The Truth About Project Labor Agreements

Two recent magazine columns have asserted that President Obama’s pro-project labor agreement (PLA) Executive Order 13502 is incongruous with the administration’s recent re-focus on policy solutions that will create jobs.  January government data indicates that the construction industry is suffering from 24.7 percent unemployment. But critics argue that anti-competitive PLAs increase construction costs and result in fewer construction projects built for the same amount of limited federal construction spending.

The efficient use of government construction dollars could put more Americans back to work. But government-mandated PLAs do not maximize job creation stimulated by government spending. In addition, PLAs ensure that jobs are created for Big Labor, who compose just 14.5 percent of the U.S. private construction workforce and are one of Congressional Democrats and the White House’s largest political contributors. 

Don Nickles, a U.S. senator for 24 years, criticized PLAs in the U.S. News and World Report (“Obama’s Mixed Economic Signals Won’t Create Jobs,” 2/12/10).

Much has been made of the president’s intention to shift his message to “jobs.” But the mixed signals contained within the administration proposals are doing nothing to bolster employer confidence.

…Second, the strings should be clipped from the money Congress approved last year for infrastructure and other investments. The projects flowing from those funds were hamstrung by limiting them to bids by unionized companies, eliminating over 80 percent of the workforce from consideration. Requiring Davis-Bacon and project labor agreements is a nice payback for unions but wastes billions of dollars and costs countless jobs.

While it is clear Nickels understands the problems with job-killing and wasteful PLAs, it is important to note that not all federal construction projects will be subject to a government-mandated PLA. According to Executive Order 13502, whether or not a PLA is mandated will be decided by each federal agency’s procurement official. To date, there have been few attempts to require PLAs (all of them unsuccessful), partially because PLAs are bad public policy and may violate federal competitive bidding laws and partially because the FAR Council has not issued a final rule implementing Executive Order 13502 into federal procurement regulations. While the number of future PLA projects is undetermined, Executive Order 13502 certainly encourages a policy that will kills jobs, which is obviously a step in the wrong direction. 

Robert Guests’s Lexington column in The Economist (“Labour Pains,” 2/11/10) attacks the added costs of PLAs and union giveaways.

But his [President Obama’s] biggest favour has been green, foldable and borrowed. For example, he encourages the use of “Project Labour Agreements” on big federal construction projects, whereby contractors must recruit through a union hiring hall. Such agreements inflate costs by 12-18%, according to David Tuerck of Suffolk University, and were banned under Mr Bush. Even where PLAs are not in force, federal contractors are obliged to pay “prevailing” wages. That actually means something close to the union rates, which is nice for the workers in question but means that taxpayers get fewer roads and schools for their money. 

TheTruthAboutPLAs.com calls for White House and Congress to wisely spend federal construction dollars in a manner that will maximize job creation instead of catering to special interests via government-mandated PLAs.