Thursday, by a bipartisan vote of 211 to 209, the House passed an amendment offered by Rep. Roscoe Bartlett (R-Md.) and cosponsored by Rep. Jeff Flake (R-Ariz.) to the National Defense Authorization Act (NDAA) for Fiscal Year 2013 (H.R. 4310) that prohibits federal agencies from mandating anti-competitive and costly project labor agreements (PLAs) and using PLA preferences on federal construction contracts authorized by the NDAA.

“This is a victory for the nation’s merit shop construction contractors and the 86 percent of the construction workforce that chooses not to join a labor union,” said Associated Builders and Contractors (ABC) Vice President of Federal Affairs Geoff Burr. “With a construction industry unemployment rate of 14.5 percent, everyone deserves a level playing field to compete for this work, regardless of labor affiliation.

“The amendment passed today will ensure fair and open competition on government-funded construction contracts, as well as give taxpayers and the government the best possible construction product at the best possible price – completed safely and on time,” Burr said. “We thank the members of Congress who voted in favor of this amendment.”

Historic Win
This was the first time the U.S. House passed legislation ensuring fair and open competition in federal contracting. During the first session of the 112th Congress, the House voted three times on similar measures. Each effort failed by a razor thin margin (210-210 , 207-213 and 204-203).

On Friday, construction labor unions benefitting from PLA favoritism in federal contracting cut back-room deals and lobbied furiously for a re-vote on the Bartlett amendment. However, House members supportive of discrimination in federal contracting and their special interest lobbyists were unable to muster enough supporters to ensure a successful re-vote, so they withdrew their effort.

It was another victory for taxpayers, free enterprise and the merit shop contracting community.

The NDAA passed the House 299-120 on Friday afternoon.

House Appropriations Committee Supports Fair and Open Competition
On Wednesday, the House Appropriations Committee passed via voice vote a similar amendment offered by Rep. Jeff Flake (R-Ariz.) prohibiting government-mandated PLAs on federal and federally assisted construction projects funded in the MilCon/VA FY 2013 appropriations bill.

PLA proponents are expected to attempt to push an amendment to strike this language from the MilCon/VA FY 2013 appropriations bill when it is considered on the House floor later this month.

Efforts Restore Government Neutrality in Contracting
Both measures restore open competition and government neutrality toward government contractors’ labor relations on Department of Defense construction projects authorized and funded by these two pieces of legislation.

Provisions in both bills closely mirror language contained in President George W. Bush’s Executive Order No. 13202 and Executive Order No. 13208, which was upheld by the U.S. Court of Appeals for the District of Columbia Circuit decision in the Allbaugh case. The Bush executive 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 government construction projects.

Allbaugh remains the controlling case on government-mandated PLA law and affirms that governments can mandate a position of neutrality when it comes to a contractor’s use of a PLA, as is the intent of both of these measures.

From 2001 until it was repealed by President Obama’s Feb. 6, 2009, pro-PLA Executive Order 13502, President Bush’s executive orders ensured there were no government-mandated PLAs on $147 billion worth of federal construction projects and hundreds of billions of dollars of federally assisted construction projects.

Under the Bush orders, firms were free to enter into PLAs on a voluntary basis. Research found that the government’s position of neutrality toward PLAs fostered fair and open competition and contributed to the completion of safe, on-time and on-budget projects. In short, PLA mandates were unnecessary.

Additional research suggests government-mandated PLAs can needlessly increase costs and typically force nonunion construction workers to pay union dues, join a union and receive reduced take-home pay and no benefits during the life of a PLA project unless they join a union and become vested in union benefits programs.

The Government Neutrality in Contracting Act (H.R. 735), introduced by Congressman John Sullivan (R-Okla.) and cosponsored by 176 other House members, essentially codifies into law President Bush’s executive orders ensuring fair and open competition on federal and federally assisted construction projects.  It remains in the House Oversight and Government Reform Committee and was the subject of a subcommittee hearing last year.

Coalition Supports Efforts
A coalition of construction and business groups sent a letter to the full House in support of the Bartlett amendment to the NDAA highlighting concerns with the Obama administration’s anti-competitive and costly pro-PLA policy:

President Obama’s Feb. 6, 2009, Executive Order 13502 encourages federal agencies to require PLAs on federal construction projects exceeding $25 million in total cost on a case-by-case basis in order to “advance the economy and efficiency in federal contracting.”

However, studies of construction projects subject to prevailing wage laws found PLA mandates increase the cost of construction between 12 percent and 18 percent compared to similar non-PLA projects. Recent government-mandated PLAs on federal projects have resulted in increased costs, delays and discrimination.

In addition, the executive order and related FAR regulations have exposed agency procurement officials to intense political pressure from special interest groups and politicians to mandate PLAs on federal projects even when they are not appropriate.

The Bartlett amendment counteracts potential special interest favoritism by prohibiting federal agencies building projects authorized by this bill from mandating PLAs and implementing PLA preferences. However, it also permits federal agencies to award contracts to businesses that voluntarily enter into PLAs in accordance with the National Labor Relations Act.

During the Obama administration, a number of Department of Defense construction projects have been subjected to PLA mandates, or have attempted PLA mandates (here and here), discriminatory PLA preferences and onerous PLA surveys.

The diverse coalition opposed to government-mandated PLAs includes the following groups representing both union and nonunion employers and employees:

American Council of Engineering Companies (ACEC)
Associated Builders and Contractors (ABC)
Associated General Contractors (AGC)
Business Coalition for Fair Competition (BCFC)
Construction Industry Round Table (CIRT)
Independent Electrical Contractors (IEC)
Merit Elevator Contractors Association of America (MECAA)
National Association of Women in Construction (NAWIC)
National Black Chamber of Commerce (NBCC)
National Federation of Independent Business (NFIB)
Small Business & Entrepreneurship Council (SBEC)
U.S. Chamber of Commerce
Women Construction Owners & Executives, USA (WCOE, USA)

AGC’s letter supporting the Bartlett amendment highlights why union and nonunion contractors are opposed to government-mandated PLAs (emphasis added):

“Government-mandated PLAs – whether mandated in contract specifications or mandated by government rules, regulation or by Executive Order – effectively compel both union and open shop contractors to alter their hiring practices, work rules, job assignments, and benefits in order to compete for, or to perform work on, publicly funded projects. PLAs typically restrict the majority of employment to those workers whom unions are willing to refer to the project. For these reasons, PLA mandates – even when competition is facially neutral and open to all contractors – effectively discriminate against open-shop companies, small companies, and disadvantaged businesses, limiting the number of competitors on a project, increasing costs to the government and, ultimately, the taxpayers. They can also negatively impact union contractors because the PLA supersedes the hard-fought terms and conditions a union has negotiated to achieve in its collective bargaining agreement.

Project owners have many ways to ensure that their construction contractors complete their projects in a timely manner, and there is no reliable evidence that PLAs improve the performance an owner can expect in the absence of such an agreement. In addition, PLAs can give rise to jurisdictional disputes that would not otherwise occur.

The choice of whether to enter into a collective bargaining agreement should be left to the employers and employees who will be subject to the agreement; the choice should not be imposed as a condition to, or advantage in, competing for publicly funded work. In cases where the use of a PLA would benefit a particular project, the construction contractors otherwise qualified to perform the work would be the first to recognize that fact and would adopt a PLA without the mandate.”

The Bartlett amendment is supported by the National Taxpayers Union:

“PLAs diminish the benefits of competitive contracting and, by effectively encouraging unionization, undercut an individual’s right to choose whether or not to be represented by a union.  PLAs are often the source of cost overruns and higher construction expenses, both of which are passed on to the taxpayer.”

The National Right to Work Committee’s letter to Congress in support of the Bartlett amendment explains the negative impact of government-mandated PLAs on nonunion workers and contractors:

“The fact is, union-only PLAs between public entities and contractors discriminate against independent-minded workers and contractors.

Unfortunately, state Right to Work laws don’t fully protect workers from forced-unionism abuse under PLAs. While Right to Work laws protect workers from forced dues and fees, under a PLA, workers are forced under terms and conditions exclusively negotiated by union bosses.

Worse, PLAs often force contractors and their employees to “contribute” to mismanaged union pension and benefit plans even if their workers already have their own plan. And, unless those employees are willing to give up their independence altogether by joining the union, they’ll likely never see the supposed “benefits” they’ve been forced to pay for.

By requiring union-only PLAs on taxpayer-funded projects, the federal government is essentially telling open or merit shop contractors they either turn their employees over to union boss control or forget about applying for the work. In these tough economic times especially, that’s the last thing Congress should allow!

Forbidding non-union contractors and workers from projects their tax dollars help fund amounts to state-sanctioned discrimination, plain and simple. Congress should never allow federal agencies to actively shut out or discriminate against well-qualified workers and contractors solely on the basis of union affiliation.

The fact is, union-only “Project Labor Agreements” are nothing more than an attempt by union officials to take even more power at the expense of workers and taxpayers.

Adoption of the Bartlett Amendment is critical, not just for non-union workers but for taxpayers as well. Contracts for any publicly-funded project should be awarded on merit, not on the basis of union affiliation.”

