An Albany County Supreme Court ruled March 1 that the government-mandated PLA issued by NYS DOT violated state procurement laws. The court found that the NYS DOT failed to demonstrate that the decision to require a PLA advanced the state’s interests in the procurement of construction services. The court ordered NYS DOT to re-bid the project.

Here are the highlights from the press release issued by the Empire State Chapter of Associated Builders and Contractors (ABC):

“The ruling effectively means the DOT was flawed in its decision to add a project labor agreement to the job, which would cost taxpayers $4.5 million more than necessary,” said Mark Galasso, President of Lancaster Development, Inc. “As a contractor and taxpayer I am pleased by today’s decision.”

The court on Friday ruled the PLA illegal and thus nullified the existing contract. This means the state DOT must rebid the project.

“The ruling shows a failure by New York State Department of Transportation officials to comply with the competitive bidding rules set out by state law,” said Steve Lefebvre, President of ABC. “Thanks to the court’s decision the project will be rebid, to the benefit of the taxpayers. When this project goes out to be rebid, I would caution the DOT not to attempt the inclusion of a PLA, as we have just seen an open and fair bidding process is the best way to maximize cost savings on public work projects.”

Lefebvre further added that the decision rendered by the court confirms what the ABC has said right from the start, that Project Labor Agreements are subjective and subject to questionable insider negotiations.

In this ruling, the judge points out several alarming issues that arose during the court’s examination of NYS DOT’s attempt to implement a PLA mandate.

Throughout the legal process, the courts ordered NYS DOT to hand over correspondence and other documents surrounding the process used to determine that a PLA is appropriate for this project.  In the decision, the judge takes NYS DOT to task for not being able to produce all the documents involved in the decision to require a PLA despite repeated requests by the court.  At best, this is evidence of sloppiness on the part of NYS DOT.  At worst, it could indicate that they have something to hide.  Either way, it is troubling.

The court also criticized the department’s handling of its feasibility study process.  In New York, public entities are required to obtain a feasibility study prior to requiring contractors to sign a PLA as a condition of performing work.  The study must demonstrate that the PLA mandate will promote the public interest through the: “(1) protection of the public finances by obtaining the best work at the lowest possible price; and (2) prevention of favoritism, improvidence, fraud and corruption in the awarding of public contracts.”

The court found the decision to require a PLA was not supported by either the first draft of the feasibility study developed by Arace & Company Consulting, LLC or NYS DOT’s own initial research.  The department relied on the more PLA-friendly second draft of the Arace study to justify the PLA mandate.  This second study was released to the department approximately one month after the first draft and with virtually no new evidence, endorsed the PLA mandate to a degree that the initial draft did not.

Clearly, the department wanted a PLA mandate on this project.  You don’t need to look any further than the fact that they threw out a bid from a qualified contractor for nearly $5 million more than the next lowest bid to determine NYS DOT’s intent.

The project will now be rebid.  We hope fair and open competition will trump Big Labor favoritism this time.

We also hope this incident will prompt lawmakers to take a closer look at The Public Construction Savings Act (S. 4121/A. 7855).  This bill would prohibit government-mandated PLAs on public construction projects.  It would guarantee that PLAs would be used when they make sense and ensure that taxpayers get the best construction at the best price.

In October 2010, two construction trade groups affiliated with construction trade unions, the Building Industry Electrical Contractors Association (BIECA) and United Electrical Contractors Association (UECA), filed a complaint against the City of New York (NYC) because of their widespread use of government-mandated PLAs in The Building Industry Electrical Contractors Association et al v. City of New York, in the U.S. District Court for the Southern District of New York, No. 10-8002.

The plaintiffs maintained that NYC violated the National Labor Relations Act, Municipal Law and New York Labor Law because of PLAs mandated by NYC government. The complaint argued that instead of acting to secure the best deal for the taxpayers, the city was using PLAs to handpick favored unions and contractors to perform the vast majority of the work. The plaintiffs also argued the alleged cost savings of $300 million over four years PLA advocates claimed the PLA would deliver to the city were “speculative and illusory” and were calculated using flawed methodology based on erroneous assumptions by Hill International and other consultants paid by city agencies to prepare PLA feasibility studies for various NYC public works projects.

Unfortunately, on August 4, 2011, U.S. Southern District Judge Robert Patterson ruled in favor of the city and PLA opponents.

Reuters reports:

Alan Pollack, who represented the plaintiffs, said his clients will appeal. The ruling will hurt city taxpayers by driving up construction costs, he said.

As the case makes its way through the appeals process, the public, media and elected officials should recognize an important fact from this lawsuit: Union contractors and union employees are often harmed by government-mandated PLAs.

In fact, the union contractors and union employees aided by this suit are opposed to government-mandated PLAs for the same reasons nonunion contractors and nonunion employees loathe government-mandated PLAs. In this case, contractors belonging to the plaintiff associations, the BIECA and UECA, were effectively excluded from the competitive bidding process for NYC contracts subject to a government-mandated PLA because of their existing contracts and relationships with other unions that are not favored or part of the NYC PLAs. The case’s fact pattern is similar to common complaints from nonunion contractors that government-mandated PLAs discourage, if not effectively exclude, nonunion contractors from competing for contracts and deny qualified nonunion tradespeople the opportunity to build a taxpayer funded construction project because they are not affiliated with unions that drafted and promoted the PLA.

This is not an isolated incident. Union contractor associations, contractors and union members excluded from PLA negotiations and PLA contracts have opposed government-mandated PLAs for years.

For example, in 2009, New Jersey’s Bayonne Local Redevelopment Authority was sued by the International Steelworkers Union to get on the list of unions eligible to perform work on a PLA covering a Military Ocean Terminal site.

Associated General Contractors (AGC), a national construction trade association that often negotiates union collective bargaining agreements for its union members, explains how government-mandated PLAs negatively impact their union contractor members (and nonunion members too) in this document.

Finally, here is a link to other examples of union contractors and associations opposing PLA schemes.

Anti-Competitive Favoritism Inherent in NYC PLAs
The City of New York enacted a series of PLAs entered into by and between various NYC agencies procuring contracts to build public works projects and The Building Construction Trades Council of Greater New York and Vicinity and its affiliated Local Unions (known as the BCTC).  Pursuant to the BCTC’s negotiations with NYC, only those unions belonging to the BCTC were permitted to become participating signatory unions to each of NYC’s PLAs and benefit from being recognized as the collective bargaining representative for all persons who perform work on PLA projects.

Consisting of 27 contractors, the BIECA is a trade association that has entered into a collective bargaining agreement (CBA) with Local 363, United Electrical Workers of America, IUJAT.  Local 363 is not a member of the BCTC. Pursuant to Local 363’s CBA with the BIECA, the BIECA and its contractors have agreed to recognize Local 363 as the “sole and exclusive bargaining representative of all electrical workers…who are or may hereinafter become employed” by any BIECA contractor. Their CBA requires employees of BIECA contractors to become members of Local 363 and BIECA contractors must contribute to pension, benefit, welfare and education funds designated by and affiliated with Local 363.  The terms of the NYC PLAs conflict directly with BIECA CBAs.

The UECA has been engaged in ongoing collective bargaining negotiations with the International Brotherhood of Electrical Workers (IBEW) Local 3. Pursuant to a December 7, 1995 Settlement Agreement with the National Labor Relations Board, UECA contractors are required to contribute to Building Trades pensions and benefit funds. In contrast, the NYC PLAs require contractors to contribute to BCTC’s benefit funds, which violates the BIECA’s settlement agreement with IBEW Local 3.

The facts of the case demonstrate that the terms and conditions in the PLAs used in NYC effectively excluded union contractor members of the BIECA and UECA from winning contracts subject to the PLA.

For instance, the PLA prevented Local 363 journeymen and apprentices members and any existing journeymen and apprentices of BIECA contractors from working on PLA projects because they are not represented by the unions favored in the BCTC’s PLA.  The existing CBA between Local 363 and BIECA contractors forbids contractors from hiring tradespeople represented by other unions, which prevented the plaintiff from bidding on the contracts subject to the BCTC’s PLA.

In addition, the PLA would have forced BIECA and UECA contractors to pay fringe benefits into the plans affiliated and managed by BCTC unions favored in the NYC PLA. Since existing UECA and BIECA agreements require contractors to make benefit contributions into funds managed and affiliated with local unions not favored by the BCTC, these contractors must pay benefits to both the BCTC benefit funds identified in the PLA and the existing benefit funds designated in their current union agreements.

These double benefit expenses increase labor costs and put UECA and BIECA contractors at a severe disadvantage when submitting a competitive bid.  In addition, the union members employed by the plaintiffs would not receive any benefit contributions made to BCTC benefit plans unless they joined these BCTC unions and became vested in these BCTC favored plans. In short, the NYC PLAs would have resulted in a windfall for BCTC plans at the expense of many union members employed by UECA and BIECA contractors.

The fact that certain union members and signatory contractors are excluded and discriminated against by PLAs undermines the false claim that PLAs are needed to ensure a high quality project built by a safe, well-trained and efficient union workforce. Like their nonunion counterparts, the BIECA and UECA contractors and their employees are qualified and experienced, but they are being harmed by the anti-competitive intent of PLA schemes. The real purpose of these agreements is to create a monopoly for handpicked unions to supply labor to construction jobsites and deny qualified contractors and their skilled an employees the right to compete for these contracts and jobs.

