An Op-Ed critical of President Obama’s pro-project labor agreement (PLA) Executive Order 13502 by David G. Tuerck, chairman and professor of economics and executive director of the Beacon Hill Institute (BHI) at Suffolk University, ran in today’s Boston Globe (“Obama Kowtows to Labor Unions,” 10/7).
Professor Tuerck, author of a new BHI study called “Project Labor Agreements on Federal Construction Projects: A Costly Solution in Search of a Problem,” makes a strong case that PLAs and President Obama’s Executive Order 13502 are special interest handouts to Big Labor and are solutions to “a contracting process that was never broken.”
LAST YEAR as a presidential candidate, Barack Obama told the Building Trades National Legislative Conference that “we need to make sure the government uses project labor agreements to encourage completion of projects on time and on budget.’’ He complained that project labor agreements had been banned by the Bush administration.
PLAs require construction firms to follow union work rules and to hire their workers through a union hiring hall. Workers hired under PLAs have to pay union dues whether they belong to the union or not.
Candidate Obama’s audience knew perfectly well that his speech had more to do with their wallets than with any high-minded concern for the public interest. The real purpose of PLAs is to discourage nonunion contractors from bidding on public projects. It’s a matter of the 16 percent of construction workers who belong to unions protecting their jobs and perks from the other 84 percent.
The unions claim that PLAs are necessary in order to avoid labor disputes and to assure labor “peace’’ during the course of a construction project. But where does the threat to labor peace come from, if not the unions themselves? When the unions say they want a PLA, they are making the builder an offer he can’t refuse.
PLAs can be seen as one leg of a three-legged stool that supports the union monopoly over public construction projects. The second leg is the prevailing wage law, which compels contractors to pay what amounts to the union wage. The third leg is a government willing to subordinate the interests of the taxpayers to a powerful lobby.
The effect of the union monopoly over public construction is to raise construction costs. The Beacon Hill Institute found that PLAs have added 12 to 18 percent to school construction costs in Massachusetts and Connecticut.
Obama has made good on his campaign promise by lifting the ban on PLAs imposed by President Bush. The Obama administration will permit PLAs on federal construction projects costing $25 million or more.
It turns out, however, that Obama is fixing a contracting process that was never broken. If PLAs are really effective for avoiding labor disputes, then there should have been dozens of such disputes over the course of the PLA-free Bush administration. To test this hypothesis, the Institute conducted a study aimed at identifying labor disputes that took place under the Bush administration and that affected projects costing $25 million or more.
We inspected documents obtained from federal agencies that were asked to report any disputes for which they had records. We searched Internet sources, talked to contractors, and examined surveys of contractors who worked on federal projects during this period.
How many disputes attributable to PLAs did we find? None. We did find one labor dispute, but it took place for reasons unrelated to the absence of a PLA and involved only two days delay at a cost of $16,000. And that was out of almost $60 billion in projects. Did we miss any disputes? Maybe, but it seems unlikely. The President’s Office and Management and Budget has oversight for all federal procurement. The OMB has every incentive to reveal any dispute that makes the president’s point for him. Yet, when queried, it reported none.
While we couldn’t find any projects initiated under the Bush administration that were delayed or that ran over budget because of the absence of a PLA, it is easy to find projects that suffered from delays or cost overruns despite the presence of a PLA. The granddaddy of all of these is the Big Dig, notorious for its delays, cost overruns, and shoddy workmanship. An Iowa Events Center has a similar history. The City of Fall River had to cancel its plans to build schools under a PLA when the result was to attract only a few bidders and when the bids submitted were way over budget.
Obama’s kowtow to the construction unions is the same politics-as-usual against which he campaigned last year. The voters expected and deserved better.