Learn about government-mandated PLAs and Right to Work here.

Continued:

“…In fact, studies of other union-only PLAs confirm they increase taxpayer expenses by at least 20%.

It is simple. Under PLAs, higher costs are exacted from taxpayers while individual workers are forced under monopoly union control at best and forced to pay dues or lose their jobs at worst.

By adopting the Bartlett Amendment, you would not only be protecting the rights of American workers and contractors but also defending the pocketbooks of the American taxpayers. Only Big Labor gains from union-only PLAs — not the majority of workers and taxpayers, not the majority of businesses, and not our nation’s economy.

The overwhelming majority of American workers, those who are not union members, should certainly not be denied access to the projects paid for by their taxes simply because they choose not to surrender their bargaining rights to a union boss…”

Review studies on the increased costs and reduced competition resulting from government-mandated PLAs here.

TheTruthAboutPLAs.com applauds the House for passing the Bartlett amendment.  It is an important step in restoring fair and open competition in government contracting.

Check back for updates and media coverage.

Further Reading
Language of Bartlett Amendment No. 182
Floor Debate on Bartlett Amendment
Roll Call Vote on Bartlett Amendment
Coalition Letter of Support
ABC Letter of Support
AGC Letter of Support
NRTW Letter of Support
National Taxpayers Union Endorsement
Rep. Bartlett Press Release
Dear Colleague Letter of Support from Rep. Guinta (R-NH)
Building Trades Unions Materials Opposing Bartlett Amendment
Rebutting Misleading and Untrue Statements Union Lobbyists Make about Project Labor Agreements (PLAs)
The Legality of Legislation Restricting Government-Mandated PLAs
Packet Supporting Bartlett Amendment

While Oklahoma does not have a history of problems with PLA mandates, this statute will ensure taxpayers continue to enjoy the value and accountability resulting from public construction that is awarded based on contractors’ ability to provide the best construction at the best price.

This law also ensures neither the state government nor local government entities will be in a position to pick winners and losers for public construction projects based on a contractor’s affiliation with a labor union.

Oklahoma’s leaders continue to be champions of open competition on public construction projects. If Gov. Fallin’s name sounds familiar to readers of this blog, it is because she spearheaded a proposal in former U.S. House Minority Whip Eric Cantor’s (R-Va.) YouCut program when she was a member of the U.S. House of Representatives. The YouCut website, launched in May 2010, featured a list of five proposals aimed at reducing federal spending. The public was encouraged to vote for the proposal it would most like to see eliminated by Congress. The YouCut program highlighted some of the ridiculous ways the federal government spends taxpayer money.

Gov. Fallin is not the only champion of free enterprise from the Sooner State. Oklahoma is also home to Congressman John Sullivan, who is the lead sponsor on the U.S. House version of The Government Neutrality in Contracting Act (H.R. 735). This bill would prohibit government-mandated PLAs on federal and federally assisted construction, guaranteeing Americans the best construction at the best price.

Here at TheTruthAboutPLAs.com, we are pleased that responsible state leaders continue to stand up for free enterprise despite strong opposition from organized labor and their allies.

However, data continues to show that construction union multiemployer pension plans (MEPPs) are in serious financial trouble, which calls into question the wisdom of elected officials pushing MEPPs onto qualified contractors and craft professionals through PLA mandates.

A new report shining light on the dreadful health of MEPPs for U.S. union workers and retirees estimates such plans are only 52 percent funded, with a $369 billion shortfall (Dan McCrum & Ajay Makan, “US Union Pensions Hole Deepens To $369 Billion,” Financial Times, 4/8/12 and “The Multiheaded Pension Monster,” WSJ, 4/23/12 ).

The March 26, 2012, Credit Suisse report paints a grim financial picture for firms, workers and retirees participating in MEPPs, concluding the deficit in these plans could more than triple if participating companies calculate their funding levels using fair market values.

Construction Industry MEPPs Are Troubled
While the report does not measure the specific exposure of construction industry MEPPs to underfunding, data from the Pension Benefit Guaranty Corporation (PBGC)—the federal agency created in 1974 to monitor and insure pension benefits in private sector defined benefit plans—indicates the construction industry is a key contributor to the drastic overall underfunding of MEPPs.

Fifty-five percent of the 1,488 MEPPs insured by the PBGC are in the construction industry, according to the most recent PBGC report using 2009 data (see table M-8: PBGC-Insured Plans and Participants by Industry (2009) Multiemployer Program).

The largest number of employees from any industry, about 3.885 million or 37.4 percent of all PBGC-insured MEPP participants (workers and retirees), are from the construction industry.

Construction MEPPs are responsible for about $167 billion (or 47 percent) worth of PBGC-insured MEPP underfunding (see Table M-14: Funding of PBGC-Insured Plans by Industry (2009, estimated) Multiemployer Program).

In 2009, the PBGC reported the construction industry was responsible for about $87.8 billion (or 45 percent) worth of PBGC-insured MEPP underfunding (see Table M-14: Funding of PBGC-Insured Plans by Industry (2007) Multiemployer Program).

The construction industry MEPP underfunding doubled in a few years, and it is likely to get worse. Yet, the public won’t know the real-time financial implications because there is a two-year lag in the public reporting of the health of MEPPs. The public does not yet know the health of MEPPs for the 2010 and 2011.

Will the MEPP Crisis Result in a Taxpayer Bailout?
The PBGC has publicly raised concerns about the simmering funding crisis because its balance sheet is impacted by the health of MEPPs. MEPP insolvency triggers the PBGC’s guarantee and loans are provided to the MEPP (those loans are rarely repaid by the MEPP) to help it pay guaranteed benefits (up to $12,870 per year per individual beneficiary), according to the Credit Suisse report. PBGC financing comes from insurance premiums paid by companies insured by the PBGC, as well as other sources such as investment income, plan assets and other recoveries. Taxes do not fund the PBGC plans…yet.

Engineering News-Record reported that PBGC’s fiscal 2011 report estimates the number of insolvent MEPPs would more than double in five years. (“Pension Agency Sees Rise in Aid to Ailing Multiemployer Plans,” 12/5/11):

PBGC estimates its “reasonably possible” obligations to multiemployer plan participants were $23 billion at the end of fiscal 2011, up from $20 billion a year earlier and $326 million in 2009. PBGC says the main reason for the increase in potential obligations to multiemployer plans is that two large plans were added to the “reasonably possible” inventory.

[snip]

PBGC reports it provided $115 million in aid to 49 multiemployer plans in 2011, up from $97 million in aid to 50 plans in 2010. Because added plans failed, PBGC says its multiemployer plan insurance program’s deficit jumped to $2.8 billion in 2011 from a $1.4-billion shortfall in 2010.

That’s right. The PBGC’s MEPP insurance program deficit doubled in one year. If this deficit continues to climb, expect calls from Big Labor and its beltway pals to orchestrate a backroom-deal PBGC bailout. Caps on annual monetary contributions from the PBGC to insolvent MEPPs and participants could be raised significantly because taxpayers would foot the bill instead of private revenue generated by the PBGC.

Sen. Robert Casey (D-Pa.) tried to execute a similar bailout in 2010, described in this Aug. 15, 2010, Wall Street Journal editorial. So did Reps. Patrick Tiberi (R-Ohio) and Earl Pomeroy (D-N.D.), according to this RealClearMarkets column by Diana Furchtgott-Roth, former chief economist of the U.S. Department of Labor.

If re-elected, President Obama and Democrats in Congress may consider a bailout of the union MEPPs through the PBGC. The current maximum of $12,870 per year MEPP beneficiaries are guaranteed through the PBGC is possible only if the PBGC has the money. If Democrats use the PBGC to bail out the union MEPPs, they first have to bail out the PBGC.

MEPPs in the Construction Industry
All MEPPs are defined by the Taft-Hartley Act of 1947. They cover workers from more than one employer. Employer contributions, determined by collective bargaining with a labor union, fund the plan. These plans exist to provide benefits to unionized workers in businesses characterized by frequent job and employer switching, such as union craftspeople in the construction industry. They do so by considering service with multiple employers under the same plan as if the worker had worked for the same employer during the life of their career.

Unionized contractors receive craft labor from union hiring halls composed of tradespeople who specialize in a specific craft (e.g., IBEW dispatches electricians and LiUNA dispatches laborers).  During their career, union workers may be dispatched by union halls to dozens of union-signatory contractor employers. Designated union bosses and union contractors administer pension plans that multiple union-signatory employers must pay into on behalf of employed trade union members in accordance with their respective collective bargaining agreement(s) with a construction union.

In contrast, quality merit shop contractors typically hire, train and invest resources in tradespeople who work exclusively for the company in a traditional employee/employer relationship. These contractors provide common benefits packages including a portable 401(k), paid time off, training and profit sharing to attract and retain skilled, experienced employees.

MEPPs Opposed by Merit Shop for Decades
As TheTruthAboutPLAs.com has stated many times, one of the reasons nonunion contractors are discouraged from competing for contracts on construction projects subject to government-mandated PLAs is because of typical provisions in a PLA that require employers to pay employee benefits into Big Labor’s MEPPs for the life of a PLA project.

