The Truth About Project Labor Agreements

The Napa Valley Register ran an Op-Ed by Carole Bionda, vice-president of ABC member Nova Group in Napa, CA, that is critical of president Obama’s pro-project labor agreement (PLA) Executive Order 13502 and other special interest giveaways to Big Labor that will kill jobs and increase wasteful federal spending (“Stopping the blows to construction industry,” 2/12/10).

Of course, I am in favor of fair wages and benefits for employees. But I am adamantly opposed to government discrimination against a group of qualified businesses and their employees who have exercised their rights not to join a union because they are not affiliated with Big Labor, which is exactly what this order does.

PLAs put nonunion contractors – the majority of the construction workforce – at a huge disadvantage when competing against union contractors. Under a PLA, nonunion contractors will be forced to pay health and pension benefits twice — once to existing plans employees are already enrolled in and once to the union benefit plans. Craft or hard hat employees lose, too, as they will not receive employer contributions unless they decide to join a union and become vested in the union plans. Also, craft employees may be forced to pay union dues under the PLA, which means that more money comes out of their paychecks — all for the right to work on projects funded by their tax dollars. These typical PLA provisions are windfalls for Big Labor and increase costs to non-union contractors.

Taxpayers are forced to absorb a PLA cost premium of around 18 percent, according to recent research. Driving up costs and building for schools, roads and bridges for the price of five or more is bad public policy. And fewer construction projects results in fewer construction jobs.

Some in Congress understand that PLAs aren’t good for the economy and have introduced legislation (S. 90 and H.R. 983) to preserve open competition on federal projects and to ensure that the government stays neutral toward qualified businesses and employees who want to compete, regardless of their union membership.

Bionda raises concerns about Section 7 of Executive Order 13502.

I am deeply concerned that Obama’s costly and discriminatory order will creep into state and local construction activity. One provision in the order allows the government to look for ways to expand the use of PLAs onto construction projects receiving federal financial assistance.

Bionda sites a government-mandated PLA on the 50 United Nations Project in San Francisco that is required by the U.S. General Service Adminstration’s Procurement Instructional Bulletin 09-02 that will give Big Labor a big advantage when competing for federal construction contracts associated with this project. (For more coverage on the GSA projects, visit here and here).

San Francisco is scheduled to have an upcoming federal project managed by the federal General Services Administration — 50 United Nations Plaza in downtown San Francisco — to which a PLA will likely be attached if the order gets approved. Local contractors will be forced to choose whether they can afford the financial risk to compete for this job. If history serves, lessened competition typically results in higher costs.

Hathaway Dinwiddie’s (the construction manager for this project) prequalification document states that contractor is not qualified to work on this project unless it agrees to abide by a PLA (see page 7, Section 1-7).

 There will be a Project Labor Agreement (PLA) on this project. If awarded any trade scope(s), will your firm agree to and abide by the terms and conditions of the PLA as prepared by the GSA? (Yes= 0 pts, No=NQ).

However, when the Hathaway Dinwiddie was asked by an interested subcontractor for a copy of the PLA, presumably to detemine the terms and conditions of a PLA (and possibly whether or not a contractor could even operate under a PLA as well as estimate labor costs), HD could not produce the PLA.

Question: On page 7, Section I-7, a Project Labor Agreement (“PLA”) is referenced. Is the PLA available for review?

Answer: A PLA has not been prepared to date and is not available at this time.

This is a textbook example of how PLAs cut competition from nonunion contractors.  Politics – not sound public policy – dictate whether a PLA will be mandated.  The project follows the typical “competitive” bidding process without disclosing the terms and conditions of a PLA. Nonunion contractors, not knowing the terms and conditions of a contract that will impact labor costs and shape the rules of how a firm can deliver a project on-time and on-budget to their customer, are kept in the dark until the bid process is either over or too far along in the process for nonunion contractors to evaluate the PLA and make the necessary adjustments.

Would you take the risk of signing a contract without reading it?

Nonunion contractors can’t take that risk and they shouldn’t have to. This is one of the ways how a PLA project becomes a de-facto union-only job.

It’s also a prime example of bad public policy that benefits special interests ahead of taxpayer interests.