Obama’s Pro-Project Labor Agreement Executive Order Promotes Waste on Federally Assisted Construction Contracts. Rescind it.

0 February 2, 2017  Featured, Federal Construction

The media has reported that the White House has compiled a list of about 50 infrastructure spending projects totaling at least $137.5 billion as a first step in following through on President Trump’s campaign promise to renew America’s crumbling highways, airports, dams and bridges.

A preliminary list of infrastructure investment priorities provided by the Trump transition team to the National Governors Association (NGA) after the election offers a glimpse at which projects around the country might get federal funding.

Many of these projects could be subject to anti-competitive government-mandated project labor agreements (PLAs) unless President Trump takes action and rescinds and replaces President Obama ‘s Executive Order 13502 with an order ensuring fair an open competition free from government-mandated PLAs and preferences on federal and federally assisted projects. Signed in 2009, Obama’s pro-PLA order encourages federal agencies to mandate PLAs on large-scale federal construction projects exceeding $25 million in total cost on a case-by-case basis.

ABC has vigorously attacked President Obama’s pro-PLA order and has achieved great success defeating PLA mandates on federal construction contracts using public relations, political, regulatory, advocacy and legal tactics.

However, the Obama order also allows (but does not formally encourage) federally assisted projects procured by state and local governments to require PLAs under certain circumstances. During the Obama era, state and local lawmakers procuring construction services with the assistance of federal dollars have been strongly encouraged by some federal agencies, bureaucrats and federal lawmakers to mandate PLAs.

In addition, states and localities have been freely mandating PLAs on federally assisted projects, which needlessly increases construction costs, wastes taxpayer dollars, decreases construction industry job creation and reduces competition from qualified nonunion contractors and harms veteran, minority, women and local construction workers not affiliated with unions who are boxed out by PLA mandates that greatly favor unionized contractors and construction workers.

It is unclear how many federally assisted contracts have suffered from anti-competitive and costly PLA mandates, but snapshots of data demonstrate it is significant.

For example, according to a U.S. Department of Transportation’s (DOT) Federal Highway Administration (FHWA) November 2016 report, lawmakers during the Obama era mandated PLAs on more than 400 state and local construction projects (totaling $8.866 billion) that received federal assistance and formal approval from the FHWA.

407 FHWA Approved PLAs Valued at $8B 020217 Snip

In addition, the U.S. Department of Housing and Urban Development (HUD) has been “vigorously promoting PLAs with housing authorities, redevelopment agencies and city governments,” according to remarks by former HUD Secretary Shaun Donovan at a 2010 National Alliance for Fair Contracting Conference in Washington, D.C., and at a 2011 White House Emerald Cities Collaborative Briefing. To date, HUD has pushed housing authorities procuring construction projects supported by federal dollars from HUD to mandate PLAs on projects in Boston, Chicago, New Orleans, Oakland, Philadelphia and Portland.

State and local governments heavily influenced by labor in states like Hawaii, California, Washington, Illinois and New York have a track record of mandating PLAs on massive infrastructure projects receiving federal assistance. These projects have often delivered poor outcomes, despite the alleged benefits of a PLA mandate.

For example, the media has called the Highway 99 tunnel mega-project underneath Seattle’s downtown waterfront the West Coast’s “Big Dig,” named after Boston’s notoriously delayed and budget-busting series of tunnels that were also procured with a government-mandated PLA. It has been plagued by delays, cost overruns, union strikes, featherbedding and labor disputes, a poor safety record, employees working on the jobsite while drunk, sexual harassment allegations and violations of state and federal minority contracting rules.

In Dec. 2016, Honolulu Authority for Rapid Transportation (HART) officials informed the U.S. DOT’s Federal Transit Administration (FTA) that the Honolulu Rail Transit Project budget has ballooned to an estimated $9.5 billion, almost three billion dollars more than expected.

In June 2016, it was reported that costs on the FTA-supported Eads Bridge in St. Louis increased from $23 million to $48 million after it was subjected to a turf war between Illinois and Missouri building and construction trades councils, related delays and a whistleblower lawsuit brought by a Metro employee alleging corrupt bidding practices.

