The Truth About Project Labor Agreements

On April 6, 2011, the full Metro Washington Airport Authority (MWAA) board passed a resolution [1] 11-2 requiring an estimated $2.5 billion to $3.5 billion worth of construction for Phase 2 of the Dulles Corridor Metrorail Project to be subject to a project labor agreement (PLA).[2]

When mandated by government agencies, these agreements are very controversial in the construction industry because they are special interest schemes that end open, fair and competitive bidding on public works projects.

Construction trade unions lobby elected officials in government agencies that are allies of Big Labor to place PLAs on as many government projects as possible because it ensures that union members will build these PLA projects. Union organizations and Big Labor bosses receive a significant financial windfall from these arrangements. In turn, construction trade unions contribute to the campaigns of pro-PLA politicians. It perpetuates more government-mandated PLAs and more campaign donations to politicians willing to engage in crony contracting.

Corruption: This is How Big Labor Leverages Politics to Secure Anti-Competitive and Costly Government-Mandated Project Labor Agreements

This cycle of corruption and special interest favoritism has no place in government contracting and it comes at the expense of taxpayers and jobs for skilled local construction tradespeople that do not belong to a union.

Anti-competitive PLAs drive up the cost of construction by discouraging competition from merit shop contractors (commonly known as nonunion contractors as they are not signatory to union agreements and they typically hire union and nonunion employees and work alongside/hire union subcontractors based on merit) and their skilled employees from building projects paid for by their own tax dollars.

What Is a Project Labor Agreement?
Typical PLAs are pre-hire contracts that require projects to be awarded only to contractors and subcontractors that agree to:

• recognize unions as the representatives of their employees on that job;
• use the union hiring hall to obtain workers;
• obtain apprentices exclusively from union apprenticeship programs;
• pay into underfunded and mismanaged union benefit plans; and
• obey costly, restrictive and inefficient union work rules.

Merit shop contractors are not prevented from bidding on PLA projects, but they must agree to follow the terms and conditions of a PLA in order to win a contract. While some provisions of a PLA are already standard practice in the construction industry, typical PLA provisions put merit shop contractors at a competitive disadvantage by forcing them to adopt inefficient union work rules and subjecting them to needless costs, which makes it very difficult for merit shop contractors to win PLA contracts against union/pro-PLA contractors.

How Will a PLA Impact Costs and Competition for Phase 2?
Government-mandated PLAs discourage (if not eliminate) competition from qualified merit shop contractors that can offer to MWAA and taxpayers the best possible construction project at the best possible price.[3]

A government-mandated PLA on this project is especially problematic in Virginia because only 3.9 percent of the state’s private construction workforce belongs to a union.[4] (Only 13.1 percent of the U.S. private construction workforce belongs to a union.[5])

While it is unclear how much the PLA will add to the Dulles Phase 2 project at this time (because the final agreement has not been drafted, and because costs vary from project to project and market to market), studies have found that PLAs typically increase the cost of construction between 12 percent and 18 percent compared to similar non-PLA projects.[6]

Dulles Transit Partners Built Phase 1 with a Voluntary PLA
Dulles Transit Partners (DTP) (Bechtel and URS) completed Phase 1 of the Metrorail Project under a voluntary PLA entered into by DTP after they already had been awarded the contract under a competitive bidding process.[7] In addition, merit shop contractors were exempted from being subject to the agreement.[8]

This is a significant detail, as the Phase 2 PLA is being mandated by MWAA on prime contractors prior to contract award. Prime contractors and subcontractors interested in competing for these contracts likely will be forced to agree to a PLA (it is unclear if the PLA will have already been negotiated by MWAA) in MWAA’s request for proposal (RFP), which is how contractors get the information needed to submit bids to win Phase 2 contracts.

About six prime contractors are interested in competing for Phase 2 contracts. Three of the six prime contractors and their preferred subcontractors are opposed to government-mandated PLAs and might be discouraged by the PLA mandate, depending on the details of the agreement and how it is utilized in the procurement process. Cutting competition from experienced and qualified contractors and subcontractors is not wise. A PLA will give three of the interested prime contractors, including Phase 1 winner DTP, a significant advantage in the competitive bidding process, as the PLA may effectively cut competition from the remaining prime contractors opposed to PLAs.

If contractors believe PLAs are beneficial, they should voluntarily enter into them after they have been awarded the project. MWAA should not be part of this decision.

It is unclear if the Phase 2 PLA will exempt merit shop subcontractors, as it did in Phase 1. Considerable evidence suggests there will be no exemption for merit shop subcontractors, as union special interests serving on the MWAA board will benefit from a PLA extending to all merit shop subcontractors.