In rare instances when nonunion employees (and union employees who do not belong to unions that are favored in PLAs) and their employers participate in PLA projects, employers must make benefit contributions to Big Labor’s MEPPs on behalf of their employees. These benefit contributions are forfeited to the MEPP unless employees join a union and meet vesting schedules defined by each plan.

An October 2009 report by Dr. John R. McGowan, “The Discriminatory Impact of Union Fringe Benefit Requirements on Nonunion Workers Under Government-Mandated Project Labor Agreements,” found that employees of nonunion contractors forced to perform work under government-mandated PLAs suffer a reduction in their take-home pay that is conservatively estimated at 20 percent.

Besides stealing benefits rightfully earned by construction employees working on a PLA project, PLA pension provisions are a windfall for Big Labor’s MEPPs because the MEPPs don’t have to pay future benefits to those employees. Though small in comparison to overall funding shortfalls, these contributions prop up insolvent MEPPs and hide the flawed structure and Ponzi-scheme economics of MEPPs.

For decades, merit shop firms have offered alternative retirement plans for their workforce in lieu of MEPPs because they know union MEPPs cannot be financially sustained in the long term. Construction industry stakeholders have only recently publicly addressed MEPP underfunding, partially because of scrutiny from the financial industry.

For example, data from Moody’s Global Corporate Finance’s Sept. 10, 2009, report, “Growing Multiemployer Pension Funding Shortfall is an Increasing Credit Concern,” measured the crisis faced by construction industry MEPPs. Using 2007 numbers as a starting point, Moody’s estimates that 2008 underfundings for construction MEPPs ballooned to $72.484 billion, or a 54 percent funded level. In other words, for every dollar that these construction MEPPs owe, they hold only 54 cents of invested assets.

With unemployment in the construction industry at 17 percent as of March 2012, it is no surprise that contractors (specifically union contractors) that participate in these MEPPs are going out of business. And when MEPP participants go belly up, the burden on employers remaining in the MEPPs becomes greater. Bankrupt contractors that can’t pay their fair share to MEPPs create additional liability for a MEPP’s remaining employer participants, which produces all sorts of disastrous consequences like forcing more employers out of business, weakening already struggling MEPPs and forcing the PBGC to step in.

The Blame Game
The recession, decline in construction industry union membership, high industry unemployment rate, and a looming construction industry workforce shortage point to future insolvency for many MEPPs.

In response, Big Labor has tried to exploit its political clout to fix its pension woes by pushing lawmakers and unelected bureaucrats at the National Labor Relations Board to pass rules that will make it easier for unions to organize and add new members to the basement of their MEPP scheme (see the Employee Free Choice Act/Card Check, Executive Order 13502, Ambush Elections, Micro Unions and Invasion of Privacy).

In addition, unions have ratcheted up rhetoric blaming their pension troubles on Wall Street and the recession.  Instead of pushing reasonable solutions like adjusting benefits, increasing contributions, preventing fraud and waste, executing sound investment and management strategies, and diverting hundreds of millions of dollars of discretionary union political spending to pension plans, unions are playing the blame game and posturing for a bailout from Uncle Sam. The union MEPP crisis is a key reason why unions are hijacking the Occupy Wall Street movement and asking this loaded question: If Wall Street can get a bailout, why shouldn’t union pension plans?

However, the shaky financial condition of some MEPPs was obvious pre-recession and occurred under the watch of union pension trustees, such as this example from a TheTruthAboutPLAs post:

The Sheet Metal Workers National Pension fund discloses the plan’s annual funding levels for plan participants here.  The SMWIA union’s own pension fund documents indicate that on 1/1/2008, the fund was just 52.2 percent funded.

So just three months after the Dow closed at an all-time high of 14,164 on 10/9/07, the pension fund took such a big loss in the stock market that the plan ended the year at 52.2 percent funded? Something doesn’t smell right.

This July 26, 2009, WSJ article points to similar anecdotes of pre-recession MEPP underfunding in other industries and inequality between the pension plans of rank-and-file members and Big Labor Bosses:

Poor management probably deserves a lot of the blame for the union decline, but the exact causes are a mystery. An even bigger mystery is that the unions do a far better job with funds created for their officers and employees than for mere workers. The SEIU Affiliates, Officers and Employees Pension Plan—which covers the staff and bosses at its locals—was funded as of 2007 at 102.2%. The plan for the folks at SEIU international headquarters was funded at 84.8%.

A September 2009 report on union pension plans by the Hudson Institute, “Comparing Union-Sponsored and Private Pension Plans: How Safe Are Workers’ Retirements?” found similar results and highlighted the disparities between union officer pension plans and union member plans. So does this piece.

Get to Know Your MEPP
The U.S. Department of Labor provides a list of all MEPPs in the critical and endangered status here. We’ve sorted through the growing list and identified construction industry MEPPs in this easy-to-search spreadsheet. Check to see if the MEPP you are participating in (or your competitors pay into) is in trouble.

For too long construction industry employees, contractors and lawmakers have been fooled into thinking union MEPPs deserve special treatment, are without fault and are a safe retirement strategy. The truth is that many plans are not in good shape and haven’t been healthy even in the best of economic times. Construction industry MEPPs have offered little transparency, accountability or meaningful solutions.  Workers, contractors and taxpayers should expect more of the same without proper education, oversight and corrective action.

Share your thoughts, concerns and anecdotes on this issue in the comments section.

Required Reading

• Multiemployer Pension Plans Face Uncertain Future (pdf)
• A Hitchhiker’s Guide to Taft-Hartley (pdf)
• Outstanding WSJ analysis in this editorial (8/15/10): “The Next Pension Bailout” (pdf)
• Construction Unions Push PLAs to Save Underfunded Union Pension Plans
• Construction Union Pension Plans and Project Labor Agreements
• New Report Finds PLA Pension Requirements Steal From Employee Paychecks, Harm Employers and Taxpayers
• Construction Unions Posture for Pension Bailout?

Readers can keyword search “pensions” to review the numerous posts TheTruthAboutPLAs.com has written about the link between government-mandated project labor agreements (PLAs) and MEPPs.

UPDATE 5/15/12: The WSJ wrote about this piece, “The Union Pension Bomb: Multi-employer plans look to be in big trouble,” 5/14/12. Take a look.

The IG report, documenting the GSA’s excessive, wasteful, and in some cases impermissible spending, forced the resignation of GSA Administrator, Martha N. Johnson, and the firing of Public Buildings Service (PBS) Chief Robert A. Peck and another Johnson deputy. Four regional commissioners who planned the October 2010 conference are on administrative leave.

Linda Chero, previous Mid-Atlantic regional commissioner with the GSA’s Federal Acquisition Service, has replaced Peck. PBS oversaw billions of dollars worth of federal construction projects funded by the federal budget and the American Recovery and Reinvestment Act.

The scandal has grabbed newspaper headlines, sparked outrage from political commentators and drawn White House ire.

Inexplicably, there was little reaction from the media and no investigation from the GSA’s IG office when the GSA’s PBS wasted nearly four times as much money on a blatant handout to Big Labor in 2010.

GSA Policy Funnels Construction Contracts to Obama’s Political Patrons
The GSA approved a change order of an additional $3.3 million on a $52.3 million construction contract to ensure stimulus-funded renovations to the Lafayette Federal Building in Washington, D.C., were built with union labor through a union-favoring project labor agreement (PLA).

As a result of President Obama’s Executive Order 13502, issued Feb. 6, 2009, federal agencies like the GSA are strongly encouraged, on a case-by-case basis, to mandate PLAs on federal construction projects exceeding $25 million in total cost.

The order, which effectively steers federal contracts to unionized contractors and union workers, is a gift to well-connected special interests that have spent hundreds of millions of dollars in support of President Obama and his Democrat colleagues in Congress.

Executive Order 13502: Obama's Gift to Big Labor. Image courtesy of The Boston Globe, "Obama kowtows to labor unions," 10/07/09.

What is a Government-Mandated PLA?
Anti-competitive government-mandated PLAs are special interest schemes that require contractors to promise that most or all of their workforce building a PLA project will be hired through a union hiring hall or built by card-carrying (and unfamiliar) union members. The terms of PLAs vary from project to project because these pacts are one-time contracts between contractors and labor unions for a specific construction jobsite. However, when required by local, state and federal agencies, contractors can’t win taxpayer-funded contracts unless they agree to the government-mandated PLA.

In some PLAs, merit shop contractors are permitted to use a limited number of existing nonunion employees, but they are forced to join a union and/or pay union dues and fees in order to work on a project funded by their tax dollars.

It is a raw deal for an industry workforce already facing a 17.2 percent unemployment rate, according to government data. It is especially discriminatory to the 86 percent of the U.S. construction workforce that choose not to belong to labor union.

In addition, PLAs saddle contractors with archaic and inefficient union work rules that needlessly increase construction costs.

Finally, PLAs typically force merit employers to pay employee benefits into union-managed multi-employer pension funds, but employees do not see the benefits of the employer contributions unless they join a union and become vested in these plans.

