How much does a government-mandated project labor agreement (PLA) add to a $52.3 million construction project funded by the American Recovery and Reinvestment Act of 2009 (ARRA) in Washington, D.C.? At least $3.3 million.
That’s the cost of a change order the U.S. General Services Administration (GSA) paid to a federal contractor to ensure renovations to the Lafayette Federal Building in Washington, D.C., are conducted subject to a union-favoring PLA, according to a column by Mark Hemingway in The Washington Examiner (“Mark Hemingway: Mandatory PLAs put tax dollars into union coffers,” Dec. 5).
What is a Government-Mandated PLA?
Anti-competitive government-mandated PLAs are special interest schemes that force contractors to promise that most or all of their workforce building a PLA project must be hired through a union hiring hall or be card-carrying (and unfamiliar) union members. In some PLAs, merit shop contractors are permitted to use a limited number of existing nonunion employees, but they are forced to join a union and/or pay union dues and fees in order to work on a project funded by their tax dollars. It is a raw deal for an industry workforce already facing 18.8 percent unemployment according to November Bureau of Labor Statistics numbers.
In addition, PLAs saddle contractors with archaic and inefficient union work rules that drive up construction costs.
Finally, PLAs typically force merit employers to pay employee benefits into union-managed funds, but employees do not see the benefits of the employer contributions unless they join a union and become vested in these plans.
An October 2009 report by Dr. John R. McGowan, “The Discriminatory Impact of Union Fringe Benefit Requirements on Nonunion Workers Under Government-Mandated Project Labor Agreements,” found that nonunion employees of merit contractors forced to work under government-mandated PLAs suffer a reduction in their take-home pay that is conservatively estimated at 20 percent.
Merit contractors that offer their own benefits, including health and pension plans, often continue to contribute to both existing programs and union programs under a PLA.
The McGowan report found that nonunion contractors are forced to pay in excess of 25 percent in benefits costs above and beyond existing prevailing wage laws as a result of this “double payment” attached to PLAs. These requiements make it impossible for nonunion contractors to compete and results in increased construction costs. It is also unfair to employees who have earned this money for a secure retirement.
PLAs Increase Costs and Reduce Competition
The costly and discriminatory terms and provisions in typical PLAs discourage competition from non-union contractors and increase the cost of construction. Numerous studies have found that government-mandated PLAs typically increase the cost of construction between 12 percent and 18 percent.
In the case of the Lafayette Building, the $3.3 million change order is the added cost the contractor charged the federal government for agreeing to the provisions in this PLA. (Remember that the general contractor for this project was awarded the contract for $52.3 million without a PLA). The added $3.3 million isn’t the result of increased material costs, revised blueprints or a more aggressive completion deadline. The contract was awarded to the same company with the same proposal, and the only variable is the PLA. There is no denying the PLA is the culprit of the increased costs on the Lafayette Building.
PLAs Are Political Payoffs to Big Labor Bosses
The Lafayette Building PLA is a clear example of government waste and crony contracting. In return for political dollars and support from Big Labor that helped get President Obama elected to the White House, President Obama signed Executive Order 13502, just 16 days after he took office. The order repealed a prior executive order in effect since 2001 that prohibited government-mandated PLAs and ensured fair and open competition on federal and federally-assisted construction projects.
The Obama order also encourages federal agencies to require PLAs on federal construction projects exceeding $25 million in total cost. The White House rabidly promotes the use of PLAs through Vice President Joe Biden’s Middle Class Task Force in consort with political appointees posted in federal agencies and members of Congress beholden to union special interests. More government-mandated PLAs mean more money flowing back into Big Labor’s coffers. This money later supports pro-PLA politicians through campaign donations “voluntarily” deducted from the paychecks of rank and file union members by Big Labor bosses.
Government-mandated PLAs feed the endless cycle of corruption in the federal government (here is an obvious example) and in local and state governments across the country (for starters, evidence here, here and here).
The administration justifies the use of PLAs because they allegedly produce “economy and efficiency” in government contracting. The problem is that there is no credible evidence to support this claim. PLAs are an earmark for Big Labor bosses masked as a solution to a problem that doesn’t exist in federal contracting.
