Government Project Labor Agreement Mandates Harm Small Businesses

1 June 2, 2010  Federal Construction, Uncategorized

Last week the federal government celebrated National Small Business Week

Over at, the Workforce Fairness Institute’s Katie Packer wrote about government-mandated project labor agreements (PLAs) when describing how “the Obama Administration’s support for proposals that result in forced unionization could lead to the extinction of these very same businesses” (“Obama Administration’s Small Business Policies Are Nothing To Cheer About,” 5/28).

While President Obama caters to Big Labor’s demands for political paybacks, small businesses are just trying to survive day by day in this extremely challenging economy. The investment by union bosses of hundreds of millions of dollars in getting the President elected has allowed them unprecedented access in government resulting in policies that increase costs and burdens on employers. [snip]

In the year and a half President Obama has been in office, he has bent over backwards to meet the demands of Big Labor at the expense of small businesses, one recent example being Executive Order 13502, which encourages the use of project labor agreements (PLAs) on big federal construction projects. These union-favoring agreements effectively end fair and open competition, instead creating situations where it’s too cost-prohibitive for non-union contractors to compete. Under PLAs, non-union shops are discriminated against when it comes to competing for public jobs paid for with their own tax dollars.

This order is so concerning to non-union shops – which comprise the majority of the construction industry – because losing out on project work means employees will lose their jobs and businesses will struggle to stay open. The reality is that it’s too costly for non-union contractors to even compete for these jobs. PLAs require that non-union contractors pay employee benefits twice – once to their employees and once to the unions that oversee the project. In addition, non-union contractors would have to pay into under-funded and mismanaged union pension plans and their employees wouldn’t see the benefits of these plans unless they joined the union.

Paying into these failing plans would very likely expose a company to pension liabilities, potentially prohibiting non-union contractors from qualifying for construction bonds for future projects or even bankrupting them.

Packer writes about the connection between The Employee Free Choice Act (EFCA), PLAs and failing multi-employer “union” pension plans:

Failing union pension plans are at the heart of why the unions want paybacks despite the fact that the liability would be assumed by small businesses. These plans are less than fully-funded and, in particular, the rank-and-file plans are much worse off than the union officer plans. These plans had been failing long before the economic crisis hit largely due to union boss abuse and mismanagement and Big Labor will do anything to bail them out.

Key point:

The livelihood of small businesses is at stake and yet the Obama Administration wants to cater to the interests of power and money-hungry labor bosses. The federal government can applaud employers’ achievements all it wants during Small Business Week, but the Obama Administration’s policies and favoritism toward Big Labor speak much louder and will cause irreparable harm to the very ones they cheer this week.

Government-mandated PLAs don’t make sense for small businesses in the construction industry.

The Small Business Administration states that the construction industry has one of the highest concentrations of small business participation (more than 86 percent) compared to other industries (Source: The Small Business Economy: A Report To The President, U.S. Small Business Administration, Office of Advocacy (2009), at 8). Because most construction industry small businesses are nonunion, they are put at a large disadvantage as a result of PLAs. Therefore, PLA mandates do nothing to help small businesses and actually counteract some of the existing pro-small business contracting programs and set-asides in the procurement process put in place by Congress.  It is a clear example of bad politics trumping sound public policy.

On August 13, 2009, ABC filed comments with Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council in response to the proposed rule to implement Executive Order 13502, which encourages federal agencies to require PLAs on federal construction projects via the Federal Aquisition Regulation (FAR) Council “FAR Case 2009-005, Use of Project Labor Agreements for Federal Construction Projects.

The comments repeatedly addressed the impact of the rule and PLAs on small businesses in the construction industry. Read the comments here and here.

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One Response to Government Project Labor Agreement Mandates Harm Small Businesses

Government Project Labor Agreement Mandates Harm Small Businesses | Streamlined Life June 2, 2010 at 2:51 pm

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