Qualified Nonunion Employees and Experienced Contractors Victimized by PLAs
An October 2009 report by Dr. John R. McGowan, “The Discriminatory Impact of Union Fringe Benefit Requirements on Nonunion Workers Under Government-Mandated Project Labor Agreements,” found that nonunion employees of merit contractors forced to work under government-mandated PLAs suffer a reduction in their take-home pay that is conservatively estimated at 20 percent.

Merit contractors that offer their own benefits, including quality health and retirement plans, often continue to contribute to both existing programs and union programs under a PLA.  The McGowan report found that nonunion contractors are forced to pay in excess of 25 percent in benefits costs above and beyond existing prevailing wage laws as a result of this “double payment” attached to PLAs.

These requirements make it difficult for nonunion contractors to compete and results in increased construction costs. It is also unfair to employees who have earned this money for a secure retirement.

PLA Mandates Increase Costs and Reduce Competition
The costly and discriminatory terms and provisions in typical PLAs discourage competition from nonunion contractors and increase the cost of construction. Numerous studies have found that government-mandated PLAs typically increase the cost of construction between 12 percent and 18 percent. That translates into less building and fewer construction industry jobs.

PLA Mandates Are Politically Motivated Solutions in Search of a Problem
The Obama administration justifies the use of government-mandated PLAs because they allegedly produce “economy and efficiency” in government contracting. However, no credible evidence supports this claim. In reality, PLA mandates are an earmark for Big Labor bosses and contractors justified as a solution to a problem that doesn’t exist in federal contracting.

GSA’s PLA Policy Investigated by Congress, but Remains Unchanged
The GSA has taken an aggressive and indiscriminate approach to promoting the use of union-favoring PLA mandates.

GSA policy permits firms to submit a PLA offer or, a nonPLA offer (or both) on all GSA projects exceeding $25 million in total cost. However, PLA offers submitted by bidders receive extra credit in the technical evaluation category of the best value procurement process. The special treatment makes it difficult, if not impossible, for non-PLA offers to win contracts when competing against PLA offerors (see the 9/24/10 PBS Procurement Instructional Bulletin (PIB) 10-04-Revision 1 for more details on this policy).

The GSA’s discriminatory PLA preference policy has led to delays, reduced competition and increased costs. Requests for congressional investigation forced the GSA to testify at two 2011 House Oversight and Government Reform Committee hearings to justify its wasteful favoritism.

See GSA deputy administrator Susan Brita’s attempt to justify the waste on the Lafayette Building at 44:16 of this hearing video and check out more highlights from the hearing after the jump.

Despite the congressional investigation, the GSA’s wasteful and discriminatory PLA preference policy remains unchanged. They refused to answer tough questions regarding their PLA policy and have provided the public with no evidence that it is beneficial to the public.

Union contractors and union construction workers continue to receive a considerable advantage when competing for contracts to build taxpayer-funded GSA construction projects. Numerous projects have been awarded to contractors submitting PLA bids at the expense of qualified firms opposed to PLA mandates. Full and open competition has been curtailed in violation of the federal Competition in Contracting Act. Taxpayer dollars have been wasted. Skilled nonunion craftspeople and their qualified employers have been denied jobs and opportunity as a result of this needless policy.

The waste and favoritism of the GSA’s PLA policy is comparable to the waste documented in the recent IG’s report.  If unchallenged, federal agencies will continue their unfortunate track record of waste, fraud and taxpayer abuse.

Congress and the media should renew their interest in the GSA’s anti-competitive procurement practices and call for reform. The GSA needs to be held accountable for any instance of waste, whether it be procuring conferences or construction services.

In a press release and letter to the White House issued Monday, Sen. Ayotte asked President Obama to repeal his pro-union Executive Order 13502 and remove the anti-competitive and costly union project labor agreement (PLA) mandated by the U.S. Department of Labor (DOL) on a $20 million to $50 million DOL Job Corps Center in Manchester, N.H.

The DOL’s Jan. 30 solicitation (DOL121RB20457) for the Manchester Job Corps Center mandates a union-favoring PLA.

Bidding is only open to certified small business contractors willing to agree to the terms and conditions of the union-friendly PLA drafted and mandated by the DOL.

Qualified federal contractors played no part in creating this government-mandated PLA, which requires contractors to obey numerous union collective bargaining agreements, pay into union pension and benefit plans, follow inefficient union work rules, hire most of their employees through union hiring halls for the life of the project and force unwanted union representation on nonunion employees.The PLA is a direct assault on New Hampshire’s ”Live Free or Die” state motto.

In New Hampshire, 85.5 percent of the construction workforce does not belong to a labor union, according to new government data. The state does not have a history of using government-mandated PLAs and few federal small business contractors are unionized, leading many in the industry to believe out-of-state union contractors and union workers from Boston will steal jobs away from the New Hampshire construction industry, which is already suffering from a grim construction economy.

According to a press release issued by ABC New Hampshire/Vermont President Mark Holden:

The government-mandated PLA has the potential to again delay this project, increase costs, reduce competition from qualified New Hampshire businesses and deny badly needed jobs to skilled New Hampshire construction workers who have freely chosen not to belong to a union.

The Union Leader ran an article about this controversy (“Sen. Ayotte slams bidding for Manchester Job Corps Center,” 2/7/12):

Sen. Kelly Ayotte is calling on the Obama administration to scrap all union-friendly project labor agreements, saying they are the reason the planned Job Corps Center in Manchester has yet to be built.

In a letter to Obama released Monday, Ayotte asked the President to reverse his executive order requiring federal projects over $25 million to consider using project labor agreements, or PLAs. In his State of the Union address, Obama said he wanted to cut government red tape. These agreements would be a good place to start, the Republican senator said.

“Federal government-mandated PLAs needlessly increase construction costs and limit the ability of non-union companies to successfully compete for government construction contracts,” wrote Ayotte. “This Washington mandate also significantly slows down the procurement of construction projects, forcing workers to wait on the sidelines until the PLA winds its way through the federal bureaucracy.”

A Foster’s Daily Democrat editorial also blasts the DOL’s anti-competitive and costly union-friendly PLA mandate on the Job Corps Center (“The union souffle is falling fast,” 2/9/12):

While there is some debate on the actual impact of PLAs on construction costs, PLAs should play no role in a free an open marketplace.

Unions argue that even though union labor — or union labor rates — may increase the cost of constructions projects, their workers bring to the table better skills and quality assurance. These, in the long run, supposedly make the extra costs worthwhile.

If that is true unions should be willing to compete on the merit of their argument. Bidding on such projects as the Job Corps Center should not be delayed by the prerequisite of a PLA. The impact of union labor on a projected should be part of the bid offered by contractors who may of their own free will choose to use union labor — no pre-mandate.

Such dictatorial practices go a long way in alienating the general public. They fuel Right to Work efforts in states such as New Hampshire. And they leave such a sour taste in he mouths of Mr. and Mrs. John Q. Public that union ranks nationally have fallen faster than a souffle after the oven door is slammed shut while baking.

PLA Controversy Delayed Project
TheTruthAboutPLAs.com readers may recall previous media coverage of the Job Corps Center project, which most recently included a Dec. 23  holiday-themed op-ed in the New Hampshire Union Leader  by Holden. It summarizes the long-running controversy surrounding the DOL’s PLA mandate on the Job Corps Center and the absurdity of this gift to Big Labor at the expense of New Hampshire businesses and workers. It was penned in response to the DOL’s Dec. 22, 2011 pre-solicitation indicating the project would be subject to a PLA mandate.

By Mark Holden

It may be beginning to look a lot like Christmas, but many New Hampshire construction workers and businesses are expecting a lump of coal in their stockings from the federal government.

In this case, the Grinch is the U.S. Department of Labor (DOL), which is planning to build a $35 million Job Corps Center in Manchester with federal tax dollars.  Unfortunately, the DOL is poised to ensure the project is built by out-of-state union labor and union contractors, despite the fact that more than 91 percent of New Hampshire’s construction workforce chooses not to belong to a construction labor union.

The DOL is mandating a union-favoring project labor agreement (PLA) on the Job Corps Center.  Created by unions as a way to circumvent the free market and regain lost market share, a PLA typically requires contractors to replace most or all of their existing workforce with unfamiliar union labor, follow archaic and inefficient union work rules, and pay into underfunded union pension and benefit plans if they want to win contracts.

New Hampshire’s skilled nonunion workers are forced to accept unwanted union representation and pay union dues, yet they will forfeit benefits paid into union pension and benefit plans during the life of the project unless they join a union and become vested in these plans.

Such humbuggery has the effect of discouraging competition from New Hampshire’s qualified contractors and their local employees.

Reduced competition coupled with costly union red tape needlessly increases construction costs.  Studies by the Beacon Hill Institute in Boston indicate projects subject to prevailing wage laws built with government mandated PLAs are 12 percent and 18 percent more expensive compared to similar non-PLA projects subject to government-determined wage and benefit rates. The research comes as no surprise to anyone familiar with Boston’s Big Dig boondoggle, which was built with a PLA mandate.

In short, government-mandated PLAs are a gift to Big Labor at the expense of taxpayers and New Hampshire construction businesses and tradespeople.

