The Truth About Project Labor Agreements

It is no secret that U.S. Department of Labor (DOL) Secretary Hilda Solis supports anti-competitive and costly project labor agreements (PLAs) on federal construction projects.

On Nov. 9, 2010, Solis made these remarks in support of PLAs and President Obama’s pro-PLA Executive Order 13502 to the United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada at the Hollywood, Fla. Westin Diplomat Hotel and Resort:

…And while we are working with businesses to ensure employee safety, we are also working with them to strongly consider Project Labor Agreements.

We are glad to be working with you on the President’s Executive Order encouraging the use of PLA’s

We know PLA’s can contribute to economy and efficiency of large construction projects.

We are very interested in learning from your experience in the private sector and how we can get some of those advantages in federal construction.

We know that PLA’s are a win-win: good for workers and for contractors.

At a Feb. 2, 2010 House Education and Labor Committee hearing, Solis again confirmed her support of PLAs in response to a question by Rep. Glenn ‘GT’ Thompson (R-Pa.).

In September 2009, Solis addressed the AFL-CIO Convention in Pittsburgh and reaffirmed her support of these special interest schemes that will kill jobs, unfairly help unionized contractors win federal contracts and harm American taxpayers, workers and businesses:

“Not only do the President and I support Employee Free Choice Act, we are strong supporters of Project Labor Agreements.

We know that they are a win-win: good for workers and for contractors Project Labor Agreements improve the economy and efficiency of construction projects.

President Obama issued an executive order encouraging the use of PLA’s for large federally funded projects, and we have been working very hard at DOL with Vice President Biden and the Middle Class Task Force to ensure that Project Labor Agreements are really encouraged and used.

Project Labor Agreements help make Good Jobs!”

Taxpayers, qualified merit shop contractors and their skilled employees should be dismayed by this statement because it signals a possible expansion of President Obama’s Executive Order 13502, which encourages federal agencies to require discriminatory and anti-competitive PLAs on federal construction projects exceeding $25 million in total cost.

Section 7 of Executive Order 13502 instructs the director of the Office of Management and Budget, in consultation with Labor Secretary Solis and other White House officials, to make “recommendations about whether the broader use of project labor agreements, with respect to both construction projects undertaken under federal contracts and construction projects receiving federal financial assistance, would help to promote the economical, efficient, and timely completion of such projects.”

Expansion of Executive Order 13502 could translate into requirements or incentives for state and local governments to use PLAs on construction projects receiving federal assistance. (Federally-assisted projects are local, state or private construction projects that receive a federal grant, loan, tax-break or other form of financial assistance.)

Section 7 PLA Expansion’s Impact on Communities
States and local communities should take interest in the expansion of Executive Order 13502 via Section 7. Accepting federal assistance for construction projects with strings attached that favor Big Labor could bust strained budgets. Will states and local communities swallow the typical 18 percent PLA premium? Can they afford to build four schools, hospitals, bridges and courthouses for the price of five?

Section 7 PLA Expansion Is a Job Killer
PLAs on federally-assisted projects also will cost jobs. The impact of higher costs resulting from PLAs on finite state and local budgets translates into fewer construction projects. Less building means fewer jobs in an industry that faced an unemployment rate of 27.2 percent in February of this year – the highest level recorded since the federal government began making the data available in 1976.

Between August 2006 and August 2010, employment in the construction industry dropped 27.4 percent, as 2.1 million construction workers lost their jobs. To put the construction industry’s job losses in perspective, the 5.6 million people working in construction today is barely higher than the 5.59 million people who were working in construction in August 1996.

With the U.S. construction unemployment rate at 17.3 percent—nearly twice the overall national unemployment rate in all industries—expensive and job-killing government-mandated PLAs make little sense.

In addition, will local and state governments understand that PLAs give preference to out-of-state union members ahead of local and qualified nonunion employees? PLA projects in areas with low union density and market share often fall victim to this boneheaded fiscal policy, as local nonunion employees continue to rely on state unemployment and entitlement services and not pay into the local tax base while PLAs give preference to out-of-state union members obtaining work through local union hiring halls.

Finally, it is discriminatory and shortsighted public policy for states and communities to tell skilled nonunion labor they cannot work on these projects unless they agree to pay union dues and lose employer contributions to union benefit and pension plans for the life of a PLA project–typical negative consequences of PLAs on nonunion labor and key reasons why nonunion contractors rarely compete to work on PLA projects.

Big Labor’s Infamous Hotel Boondoggle
It is bizarre that Solis’ recent remarks in support of PLAs were given at a construction industry union conference held at the Hollywood, Fla. Westin Diplomat Hotel and Resort. The union-only construction of the Westin Diplomat Hotel is infamous for suffering from embarrassing delays and cost overruns that wiped out money invested by a construction union pension fund.

The Westin Diplomat Hotel was funded in part by an $800 million investment from the National Federation of Plumbers, Pipefitters and Journeymen’s pension fund–an amount that was nearly 20 percent of the pension fund’s total assets at the time.

The hotel opened in February 2001, almost 18 months late and at a cost almost $400 million above projections after two years of construction.

The pension fund fired the original developer and pension plan trustees were sued by the DOL under auspices of the Employee Retirement Income Security Act (ERISA), a conflict-of-interest statute designed to prevent the trustees of a multiemployer national pension fund from engaging in self-serving actions and to ensure fund investments are prudent.

According to reporting by Engineering News Record, the suit eventually led to an Aug. 2, 2004, settlement with the DOL where trustees Maddaloni and Patchell paid an $11-million civil fine. The settlement allowed union leaders Maddaloni and Patchell to keep their union posts, but they had to resign as trustees of seven pension funds.

The Westin Diplomat hotel is a curious place to be touting the benefits of anti-competitive and costly union-favoring PLAs as this boondoggle was a black eye for Big Labor and it should serve as an ominous warning to communities around the country about the problems with union-only construction and PLAs, should Section 7 of Executive Order 13502 expand and apply to federally-assisted projects.