federal contracting. However, the negotiation and execution of the 1800 F Street PLA became so problematic, the GSA allowed the contractor to ditch the PLA and proceed with construction without a PLA.
GSA Issues a Discriminatory De Facto PLA Mandate
In April 2010, the GSA issued a solicitation to potential bidders utilizing a two-step selection process. In Step 1, the GSA issued a Request for Qualifications (RFQ) that the GSA used to narrow the list of qualified bidders to invite to respond to its Request for Proposal (RFP). Step 2 participants received the project plans and contract specifications and were invited to respond to the RFP and submit a firm-fixed price.
Pursuant to a new controversial pilot program promoting the use of PLAs outlined in the GSA Public Buildings Service’s Aug. 11, 2009, Procurement Instructional Bulletin (PIB) 09-02, contractors invited to participate in Step 2 of the 1800 F Street project bidding were allowed to submit a proposal with or without a PLA (or submit two proposals: one with a PLA and without a PLA).
However, the winning bidder was selected using a best value process evaluating firms based on a mix of price and non-price factors. The best value process, outlined in Section V.A. Evaluation of Offers of Section C201 of the RFP (see page 23), included a anti-competitive and discriminatory provision giving firms submitting a proposal containing a promise to utilize a PLA 100 points, or 10 percent, out of the 1,000 total possible points the GSA used to evaluate non-price factors.
While Step 2 firms were not technically forced to use a PLA, the GSA’s new policy discriminated against contractors unwilling to enter into a PLA and put them at a significant competitive disadvantage. This 10 percent “bonus” to PLA contractors is a de facto PLA mandate because it would be virtually impossible for contractors that do not want to build the project with a PLA to have a non-price score competitive with firms willing to use a PLA. There is no rationale justifying the preferential treatment towards PLA offers other than special interest favoritism.
In short, the 10 percent bonus is the GSA’s way of rigging the competitive bidding process to produce a result that would guarantee the contractor building 1800 F Street does so with a PLA that would funnel jobs to well-connected union-friendly contractors and ensure job creation for unionized workers, despite the fact that fewer than one out of 10 construction workers in the District of Columbia and surrounding states belong to a union.
1800 F Street Contract Awarded to PLA Offeror
On Sept. 16, 2010, the GSA awarded contract GS-11P-10-MKC-0025 to a Whiting-Turner Walsh Joint Venture (JV) for $124,349,000 funded by the American Recovery and Reinvestment Act (ARRA) of 2009, commonly known as the stimulus act.
As expected, the JV submitted a PLA offer. A non-PLA offer would have been a waste of time because of the GSA’s rigged bidding process, so there is no direct comparison of the JV’s winning PLA bid versus its non-PLA bid.
Section C101 of the RFP (see Section III.A.16 Project Labor Agreement on page 20), explains the minimum mandatory terms of a PLA acceptable to the GSA and requires the winning contractor to “bargain in good faith with all Labor Organizations having jurisdiction over work included in the Contract and to enter into a PLA that will govern the performance of all construction work by the Contractor and its subcontractors under this Contract.” It also requires the executed PLA to be furnished to the contracting officer within 45 days following award (Oct. 31, 2010).
However, FOIA documents demonstrate this project suffered increased costs and was delayed by at least 107 days due to the prime contractor’s inability to successfully execute a PLA with labor organizations.
PLA Negotiation Caused Delays
The GSA issued Whiting-Turner Walsh JV a Limited Notice to Proceed Nov. 1 because it had not submitted an executed PLA by the Oct. 31 deadline.
The JV was granted a 10-day extension to submit a final PLA by Nov. 10.
Correspondence on Nov. 30 from the GSA indicated the JV must continue PLA negotiations with “all Labor Organizations having jurisdiction over work” despite the fact the JV could only successfully execute a PLA with the carpenters union and were unable to execute a PLA with other unions represented by the DC Building Construction Trades Council (here is the executed Carpenters PLA).
On Feb. 10, 2011 (107 Days after Nov. 1), the GSA communicated to the JV would receive a Full Notice to Proceed and must issue a refund to the GSA for costs associated with the PLA in its bid because the JV could not execute a PLA with all labor organizations:
“…[the]GSA would be issuing a modification to your contract that would not only remove the PLA requirement but also establish a credit value for the removal of that requirement. Therefore, given that your initial bid proposal did not include Non-PLA pricing, I request that you provide Non-PLA pricing to the attached list of items that were awarded on 16 September 2010 under your PLA cost proposed.”