If this controversy has the disappointing familiarity of a re-gifted fruitcake, it is because the DOL tried to mandate a PLA on the Job Corps Center in 2009.  In the face of such blatant discrimination, a brave contractor, North Branch Construction of Concord, filed a bid protest against the DOL’s anti-competitive PLA. Instead of proceeding with PLA-free construction subject to fair and open competition – which would result in badly needed local job creation – the DOL canceled the project.

Not to be deterred, the DOL retained the services of a consultant, Hill International, to prepare a report justifying and defending a PLA requirement. The report cost taxpayers $130,000. It was the second PLA report Hill International prepared for the DOL. The first report, which trumpeted the alleged benefits of PLAs on federal construction projects, cost taxpayers $300,000. The latest report is so shoddy and full of pro-PLA bias, taxpayers will wish it came with a gift receipt.

The DOL and the federal government’s discriminatory policy is the product of an executive order signed by President Obama just a few days after moving into the White House in 2009. The measure encourages federal agencies to mandate PLAs on a case-by-case basis on large federal construction projects exceeding $25 million in total cost.

It is no coincidence it steers federal contracts to one of the White House’s and Democrat party’s biggest political patrons: Big Labor.

So while the Grinch has come to town, stealing Christmas hopes and dreams away from The Granite State’s workers and their families, will any of the GOP presidential candidates take a stand against deceptive payback to Big Labor prior to New Hampshire’s Jan. 10 primary?

All nonunion contractors and their employees want this holiday season is the ability to fairly compete.  Some members of Congress, such as New Hampshire Sen. Ayotte, Rep. Frank Guinta and Rep. Charlie Bass, have stood up for free enterprise and New Hampshire families in support of legislation (S. 119 and H.R. 735) to “preserve open competition and federal government neutrality toward the labor relations of federal government contractors on federal and federally funded construction projects.”

That’s exactly what should happen. The federal government should preserve the right of everyone to fairly compete for jobs, not just a select few.

Congress should pass this legislation or a new president should undo President Obama’s destructive policy catering to well-connected special interests. It’s the only surefire way to keep the federal Grinch at bay.

##

Mark Holden is the president of the New Hampshire/Vermont Chapter of the Associated Builders and Contractors. To learn more about anti-competitive PLAs, visit www.TheTruthAboutPLAs.com.

Obama Administration’s First Federal PLA Mandate
The DOL mandated a PLA on this project in 2009. It was the first PLA mandated by a federal agency on a federal construction project following President Obama’s Feb. 6, 2009 Executive Order 13502, which encourages federal agencies to mandate PLAs on a case-by-case basis on federal construction projects exceeding $25 million in total cost. The DOL’s 2009 PLA mandate was especially unusual because it was issued prior to the Federal Acquisition Regulatory (FAR) Council final rule (pdf), issued April 13, 2010, and effective May 13, 2010, implementing Executive Order 13502 into federal procurement regulations (learn more here).

Similar attempts by federal agencies to mandate PLAs before and after the effective date of the FAR final rule were foiled by ABC contractor-led bid protests (learn more here).

Last summer, the project and PLA controversy received attention from the New Hampshire Union Leader (“Jobs Corps Center project going forward,” 8/20/11) and a related press release from Sen. Ayotte (“Senator Ayotte Expresses Concerns about Labor Requirement for Manchester Job Corps Project,” 8/19/11) in response to the DOL’s August announcement they will proceed with construction and mandate a PLA despite previous controversy.

Executive Order 13502 and the related FAR rule remain controversial White House gifts to Big Labor likely to increase federal construction costs, reduce economy and efficiency in federal contracting, reduce competition from quality nonunion contractors and their skilled employees, and deny taxpayers the accountability they deserve from the government.

TheTruthAboutPLAs.com will be following the DOL Job Corps Center PLA closely in the coming weeks.

According to BLS data, the construction industry recorded the lowest number of union members in 2010, when just 801,000 private construction workers belonged to a union.

From 2010 to 2011, union membership grew from 13.1 percent to 14 percent of the U.S. private construction workforce, with construction unions adding 73,000 new members.

The recession has hit the construction industry hard.  The average construction industry unemployment rate in 2011 is 16.4 percent. According to government data, the current industry unemployment rate is at 16 percent, but it was as high as 22.5 percent in Jan. 2011 .

The construction industry has shown few signs of improvement. From 2010 to 2011, the construction industry added 141,000 jobs and grew from 6,103,000 workers to 6,244,000 workers. However, this few workers have not been employed in the construction industry since 1998, when 5,946,500 workers were employed and 17.8 percent of the workforce was unionized, according to the Union Membership and Coverage Database, available at www.unionstats.com. In addition, government data indicates construction spending has been flat.

Update: www.unionstats.com has released state specific union membership information for various industries, including construction (see table II), for the year 2011.

Government-Mandated PLAs Create Jobs for Union Members
So how will the decline in overall construction union membership change the public policy debate surrounding government-mandated project labor agreements (PLAs) and President Obama’s pro-PLA Executive Order 13502?

In short, there will be added pressure on politicians to pander to Big Labor’s special interests and help keep their political base afloat. As they did in 2009 and 2010, the White House, members of Congress and federal officials beholden to Big Labor’s costly special interest agenda will try to steer federal construction contracts to unionized employers and create jobs exclusively for union members through federal government-mandated PLAs. On April 13, 2010, the Federal Acquisition Regulatory (FAR) Council issued a final rule (pdf), effective May 13, implementing President Obama’s Feb. 6, 2009, pro-PLA Executive Order 13502 into federal procurement regulations.

While the final rule does not mandate PLAs on all federal construction projects — and it offers agencies some flexibility when deciding whether to mandate a PLA on a specific large-scale construction project — the regulation is nothing but a handout to special interests.

The decision to agree to a PLA should be left up to individual contractors and not forced onto qualified contractors by government agencies as a condition of winning a federal construction contract. PLAs mandates reduce competition, increase costs and steer contracts to unionized firms.

This election year, special interests and their political allies will turn up the heat on federal bureaucrats to ensure more PLAs are attached to federal construction projects and other taxpayer-funded construction projects.

After all, numerous elected officials have a politically motivated self-interest in creating jobs for construction union members.  Fewer union jobs spells disaster for union institutions, union retirement plans and the politicians that depend on union contributions to get elected and pass public policy favoring Big Labor.

Politicians understand that a lack of union jobs in the construction industry means fewer union dues and “voluntary” political contributions deducted from union members’ paychecks that are funneled into various union slush funds coordinated through Labor Management Cooperation Committees (LMCCs), 527 groups and Political Action Committees (PACs) that support Big Labor’s friends in politics.

This symbiotic relationship between Big Labor and its political chums cannot continue without healthy union institutions and political contributions from labor unions that fuel the Democrats’ political machine.  

So the latest union membership numbers—coupled with high unemployment in the construction industry and the complex relationship of entities dependent on union revenue—point to a greater push for local, state and federal governments to mandate PLAs at the expense of taxpayers and the merit shop contracting community.

There are valid economic and ethical reasons why promoting the special interests of Big Labor, which composes just 14 percent of the U.S. private construction workforce, ahead of the needs of the rest of the construction industry through PLAs is bad public policy.

For example, on prevailing wage projects, PLAs on average increase the cost of construction between 12 percent and 18 percent compared to similar non-PLA mandated projects. With the added cost premium of anti-competitive PLAs, there is less construction money available. And less construction money means fewer total construction projects and construction jobs. So union-favoring PLAs could make unemployment in the construction industry even worse.

In addition, there is no compelling reason (other than political self-interest) to create jobs for union members ahead of nonunion employees via government-mandated PLAs. Qualified nonunion employees deserve just as fair a shot to feed their families as union members. Unions should use the ultra-competitive market and tough economy as an opportunity to retool their product and make it more lean and efficient to compete in today’s marketplace instead of relying on government handouts to stay relevant.

The U.S. economy and the construction industry would benefit from free and open competition, without corrupt government-mandated PLAs, where taxpayers can get the best possible construction product at the best possible price.

“Building this new energy future should be just one part of a broader agenda to repair America’s infrastructure. So much of America needs to be rebuilt. We’ve got crumbling roads and bridges. A power grid that wastes too much energy. An incomplete high-speed broadband network that prevents a small business owner in rural America from selling her products all over the world.

“During the Great Depression, America built the Hoover Dam and the Golden Gate Bridge. After World War II, we connected our States with a system of highways. Democratic and Republican administrations invested in great projects that benefited everybody, from the workers who built them to the businesses that still use them today.

“In the next few weeks, I will sign an Executive Order clearing away the red tape that slows down too many construction projects. But you need to fund these projects. Take the money we’re no longer spending at war, use half of it to pay down our debt, and use the rest to do some nation-building right here at home.

“There’s never been a better time to build, especially since the construction industry was one of the hardest hit when the housing bubble burst. Of course, construction workers weren’t the only ones who were hurt…”

On behalf of the merit shop contracting community, ABC 2012 National Chairman Eric Regelin, president of Granix, LLC, Ellicott City, Md., today reacted to President Obama’s remarks:

“In his speech, the president said ‘we can restore an economy where everyone gets a fair shot, and everyone does their fair share,’” said Regelin. “Yet, one of his first official acts when he took office was to sign an executive order on project labor agreements that discriminates against the 87 percent of the nation’s construction workforce that chooses not to belong to a labor union.