Consultants’ Pro-PLA Studies Flawed, Says Complaint
The plaintiffs argue that the pro-PLA studies are flawed. Cost savings the studies say a PLA will deliver to NYC are illusory. According to the plaintiffs brief in opposition to the defendants’ motions to dismiss:

…each study concludes that by obtaining certain union concessions, including standardizing work hours, overtime hours, work shift rules and holidays for each of the various construction trades along with “no strike” provisions and common grievance procedures, the City would realize substantial cost savings on projects covered by these PLAs…However, as detailed in the accompanying Tuerck Affidavit, the PLA studies are based on the flawed and unsupported methodology that only BCTC contractors historically bid on and perform City work.  The PLA studies further conclude that by obtaining certain concessions from the BCTC unions under the City PLAs, the City saves money.

For example, the original complaint explains that the non-BCTC contractors like the BIECA and UECA already have cost saving labor practices promised by the PLA, so a PLA is not needed and the alleged cost savings are bogus:

By artificially limiting the universe of contractors who perform City work to BCTC contractors, the authors of the feasibility studies give false and unwarranted credit to the PLAs for concessionary cost savings that would have been realized in the absence of a PLA and through the competitive bidding process.

For example, when the Local 363 CBA is compared with the CBA of Local 3, which is a BCTC signatory union, it is evident that certain cost savings the City claims can only be accomplished by concessions negotiated by a PLA, are already built into Local 363’s CBA.

Since the signatory unions mandate a seven hour workday, the feasibility study assumes that by adopting a PLA which mandates an eight hour workday, the City is provided with cost savings benefits by saving an hour of overtime pay per day over the course of the project.  Thus, the PLA would reduce costs by 12.5% (1/8) of the total number of hours worked, multiplied by the difference between overtime and straight time pay.

However, this presumed cost savings ignores the fact that Local 363’s CBA, Article 6, Section A (a), stipulates that a “regular week’s work shall consist of forty (40) hours, divided into any five (5) consecutive days between Monday through Sunday inclusive, of eight (8) hours each, performed between the hours of 6:00 AM and 6:00 PM.”  Had the City considered local 363’s CBA as their baseline, or the work rules and practices of a UECA contractors, it would have already realized a savings that would have obviated the need for any cost savings through the enactment of a PLA.

Nonunion contractors are also not restricted by the BCTC’s inefficient CBA rules that the PLA would allegedly address, resulting in cost savings that the plaintiffs call illusory. The brief continues:

What each of the PLA studies fails to address is whether PLAs offer any real cost savings when compared to projects performed in the absence of a PLA, where the actual qualified bidding pool of contractors – including other union and nonunion contractors – is able to bid for City work through the competitive bidding process.

Unfortunately, this is not the first time Hill International and other consultants have produced a flawed study to justify a government-mandated PLA without considering that there is a skilled and experienced alternative to BCTC labor and contractors signatory to BCTC unions.

A number of the firms selected by government agencies to evaluate the feasibility of PLAs have clear conflicts of interest with Big Labor that prevent them from providing an honest and accurate assessment of the impact of government-mandated PLAs on cost, competition and quality.

For example, the in the summer of 2009 Pennsylvania Department of General Services relied on the questionable findings of the Keystone Research Center (KRC) to justify the use of PLAs on hundreds of millions of dollars worth of prison construction even though the KRC board was heavily dominated by construction union members and a portion of the KRC’s annual revenue came from construction trade unions (learn more about this scandal here).

Can the Appeals Process Deliver Justice?
Regardless of how this case plays out in the courts, it is clear that anti-competitive and costly provisions in NYC’s government-mandated PLAs have harmed the plaintiffs representing union contractors and their union employees just as much as these agreements have harmed nonunion firms and tradespeople in the NYC area.

It is also clear that the process used to justify these PLA schemes is rife with errors, corruption and deception.

Anti-competitive and costly government-mandated PLAs have no place in a fair and open market.

Why not let the best contractors and employees with the best skills and experience compete? NYC taxpayers can only best be served via fair and open competition.

Check back with www.TheTruthAboutPLAs.com for updates on this case.

Measuring the Cost of Project Labor Agreements on School Construction in California (Vince Vasquez, Dr. Dale Glaser, and W. Erik Bruvold; 2011) examined the inflation-adjusted square foot construction costs for 551 school projects in California built between 1995 and 2009 – a dataset more than four times larger than any previous similar study, such as the three studies examining the impact of PLAs on school construction costs in Mass., Conn., and NY by the Beacon Hill Institute at Suffolk University in Boston, which also found that there is a statistically robust correlation between PLAs and greater school construction costs when compared to school projects constructed without a PLA.

The findings of the NUSIPR study are particularly important because California voters have approved $64 billion in school construction bonds during the past decade and several school districts have adopted the use of PLAs on these projects.

“This study, the largest and most comprehensive to date, provides new insight into the fiscal impact of PLAs,” said Vince Vasquez, NUSIPR senior policy analyst and co-author of the report. “It is our hope that our findings inform public debate when PLAs are advanced as a costless policy tool. Our research suggests they are not. Should districts choose to adopt them, school construction costs are likely to rise significantly.”

TheTruthAboutPLAs.com has long maintained that anti-competitive government-mandated PLAs are special interest schemes that end open, fair and competitive bidding on public works projects. PLAs drive up the cost of construction by reducing competition and discouraging qualified merit shop contractors and their skilled employees from building projects paid for by their own tax dollars.

Typical PLAs are pre-hire contracts that require projects be awarded only to contractors and subcontractors that agree to:

• recognize unions as the representatives of their employees on that job
• use the union hiring hall to obtain workers
• obtain apprentices exclusively from union apprenticeship programs
• pay into underfunded and mismanaged union pension and benefit plans
• obey costly, restrictive and inefficient union work rules

Study Criticized by PLA Proponents
The AFL-CIO Building and Construction Trades Department – staunch advocates and beneficiaries of anti-competitive and costly government-mandated PLA schemes – attacked the study’s findings, citing arguments by a proponent of PLAs, Dr. Dale Belman of Michigan State University’s School of Labor and Industrial Relations (see Belman’s CV and previous coverage). Belman claimed that the study overlooked important factors that affect school construction costs.

In response, the study’s authors noted during a July 22 press conference the NUSPIR study used methods to control for factors that might have increased costs that could not have been attributed to the PLA, such as the numbers of stories, where the school was built and the presence of swimming pools and gymnasiums.  NUSIPR also responded to Belman’s critique in this July 25 news release.

Adding credibility to the study’s methodology and findings, the Keston Institute for Public Finance and Infrastructure Policy at the University of Southern California performed an independent review of the study and endorsed the statistical analysis and associated findings:

“Overall, we believe that the conclusion drawn in the report regarding the influence of PLAs on project cost are supported by the data set provided to us and the subsequent statistical analysis of that data,” said Richard G. Little, AICP, Director of The Keston Institute. “The research team appropriately utilized well-accepted statistical methods to arrive at this conclusion and it constitutes an important research finding. However, I would like to reiterate at this time that the results of our review should in no way be construed as the Keston Institute for Public Finance and Infrastructure Policy supporting any position relating to the use of Project Labor Agreements by any public or private entity.”

There is little doubt that academic experts will continue to vigorously debate relevant study methodologies and the overall value and cost implications of government-mandated PLAs on construction projects (for example, take a look at how Dr, David Tuerck from the Beacon Hill Institute at Suffolk University in Boston dissects Congressional testimony provided by PLA advocate and University of Utah Professor Dr. Peter Phillips in a recent Congressional hearing.

Study Renews PLA Debate
The study, covered by the San Diego papers here and here, renewed the debate about government-mandated PLAs on California construction projects funded by taxpayer dollars.

The San Diego Union Tribune reported that PLA proponent Tom Lemmon, business manager for the San Diego local trades council, admitted that PLAs do not save money when asked to comment about the study:

“You could study this thing to death,” said Lemmon, an asbestos worker. “PLAs do not raise the cost of projects. We are not saying they save money either, but they bring the projects in on time and on budget because of a more coordinated workforce.”

An op-ed published in the Sacramento Bee from Eric Hogue, a talk show host on KTKZ (1380 AM) in Sacramento and vice president of advancement at William Jessup University, argues that public officials should evaluate contractors on merit, rather than whether or not they are willing to sign a union-favoring PLA that only benefits Big Labor’s special interests (“Viewpoints: Exposing California’s costly school construction secret,” 6/22/11):

Given this data, if I were in charge of a school district, here is what I would do. If we needed to build a new school or modernize an existing facility, I would encourage all contractors to bid on the project. I would prohibit any discrimination against union contractors or other licensed construction firms. And I’d make sure that every bidder was evaluated on the merits of their proposal, the history of their performance and the benefit to my teachers, students and taxpayers who are paying the bills.

To my conservative friends, I’d say, “I’m hiring union” if their bid was best. And to my liberal friends, I’d say, “sorry, can’t work with you this time” if another contractor was the best choice. That’s the point. Political ideology has no business in anything other than history books. And that’s the biggest benefit of the national study. It’s all about dollars and cents.