The delays associated with the PLA conflict directly with June 3, 2011, testimony given by GSA Deputy Administrator Susan Brita before the House Oversight and Government Reform Committee’s Technology, Information Policy, Intergovernmental Relations and Procurement Reform Subcommittee. At 40:50 of this hearing video, Brita claims the PLA only delayed the 1800 F Street project by 45 days. The truth is the PLA delayed the project by 107 days.
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PLA Increased Costs
It is unclear how much the de facto PLA mandate increased costs for the GSA and taxpayers, but the bottom line is it did increase costs.
A July 25, 2011, a contract modification document uncovered through a FOIA request puts the amount the JV credited to the GSA due to the PLA at $1,631,600. The credit is acknowledged on usaspending.gov here, but it does not assign a monetary value.
However, this amount appears to factor in other non-PLA-related costs at issue between the JV and the GSA. In addition, the figure does not account for the amount of time lost and expense incurred by the JV negotiating a PLA with various labor groups prior to the GSA issuing a Full Notice to Proceed 107 days after the JV could have proceeded with construction had there not been a PLA requirement.
Finally, the figure fails to address the additional cost savings the GSA could have experienced had the RFP been bid without a discriminatory de facto PLA mandate policy.
Studies indicate PLA mandates on projects subject to prevailing wage laws like the 1800 F Street project increase costs between 12 percent and 18 percent. In fact, a Jan. 27, 2010, consultant’s report funded by the GSA recommended against a PLA on the 1800 F Street project, expressing concerns it would raise costs by 4.9 percent (see page 93 of the PDF):
“Based on the Rider Levett Bucknall analysis contained within this report and given the current poor economic climate in the US – for a well compiled PLA on 1800 F St, Washington DC, the GSA may be disadvantaged by a PLA and that a PLA is likely to not advance the federal Government’s interest in achieving economy and efficiency in federal procurement…”
The only entity that knows the cost of the PLA is the Whiting Turner Walsh JV and perhaps the GSA. The GSA’s Office of Inspector General should investigate the waste, fraud and abuse associated with the PLA and the GSA’s discriminatory pro-PLA policy.
However, an investigation wouldn’t reveal the true amount of money wasted because it would fail to account for the cost-saving benefits of free and open competition without a PLA mandate or preference.
In short, the excessive delays and the act of the GSA requesting the JV to refund money associated with increased costs related to the PLA undermines the key claim in President Obama’s Feb. 6, 2009, pro-PLA Executive Order 13502 that a PLA increases economy and efficiency in federal contracting. A PLA is supposed to establish jobsite harmony and rules all unions and contractors must obey, yet the PLA proved to be more of a problem than a helpful tool. Phase 1 of the 1800 F Street building ended up being constructed without a PLA without any strikes, delays or any other problems.
GSA Continues Costly Policy of PLA Favoritism
As a fitting coda to this story, the GSA announced it has halted plans to construct Phase 2 of the 1800 F Street modernization due to a lack of funding.
The increased costs and delays associated with the 1800 F Street project PLA, in addition to $3.3 million worth of increased costs associated with a de facto PLA mandate on another GSA building in Washington, D.C, – the Lafayette Building – have not dampened the GSA’s enthusiasm for PLA preferences and PLA mandates.
While procuring this project, the GSA revised its pro-PLA policy April 30, 2010, and Sept. 24, 2010, to clarify some sticking points in its PLA pilot program, including forcing contractors to sign PLAs with all labor organizations (and not just one labor organization, as was a problem with the 1800 F Street project).
In addition, despite negative media attention, a congressional hearing and inquiry from House GOP members, the GSA has expanded its policy of PLA favoritism to all GSA projects exceeding $25 million. However, the impact of this change has been limited because the GSA’s budget for new construction has been slashed dramatically during the past few years due to fiscal concerns, a glut of federal properties and the scandal that rocked the agency in April 2012.
It’s time for the GSA to shelve its anti-competitive and costly pro-PLA policy once and for all, and restore economy and efficiency in federal contracting.