The Truth About Project Labor Agreements

Last night (September 2), the board of directors of the Sacramento Municipal Utility District (SMUD) had an unexpected and unscheduled hour-long inquiry into its contracting practices, including district mandates for contractors to sign project labor agreements (PLAs) with unions in order to work on two specific large projects.  We learned that the elected board of this publicly-owned utility allows staff to make key decisions regarding contracting practices without input or scrutiny from the board or the ratepayers of this district.

First, some brief historical background on PLAs at the Sacramento Municipal Utility District:

In the mid-1990s, prime contractors signed PLAs with unions for three small SMUD power plants (Carson Ice-Gen Plant, Proctor & Gamble Company Generation Plant, and Campbell Soup Cogen).  I’ve heard people cite a variety of reasons why these PLAs were signed, but ABC was not active in fighting these PLAs and has little background documentation.

At its November 21, 2002 meeting, the SMUD board voted 6-1 to require contractors to sign a PLA to build the Cosumnes Power Plant.  Earlier in 2002, California Unions for Reliable Energy (CURE) had become an intervenor in the California Energy Commission permitting process for this power plant.  Some SMUD officials and board members acknowledged at the time that CURE would delay permits to build the power plant unless contractors were forced to sign a union agreement.

The PLA was tainted in February 2005, when SMUD removed the unionized general contractor from the project because of delays, poor workmanship, and a shortage of workers in the pipefitter trade.  Unions had promised in Sections 1.7 and 1.8 of the PLA “to ensure that a sufficient supply of skilled craft workers are available at the Project, that all construction work and related work performed on the Project shall proceed continuously, without interruption, in a safe and efficient manner…and to secure optimum productivity.”  (Empty promises, as usual – obviously the unions had no ability to ensure these conditions.)

SMUD then bid out two large wind projects in the mid-2000s – Solano Wind Phase I and Phase II – under fair and open competition without PLA requirements.  But in 2010, when unions were desperate for work, bid specifications for the Solano Wind Phase III project and the $80-100 million East Campus Operations Center (Corporation Yard) included PLA requirements.

ABC and other supporters of fair and open competition had an opportunity to speak against the PLAs when the SMUD management decided to reject all four bids for the East Campus Operations Center and rebid the job.  At the September 2 board meeting, several association representatives and contractors asked the SMUD board during the general public comment period to eliminate the PLA requirement in bid specifications when the project was rebid.

We challenged the SMUD board to ascertain if PLAs cut competition and increase costs by taking the opportunity to bid the project with a PLA and without a PLA.  (During the same public comment period, three unhappy subcontractors that were part of the winning bid explained to board members how their companies lost time, money, and bidding opportunities as a result of the rejection of all bids.)

Although state law prohibited the board from taking action on an item brought up during public comment, the board asked SMUD staff to elaborate on their decisions to reject all bids and require contractors to use a PLA.  Staff reported that bid protests were becoming routine on public works in Northern California with contractors desperate for work.  All three losing bidders filed bid protests with staff against the winning bidder (Turner Construction), but one bid protest (from McCarthy Construction) contained among its 13 charges one claim that legal counsel had determined was valid and would result in “substantial litigation risk.”

Staff also revealed publicly that the SMUD general manager has full authority to decide when the agency should require its contractors to sign PLAs (a condition I do not believe is allowed by any other California local government).  In other words, the elected SMUD board members do not have to make public votes on PLAs and thus can evade direct accountability to SMUD ratepayers for the financial consequences of PLAs.

What ABC is seeking now is public accountability for the SMUD board members.  Why does the board give staff full authority to negotiate and approve Project Labor Agreements?  How can the board allow staff to reject all bids for an $80 million project without any public discussion or scrutiny of the decision?  Is SMUD being open to its ratepayers about how it conducts business as a publicly-owned utility?

Here is one solution to the problem:

On March 22, 2007, the governor of Missouri signed Senate Bill 339 into law, which states that a state or political subdivision considering a PLA shall publish a document titled “Intent to Enter Into a Union Project Labor Agreement” that establishes a rational basis upon which the state or political subdivision bases its intent to require a union-only project labor agreement for the project.  In addition, the law states that “No fewer than fourteen days but not more than thirty days following publication of the notice of a public hearing, the state or political subdivision shall conduct a public hearing on whether to proceed with its intent to require a union-only project labor agreement.” (See Missouri Revised Statutes: State Purchasing and Printing: Section 34.216.)

The board of the Sacramento Municipal Utility District should adopt this policy, promptly.