TheTruthAboutPLAs.com readers know that the Federal Acquisition Regulatory (FAR) Council’s regulations implementing this gift to Big Labor went live May 13, 2010, but this didn’t stop the GSA from prematurely trying to mandate a PLA on the Lafayette project about a year ago. However, on Feb. 4, 2010, the GSA canceled the Lafayette Building solicitation in response to a bid protest contractors submitted with the Government Accountability Office (GAO) against the GSA’s PLA requirement.
The GSA issued a new solicitation March 24, 2010 that removed the PLA mandate and permitted contractors to “voluntarily” submit bids with a PLA, without a PLA, or both:
“Offerors will be invited to submit a proposal subject to PLA requirements (a PLA offer), a proposal not subject to PLA requirements, or both. If a PLA proposal is accepted by GSA, the awardee shall be required to execute a Project labor Agreement (PLA) with one or more appropriate labor organizations for the term of the resulting contract.”
However, in the new technical evaluation section of contractors submitting a bid (Section M), the GSA awarded a 10 percent preference to contractors that voluntarily submitted a bid subject to a PLA. In some procurement scenarios and competitive construction markets, this needless bonus for bids subject to PLAs will result in a de facto PLA mandate.
GSA’s New Procurement Policy Gives Illegal Preference to PLA Proposals
This same frivolous PLA preference used on the Lafayette project is being used on all GSA projects exceeding $25 million, according to this April 30, 2010 GSA Public Buildings Service Procurement Instructional Bulletin 10-04.
The GSA’s White House-driven PLA preference is a clear violation of the Competition in Contracting Act (CICA) — a federal statute requiring open competition on federal contracts — and will be subject to a legal challenge.
The GSA has applied their unwarranted PLA preference on a number of contracts in the District of Columbia, despite evidence indicating that PLAs make little sense in the local construction market. The policy has resulted in the award of about $237.38 million worth of GSA contracts (1800 F Street, the Lafayette Building, and the Adaptive Reuse contract for the DHS HQ at St. Elizabeth’s Hospital) to contractors that submitted a “voluntary” PLA bid versus an estimated $82 million worth of contracts awarded to contractors who submitted non-PLA bids (Security Perimeter, Demolition, and Phase I Tunnel contract for DHS HQ at St. Elizabeth’s Hospital). That’s quite a stimulus for Big Labor.
Congresswoman Eleanor Holmes Norton (D-DC) praised the GSA’s District of Columbia PLAs in an October 7 press release riddled with factual errors. Norton, who is no stranger to pay to play politics as evidenced by this shocking audio recording, claims these PLAs will ensure employment of D.C. residents and help produce a quality project. Of course, Norton’s endorsement of PLAs is motivated by politics and support and campaign cash from Big Labor rather than facts and sound public policy: About 12 percent of D.C.’s construction workforce belongs to a labor union and a review of PLAs in the District demonstrates a record of poor performance. Is this really a win for the District’s nonunion workforce and taxpayers footing the bill for added PLA costs? Norton’s PLA promotion drew sharp criticism from the National Black Chamber of Commerce President Harry Alford:
The Congressional Black Caucus continues this selling out of Black workers. Just this month Congresswoman Eleanor Holmes Norton (D – DC) put out a press release praising the Project Labor Agreement for the new headquarters of Homeland Security (a boondoggle). A Project Labor Agreement means union only labor on the project or union only rules for anyone there. That locks out 98% of the Black workforce and she is shouting for joy about this. The very next day the Washington Post reported that Black unemployment in DC was actually increasing. This can certainly be credited with the betrayal of elected officials like Congresswoman Norton. They get it but just don’t care about those defenseless underrepresented citizens in their district that do not get a decent chance to make a living. Clearly, Congresswoman Norton works for the enemy. She is too intelligent to be ignorant. She knows the deal (blocking Black employment) and plays along with it as their constituents can’t organize worthy opponents to defeat her and the others at the next election. We are still waiting on the change.
Solutions to End PLA Crony Contracting?
The answer to the PLA problem is primarily a political solution.