The study also inspired The Flash Report’s John Fleishman’s call for fair and open competition on school construction projects  (“Checkmate: University Study Makes the Case Against Project Labor Agreements,” 7/25/11)::

I would encourage every education official to think long and hard about enacting these mandated waste agreements and tell any voter to reject a school bond, UNLESS, there is written language that states there will be no project labor agreement tied to any of the funds.  If the unions earn the work by providing the best bid, then that’s fine.  But forcing taxpayers to spend millions more than necessary at the same time as we’re pink-slipping teachers and talking about shortening the school year is flat wrong.

This report is required reading for anyone who cares about schools or the state’s budget challenges.  It’s full of good data that should serve as the foundation for a statewide campaign to ensure all public dollars spent for school construction are allocated through a competitive bidding process that is open to all licensed and qualified contractors.

The Associated Builders and Contractors California Cooperation Committee — which supported the study with a grant to defray about 20 percent of the study’s extensive research costs according to NUSIPR estimates — plans to educate  public officials about the study’s findings through a direct mail piece to California’s construction stakeholders.

Be sure to review the study and related materials at www.TheCostofPLAs.com.

Check back with www.TheTruthAboutPLAs.com and www.facebook.com/theTruthAboutPLAs for more coverage and analysis as this study gains more attention.

Please note that all links have been added by TheTruthAboutPLAs.com.

Dear Mr. Brubeck,

I would like to bring to your attention a matter of considerable importance to the question of mandatory Project Labor Agreements (PLAs). As you know I testified against mandatory PLAs at a hearing conducted June 3 before the Subcommittee on Technology, Information Policy, Intergovernmental Relations and Procurement Reform of the Committee on Oversight and Government Reform of the U.S. House of Representatives.

In my testimony, I reported the results of studies in which the Beacon Hill Institute showed that PLAs increased construction costs for samples of schools built in Massachusetts, Connecticut and New York.

Note: Tuerck’s tesitmony starts at 22:13 of this video

I argued that our studies provide compelling evidence that mandatory PLAs generally increase construction costs and are, on that basis, not in the public interest.

You will also recall that, before I could testify, Representative Elijah E. Cummings read a statement from Professor Peter Philips of the University of Utah in which Philips claimed that our work was nothing but “simple minded statistics” that, in his judgment, do “not pass muster.” Unaware, as I was at the time, that this statement had been submitted to the Subcommittee and given the circumstances in which it was read to me and everyone else at the hearing, I could not respond adequately to Philips’ accusations at that time. Following the hearing, however, and with a written copy of Philips’ statement in hand, I wrote my response, attached here, and sent it to Congressman Cummings.

As you can see, I find Philips’ criticisms to be based on an entirely fabricated characterization of the methodology that we followed in our studies. I need to be emphatic. It is not as if Philips just disagreed with our interpretation of our statistical results, as economists often do in examining each other’s work. This was not a complaint, say, that our results suffered from some problem connected with sample selection or that they failed some standard test for robustness. This was a false characterization of what we did in obtaining our results. It would be as if one chemist tried to debunk another chemist’s findings by falsely describing the laboratory procedures followed in getting those findings.

It has now been a month since I wrote to Congressman Cummings. I have received no reply from him about the questions I raise. If, as it appears, neither Congressman Cummings nor anyone on his staff has asked Philips to clarify his remarks, then anyone who read the record of that hearing would be permitted to believe that there was substance to those remarks, when in fact there was none. Anyone could infer that our findings about PLA costs were spurious and could be ignored when in fact there was nothing presented at that hearing (or anywhere else, by my reckoning) that would support any such conclusion.

I am therefore compelled to take my case to a broader public. To that end, I hoped that you might be able to bring my letter to the attention of readers who follow ABC and its efforts to inform the public about government-mandated PLAs. Your help in this regard would be much appreciated.

Sincerely,

David G. Tuerck
Executive Director, The Beacon Hill Institute
Professor and Chairman, Department of Economics
Suffolk University

##

Here is more on the controversy from a post by BHI on the Red Mass Group blog, (BHI Weekly Dispatch: Taking on the D.C. union proxies on Project Labor Agreements,” 7/21/11).

Here is a key passage from Dr. Tuerck’s letter to Rep. Cummings in response to Dr. Phillips’ attacks:

In Phillips’ mindset, however, a project would never be more costly because it was conducted under a PLA.  The explanation would always lie elsewhere.  The project had a more complex roof.  Or it included an auditorium.  Or it had some other feature that increased the cost. Never mind if there were only a few bidders. Or if the contractor had to follow burdensome work rules.  Or if the contractor had to hire union workers instead of his own workers.  It just couldn’t be the PLA that was at fault.

Phillips’ approach to the PLA question reflects a compulsion, unhappily all too common among social scientists (and even some physical scientists), to hold stubbornly to one’s assumptions no matter what the data show.  That, in and of itself, is a bad enough fault to exhibit in criticizing someone else’s work.  In this instance, however, Phillips went beyond merely attempting to defend his assumptions against the data.  He made up an entirely fictitious story to discredit the work of someone whose data challenge those assumptions.

Be sure to give the full letter a read.

V. Construction Defects on PLA Projects

Many PLA projects have suffered from serious construction defects, despite claims from PLA supporters that government-mandated improve the quality of construction.

The union-only Boston Central Artery / Tunnel project encountered several defects in construction that both delayed and increased the overall cost of the project.[1] An auditor reported that “inadequate controls resulted in a serious leak in the sunken tube tunnel, . . . and that inadequate welding and inaccurate measurements generated unnecessary costs.”[2] When the tunnel opened, the toll takers were forced to wear respirators because of headaches, nausea, sore throats and itchy eyes. The same auditor previously found $170 million in waste and other questionable costs. In 2004, after the project was substantially completed, The Boston Globe reported that the tunnel had developed more than 400 leaks, as well as “thousands of ceiling fissures, water damaged supports and fireproofing systems, and overloaded drainage equipment.”[3] In 2006, concrete slabs inside the tunnel collapsed, killing a driver.[4] Additionally, the state is conducting an investigation into the safety of tunnel lighting after a 110-pound light fixture crashed from the ceiling onto the road, narrowly missing a vehicle.[5]

Meanwhile, even before the opening of the new Convention Center in Washington, D.C., built under a government-mandated PLA, a large section of the roof collapsed during construction of the project.  Construction workers and building managers said “fasteners that held the large steel pieces of the roof together were improperly fastened [by union workers].”[6]

A section of concrete flooring in the second-floor loading dock of Pittsburgh’s David L. Lawrence Convention Center gave way under the weight of a tractor trailer in 2007. The collapse left a 20-foot by 60-foot hole across the floor of the PLA project, “sending concrete steel, debris and equipment crashing 30 feet down into a walkway and a water feature below.”[7]

In 2003, hairline cracks were discovered throughout the PLA-constructed Iowa Events Center’s main concourse floor. An estimated 30 to 40 cracks were found throughout the slab, which an out-of state contractor poured. Local concrete contractors had refused to bid on the work due to the presence of the union-only PLA, according to the county’s construction manager.[8]

Construction under a PLA on the Indianapolis Public Library had to be halted for more than a year in 2004 after cracks and gaps were discovered in the concrete in its new parking garage. As noted above, the project cost suffered nearly $50 million in overruns due to required repairs.[9]

Finally, the New York Post reported in 2009 that the Mets’ new Citi Field, built under a PLA at a cost of $850 million, is “riddled with construction defects.” The defects included large chunks of concrete and granite and a neon sign falling from the stadium, as well as numerous problems with elevators, electricity and flooding of various stadium sections.[10]

NOTE: Click the appropriate chapter from the report:

1. Introduction
2. Increased Costs on PLA Projects
3. Reduced Competition on PLA Projects
4. Construction Delays on PLA Projects
   

On Wednesday we will post the chapter, Safety Problems on PLA Projects.

Citations after the jump.

[2] Id.

[3] Boston Globe, Nov. 11, 2004; See also Powell, Boston’s Big Dig Awash in Troubles: Leaks, Cost Overruns Plague Project, Washington Post, Nov. 19, 2004, available at http://washingtonpost.com.

[4] See WBZTV: $21 Million Settlement In Big Dig Tunnel Collapse, available at http://wbztv.com/bigdig.

[5] State: Corrosion discovery prompts review of Big Dig lights. Boston Herald (March 16, 2011

[6] Roof Section Collapses at D.C. Convention Center Site, Washington Construction News (May 2001).

[7] Convention Center’s Builders Assess Collapse. Pittsburgh Post Gazette, Feb. 6, 2007.

[8] Des Moines Register, Oct. 3, 2003.

[9] Concrete Cracks Halt Construction On Indianapolis Library, Indianapolis Star, April 22, 2004.

[10] Mets in Foul Territory, New York Post, September 6, 2009.

IV. Construction Delays on PLA Projects

Another argument often made in support of government-mandated PLAs is that they will ensure timely completion of construction projects by, inter alia, guaranteeing labor peace.  Once again, however, the proponents’ claims are belied by the published reports of the completion dates of union-only projects and their significant labor disruptions.