MWAA Member Dennis Martire Is Engaged in Self-Dealing
MWAA member Dennis Martire is chairman of MWAA’s Planning and Construction Committee. He also is employed as the vice president and Mid-Atlantic regional manager of the Laborers’ International Union of North America (LiUNA), a labor union.[9] Martire’s employer, LiUNA, and its local affiliates, will receive a financial windfall from the Phase 2 PLA that could easily exceed millions of dollars.[10]

Typical PLAs require that contractors pay union wage and benefit rates contained in union collective bargaining agreements (CBAs). In these CBAs, a contractor is required to deduct a certain amount of each trade employee’s hourly wage/benefit payments and distribute it to each respective trades’ local union hall and/or state/regional union umbrella groups and their related pension, benefit and various slush funds.

Every laborer dispatched to contractors to perform work on Phase 2 of the project from LiUNA hiring halls will send money to Martire’s employer. Likewise, every tradesman dispatched from other trade union hiring halls will do the same thing (i.e., the International Brotherhood of Electrical Workers union will receive money from all Phase 2 electricians, the Sheet Metal Workers Union will receive money from sheet metal workers, etc.). All unions and their local affiliates will make money off of this PLA. Unions typically support Democrats, which is a key reason why MWAA members appointed by Democrats or affiliated with the party supported this PLA resolution.

Martire has been an advocate for a government-mandated PLA on Phase 2, authoring this paper, [11] voting in support of the PLA, speaking at MWAA Dulles Corridor committee meetings in support of the PLA and helping MWAA member Michael Curto introduce the PLA resolution.

At the very least, Martire should have excused himself from engaging in this decision, as this self-dealing undermines the public trust given to MWAA, is a common-sense disregard for integrity and is a direct violation of the code of ethical responsibilities MWAA board members must follow.[12]

Wilson Bridge Redux?
Stakeholders concerned about the anti-competitive and costly impact of the government-mandated PLA on Phase 2 of the Dulles Corridor Metrorail project should look at the results and controversy surrounding the Wilson Bridge in the Washington, D.C., area almost a decade ago.  The $2.4 billion project to replace the Wilson Bridge between suburban Maryland and Virginia was temporarily subjected to a union-favoring PLA requirement by former Maryland Gov. Parris Glendening in 2000. After the PLA was imposed, only one bidder responded to the RFP for Phase 1 of the project, at a bid price more than $370 million above the state’s engineering estimates—a 78 percent cost overrun.^[13] After President Bush issued Executive Order 13202 prohibiting PLAs on federally assisted projects like this one,^[14] the mega-contract for the Wilson Bridge project was rebid into smaller contracts without a government-mandated PLA. This time, multiple bids were received and the winning bids came in significantly below the engineering estimates.^[15] The megaproject ultimately will be completed on time and on budget by union and merit shop contractors, with no government-mandated PLAs.^[16]

What’s Next?
MWAA should rescind the resolution mandating a PLA on Phase 2 of the project. Doing so will encourage full and fair competition from local and qualified prime contractors and subcontractors and reduce construction costs.

Abandoning this special interest PLA scheme will give local construction professionals harmed by the PLA – specifically, 96 percent of Virginia’s construction workforce that does not belong to a union – a fair shot at working on projects funded by local and state taxes and tolls. Such fairness would be a welcome act of good government as the construction industry faces a 20 percent unemployment rate.[17]

If you would like more information about the PLA on Phase 2 of the project, please send us a note here.

Update @ 4:30 on 4/13/11:

For more details on the Phase 2 project, check out an article from The Washington Post on MWAA’s decision to adopt the costlier below ground construction option for Phase 2 (“Dulles Airport to get underground metro station,” 4/6/11).

This Washington Post editorial is critical of the costly decision (“Underground but underwater for Dulles metro station,” 04/08/11).

Washing Times article on local officials opposing increased project costs (“Pricey Dulles Rail Station Upsets County Lawmakers, “4/13/11).