However, stakeholders can support the cost of educational campaigns and legal efforts led by ABC and TheTruthAboutPLAs.com to limit PLAs on a case-by-case basis as well as lawsuits against the GSA’s PLA preference and PLA mandates by other federal agencies. These cases may present an opportunity to challenge President Obama’s illegal and discriminatory Executive Order 13502.
Citizens can also write or call their elected officials and encourage them to support the Government Neutrality in Contracting Act (S. 90/H.R. 983) now or when it is reintroduced in the 112th Congress. This legislation will prohibit PLAs on federal and federally-assisted construction projects, and ensure fairness and accountability on important public works projects.
Hemingway’s full column is after the jump:
Mark Hemingway: Mandatory PLAs put tax dollars into union coffers
By: Mark Hemingway 12/05/10 8:05 PM
Unemployment rose to 9.8 percent Friday, prompting taxpayers to ask yet again, “Hey, what happened with all those jobs that were supposed to be created with that $814 billion stimulus bill?”
There are a lot of reasons why the Obama stimulus failed, but perhaps the bill’s most insidious problem is that it was used to pay off special interests, especially the labor unions. In fact, this is happening right now on the White House doorstep.
On Sept. 14, the General Services Administration awarded a $52.3 million stimulus-funded contract to renovate the Lafayette Building at 811 Vermont Ave. NW — right across Lafayette Square from the White House.
The building houses a number of government entities, including the Department of Veterans Affairs. The contract went to the builder who offered the bid with the best overall score under federal procurement regulations and the lowest price.
But then, as usually happens in Washington, things got political. On the same day the contract was awarded, the GSA ordered the winning contractor, Grunley Construction, to use a “Project Labor Agreement (PLA),” thus forcing the firm to use more expensive unionized labor.
Even in the Washington region, union labor only makes up 12 percent of the construction industry, so the price of forcing the PLA on Grunley added $3.3 million to the cost of the Lafayette renovation, courtesy of the taxpayer.
Unless you’re in the construction business, you’ve probably never heard of PLAs. Accepting a PLA locks a company into an iron-clad construction contract that virtually guarantees cost overruns. Typically, construction projects with PLAs cost 12 to 18 percent more than those without them.
Nationally, unions only make up about 14 percent of the construction industry. There’s no shortage of competition. So why would anyone hire union labor knowing it will make their project cost more?
The answer is political pressure. One of President Obama’s first actions was to rescind an executive order signed by his predecessor in 2001 that protected taxpayers from PLAs on federally funded construction projects of $25 million or more.
Why? Because unions collectively spent $400 million to elect Obama and a Democratic majority in Congress in 2008. They spent hundreds of millions more this year trying to keep Democrats in power on Capitol Hill.
Thanks to the stimulus bill, the federal government now has $140 billion in new federally assisted construction projects to oversee. And Obama is doing his best to insure all of them use PLAs.
Instead of fair bidding on the open market, GSA awards extra points to bidders who agree in advance to use PLAs. While it’s not an explicit requirement, the message to government contractors is clear – accept a PLA or be at a huge disadvantage to rivals who do.
If PLAs were added to all stimulus-funded construction projects, it would add $17 billion to $25 billion to their total costs, money that would be better spent creating new private-sector jobs or reducing the federal deficit.
Meanwhile, the White House has the temerity to suggest its actions are good economic policy. The Annual Report of the White House Middle Class Task Force released earlier this year had an entire section inexplicably touting PLAs. Nowhere does the report acknowledge the added costs PLAs impose on taxpayers.
If you can figure out how awarding billions of tax dollars to a powerful special interest that represents a small slice of a single employment sector helps the middle class, you might be smart enough to work for the White House economic team.
The rest of us are left wondering why those 814 billion stimulus dollars didn’t create jobs.
Mark Hemingway is an editorial page staff writer for The Examiner. He can be reached at [email protected].
Read more at the Washington Examiner: http://washingtonexaminer.com/opinion/columnists/2010/12/mark-hemingway-mandatory-plas-put-tax-dollars-union-coffers#ixzz17INEGJlZ