In 1999, union carpenters on the San Francisco Airport expansion project struck over wages even though their union had signed a PLA.  The union electricians, plumbers and painters also went on strike in support of the union carpenters.[1] The cost of the strike was $1 million. The project, which already was a month behind schedule, lost even more time.[2]

The PLA-mandated Safeco field in Seattle also was completed months later than scheduled.  The stadium could not be opened in time for the beginning of the 1999 season, as had been promised, and the Seattle Mariners could not begin play at their new home until July 1999.[3]

The Miller Park baseball stadium in Milwaukee, built under a government-mandated PLA, was supposed to be completed in time for opening day of the 2000 season. Instead, the new stadium was not completed in time to be used at all during that season due to construction delays, which included a fatal accident involving union workers (discussed above).[4]

The completion of the Big Dig in Boston, which suffered significant cost overruns, was delayed by more than two years. The project was supposed to be finished in 2002 but was not finished until several years later.[5]

In 2006, four Los Angeles Unified School District campuses built under a PLA were forced to open their schools one month late because contractors could not find enough skilled labor to complete the project on time.[6]

In 2008, the owner of the Washington Nationals initially refused to pay $3.5 million in rent because the PLA project was not “substantially complete” on the date the city was required to hand over the stadium.[7]

Union members walked off the job in violation of their no-strike clause under a PLA governing construction of Chicago’s Trump International Hotel and Tower in 2006. The development company was forced to sue the Chicago and Cook County Building and Construction Trades Council.[8]

A two-week construction workers strike also halted the resurfacing of Chicago-area expressways and streets, despite a PLA containing a union no-strike clause. The strike forced the Illinois Tollway to suspend its major projects in 2010.[9]

Construction of three state prisons in Pennsylvania was delayed for many months in 2009 and 2010 after state officials announced plans to mandate PLAs on the projects, which were valued between $200 million and $400 million each. According to the Pittsburgh Post-Gazette, “[A] major reason can be summed up in three words – Project Labor Agreements.”[10]

The 2010 report on New Jersey PLA projects by the New Jersey Department of Labor found that the average duration of PLA projects was 100 weeks compared with 78 weeks for non-PLA projects.[11]

Finally, a study of federal construction projects completed between 2001 and 2009, during which time President Bush’s Executive Order No. 13208 prohibited any government-mandated PLAs on federal construction projects, found there were no significant labor disputes reported on federal construction that caused delays during that entire period.[12]

NOTE: Click the appropriate chapter from the report:

1. Introduction
2. Increased Costs on PLA Projects
3. Reduced Competition on PLA Projects

On Tuesday we will post the chapter, Construction Defects on PLA Projects.
Citations after the jump.

[2] Carpenters at Airport Protest Against Union Leadership, San Francisco Chronicle, May 21, 1999.

[3] New Seattle Stadium Battles Massive Cost Overruns, ENR, July 27/Aug. 3, 1998 at 1, 9.

[4] Crane Accident Kills Three at Unfinished Miller Park, Washington Time, July 15, 1999.

[5]http//www.issuesource.org.

[6] Construction Delays Will Force 4 New L.A. Schools to Open Late, Los Angeles Times, June 17, 2006.

[7] Nationals Withhold Rent on Ballpark, Washington Post, July 11, 2008.

[8] 401 North Wabash Venture LLC v. Chicago and Cook County Building and Construction Trades Coucnil, N.D. Ill., No. 06-CV-3077 (N.D. Ill. June 5, 2006).

[9] Construction strike now affects tollway work, www.chicagobreakingnews.com, (July 16, 2010).

[10] Dispute between builders delays 3 prisons, Pittsburgh Post-Gazette, March 14, 2010, available at www.postgazette.com.

[11] Annual Report to the Governor and Legislature, use of Project Labor Agreements in Public Works Building Projects in Fiscal Year 2008 (NJDOL Oct. 2010), available at www.thetruthaboutplas.com.

[12] See Tuerck, Glassman and Bachman, Project Labor Agreements on Federal Construction Projects: A Costly Solution In Search of A Problem (2009), http://www.beaconhill.org/BHI Studies.  During the 2001-2009 time period, the federal government entered into construction contracts valued in excess of $140 billion. See usaspending.gov.

III.       Reduced Competition on PLA Projects

According to a number of published sources, a contributing factor to the increased costs of government-mandated PLAs is the reduced competition evident on these projects. Published reports about government-mandated PLAs reveal a substantial number of projects in which the competition among bidders has been less than expected. These reports tend to confirm the results of numerous surveys of construction contractors, who overwhelmingly have indicated they are less likely to bid for work that includes a PLA requirement.[1] When asked, the contractors (and subcontractors) have explained that PLAs injure competition by discriminating against the majority of the industry whose employees do not want to be represented by any union.[2] As further explained in a 2009 study, PLAs on government projects covered by prevailing wage laws typically discriminate against nonunion contractors and their employees with respect to benefit contributions—in effect reducing the take-home pay of nonunion workers while increasing the fringe benefit costs of nonunion contractors, with no benefit to either group.[3]

Numerous published reports on specific PLA projects have reflected dramatic reductions in the number of bidders/offerors when government agencies have included PLA requirements in their bid solicitations, including the following examples.

In 1995, as noted in Section I, a published study examined the impact of a government-mandated PLA on the bidding for a construction project on the Roswell Park Cancer Institute in New York.[4] Portions of the project were first bid under a PLA before being re-bid without the PLA. The study found that the number of bidders correlated to whether there was a PLA, and that the number of bidders on the project further correlated to whether the project came in under budget. Thus, projects that were bid without a PLA had 21 percent more bidders and were more than 10 percent under budget. The projects bid with a PLA had fewer bidders and were 10 percent over budget.  “Those packages that were bid under budget had 45 percent more bidders than those that were bid over budget.” The study concluded that PLA projects attract fewer bidders, thereby causing a decrease in competition for the construction work and an increase in costs.[5] Elsewhere in New York, in 1997 the City of Oswego Sewer project attracted no bids after the city imposed a union-only PLA.[6]

In 1995, Boston officials administrating the union-only Central Artery/Tunnel (CA/T) (“Big Dig”) project predicted intense competition for the award of work on the project.  The project director, Peter M. Zuk, said: “previous history indicates intense competition for the jobs, with all bids generally coming in below engineers’ estimates.”[7] Only one year later, however, after a PLA was imposed, Zuk said that, “given the size of the project we are surprised at the relatively small number of bidders to date.”[8] He also said that, “the bid packages are big enough that they should be attractive.” Zuk eventually was forced to pursue bidders for the remaining $2 billion in construction work that had not been awarded. As discussed later in the report, all of the Central Artery project bids were awarded at costs higher than the engineers’ estimates.[9]

The San Francisco International Airport experienced a similar adverse impact on competition when the Airport Authority implemented a union-only PLA in 1996. Only four bids were submitted and all of them were higher than the undisclosed estimates.[10] Due to the high bids, the project designers were forced to “backtrack to cut costs.”[11]

In another similar case in 1998, the town of Middletown, Conn., distributed 72 sets of bid specifications containing a PLA for a local school.  Only four responses were received, and the lowest bid submitted by a union contractor for the school renovation was $9.1 million, $600,000 over the project’s $8.5 million budget.  When the PLA was removed and the project re-bid, 10 responses were received, including a $7.8 million bid from a nonunion contractor that saved local taxpayers more than $1.5 million dollars.[12]

In 2000, the Polk County, Iowa, Board of Supervisors imposed a PLA mandate on construction of the Iowa Events Center in downtown Des Moines. The project suffered from a “lack of bids,” which in turn inflated costs.[13] Though the project was broken up into 22 individual bid packages in order to increase the number of potential bidders, the county received an average of fewer than three bids per package, and four packages received only one bid.

In December 2000, the Wyoming County, W.Va., Board of Education experienced similar reductions in bidders and increased costs from its attempt to impose a union-only PLA.  The County Board voted 4-1 to re-bid all PLA contracts, without the union-only requirement, after initial bids came in more than $1.5 million over estimates and with fewer than half the expected number of bidders.  The construction manager stated: “I believe that the labor agreement had a negative impact on the number of bids, as well as the dollar amount of each bid.”[14] Without the PLA, the number of bidders increased by 67 percent and the overall cost of the project decreased by 11 percent.