In August 2016, it was reported that the Massachusetts Department of Transportation confirmed that construction of the Longfellow Bridge is likely more than $50 million over budget and has suffered severe delays, despite the promises of a PLA delivering a project on time and on budget.

In 2011, general contractor Lancaster Development submitted a PLA-free bid to the New York State Department of Transportation (NYSDOT) on a federally assisted contract to upgrade Route 17 and the Exit 122 interchange in Orange County, N.Y. Following political pressure, NYSDOT added a PLA requirement just 13 days before the bid deadline. Lancaster, a nonunion, merit-shop firm, had already prepared a PLA-free bid and submitted its bid with explicit provisions that it wouldn’t sign a PLA. When bids were opened, Lancaster was the low bidder at $68 million, $4.5 million below the next lowest (PLA-compliant) bidder. NYSDOT did not accept Lancaster’s PLA-free bid and litigation ensued. In short, NYSDOT rejected $4.5 million of savings (6.6 percent) on a $72.5 million highway contract due to the PLA.

These projects provide a recent snapshot of problematic federally assisted projects subject to government-mandated PLAs.

According to the U.S. Census, in 2015, $288.92 billion worth of public construction was put in place  consisting of $266.315 billion in state and local construction put in place and $22.577 billion in federal construction put in place. All of this work should be protected from anti-competitive favoritism and procured free from government-mandated PLAs.

Federally Assisted Projects Deserve Protection From PLA Mandates

President Obama’s pro-PLA order repealed President George W. Bush’s 2001 Executive Order 13202, “Preservation of Open Competition and Government Neutrality Towards Government Contractors’ Labor Relations on Federal and Federally Funded Construction Projects” and Executive Order 13208. These orders declared that neither the federal government, nor any agency acting with federal assistance, shall require or prohibit construction contractors to sign union agreements as a condition of performing work on federal and federally assisted construction projects.

Essentially, the federal government took a position of neutrality towards the use of PLAs and decided that government and taxpayers benefited from full and open competition from all qualified contractors.

The Bush order was challenged by PLA proponents in a lengthy legal case, Building and Construction Trades Department, AFL-CIO et al., v. Joe M. Allbaugh, Director, Federal Emergency Management Agency, et al. Construction unions contended the Bush executive orders conflicted with the National Labor Relations Act (NLRA).  In January 2003, the U.S. Supreme Court denied certiorari in the case, upholding the U.S. Court of Appeals for the District of Columbia Circuit decision, which upheld President Bush’s Executive Orders 13202 and 13208.

The Allbaugh case remains the controlling case in similar litigation.

Under the Bush executive orders, the federal government awarded $147.1 billion worth of federal construction contracts without government-mandated PLAs, and tens of billions’ of dollars’ worth of federally assisted construction projects were built without PLA mandates. During the eight years of the Bush administration, research found there were no significant labor-related problems on federal construction projects (such as work delays, cost overruns or similar problems) even though there were no government-mandated PLAs.

Taxpayers and the entire construction industry would benefit from President Trump rescinding Obama’s Executive Order 13502 and replacing it with an order identical to Executive Orders 13202 and 13208. This new policy will prevent federal agencies and recipients of federal assistance from requiring contractors to sign an anti-competitive and costly PLA as a condition of winning a federal or federally assisted construction contract. These measures have already been upheld in the highest courts and would allow federal agencies to award contracts to contractors that voluntarily enter into PLAs, an industry practice permitted by the NLRA. A total of 22 states—20 since 2011—have passed similar measures allowing the free market—not the government—to determine if a PLA is appropriate for a construction project. All legal challenges to these state laws have failed.

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Simply put, this new policy, which is supported by a broad coalition of industry groups, will create a level playing field in the procurement of government construction contracts, increase competition, help small businesses grow, curb construction costs and spread the job-creating benefits of federally funded contracts throughout the entire construction industry.

America deserves efficient, accountable and effective construction spending and investment in infrastructure free from special-interest handouts. The Trump administration can create the conditions to make America great again by rescinding President Obama’s failed policy and replacing it with a common-sense approach that encourages fair competition and benefits all Americans.

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