“It is not clear at this point what President Obama meant when he spoke of removing red tape from construction projects, but any sincere effort to do so must involve the elimination of government-mandated project labor agreements and Davis-Bacon wage requirements on taxpayer-funded construction projects,” Regelin said.

“The president’s insistence on a so-called ‘millionaire’s tax’ to fund his various priorities will expose the 80 percent of construction firms that are taxed at the individual rate to a significant tax increase,” said Regelin. “This does not represent a ‘fair share’ that will help the economy and create jobs, but rather the president’s continued use of the nation’s job creators as his personal piggy bank.

“The nation’s construction industry continues to struggle with an unemployment rate of 16 percent – nearly twice the national average,” Regelin said. “However, the president’s only solution to fix the economy is to hand out favors to special interests and punish those who work hard and take risks.”

To view this statement, click here.

So will President Obama’s new executive order cutting red tape slowing down construction projects be helpful, or, will it be another gift to special interests?

Cartoon courtesy of the Boston Globe

It is quite possible President Obama’s new executive order is just repackaging a policy the White House announced in October 2011 to speed along the approval of 14 high priority infrastructure projects. If so, this won’t likely be controversial. It could be something else equally noncontroversial

However, there is concern President Obama will make some changes this election year to federal policy concerning government-mandated PLAs on federal and federally assisted projects. See Section 7 of Executive Order 13502, issued Feb. 6, 2009:

Section 7. The Director of the OMB, in consultation with the Secretary of Labor and with other officials as appropriate, shall provide the President within 180 days of this order, recommendations about whether broader use of PLAs, with respect to both construction projects undertaken under Federal contracts and construction projects receiving Federal financial assistance, would help to promote the economical, efficient, and timely completion of such projects. [Note: Order was issued Feb. 6, 2009, 180 days sets the deadline at Aug. 5, 2009, but a recommendation has not been publicly issued.] 

An expansion of Section 7 could decrease the current $25 million threshold when federal agencies are currently required to evaluate if a PLA mandate is appropriate on a federal construction project. More PLA mandates on smaller projects would help Big Labor at the expense of everyone else. 

Section 7 could also force pro-PLA policies on federally assisted projects built by private owners and state and local governments. An expansion could increase costs for local and state projects already suffering from difficult budget realities. It could also lead to out-of-area union workers taking jobs away from qualified nonunion construction workers in the local economy.

TheTruthAboutPLAs.com explained the concerns with Section 7 expansion here.

Let's hope Section 7 of Executive Order 13502 is not.

TheTruthAboutPLAs.com will be following White House policies impacting the construction industry closely.

The PLA mandate harms Washington’s experienced and skilled nonunion construction workforce and will discourage competition from qualified contractors that have successfully built federal projects in Washington and across the country without PLA mandates.  It will also needlessly increase costs.

According to an article in the Kitsap Sun, NAVFAC Northwest mandated a PLA after Sens. Maria Cantwell and Patty Murray, and Reps. Norm Dicks and Jay Inslee (all Democrats from Washington) wrote to the Navy in support of a PLA at the request of construction trades unions (“Navy to hire local workers for second explosives handling wharf,” 1/1/12):

The trades council contacted the area’s federal delegation — Sens. Patty Murray and Maria Cantwell and Reps. Norm Dicks and Jay Inslee — who wrote to the Navy supporting a PLA, Whetham said. Four trade council officials and seven from the Navy met in November to explore the benefits and arrived at cost savings and skilled labor.

Here is a copy of the 9/23/11 letter pressuring NAVFAC to mandate a PLA on this project. Rep. Norm Dicks (D-Wash.) is the ranking member on the U.S. House Appropriations Committee, a powerful position that controls the budgets for federal agencies such as NAVFAC.

According to information obtained from opensecrets.com, construction trades unions have donated the following political contributions totaling $814,375 to the four Washington Democrats who signed the letter:

Rep. Inslee:       $340,000   from 2000 – 2012
Rep. Dicks:        $183,125   from 1998 – 2012
Sen. Murray:      $279,250   from 1998 – 2012
Sen. Cantwell:    $ 12,000    from 2002 – 2012
Total:                 $814,375

Is this PLA mandate the product of a crony contracting scheme by federal officials?

Prior to mandating the PLA, NAVFAC Northwest did not consult with the merit shop contracting community about the negative impact of PLA mandates on qualified federal prime contractors, subcontractors and their skilled local employees.

First Navy PLA Mandate Under Obama Administration
This is the first PLA mandate on a Navy project since President Obama issued Executive Order 13502 on Feb. 6, 2009, just a few weeks after his inauguration. The order strongly encourages federal agencies to mandate PLAs on a case-by-case basis on federal construction projects exceeding $25 million in total costs.

As a result of Obama’s encouragement of federal PLA mandates, NAVFAC has issued several PLA surveys to the contracting community to determine if a PLA mandate will advance the economy and efficiency in federal procurement of numerous large-scale construction projects across the country.  ABC National and ABC members have responded to these PLA surveys.

NAVFAC Northwest did not issue a survey to evaluate if a PLA would be appropriate for this project.

In contrast, NAVFAC directly contacted ABC National and the merit shop contracting community for feedback on possible PLA mandates on other federal projects.

For example, after soliciting comments from ABC National and the contracting community in October 2010 concerning NAVFAC’s potential use of PLAs on billions of dollars worth of construction for Guam base realignment, NAVFAC elected not to mandate a PLA.

NAVFAC’s PLA Mandate Creates Inefficiencies
NAVFAC Northwest’s Dec. 13, 2011 amendment number 0008 to the solicitation instructs qualified contractors invited by NAVFAC to bid on Phase 2 of the solicitation (the short-listed contractors) to negotiate a PLA with specific trade unions and submit an executed PLA within 10 days of the contract award. These firms made it to Phase 2 of the solicitation under the impression there would be no PLA mandate.

NAVFAC supplied short-listed contractors with a pre-drafted PLA containing the terms and conditions NAVFAC already developed with specified construction trade unions and councils.

NAVFAC asked contractors to submit feedback on the pre-drafted PLA by Dec. 28.

ABC advised short-listed contractors about the numerous problems with NAVFAC’s mandatory PLA language and cumbersome and inefficient procurement approach. Some of these concerns were submitted by short-listed contractors to NAVFAC.

NAVFAC is expected to review and share these comments with unions and provide contractors with a final PLA at a later date that they must use as the starting point in PLA negotiations.

Proposals from short-listed contractors are due Feb. 13. It is unclear when NAVFAC will award the contract, although it should be in early 2012.

Under this inefficient procurement process, it is possible for contractors to not know the terms and conditions of the executed PLA – which impacts labor costs and final bid costs – before submitting a final price proposal to NAVFAC.  If PLA negotiations are stalled by unions or NAVFAC does not supply the final terms of the pre-drafted PLA in time, contractors cannot submit an accurate price proposal.

In addition, the project could be delayed pending the outcome of the post-award PLA negotiations.  The project may have to be re-bid if the final agreement cannot be executed.

In 2010, a General Services Administration (GSA) project, the GSA Headquarters at 1800 F Street in Washington, D.C., suffered delays as a result of labor unions refusing to agree to the terms of a PLA the contractor presented and signed with other labor unions. Congressional testimony from GSA deputy administrator Susan Brita described this scenario, which also required the contractor to present an executed PLA within 10 days post-award.

Even regulatory comments  filed by Frank Dean, NAVFAC’s labor advisor, on the FAR Council’s proposed rule implementing Executive Order 13502 identify concerns with this inefficient post-award PLA procurement approach.

PLA Will Harm Local Nonunion Workforce and Small Businesses
From 2001 to 2009, when President George W. Bush’s Executive Orders 13202 and 13208 prohibited PLA mandates on federal and federally assisted construction projects, Washington’s skilled nonunion tradespeople constructed large-scale projects for the Navy, Army and other federal agencies absent a PLA mandate with no reported problems.

This union-favoring PLA is sure to serve as a barrier to new jobs for 84 percent of Washington’s private construction workforce and 86.9 percent of the U.S. construction workforce that has chosen not to join a construction labor union.

The Washington State Building and Construction Trades Council, AFL-CIO announced “construction labor on this project will be provided by Olympic Peninsula Building Trades and the Northwest Regional Council of the National Construction Alliance II (NWNCA),” and it is unlikely this project’s PLA will allow nonunion contractors to use few, if any, of the existing skilled nonunion employees they have invested training and resources in while employed at the company.

As this letter to the editor in the Kitsap Sun points out, if the PLA even allows nonunion construction workers to build this project, they will have to join a union and/or pay union dues and pay into union pension plans that they will never benefit from unless they join a union and meet vesting requirements.  The PLA results in a huge financial windfall for Big Labors coffers.

Favoritism for unionized construction workers is especially despicable because the construction industry is plagued by high unemployment in Washington and across the country. The number of construction workers employed in Washington in July 2011 was as sparse as the number of workers employed in Washington in August of 1997. Meanwhile, the U.S. construction industry is suffering from an unemployment rate of 16 percent as of December 2011.