Also in 2000, a study conducted on behalf of the Jefferson County, N.Y., Board of Legislators found that there was a statistically significant relationship between the number of bidders and the cost of projects, concluding that the relationship between these two factors does not occur by chance.  The study further concluded that a PLA requirement would adversely impact the number of bidders and would thereby increase project costs.[15] Similar conclusions were reached by the Clark County, Nev., School District, which recommended against adoption of any union-only requirements on Clark County schools.[16]

The $2.4 billion project to replace the Wilson Bridge between suburban Maryland and Virginia was temporarily subjected to a union-only PLA requirement in 2001. After the PLA was imposed, only one bidder responded to the RFP for Phase 1 of the project, at a bid price more than $370 million above the state’s $470 million engineering estimate, a 78 percent cost overrun.[17] After President Bush issued an executive order prohibiting union-only PLAs on federally assisted projects like this one, however, [18] Phase 1 of the Wilson Bridge project was rebid without the PLA. This time, multiple bids were submitted and the winning bids came in significantly below the engineering estimates.[19]

As noted above, prior to entering into a PLA the Oakland Unified School District received seven bids on the Burkhalter Elementary School in 2002 and received a low bid of $1.8 million for the construction work, After re-bidding the work under a newly signed PLA, however, the district received only three bids and the low bid was $2.2 million, more than $437,000 (24 percent) higher than the non-PLA bid.[20]

In Hartford, Conn., bid results under a union-only PLA for the renovation of Hartford Public High School were characterized as “pitiful” in April 2004. Some components of the job received few or no bids. The bids that did come in were several million dollars more than the $82 million voters had approved.[21]

In another example from 2004, the City of Fall River, Mass., initially bid three school construction projects under a PLA. When the projects attracted a low number of bidders, the city cancelled the PLA and reopened bidding without the PLA, which immediately resulted in more bidders and reduced bid prices.[22]

In 2008, the Lucas Oil Stadium in Indianapolis “blew out” its budget by more than $75 million under a PLA for the construction project.[23] A similar result occurred on the Indianapolis Public Library, which exceeded its budget under a PLA by $50 million.[24]

In 2010, the Ohio School Facilities Commission was forced to rebid a planned PLA project for replacement of the state’s schools for the deaf and blind after only two firms bid on the general trades contract work, with the lowest bid exceeding the estimated cost by 44 percent. After removing the PLA, 12 firms bid for the general trades work, with a low bid 20 percent under the commission’s estimate.[25]

Also in 2010, the Carter County School Board in Kentucky was forced to reject all bids on the Tygart High School project after the lowest bid under a PLA came in more than $1 million over budget.[26] The PLA also prompted a lawsuit that was settled only after the board voted to withdraw the PLA mandate.

In all, more than a dozen comparisons have been performed on projects on which bids were received for the same work with and without PLAs. In every instance, significantly fewer bids were received under the PLAs than without the PLAs (and the PLA projects suffered from more cost overruns).[27] Finally, it should be noted that there are no published reports of PLA projects resulting in an increased number of bidders compared to non-PLA projects.

NOTE: Click the appropriate chapter from the report:

1. Introduction
2. Increased Costs on PLA Projects

On Monday we will post the chapter, Construction Delays on PLA Projects.
Citations after the jump.

[2] The Bureau of Labor Statistics’ (BLS) most recent report states that the nonunion private sector workforce in the construction industry comprises more than 84 percent of the total industry workforce. See www.bls.gov,  “Union Members Summary” (Jan. 2009). See also Comments filed by Associated Builders and Contractors, Inc. in the 2009 FAR Council rulemaking proceeding on Executive Order 13502, FAR Case No. 2009-005, available at www.thetruthaboutplas.com.

[3] See McGowan, The Discriminatory Impact of Executive Order 13502 on Non-Union Workers and Contractors (2009), available at http://abc.org/plastudies. According to the study, the take home pay of nonunion workers is reduced by an average of 20 percent, while nonunion contractors’ fringe benefit costs are increased by 25 percent, largely in the form of forced contributions to union trust funds from which the nonunion workers derive no benefits.

[4] Analysis of Bids and costs to Taxpayers in Roswell Park, New York (ABC 1995), available at http://abc.org/plastudies.

[5] Id.

[6] Sewer Project Phase Attracts No Bids, Syracuse Post-Standard, Aug. 20, 1997, E-1.

[7] Big Boston bids in 1996, ENR Nov. 20, 1995 at 26.

[8] More Bidders Wanted For Central Artery Project Work, ENR, Feb 3, 1997, at 1, 18.

[9] Boston Project Tracking Higher, ENR, Jan. 20, 1997, at 27.

[10] Labor Protests Fly, Bids Are High, ENR, July 22, 1996, at 16.

[11] Id.

[12] State’s Dubious Labor Policy, Hartford Courant, Aug. 20, 1998, 3.

[13] Frantz, et al., The PLA for the Iowa Events Center: An Unnecessary Burden on the Workers, Businesses and Taxpayers of Iowa, Policy Study 06-3, Public Interest Inst. At Iowa Wesleyan College (April, 2009),

www.limitedgovernment.org/publications/pubs/studies/ps-06-3.pdf.

[14]  New Wyoming County School to be Rebid, Associated Press, Dec. 20, 2000.

[15] Carr, PLA Analysis for the Jefferson County Courthouse Complex (Submitted to Jefferson County Board of Legislators, Sept. 14, 2000).

[16] School District Should Heed Conclusions of Report, Las Vegas Journal, Sept. 11, 2000.

[17] Lone Wilson Bridge Bid Comes in 70 percent Above Estimate, Engineering News Record, Dec. 24, 2001; see also Baltimore Sun, March 2, 2002.

[18] See discussion above at page 2.

[19] Unexpectedly Low Bid Keeps Wilson Bridge Under Budget, Washington Post, March 2, 2002. See also Thieblot, Review of the Guidance for a Union-Only Project Labor Agreement for Construction of the Wilson Bridge (Md. Foundation for Research and Economic Education Nov. 2000)

[20] School Costs Skyrocket After Labor Pact, San Francisco Chronicle, April 28, 2004.

[21] School Project Back in Limbo, Hartford Courant, April 7, 2004.

[22]Project Labor Agreements and Financing School Construction in Massachusetts , Beacon Hill Institute (Dec. 2006) (www.beaconhill.org).

[23] An Ailing Process, Indianapolis Star, Jan. 24, 2010, available at www.thetruthaboutplas.com.

[24] Id.

[25] New bids drop cost of work on deaf, blind schools (Nov. 10, 2010), www.dispatch.com.

[26] School Board rescinds PLA after latest Tygart bids rejected, Journal-Times, Oct. 8, 2010, www.journal-times.com.

[27] See Examples of Projects Bid With and Without PLAs, available at http://abc.org/plastudies. See also New Study of Boston Harbor Project Shows How PLA Hurt Competition, ABC Today, June 4, 1999; Neil Opfer, Jaeho Son, and John Gambatese, “Project Labor Agreements Research Study: Focus On Southern Nevada Water Authority” (UNLV 2000).

II.        Increased Costs on PLA Projects

Proponents of PLAs frequently claim that such agreements will achieve cost savings.  To the contrary, the public track record of a significant number of government-mandated PLAs to date has reflected significant cost overruns.  The following union-only projects have been the subject of published reports of increased costs on PLA projects.

In the mid-1990s, the Roswell Park Cancer Institute in New York was partially constructed under a union-only PLA. Comparisons of bid packages released under the PLA and bid packages undertaken without any union requirement revealed that costs of construction under the government-mandated PLA were 48 percent higher than without the PLA.  Projects not subject to the PLA were 13 percent under budget. Projects bid under the PLA were 10 percent over budget. [1]

Similarly, in Buffalo, N.Y., a PLA was imposed on the Northwest Academy school project in 1998.  Bids were more than 20 percent over budget, and the price tag soared from an estimated cost of $26 million to $32.4 million.  The school board was forced to cut $4 million from projects at other schools to make up the deficit.[2]

Also in Buffalo, a Democratic legislator proposed naming the new Erie County Courthouse the “Flimflam-50 Percent Courthouse.”  Referring to the product of a government-mandated PLA, the legislator stated: “We’ve been flimflammed and now we’re 50 percent over budget.”[3]

In Rochester, Minn., bids were opened under a union-only PLA for expansion of the Mayo Civic Center on Sept. 21, 1999.  The lowest bid was $14.9 million, 36 percent higher than the city’s budget.  On Oct. 5, 1999, the City Board voted to reject all bids, redesign the project and rebid it.[4] The City Parks Superintendent said: “We don’t really know what to do.  We were very disappointed with the bids.”  Significantly, previous work on the center had been performed without any union-only requirements and had been completed within the city’s budget.

The Boston Central Artery Project (the “Big Dig”) was built under a government-mandated PLA, notwithstanding a court challenge, in the 1990s.  Originally projected to cost $2.2 billion, the Big Dig wound up costing more than $14 billion, among the biggest cost overruns in the history of American construction projects.[5] A July 17, 2008 Boston Globe Articlestated, “In all, the project will cost an additional $7 billion in interest, bringing the total to a staggering $22 billion, according to a Globe review of hundreds of pages of state documents. It will not be paid off until 2038.”[6] The scope of the overruns was reported on television’s “Sixty Minutes” and in numerous newspaper reports, and allegations of fraud and waste on the Big Dig resulted in a Congressional investigation and years of litigation.[7] As discussed in later sections of this report, the excessive cost of the Big Dig did not result in higher quality or safety of construction, as there were a number of fatalities among the union workers, massive leakage throughout the tunnel, and ultimately a tunnel collapse that killed a motorist.[8]

The San Francisco Airport, whose PLA was upheld by the California Supreme Court in part on the ground of expected cost savings, subsequently went hundreds of millions of dollars over budget in 1999.  Following the court decision in favor of the PLA, published estimates indicated the airport would exceed its $2.4 billion budget by more than $400 million.[9]

The Eastside Reservoir project east of Los Angeles, built under a government-mandated PLA, was the nation’s largest earth moving project in the late 1990s.   In October 1998, the project reported a $220 million (11 percent) cost overrun.   The increase was attributed to payment of overtime wages under circumstances mandated by the PLA. [10]

