The Truth About Project Labor Agreements

There is an interesting piece in today’s Washington Times that examines how poorly performing union pension plans are at the heart of Big Labor’s support for health care reform and push for government-mandated project labor agreements (PLAs) on federal and federally-funded construction projects  (“Unions Want Washington’s Help With Pension Funds,” 3/25/10).

Nonunion workers and private companies could be forced into absorbing the financial liabilities of underfunded union pension plans, thanks to pending health care mandates and an executive order that could be finalized this year, policy analysts and trade group representatives have concluded.

Even as unions continue to market themselves to new members on the basis of generous pension programs, government figures show these plans are performing poorly in comparison with retirement packages that operate beyond the orbit of organized labor.

In addition, unions are pushing the Obama administration on project labor agreements (PLAs), which, among other things, will give their pension plans new sources of outside funding – nonunion workers on government contracts worth more than $25 million.

Here is what the article says about PLAs.

Next up after health care could be final approval of an executive order that calls for multi-employer, multi-union PLAs to be used when federal construction projects exceed $25 million. PLAs stipulate that projects be awarded to contractors and subcontractors who agree to recognize unions as representing their employees during that particular job.

Although nonunion contractors are permitted to bid on PLA projects, the reality is that the projects are awarded almost exclusively to unionized contractors, critics point out. Only 15.6 percent of the nation’s private construction work force is unionized, Labor Department statistics show. This means PLAs could be used to discriminate against the more than eight out of 10 construction workers who are not part of a union.

Moreover, PLAs typically require contractors to participate in multi-employer union pension plans. This arrangement puts nonunion contractors at a financial disadvantage because they must pay for the union plan and for their existing company plan, the Associated Builders and Contractors points out in its analysis of the Obama order.

Individual workers also could lose out because they must surrender their nonunion plans and become vested with the union before receiving any benefits, the Associated Builders and Contractors argues.

Another disadvantage to private companies concerns the “withdrawal liabilities” they may be forced to cover as pensions erode, John R. McGowan, an accounting professor with St. Louis University, has warned in a study that examines the impact of PLAs.

Employers that are tied in with collectively bargained agreements are obligated to cover costs for underfunded union pensions when other contractors drop out, according to the study.

Tommy Vietor, the assistant White House press secretary who handles labor issues, did not respond to requests for comment on the PLA issue and the status of Mr. Becker.

The Federal Acquisition Regulation Council has not issued a final ruling on the PLA order, which may account for why it has received scant attention. The council is responsible for issuing rules that officially enshrine executive orders into the federal procurement process. The public comment period for the PLA rule was closed Sept. 24.

Meanwhile, the General Services Administration has listed 10 projects across the country that could be eligible for PLAs, including three in Washington, D.C.

“We are collectively amazed that there has been no movement on this rule yet,” said Brett McMahon, an Associated Builders and Contractors representative who is also vice president of Miller & Long, a Maryland-based concrete construction company. “But because the executive order was crafted so poorly, it has raised a lot of legal questions.”

Read the entire article here.

The Hudson Institute study by Diana Furchtgott-Roth and economist Andrew Brown,“Comparing Union-Sponsored and Private Pension Plans,” is helpful in understanding the connection between the health of union pension plans and various handouts policies Big Labor is pushing in Washington, D.C. that are also a solution to their pension and declining membership problems.

“Our report reveals why organized labor is so eager to gain new members through proposed legislation like the Employee Free Choice Act – they need to help bankroll these failing pension plans with new dues-paying members,” said Ms. Furchtgott-Roth.

What are your thoughts on Big Labor’s manipulation of the government to pass laws and rules that increase union membership and bailout union pension plans?