An Ailing Process Indeed

1 January 25, 2010  Federal Construction, State & Local Construction, Uncategorized

Wasteful and discriminatory project labor agreements (PLAs) continue to garner public attention in Indiana, as Wishard Health Services prepares to go forward with a PLA on approximately $750 million in hospital renovations at their Marion County facility.

The latest PLA-related story titled, “An Ailing Process,” comes courtesy of the January 24 Indianapolis Star.

Here are the highlights:

At the heart of the issue is the decades-old use of project labor agreements that require contractors on most major projects to negotiate with union officials, recognize union benefits and generally abide by collective-bargaining agreements.

Gaylor has been opposing PLAs for years as president of Associated Builders and Contractors, an Indiana trade group representing nonunion firms.

He is raising his voice a little louder this year as officials prepare to award contracts for the $754 million Wishard Memorial Hospital complex in Indianapolis under such an agreement.
Gaylor and other nonunion contractors argue that the agreements limit competition and drive up construction costs.

As evidence, Gaylor points to the fact that earlier this month only five contractors bid for the contract on the $30 million parking garage planned for Wishard.

For Gaylor, the fact that only a handful of contractors bid during a recession that is starving the construction industry for work shows a bid process gone awry.

“By limiting competition, you don’t get the competitive bids,” Gaylor contends.

Ten or 12 bidders could drive down the price, Gaylor argues, but the bid process thwarts competition and, he claims, costs taxpayers millions of dollars on expensive projects.

The story goes on to mention that some “experts” say that no data exists to support J.R. Gaylor’s contention that PLAs increase construction costs.

Really?

If someone asked for data to prove the inflationary impact of PLAs, I would first direct them to a June 2009 study conducted by consulting firm Rider Levett Bucknall for the U.S. Department of Veterans Affairs (VA) Office of Construction and Facilities Management found that PLAs would likely increase construction costs by as much as 9 percent in construction markets in which the VA is planning to build hospitals.

Additionally, the Beacon Hill Institute at Suffolk University researched the impact of PLAs on school construction in Massachusetts, Connecticut and New York from 2003-2006 and found that PLAs increased construction costs by as much as 18 percent.  In Connecticut, this costs taxpayers an extra $30 per square foot in final construction expenses.  In other words, PLAs on school construction in Connecticut costs taxpayers an extra textbook worth of waste for every square foot of construction.

There are numerous other studies that show the inflationary impact of PLAs available at www.abc.org/plastudies.

Don’t believe the numbers?  Here is some anecdotal data.

Indianapolis has some recent history with PLAs.  Construction of Lucas Oil Stadium, home of the Super Bowl-bound Indianapolis Colts, blew out its budget by over $75 million and the Indianapolis Public Library construction project exceeded its budget by $50 million.  The library project was also plagued by problems and took two extra years to build.

The data is out there.  PLAs are nothing more than special interest handouts that deny taxpayers they results they deserve.  Hoosiers deserve better than construction defects and cost overruns.

In the meantime, we hope Marion County Health and Hospital Corporation – owners of the Wishard hospital – seriously reconsider becoming associated with the next PLA failure in Indiana.

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