The City of Elyria, Ohio, rejected the low bid of a nonunion construction contractor for its City Hall project because the contractor refused to sign a government-mandated PLA. The project was rebid, and the only bids received by the city were more than $600,000 higher on a $10 million project under the PLA. A court intervened and forced the city to rebid and award the work to the low bidder, without the PLA, resulting in more than $600,000 of cost savings.[11]

In Washington, D.C., a new convention center was projected to cost $685 million in 1998.[12] After a government-mandated PLA was signed, however, costs ballooned to more than $840 million by the time the project was completed.[13]

Another convention center in Boston, again built under a PLA, likewise suffered from cost overruns in 2001.  Construction managers were “stunned” at the size of the cost overrun, which was deemed “likely to soar nearly $100 million over the allotted $750 million for the project.”[14]

The pattern was repeated on the Iowa Events Center, constructed under a government-mandated PLA from 2003 to 2004. Though estimated to cost $200 million prior to the PLA being imposed, the center was several million dollars over budget by mid-2003.[15] The cost rose to $217 million by 2005.[16]

The $2.4 billion project to replace the Wilson Bridge between suburban Maryland and Virginia was temporarily subjected to a union-only PLA requirement by former Maryland Gov. Parris Glendening in 2000. After the PLA was imposed, only one bidder responded to the RFP for Phase 1 of the project, at a bid price more than $370 million above the state’s engineering estimates—a 78 percent cost overrun.[17] After President Bush issued Executive Order 13202 prohibiting union-only PLAs on federally assisted projects like this one,[18] Phase 1 of the Wilson Bridge project was rebid without a government-mandated PLA. This time, multiple bids were received and the winning bids came in significantly below the engineering estimates.[19] The megaproject ultimately was completed on time and on budget, with no government-mandated PLA.[20]

In Seattle, the PLA construction of Safeco Field for the Seattle Mariners experienced very high cost overruns in 1998.[21] The original estimate for the new stadium was $320 million.  The stadium’s final price tag was in excess of $517 million, a 60 percent increase.

In Cleveland, Ohio, the cost of the Gund Arena originally was estimated at $118 million. After the governing agency entered into a union-only PLA, the final cost came in at $148 million—$30 million (25 percent) more than estimated.[22]

The cost of the Cleveland Browns’ stadium, also constructed pursuant to a government-mandated PLA, was $21 million over the estimate in 1998.  The union-only bids for the stadium were millions of dollars higher than the estimates. The final cost of the stadium was reported to be at least $61 million more than the original estimate, an increase of 25 percent.[23]

Comerica Park, the Detroit Tigers’ baseball stadium, was expected to cost $260 million in 1999.  A PLA was signed and, upon completion of construction, costs were reported to be in excess of $320 million.[24]

Construction of a new baseball stadium for the Washington Nationals in Washington, D.C., under a government-mandated PLA ran significantly over the budgeted $611 million.[25] By contrast, Baltimore’s nearby Camden Yards and Washington’s own FedEx Field, among many other stadiums around the country, were built without any PLA requirements, with no cost overruns.

A 2001 study published by the nonpartisan Worcester Regional Research Bureau estimated that PLAs increased costs for a new vocational school by approximately 15 percent. The report expected a PLA to add $15 million to the school’s construction costs.[26] City officials in Worcester subsequently admitted that a PLA added to the construction costs of a $21.5 million parking garage. The city’s public works director estimated the additional costs at $365,000.[27]

A PLA was imposed on the Pasadena, Calif., power plant in 2003 after non-PLA bids had already been submitted. As a result of the PLA, the winning bidder announced its bid would go up $2.3 million, roughly a 15 percent cost increase.[28]

The Oakland Unified School District put out a call for bids on the Burkhalter Elementary School in 2002 and received a low bid of $1.8 million (out of seven bidders) for the construction work. Prior to contract award, however, the school district entered into a PLA for all of its school projects, resulting in rebidding the work. This time, only three companies bid on the PLA project, and the low bid exceeded $2.2 million, more than $437,000 (24 percent) higher than the original non-PLA bid.[29]

Hartford Public High School in Connecticut encountered significant cost overruns after the government imposed a PLA in 2004. As reported in the Hartford Courant: “Some components of the job received few or no bids. The bids that did arrive were several million dollars more than the $82 million that voters approved seven years ago.”[30]

A 2003 study published by the Beacon Hill Institute examined 126 school construction projects undertaken with and without government-mandated PLAs in the Boston area from 1995 to 2003. The study found that PLAs added $37.88 per square foot to the cost of building schools.[31] One of the study’s authors observed: “It is puzzling to us why any local official would enter into a PLA in the light of local budget realities, as well as our findings.”[32]

A 2004 Beacon Hill study found that union-only PLAs increased the cost of school construction in Connecticut, based upon an analysis of dozens of actual projects built on both a union-only and open competition basis since 1996.  According to its Connecticut report, Beacon Hill found that PLAs increase actual project costs by 17.9 percent and that bid costs are raised by 16.6 percent.[33] “Taken together, PLA projects accounted for 1.32 million square feet of construction with a combined actual cost of $224.8 million (in 2002 prices), based on the projects that we were able to include in our study.  Our estimates show that this cost was $39.5 million higher than it would have been if PLAs had not been used.”[34]

Finally, a 2006 Beacon Hill study found that the presence of a PLA on New York public schools increased a project’s winning base bid by $26.98 per square foot relative to non-PLA projects, an increase of 20 percent.[35]

Efforts have been made by PLA proponents to rebut the Beacon Hill studies,[36] but such efforts were then refuted in a 2009 report.[37] As noted by Beacon Hill: “All of our findings are highly robust for the effects of PLAs. The PLA coefficient was positive and significant for Connecticut schools when we considered small projects only, large projects only, elementary schools only or other schools weighted by size. The coefficient was positive and significant for both winning bids and actual construction costs for both Massachusetts and Connecticut schools.”[38]

Results similar to the Beacon Hill school studies were independently found in 2010 by New Jersey’s Department of Labor and Workforce Development, which is required to issue annual reports on the use of PLAs pursuant to that state’s PLA Act of 2002. The October 2010 government report stated: “School projects that used a PLA tended to have higher building costs, as measured on a per square footage and per student basis, than those that do not use a PLA.”[39] The report indicated that the indexed cost per square foot for all PLA projects was 30.5 percent higher than for all non-PLA projects.[40]

Elsewhere in New Jersey, the Township of Moorestown was forced to reject all construction bids in 2010 under a PLA for a town hall, library and police complex after the lowest bid came in at $15.7 million, 35 percent higher than the initial construction estimate of $11.6 million. The township mayor subsequently told a town meeting that the union-only restriction was a “bad call.”[41]

A June 2009 study conducted by property and construction consulting firm Rider Levett Bucknall, prepared for the U.S. Department of Veterans Affairs (VA) Office of Construction and Facilities Management, found that PLAs likely would increase construction costs by as much as 9 percent in three of the five construction markets (Denver, New Orleans and Orlando, Fla.) where the VA was planning to build hospitals. For two other heavily unionized markets, the study predicted mixed results ranging from small project cost increases to small cost savings.[42]

The VA hired the same firm to conduct a similar PLA study for the construction of a $50 million VA Research Office Building in Pittsburgh. The September 2010 study found “a potential cost risk premium of 3 percent to 5 percent if a PLA is mandated. For a $40 million project, this could equate to $1.2 to $2 million.” The study said, “We see that a mandated PLA will reduce subcontractors and lower the labor pool to the detriment of the project, and potentially add cost; therefore, we believe that a PLA would likely not ‘advance the federal government’s interest in achieving economy and efficiency in federal procurement.’”[43]

Finally, in 2010 the General Services Administration (GSA) announced that a change order to adopt a PLA on the Lafayette Building construction project in Washington, D.C., would increase the cost of the project by more than $3.3 million. A Congressional oversight committee is looking into the GSA’s reasons for adopting the PLA and its resulting cost increase.[44]

NOTE: To read the report’s Introduction, click here.

Tomorrow we will post the chapter about Reduced Competition on PLA Projects.

Citations after the jump.

[2] Board to Absorb Extra Costs as Price of New School Soars to $32.4 Million, Buffalo Evening News, Oct. 29, 1998.

[3] Calling Courthouse a Spade, Buffalo News, Jan. 23, 2000.

[4] Civic Center Bids Exceed the Budget, Post-Bulletin, Sept. 28, 1999.

[5] http//www.issuesource.org.

[6] Big Dig’s red ink engulfs state, Boston Globe, July 17, 2008.

[7] Boston’s ‘Big Dig’ Buried in Cost Overruns, Washington Post, April 12, 2000; Low Bid, $22 Million Over Estimate, Is Approved, ENR, Jan. 13, 1997 at 5; Boston Projects Tracking Higher, ENR, Jan. 20, 1997, at 27.

[8] See below for further reports on safety and quality issues on the Big Dig.

[9] SFO Expansion Project Hundreds of Millions Over Budget, San Francisco Chronicle, Dec. 22, 1999.

