The Truth About Project Labor Agreements

Word is getting out about the Obama administration’s $3.3 million gift to Big Labor.  It appears Christmas came early for Washington, D.C. union bosses, when the U.S. General Services Administration (GSA) paid a federal contractor at least $3.3 million to execute a change order adding a wasteful and discriminatory project labor agreement (PLA) to a $52.3 million renovation funded by the 2009 Stimulus bill.

TheTruthAboutPLAs.com’s own Ben Brubeck penned the following column (“Millions of taxpayer dollars wasted on stimulus for Big Labor“), published by The Daily Caller on December 9:

Millions of taxpayer dollars wasted on stimulus for Big Labor

6:31 PM 12/09/2010

Congratulations, Mr. and Mrs. Taxpayer, you just gave Big Labor a $3.3 million tip. Not for exceptional service, mind you. Just for wearing the union label.

As part of the flood of taxpayer cash approved by the American Recovery and Reinvestment Act (ARRA) of 2009, the federal government has about $140 billion worth of federal and federally assisted construction projects to fund and oversee. Most of us would expect that such projects would be awarded to qualified bidders based on whichever contractor submits a bid delivering to taxpayers the best work at the best price.

But that has not been the case under the Obama administration.

After receiving major political dollars and support from Big Labor, President Obama signed Executive Order 13502 just 16 days after taking office. The order repealed a prior executive order in effect since 2001 that kept the government accountable by prohibiting government-mandated project labor agreements (PLAs) on at least $147.1 billion worth of federal construction projects. It had also ensured fair and open competition on hundreds of billions of dollars of important federally assisted schools, jails, bridges, roads and sewers in communities across the United States.

Now, taxpayers are stuck with an executive order that encourages federal agencies, whenever possible, to require a union-favoring PLA on projects exceeding $25 million in total cost.

Think of a government-mandated PLA as a stimulus package for Big Labor at the expense of taxpayers and the construction industry’s non-union workforce. PLA schemes discourage competition from qualified non-union contractors and ensure that most or all the workforce building the federal project will be union members hired through union hiring halls. Such favoritism steers lucrative federal contracts to unionized contractors and is especially appalling since just 14.5 percent of the U.S. private construction workforce belongs to a labor union.

Unfortunately, this favoritism is going to hit taxpayers in the wallet, as evidenced by the results of a PLA forced on a U.S. General Services Administration (GSA) project in the District of Columbia. On Sept. 14, the GSA awarded a $52.3 million ARRA-funded contract to renovate the Lafayette Building at 811 Vermont Ave NW (which houses, among other entities, the U.S. Department of Veterans Affairs) to a contractor offering a non-PLA bid with the best overall experience at the best price.

But then something shocking happened. Politics trumped responsible governing. On the very same day, the GSA ordered the contractor to make it a union-favoring PLA project. The tab for this change to a special interest handout, in a city where union labor makes up a minority of the industry at just 12 percent, was a cool $3.3 million.

That’s taxpayer money being taken from the U.S. Treasury to benefit Big Labor, one of President Obama’s biggest political supporters. While this rigged public bidding system funneled an additional $3.3 million of taxpayer funds to reward special interests — only a drop in the bucket when you consider all federal construction spending — imagine the skyrocketing costs if more federal agencies are nudged by the White House into using costly federal PLAs. Numerous studies have found that government-mandated PLAs can typically increase construction costs up to 18 percent. Can America really afford four schools, jails and hospitals for the price of five?

The Lafayette Building PLA upcharge is a clear example of government waste and crony contracting and taxpayers should be wary of similar PLA schemes in their communities. Contractors have already identified costly and anti-competitive PLA preferences in GSA solicitations for large federal buildings in Hampton, Va. and in Miramar, Fla. In the last year, PLA mandates on federal projects in New Hampshire, New Jersey, Pennsylvania and Washington, D.C. were defeated by legal challenges from members of the federal contracting community concerned about guaranteeing quality and results for hard-working taxpayers.

It is time for Congress, led by new leaders elected on the promise to restore fiscal responsibility in Washington, to hold the White House and federal agencies accountable and end wasteful and corrupt special interest PLA handouts in federal contracting.

Ben Brubeck is the director of labor and federal procurement for Associated Builders and Contractors (ABC). Learn more about government-mandated PLAs at www.TheTruthAboutPLAs.com.

Taxpayers are still waiting for Big Labor to at least say ‘You’re welcome.’

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 a 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.

Learn more about the debacle surrounding the Lafayatte Federal Building’s renovation in our earlier posts.

Also, visit our earlier posts to learn more about President Obama’s attempt to drive public construction to Big Labor at the expense of American taxpayers.