Here is an interesting article on MWAA’s controversial vote  supporting a below ground construction option for Phase 2 of the project near Dulles Airport that is expect to needlessly increase construction costs an additional $325 million: http://www.tollroadsnews.com/node/5258:

“The MWAA board of directors decision last week to choose a $912m underground alternate for a mile-long segment of the rail line at Dulles Airport over a $587m elevated station has created a firestorm of criticism. The $325m price premium gets rail travelers just 600ft, 180m closer to the main terminals but both schemes have moving walkways…”

“…The board of MWAA voted 9 to 4 for the $912m tunneling plan over the $587m elevated plan for the Airport segment of what is planned to be a 23 mile, 37km Metrorail line from the Orange Line in West Falls Church through Tysons Corner and Dulles Airport ending at VA770 in Ashburn, Loudoun County. Apart from the excursions into Tysons Corner and the Dulles Airport the train line runs in the median of the Dulles Toll Road and further west in the median of the Dulles Greenway…”

The piece provides a breakdown of the financing for this project:

“…Virginia bears the lion’s share of the rail project costs. Of an estimated $6,586m (with the subway style station), Dulles Toll Road bond buyers and eventually Toll Road patrons would pay $3765m (57%), Fairfax County VA $1,060m (16%), Loudoun County VA $316m (5%) and the state of Virginia itself $275m or 4%. In total 82% of the funds for the project come specifically from citizens of Virginia in local taxes or tolls. Virginians are up for $5416m or 82% of the total cost of the project (The counties and the state are making some use of routine federal monies, but they could use them for other transportation purposes if they weren’t going to Dulles rail.)”

This Fairfax Times article has interesting reactions from local officials about MWAA’s decision to build with a costlier option (Local officials protest rail project costs, changes made by MWAA, 4/13/11).

The Examiner has this piece (“State, counties refusing to pay extra cost of Dulles Metro,” 04/13).

Footnotes after the jump.

[1] See attached “Proposed Resolution” obtained via request from MWAA staff. The PLA discussion was first publicly announced on an agenda contained in this media advisory, sent on Monday, 4/6/11. The vote was at 8AM on Wednesday. There was little time for comment prior to the meeting and no opportunity to ask questions or present concerns to MWAA members at the actual meeting.

[2] MWAA staff said minutes from the meeting will not be released until they are approved after the next MWAA meeting on May 5, 2011, but it was reported that MWAA board members Davis and Cobey voted against the PLA resolution.

[3] You can learn more about government-mandated PLAs at www.thetruthaboutplas.com

[4] www.unionstats.com , just 6.7 percent of Maryland’s private construction workforce belongs to a union. There is not data on union membership in Washington, D.C.’s private construction workforce.

[5]U.S. Department of Labor Bureau of Labor Statistics http://www.bls.gov/news.release/union2.nr0.htm

[6] Studies are available here

[7] The PLA was executed 12/15/05. Attached is the Heavy and Highway Construction Project Agreement from the National Heavy and Highway Coalition that applied to Phase 1. Here is the proposed Phase 2  Highway and Highway Construction Project Agreement.

[8] See paragraph 8 of Dulles Corridor Metrorail Project Labor Agreement Final Addendum, Heavy and Highway Construction Project Agreement, Construction of Phase 1 – Fairfax County, Virginia. “Subcontracting:…It is further understood that in the event any covered work is awarded to a merit shop contractor the contractor shall not be required to sign this agreement or sign any other agreement as a condition of performing work on this project.”  

[9] See Form LM-2 from 2010 filed with the U.S. Department of Labor Employment Standards Administration, Office of Labor Management Standards. Martire made approximately $266,000 from LiUNA in 2010.

[10] It is difficult to calculate the financial benefit of the Phase 2 PLA to LiUNA, LiUNA locals, LiUNA members and their related pension, benefit and union slush funds until the PLA is finalized and estimates for the project construction costs and projected man-hours are more refined.

[11] Project Labor Agreements: Advantages for Capital Construction Projects, Dennis L. Martire, Laborers’ International Union of North America, Dec. 2008

[12] See MWAA Code of Ethics on Direct and Indirect Financial Interests: http://www.metwashairports.com/file/CodeofEthicsDirectors.pdf

[13] Lone Wilson Bridge Bid Comes in 70 percent Above Estimate, Engineering News Record, Dec. 24, 2001; see also Baltimore Sun, March 2, 2002.

[14] Executive Order 13202 (Feb. 17, 2001), as amended, Executive Order 13208 (April 6, 2001). President Bush’s executive order was upheld against claims of labor law preemption in Building & Const. Trades Dept., AFL-CIO v. Allbaugh, 295 F. 3d 28 (D.C. Cir. 2002).

[15] Unexpectedly Low Bid Keeps Wilson Bridge Under Budget, Washington Post, March 2, 2002.

[16] Wilson Bridge Bike Path Gets Rolling, Washington Post, June 7, 2009; See also Wilson Bridge Span Open Early, Washington Post, June 12, 2006; Woodrow Wilson Bridge Beats Obstacles as It Becomes Beltway Savior, ENR, January 31, 2005.

[17] http://www.bls.gov/iag/tgs/iag23.htm