[10] Overruns Hit Eastside Project, ENR, Oct. 19, 1998, at 1, 13.

[11] Elyria Risks $610,500 To Get A Union Label, Morning Journal, March 30, 2001.

[12] Convention Center Costs Increase By $15 million, Washington Construction News, March 2001.

[13] Washington Business Journal (March 2003).

[14] Huge Overrun Looms at Convention Center, Boston Globe, Jan. 9, 2001.

[15] Troubled Center Moves Ahead, Des Moines Register, July 12, 2003; Say No to Project Labor Agreement, Des Moines Register, July 23, 2003.

[16] Frantz, et al., The PLA for the Iowa Events Center: An Unnecessary Burden on the Workers, Businesses and Taxpayers of Iowa, Policy Study 06-3, Public Interest Inst. At Iowa Wesleyan College (April, 2009), www.limitedgovernment.org/publications/pubs/studies/ps-06-3.pdf.

[17] Lone Wilson Bridge Bid Comes in 70 percent Above Estimate, Engineering News Record, Dec. 24, 2001; see also Baltimore Sun, March 2, 2002.

[18] See discussion above at page 2.

[19] Unexpectedly Low Bid Keeps Wilson Bridge Under Budget, Washington Post, March 2, 2002.

[20] Wilson Bridge Bike Path Gets Rolling, Washington Post, June 7, 2009; See also Wilson Bridge Span Open Early, Washington Post, June 12, 2006; Woodrow Wilson Bridge Beats Obstacles as It Becomes Beltway Savior, ENR, January 31, 2005.

[21] New Seattle Stadium Battles Massive Cost Overruns, ENR, July 27/Aug. 3, 1998, at 1, 9.

[22] $12 Million to pay for Arena Overruns, Cleveland Plain Dealer, Dec. 14, 1996, at 16-A.

[23] Mayor’s Final Cost at Stadium 25 percent Over, Cleveland Plain Dealer, June 24, 2000; Westbrook says stadium overruns at $21 million, Cleveland Plain Dealer, Jan. 21, 1998.

[24] Stadium On Time, But Costs More, Detroit News, Oct. 31, 1999, B3; see also Field of Woes, Crain’s Detroit Business Magazine, June 18, 2001.

[25] Nationals Park Costs Rise, Sports Commission Struggles, Examiner, Oct. 21, 2008

[26] Worchester Regional Research Bureau, Project Labor Agreements (www.wrrb.org)

[27] Ronald N. Cogliano: Competing for School Construction, Boston Globe, July 10, 2007

[28] Power Plant Costs to Soar, Pasadena Star-News, March 21, 2003.

[29] School Costs Skyrocket After Labor Pact, San Francisco Chronicle, April 28, 2004.

[30] School Project Back in Limbo, Hartford Courant, April 7, 2004.

[31] Beacon Hill Institute, Project Labor Agreements and the Cost of School Construction in Massachusetts (Sept. 2003), www.beaconhill.org.

[32] Boston Business Journal (April 11, 2003).

[33] Beacon Hill Institute, Project Labor Agreements and The Cost of School Construction in Connecticut (Oct. 2004), www.beaconhill.org/BHIStudies.

[34] Id.

[35] Bachman and Tuerck, Project Labor Agreements and Public Construction Costs in New York State (2006),

www.beaconhill.org/BHIStudies.

[36] See Belman, Bodah and Philips, Project Labor Agreements (Electric Int’l 2007), cited in Kotler, Project Labor Agreements in New York State: In the Public Interest (Cornell U. 2009).

[37] See, e.g., Beacon Hill Institute, An Economic Analysis of Government-Mandated PLAs: A Reply to Professor Kotler (2009), www.beaconhill.org/BHIStudies. See also, Tuerck, Glassman and Bachman, Project Labor Agreements on Federal Construction Projects: A Costly Solution In Search of A Problem (2009), www.beaconhill.org/BHI Studies. See also, Tuerck, Why Project Labor Agreements Are Not in the Public Interest, Cato Journal, Volume 30 Number 1, Winter 2010,

[38] Id. at 27.

[39] Annual Report to the Governor and Legislature, use of Project Labor Agreements in Public Works Building Projects in Fiscal Year 2008 (NJDOL Oct. 2010), available at www.thetruthaboutplas.com.

[40] Previous annual reports from New Jersey’s Department of Labor came to similar conclusions about the poor performance of PLAs. See, New Jersey Letter to the Editor Tells the Truth About PLAs, (Nov. 9, 2010). Available at www.TheTruthAboutPLAs.com.

[41] Council ponders next move on project, CourierPostOnline.com (May 18, 2010), available at www.courierpostonline.com.

[42] Project labor Agreements – Impact Study for the Department of Veterans Affairs, Rider Levett Bucknall (June 2009), available at www.thetruthaboutplas.com.

[43] Project Labor Agreements – Impact Study, Pittsburgh, Pennsylvania, Rider Levett Bucknall (Sept. 2010), See also, ABC Wins Another Challenge Against Government-Mandated Project Labor Agreements on Federal Construction Projects, (Jan. 6, 2011), available at www.thetruthaboutplas.com

[44] Hemingway, Mandatory PLAs Put Dollars Into Union Coffers, Washington Examiner (Dec. 5, 2010).

Corruption: This is How Big Labor Leverages Politics to Secure Anti-Competitive and Costly Government-Mandated Project Labor Agreements

As readers of TheTruthAboutPLAs.com know, the promise of a PLA delivering on-time, on-budget and incident-free construction is frequently broken.  Arguments in support of government-mandated PLAs made by special interests that exclusively benefit from PLA monopoly schemes are easily rebutted.

Yesterday we briefly covered a new report by TheTruthAboutPLAs.com contributor Maury Baskin.

Government-Mandated Project Labor Agreements: The Public Record of Poor Performance (2011 Edition) highlights poorly performing government-mandated PLA projects documented in the media that have experienced at least one of the following issues:

• Increased Costs
• Reduced Competition
• Construction Delays
• Construction Defects
• Safety Problems
• Problems for Minorities and Women

Baskin says this report that will keep elected officials, the media and proponents of fair and free competition on public works projects informed about the poor track record of government-mandated PLA projects in their communities:

Click the image to read the 2011 Edition of this report

This report attempts to bring attention to as many government-mandated PLAs as possible whose actual results have been described in published media or academic reports. Those results frequently contradict PLA proponents’ claims of cost savings, avoidance of delays and/or improved performance under proposed PLAs. Rather, the published reports of PLA poor performance strongly support the assertion that government-mandated PLAs, aside from their questionable legality, are a bad bargain for taxpayers.

During the next several days, we will post each chapter from Baskin’s paper at TheTruthAboutPLAs.com.

If you are new to this issue, here is brief explanation about government-mandated PLAs from an excerpt of the introduction to Maury Baskin’s Government-Mandated Project Labor Agreements: The Public Record of Poor Performance (2011 Edition):

Government-mandated project labor agreements (PLAs) are agreements that some public entities require construction contractors and subcontractors to enter into with labor unions as a condition of being allowed to perform work on public construction projects. Government-mandated PLAs should be distinguished from voluntary, private sector PLAs, which are authorized by Sections 8(e) and 8(f) of the National Labor Relations Act solely when entered into by “employers in the construction industry” in an atmosphere free of union or government coercion.

The government-mandated PLAs described in this report are “union-only,” meaning they require all contractors and subcontractors on a covered project to sign an agreement with a labor organization, regardless of whether their employees have previously authorized any union to represent them, as a condition of performing work on a public construction project. In this sense, most government-mandated PLAs, and all of the PLAs described in this report, are “union-only.”… [snip]

Continue reading the rest of the Introduction here.

I. Introduction

Government-mandated project labor agreements (PLAs) are agreements that some public entities require construction contractors and subcontractors to enter into with labor unions as a condition of being allowed to perform work on public construction projects.[1] Government-mandated PLAs should be distinguished from voluntary, private sector PLAs, which are authorized by Sections 8(e) and 8(f) of the National Labor Relations Act solely when entered into by “employers in the construction industry” in an atmosphere free of union or government coercion.[2] The government-mandated PLAs described in this report are “union-only,” meaning they require all contractors and subcontractors on a covered project to sign an agreement with a labor organization, regardless of whether their employees have previously authorized any union to represent them, as a condition of performing work on a public construction project.[3] In this sense, most government-mandated PLAs, and all of the PLAs described in this report, are “union-only.”

Proponents of government-mandated PLAs claim the agreements reduce labor strife and increase efficiency in construction of large projects.[4] Opponents of PLAs assert they discriminate against the majority of the construction industry that is nonunion, reduce the number of potential bidders for the work, increase costs to taxpayers and delay construction—with no improvements in quality, safety or diversity.[5]

The purpose of this report is to fill the gap in public knowledge about the true impact of government-mandated PLAs.  To achieve this goal, the report examines the actual results of government-mandated PLA construction projects across the country. By engaging in this review, it is possible to see whether government-mandated PLAs have achieved the efficiency goals claimed by their supporters, or whether such PLAs have been associated with increased costs, reduced competition, delayed construction timetables, unsafe work practices, problems for minorities and other construction defects. To the maximum extent possible, the report relies on published sources, particularly news media accounts and academic studies that have examined the actual progress of projects built under PLAs.

