The Truth About Project Labor Agreements

California’s Public CEO, a publication dedicated to the education of local government officials and employees about current events in public service, examined the ongoing debate about project labor agreements (PLAs) in California public contracting (“Debate Over Union Requirement Rages Project-by-Project,” 1/6).

The article provides a variety of anecdotes supporting and opposing common arguments about government-mandated PLAs.  We highlighted a few below but the entire article is worth a careful review.

Union contractors admit PLAs increase costs.

Another recent project that was considered for a PLA was the Central Marin Sanitation Agency Wet Weather Improvement Project. In 2007, the board unanimously voted against the requirement after getting feedback from pre-qualified contractors that they would have to raise their prices.

In the process of preparing an agreement, staff surveyed 20 pre-qualified contractors to find out what impact the requirement would have on their decision to bid and found a majority predicted higher prices and lower competition. Eleven (more than 50 percent) said PLAs increase costs, nine said they reduce the pool of bidders and three said they would not bid on the project if it included a PLA.

This was not a case of non-union shops complaining about being locked out. Fourteen of the companies were union contractors and one was variable. That means half of the union contractors agreed that a PLA would increase costs.

A contractor expains why PLAs reduce competition, increase costs and harm nonunion employees.

“PLAs include hidden costs that reduce flexibility and cause inefficiencies,” explained Ken Kreischer, CFO of Santa Rosa-based Western Water Constructors, a merit shop contractor that ultimately won the work with the best bid. Kreischer said his company would not have bid if a PLA had been a requirement.

Kreischer called PLAs a bad deal for his employees. If they work under a PLA, either the contractor or the employee has to pay into union benefit plans in addition to their existing private pension plan even though they may never receive the union benefits if they don’t work enough years to qualify. Employees also have to pay union dues for the privilege of limiting the types of jobs they can do and hours they can work.

At the dawn of 2010, Marin’s Wet Weather Improvement Project is being built on deadline and on budget with no strike issues. “This is a textbook example of how a project should be bid,” Kreischer said. “They asked the people who should know – the actual contractors who were going to bid on the project – and found out it would increase costs.”

“How can you fulfill your fiduciary role and enter into an agreement that will cost more? You can’t.” Kreischer said, answering his own question.

Give it a read and tell us what you think.