Don’t nonunion construction workers deserve a fair shot at new federal construction jobs?

Provisions in a PLA that force contractors to swap their existing workforce out for unfamiliar union labor is problematic for short-listed contractors that self-perform specific trade work, as well as subcontractors performing specialty trades.

This PLA mandate will make it difficult for short-listed contractors to meet NAVFAC’s small and disadvantaged business subcontracting targets because small businesses are traditionally not unionized:

Because building trades union membership is traditionally not diverse, a PLA mandate also may make it difficult for short-listed contractors to meet minority and women hiring goals set by the FAR’s Equal Opportunity and the Affirmative Action Compliance Requirements for Construction regulations required in federal construction contracts.

The PLA mandate’s inefficient procurement approach and pro-union language will discourage competition and increase costs to remaining competitors. Studies indicate PLA projects subject to prevailing wage laws increase construction costs between 12 percent and 18 percent compared to similar projects subject to prevailing wage laws not subject to government-mandated PLAs.

ABC Committed to Fair and Open Competition
ABC is opposed to government-mandated PLAs because these agreements typically restrict competition, increase costs, create delays, discriminate against nonunion employees and place merit shop contractors at a significant competitive disadvantage. Typical government-mandated PLAs are nothing more than anti-competitive schemes that end open and fair bidding on taxpayer-funded projects.

ABC has led industry opposition against federal PLA mandates, utilizing a variety of educational, public relations, grassroots, political and legal strategies to ensure fair and open competition on taxpayer-funded construction projects.

ABC has helped ABC member contractors file bid protests against federal PLA mandates during the Obama administration, which resulted in the removal of PLA mandates on a Veterans Affairs medical center in Pittsburgh, an Army Corps of Engineers project in Camden, N.J., a General Services Administration project in Washington, D.C., and a Department of Labor Job Corps Center in Manchester, N.H.

ABC National also has responded to and helped ABC members participate in more than 50 PLA surveys issued by federal agencies to determine the feasibility of a PLA on a federal project.

ABC supports the Government Neutrality in Contracting Act (H.R. 735/S.119), cosponsored by 31 Senators and 172 Representatives and supported by a diverse industry coalition. The measure would eliminate waste and favoritism in federal contracting by prohibiting federal agencies and recipients of federal assistance from mandating PLAs, yet it would allow contractors to voluntarily enter into PLAs. This bill is good for taxpayers and the principles of free enterprise.

In 2011, House committees held two hearings in Washington and three field hearings on the negative consequences of federal PLA mandates and the benefits of H.R. 735.

Additional hearings and votes are expected in 2012.

Stay current on government-mandated PLAs and “Like” us on Facebook at www.facebook.com/TheTruthAboutPLAs and visit TheTruthAboutPLAs.com often.

To help fight this PLA and other federal PLA mandates, please contact Ben Brubeck or TheTruthAboutPLAs.com here.

Bidding is open only to certified small business contractors willing to agree to the terms and conditions of the DOL’s union-friendly PLA. The DOL issued a sources sought notice Sept. 23, 2011 (DOL111RI20431), to determine if there were enough interested and qualified small business general contractors to designate it a 100 percent small business set-aside.

Controversy concerning the union-favoring PLA mandate will heighten once the project’s solicitation containing the PLA is issued the second week of January.

Update Jan. 30: The DOL solicitation, issued  Jan. 30, 2012, can be read here. Here is the actual PLA and here are the numerous union collective bargaining agreements (CBAs) contractors will have to agree to in addition to the PLA for the life of the project. Bids are due March 21, 2012.

Update Feb. 6: Sen. Kelly Ayotte (R-NH) issued a press release and sent a letter to the White House asking for President Obama to repeal his pro-PLA Executive Order 13502 and remove the DOL’s PLA mandate on this project. The Union Leader has a piece on the controversy here.

Dec. 23, the New Hampshire Union Leader ran a holiday themed op-ed by ABC New Hampshire/Vermont President Mark Holden. It summarizes the long-running controversy surrounding the DOL’s PLA mandate on the Job Corps Center and the absurdity of this gift to Big Labor at the expense of New Hampshire businesses and workers.

Executive Order 13502: Obama's Gift to Big Labor. Image courtesy of The Boston Globe, "Obama kowtows to labor unions," 10/07/09.

By Mark Holden

It may be beginning to look a lot like Christmas, but many New Hampshire construction workers and businesses are expecting a lump of coal in their stockings from the federal government.

In this case, the Grinch is the U.S. Department of Labor (DOL), which is planning to build a $35 million Job Corps Center in Manchester with federal tax dollars.  Unfortunately, the DOL is poised to ensure the project is built by out-of-state union labor and union contractors, despite the fact that more than 91 percent of New Hampshire’s construction workforce chooses not to belong to a construction labor union.

The DOL is mandating a union-favoring project labor agreement (PLA) on the Job Corps Center.  Created by unions as a way to circumvent the free market and regain lost market share, a PLA typically requires contractors to replace most or all of their existing workforce with unfamiliar union labor, follow archaic and inefficient union work rules, and pay into underfunded union pension and benefit plans if they want to win contracts.

New Hampshire’s skilled nonunion workers are forced to accept unwanted union representation and pay union dues, yet they will forfeit benefits paid into union pension and benefit plans during the life of the project unless they join a union and become vested in these plans. 

Such humbuggery has the effect of discouraging competition from New Hampshire’s qualified contractors and their local employees.

Reduced competition coupled with costly union red tape needlessly increases construction costs.  Studies by the Beacon Hill Institute in Boston indicate projects subject to prevailing wage laws built with government mandated PLAs are 12 percent and 18 percent more expensive compared to similar non-PLA projects subject to government-determined wage and benefit rates. The research comes as no surprise to anyone familiar with Boston’s Big Dig boondoggle, which was built with a PLA mandate.

In short, government-mandated PLAs are a gift to Big Labor at the expense of taxpayers and New Hampshire construction businesses and tradespeople.

If this controversy has the disappointing familiarity of a re-gifted fruitcake, it is because the DOL tried to mandate a PLA on the Job Corps Center in 2009.  In the face of such blatant discrimination, a brave contractor, North Branch Construction of Concord, filed a bid protest against the DOL’s anti-competitive PLA. Instead of proceeding with PLA-free construction subject to fair and open competition – which would result in badly needed local job creation – the DOL canceled the project.

Not to be deterred, the DOL retained the services of a consultant, Hill International, to prepare a report justifying and defending a PLA requirement. The report cost taxpayers $130,000. It was the second PLA report Hill International prepared for the DOL. The first report, which trumpeted the alleged benefits of PLAs on federal construction projects, cost taxpayers $300,000. The latest report is so shoddy and full of pro-PLA bias, taxpayers will wish it came with a gift receipt.

The DOL and the federal government’s discriminatory policy is the product of an executive order signed by President Obama just a few days after moving into the White House in 2009. The measure encourages federal agencies to mandate PLAs on a case-by-case basis on large federal construction projects exceeding $25 million in total cost.

It is no coincidence it steers federal contracts to one of the White House’s and Democrat party’s biggest political patrons: Big Labor.

So while the Grinch has come to town, stealing Christmas hopes and dreams away from The Granite State’s workers and their families, will any of the GOP presidential candidates take a stand against deceptive payback to Big Labor prior to New Hampshire’s Jan. 10 primary?  

All nonunion contractors and their employees want this holiday season is the ability to fairly compete.  Some members of Congress, such as New Hampshire Sen. Ayotte, Rep. Frank Guinta and Rep. Charlie Bass, have stood up for free enterprise and New Hampshire families in support of legislation (S. 119 and H.R. 735) to “preserve open competition and federal government neutrality toward the labor relations of federal government contractors on federal and federally funded construction projects.”

That’s exactly what should happen. The federal government should preserve the right of everyone to fairly compete for jobs, not just a select few.

Congress should pass this legislation or a new president should undo President Obama’s destructive policy catering to well-connected special interests. It’s the only surefire way to keep the federal Grinch at bay.

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Mark Holden is the president of the New Hampshire/Vermont Chapter of the Associated Builders and Contractors. To learn more about anti-competitive PLAs, visit www.TheTruthAboutPLAs.com.

Well said, Mark.

To date, The Government Neutrality in Contracting Act (H.R. 735/S.119) has 170 cosponsors in the House, nearly 30 cosponsors in the Senate, and broad support from industry groups.

Concerned taxpayers can write Congress here to help keep the federal Grinch at bay this holiday season.

Image Courtesy of the Columbus Dispatch

TheTruthAboutPLAs.com readers may recall previous media coverage of the Job Corps Center project, which most recently includes a New Hampshire Union Leader article (“Jobs Corps Center project going forward,” 8/20/11) and related press release from U.S. Sen. Kelly Ayotte (“Senator Ayotte Expresses Concerns about Labor Requirement for Manchester Job Corps Project,” 8/19/11) in response to the DOL’s August announcement they will proceed with construction and mandate a PLA:

MANCHESTER — A project labor agreement, which delayed construction of New Hampshire’s Job Corps Center for 21 months, will be a project requirement according to the U.S. Department of Labor.