As shown below, the public record of government-mandated PLA construction reflects a persistent pattern of increased construction costs on public works projects, along with negative impacts on competition for such projects, numerous delays in construction, construction defects, safety problems and diversity issues.  Each of these problems has been confirmed by numerous published reports on specific government-mandated PLAs.

This report is not intended to be a legal treatise; rather, it focuses on the practical outcomes of PLAs. It is nevertheless important to briefly review the legal controversy underlying the debate over government-mandated PLAs, beginning with the 1993 decision of the U.S. Supreme Court in the Boston Harbor case.[6] For the first time, the court held that a government-mandated PLA that was tailored to an individual construction project was not automatically preempted by the National Labor Relations Act (NRLA). The court did not address the legality of multi-project PLAs, however,[7] nor did the Boston Harbor opinion deal at all with the legality of PLAs under state or federal competitive bidding laws or the U.S. Constitution.  During the past two decades, a number of state courts have reviewed challenges to union-only PLAs on government projects, with mixed results.[8]

Three states—Missouri, Montana and Utah—have enacted laws (currently in effect) that prohibit government agencies from imposing union-only PLAs.[9] A fourth state, Idaho, recently passed legislation prohibiting state agencies from imposing government-mandated PLAs, effective July 1, 2011.[10] Several state governors have issued executive orders prohibiting or restricting the use of PLAs on state projects, while other governors have issued orders encouraging the use of PLAs.[11] New Jersey has enacted a law that encourages state government agencies to adopt PLAs on large construction projects. [12] In 2010, a series of ballot initiatives filed by the citizens of several southern California counties resulted in overwhelming votes to prohibit their local governments from imposing PLAs.[13]

In 2001, President Bush issued executive orders prohibiting federal agencies and recipients of federal funds from imposing union-only requirements on federally funded construction projects.[14] The Bush orders remained in effect until 2009, during which time there were no significant labor disputes reported on federal construction that caused delays or cost increases.[15] Nevertheless, on Feb. 6, 2009, President Obama issued Executive Order No. 13502, which revoked the Bush orders and “encouraged” federal executive agencies to “consider, on a project-by-project basis,” whether PLAs should be required on all projects whose costs exceed $25 million.[16] Opponents of the new executive order have successfully challenged its implementation through a series of bid protests filed at the Government Accountability Office (GAO), arguing that PLA mandates unlawfully restrict competition in violation of the federal Competition in Contracting Act (CICA).[17]

Much of the ongoing legal controversy over government-mandated PLAs is focused on whether they advance governmental interests in economy and efficiency, or whether they have precisely the opposite effect of increasing costs, reducing competition and generally harming the interests of taxpayers. Therefore, it is more important than ever to understand the true impact of government-mandated PLAs.

It is not feasible to report on the results of every PLA mandated by a government agency anywhere in the country during the past two decades. However, this report attempts to bring attention to as many government-mandated PLAs as possible whose actual results have been described in published media or academic reports.  Those results frequently contradict PLA proponents’ claims of cost savings, avoidance of delays and/or improved performance under proposed PLAs. Rather, the published reports of PLA poor performance strongly support the assertion that government-mandated PLAs, aside from their questionable legality, are a bad bargain for taxpayers.

This report is organized by PLA performance issue, in the following order:

• INCREASED COSTS ON PLA PROJECTS

• REDUCED COMPETITION ON PLA PROJECTS

• CONSTRUCTION DELAYS ON PLA PROJECTS

• CONSTRUCTION DEFECTS ON PLA PROJECTS

• SAFETY PROBLEMS ON PLA PROJECTS

• PLA PROBLEMS FOR MINORITIES AND WOMEN

Published reports on the government-mandated PLAs within each of these categories are organized chronologically under each issue associated with them, with some allowances for the fact that large projects sometimes generate reports during a period of years. The report concludes with an appendix containing an index of the cited reports on PLAs referenced in the text.

About the author:  Maurice Baskin, Esq. is a partner in the Washington, D.C., law office of Venable LLP. He represents construction industry employers in all aspects of labor and employment law representing management. Baskin has frequently litigated, written and spoken on the issue of government-mandated PLAs during the past two decades. The views expressed herein are his own. Nothing in this publication constitutes legal advice or opinion.

NOTE: Tomorrow we will post the report’s chapter about Increased Costs on PLA Projects.

Citations after the jump.

[2] 29 U.S.C. § 158(e) and (f).

[3] While most PLAs allow nonunion contractors to bid to perform on covered projects, they typically require all successful bidders/offerors to enter into union agreements in order to actually be awarded and perform the work. In other words, contractors (and subcontractors) must become unionized in order to perform work under the PLA.

[4] See, e.g., Section 1 of Executive Order No. 13502, asserting that PLAs may promote the efficient and expeditious completion of large construction projects by “providing structure and stability.”

[5] See public comments filed by Associated Builders and Contractors, Inc. in the notice and comment proceeding on the proposed rule of the Federal Acquisition Regulations (FAR) Council in 2009 implementing President Obama’s Executive Order No. 13502. FAR Case No. 2009-005. Available at www.thetruthaboutplas.com.

[6] Building and Construction Trades Council of the Metropolitan District v. Associated Builders and Contractors of Massachusetts/Rhode Island, Inc. (“Boston Harbor”), 507 U.S. 218 (1993).

[7] See Chamber of Commerce v. Brown, 522 U.S ___ , 128 S. Ct. 2408 (2008) (“In finding that the state agency had acted as a market participant, we stressed [in Boston Harbor] that the challenged action “was specifically tailored to one particular job,” and aimed “to ensure an efficient project that would be completed as quickly and effectively as possible at the lowest cost.”).

[8] Compare Tormee Const., Inc. v. Mercer County, 669 A. 2d 1369 (NJ 1995) (government-mandated union-only PLAs generally not permitted under state competitive bidding law); with New York State Chapter, Inc., Associated General Contractors of America v. New York Thruway Authority, 88 N.Y. 2d 56 (1996) (PLAs permitted only upon proof of cost savings and demonstrable need to meet unusual construction circumstances); and with Associated Builders and Contractors, Inc., Golden Gate Chapter v. San Francisco Airports Commission, 87 Cal. Rptr. 2d 654 (1999) (upholding PLA absent proof of injury to competition in order to “prevent costly delays”); See also ABC of Rhode Island, Inc. v. City of Providence, 108 F. Supp. 2d 73 (D. R.I. 2002) (government’s conditioning of tax incentives on developer’s acceptance of PLA held preempted by NLRA); Callahan & Sons v. City of Malden, Mass., 713 N.E. 2d 955 (1999) (PLAs neither “absolutely prohibited nor absolutely permitted.”).

[9] Missouri RS § 34.209 (2007); Utah Code Ann. § 34-30-14(2) (1995); Mont. Code Anno., § 18-2-425 (1999).

[10] Idaho Becomes 7th State to Ban Government-Mandated PLAs on State and Local Projects, March 4, 2011, available at www.TheTruthAboutPLAs.com (Senate Bill 1006).

[11] Most recently, the governor of Iowa revoked his predecessor’s pro-PLA executive order and substituted a new order prohibiting PLA mandates on any state-funded construction projects. See Iowa EO 69 (Jan. 14, 2011). Other state executive orders relating to PLAs include: Ark. EO 05-09 (2005) (prohibiting PLAs); Minn. EO 05-17 (2005) (same); Nev. EO (2008) (repealing previous order in favor of PLAs); 9 NY CRR § 5.49 (2006) (declaring that “no project labor agreement shall be approved by an agency unless the decision to enter into the project labor agreement has, both as its purpose and likely effect, the advancement of the interests of the state’s competitive bidding statutes.”); Ill. EO 2003-13 (2003) (encouraging PLAs); NJ EO (2002) (same).

[12] NJ Stat. 52:38-1, et seq. (2002).

[13] Proposition A Wins Big, www.KPBS.org (Nov. 3, 2010) (reporting 75 percent of all votes cast in favor of ballot initiative prohibiting government-mandated PLAs in San Diego County; and referencing previous votes prohibiting PLAs in Oceanside and Chula Vista, Calif.).

[14] Executive Order 13202 (Feb. 17, 2001), as amended, Executive Order 13208 (April 6, 2001). President Bush’s executive order was upheld against claims of labor law preemption in Building & Const. Trades Dept., AFL-CIO v. Allbaugh, 295 F. 3d 28 (D.C. Cir. 2002).

[15] See Tuerck, Glassman and Bachman, Project Labor Agreements on Federal Construction Projects: A Costly Solution In Search of A Problem (2009), http://www.beaconhill.org/BHIStudies. From 2001 to 2009, the federal government entered into construction contracts valued in excess of $147 billion. See usaspending.gov.

[16] Executive Order No. 13502 (Feb. 6, 2009).

[17] 41 U.S.C. § 253.  As a result of the bid protests filed with the GAO in 2009 and 2010, numerous federal agencies have been compelled to withdraw solicitations for bids on construction projects that contained PLA mandates. See., e.g., Contractor Protest Causes VA to Delete PLA Mandate from Research Building Bid Notice, 56 Const. Lab. Rep. 1366 (BNA), Jan. 12, 2011.