The department announced last week it would move forward with the long-delayed $35 million project off Dunbarton Road. A New Hampshire contractor challenged the requirements two years ago, delaying project construction.

U.S. Sen. Kelly Ayotte said in a press release Friday she is concerned that the PLA favors out-of-state unionized contractors over local firms and could drive up the project’s cost.

“The administration’s plan to keep in place the PLA represents yet another senseless government mandate that could put New Hampshire businesses and workers at a competitive disadvantage. A PLA effectively gives unionized firms an unfair advantage over non-union firms, making it less likely that New Hampshire contractors would be able to bid successfully for the work,” said Ayotte. “This is a New Hampshire project, and local contractors should be able to compete for it on a level playing field.”

Project labor agreements usually require companies working on a construction project to provide health care, retirement benefits and apprenticeship programs. And PLAs usually include work rules, safety provisions, dispute resolution and a no-strike clause.

Contractors balked when the Job Corps agreement called for experience with three or more PLAs. North Branch Construction of Concord filed a protest with the Government Accountability Office and that brought the bidding process to a halt.

Manchester Mayor Ted Gatsas said Friday his concern with the original PLA was the prior PLA experience. That meant no New Hampshire firms could qualify to do the work, because no firm had experience with three PLAs, he said.

“My understanding was that was not going to be in there,” Gatsas said. “It should be New Hampshire people doing this project.”

Gatsas said he has not seen the documentation, but noted “This is a project we need to move forward. It’s 300 construction jobs to the city and 135 permanent jobs.”

In response to a request from Ayotte asking to clarify the PLA issue, the DOL wrote that in keeping with a January 2009 executive order by President Obama, construction projects over $25 million should use PLAs. A PLA is appropriate for the $35 million Job Corps project, the department wrote.

Mark Holden, president of the Associated Builders and Contractors of New Hampshire/Vermont said: “It is important for all New Hampshire taxpayers to understand the impact of this decision. Requiring non-union contractors to execute union agreements for the project, agreeing to replace their employees with union workers, pay into union funds and abide by union work rules and conditions creates unknown costs that are impossible to plan and bid for and are conditions that make it non-competitive for non-union contractors.

“To suggest that a non-union contractor’s ability to compete would not be impacted by this PLA is untrue. A PLA requirement will have a chilling impact on competition from non-union contractors and will dramatically inflate the construction cost of this taxpayer funded project. At a time when a challenging economy is dependent on real solutions for job creation and accountability for every taxpayer dollar, this decision is unbelievable.”

Joe Casey, president of the New Hampshire Building and Construction Trades Council, said Ayotte and Holden are making a lot of assumptions about the PLA and what it will require. “It all depends on what the project labor agreement is and I have yet to see one for this project,” Casey said. “This is a debate we should have once the Department of Labor releases the project (documents).”

He noted the DOL hired an independent group, Hill International, to determine if a PLA is feasible for the project, but he had not seen the study. “We should all take a step back and see the actual contents of the project labor agreement,” Casey said. “The provisions could benefit New Hampshire contractors and New Hampshire workers.”

He noted the last major federal construction project in New Hampshire was the Berlin prison and the contractors and almost all of the workers came from out-of-state. That prison has yet to open because the federal government has not released operation money.

“That is the type of thing the project labor agreement addresses,” Casey said. “If federal money is coming to the state of New Hampshire, why shouldn’t it stay in New Hampshire with the New Hampshire workforce. At the end of the day, that is what we are looking for.”

Dick Anagnost, a Manchester developer who is chairman of the Job Corps Task Force, told the New Hampshire Union Leader last week that the project will take about 18 months.

He said the Labor Department should take a month to prepare bid specifications. Another month will be needed to solicit bids, and a final month will be needed to review them.

A Job Corps Center will help train economically disadvantaged youth to enter high-growth industries. New Hampshire is among the last states to have a Job Corps Center. The state began efforts 10 years ago to land a center of its own.

The DOL’s 2009 PLA mandate was the first PLA mandated by a federal agency following President Obama’s Feb. 6, 2009 Executive Order 13502, which encourages federal agencies to mandate PLAs on a case-by-case basis on federal construction projects exceeding $25 million in total cost. The DOL’s 2009 PLA mandate was especially unusual because it was issued prior to the Federal Acquisition Regulatory (FAR) Council final rule (pdf), issued April 13, 2010, and effective May 13, 2010, implementing Executive Order 13502 into federal procurement regulations (learn more here).

Similar attempts by federal agencies to mandate PLAs before and after the effective date of the FAR final rule were foiled by ABC contractor-led bid protests (learn more here).

However, Executive Order 13502 and the related FAR rule remain controversial White House gifts to Big Labor likely to increase federal construction costs, reduce economy and efficiency in federal contracting, reduce competition from quality nonunion contractors and their skilled employees, and deny taxpayers the accountability they deserve from government.

TheTruthAboutPLAs.com will be following the DOL Job Corps Center project closely in the coming weeks.

ABC members and construction professionals are encouraged to respond to the PLA surveys. Tell NAVFAC’s Washington District that government-mandated PLAs injure competition, increase costs, and will not advance the economy and efficiency in government contracting.

Below are links to the PLA surveys for the four projects along with the deadline and contact information for each.

• Construction of an Aircraft Prototype Facility, Patuxent River, Md. Responses are due to Dorothea Holley, dorothea.holley@navy.mil, and to Carolyn Sulla, carolyn.sulla@navy.mil, no later than 2:00 p.m. EST, Nov. 14. ABC National’s 11/14 response.
• Construction of an Ambulatory Care Center, Camp Springs, Md. Responses are due to Dorothea Holley, dorothea.holley@navy.mil, and to Carolyn Sulla, carolyn.sulla@navy.mil, no later than 2:00 p.m. EST, Nov. 14. ABC National’s 11/14 response.
• Construction of a Chemical Facility Naval Surface Warfare Center, Indian Head, Md. Responses are due to Stephen Astwood, stephen.astwood@navy.mil, and Carolyn Sulla, carolyn.sulla@navy.mil, by 2:00 p.m. EST, Nov. 14. ABC National’s 11/14 response.
• Construction of the Marine Corps Research Center, Quantico, Va. Responses are due to Dervin Diggs, dervin.diggs@navy.mil, and Allie Hernandez, altanelle.e.hernande@navy.mil, no later than 2:00 p.m. EST, Nov. 21. ABC National’s 11/21 response.

NAVFAC and other federal agencies like the USACE and Veterans Affairs have issued PLA surveys as a result of President Obama’s pro-PLA Executive Order 13502 and federal regulations implementing the discriminatory and costly order. The order and regulations encourage federal agencies to mandate anti-competitive and costly PLAs on a case-by-case basis on federal construction projects exceeding $25 million in total cost.

In 2011 and 2010, a handful of NAVFAC districts across the country issued sources sought notices requesting information about the potential use of PLAs on large NAVFAC construction projects. ABC National has taken the opportunity to respond to surveys as they are issued and encourages the merit shop contracting community to do the same.

It is important to express opposition to government-mandated PLAs today before they are mandated or encouraged on future NAVFAC projects, as well as other federal and non-federal state and local projects in your community by other government officials if anti-competitive and costly PLA mandates take root in your community.

The survey results are an important source of information used to determine whether a PLA is appropriate for federal NAVFAC projects.

Here are ABC National’s notable responses to NAVFAC PLA surveys:

• Letter to NAVFAC Southeast concerning construction of the $25 million to $100 million B603 Saufley Field, Naval Air Station in Pensacola, Fla. (6/10/11) (ABC Newsline article)
• Letter to NAVFAC concerning use of PLAs on Guam base realignment. (10/5/10) (ABC Newsline article)

For contractors, taxpayers and construction professionals unfamiliar with the problems with federal PLAs and regulations implementing President Obama’s pro-PLA Executive Order 13502, please review the previous letters sent by ABC National to the NAVFAC, which may be helpful information for contractors to review before responding to these NAVFAC PLA surveys.

If you need help responding, please contact us and we can provide you with some helpful tools and information.

Responding with accurate and timely information is critical and effective at removing federal agency PLA mandates. For example, in 2010, the USACE removed government-mandated PLAs from the Army Reserve Center in Los Alamitos, Calif. and the Patrick Air Force Base in Brevard County, Fla. after a strong grassroots response and survey participation from the contracting community. The USACE removed a PLA mandate on the Armed Forces Reserve Center in Camden, N.J. following a legal challenge and robust grassroots response from the construction stakeholders. The

Thanks for taking the time to respond to these surveys. Your responses will help maintain an open and competitive environment that will allow all qualified contractors to fairly compete for contracts to build the best possible construction projects at the best possible price.

Additional helpful links:

• PLA Final Rule Takes Effect Today: Let the Waste, Cronyism and Discrimination Begin
• Project Labor Agreement Basics: What is a PLA?
• Get the Truth About PLAs
• ABC National’s Main Comments to the FAR Council’s Proposed Rule
• ABC Member Survey/Comment Supplement to Main Comments
• ABC National Comments Specifically Addressing the Regulatory Flexibility Act