Report Highlights Inefficient Union Work Rules in NYC, Developers Say Alleged PLA Cost Savings Disappointing

0 May 4, 2011  Federal Construction, State & Local Construction

Merit shop contractors know government-mandated project labor agreements (PLAs) saddle nonunion and merit shop contractors with inefficient union work rules and high operational costs unique to unionized contractors, which results in reduced competition and increased costs to taxpayers.

But few understand the merit shop contractor cost advantage despite anecdotal evidence and compelling research on the topic.

A new report sheds some light on why wasteful union work rules are harming union productivity, losing union marketshare, and costing NYC taxpayers and private owners a fortune.

The Regional Plan Association (RPA) May 2011 report, Construction Labor Costs in New York City: A Moment of Opportunity, found that “arcane union work rules, inefficient practices, and featherbedding impose 20 percent to 30 percent in excess costs, leading to dramatic increase in nonunion work on NYC construction sites.”

The study also mentioned that NYC developers complained that NYC PLAs were a failure and delivered little to no promised cost savings:

“Management has been almost universally disappointed with the actual savings achieved—2 to 4 percent rather than the promised 20 percent.”
Learn more about the report here and read additional analysis here.
Earlier this year, NY building associations representing contractors signatory to union agreements with numerous trades asked unions for reforms to inefficient work rules contained in union agreements that increase costs and reduce productivity.
The RPA report cited this an many other examples of archaic union work rules:
For every Local 14 operating engineer running a major piece of equipment, a Local 15 ‘oiler’ tags along—a vestige of the mid-20th century, when equipment required frequent lubrication.35 Nowadays, thanks to the modern equipment deployed, oilers have little to do, and spend their highly paid time “polish[ing] the crane like fire trucks.” For a building of approximately one million square feet (50-60 stories) and an 18-month construction schedule, the fully loaded cost for each unneeded oiler is approximately $190,000.

The RPA report explains why such reforms are needed:

A 10 percent differential between union and nonunion construction is tolerable to union developers and contractors, while the existing 20-30 percent differential is not. If the high differential continues, developers will convert some projects that would have been union in earlier times to merit shop, and will simply not go forward with other projects.

Because the construction industry in NYC is heavily unionized, PLA proponents argue a PLA can alter normal union wage and benefit rates and offer concessions to inefficient union work rules that would otherwise be prevalent on a construction project absent a PLA.

They claim that unlike other markets, there would not be an increase in construction costs due to a lack of competition from qualified nonunion contractors – discouraged from bidding on PLA projects – because nonunion firms have limited penetration in NYC’s large vertical construction markets.
Of course, this isn’t exactly true, as demonstrated by the recent RPA report and remarks by NYC union bosses concerned with nonunion contractors penetrating their market share.  The truth is that unions need PLAs to supress mounting nonunion competition in NYC. In addition, the fallacious logic used to justify alleged cost savings resulting from PLAs has been thoroughly exposed.

Let Open and Fair Competition Work

As satisfied customers of merit shop contractors know, merit shop contractors have developed strategic advantages in the workplace by streamlining operational costs and using labor more efficiently through multiskilling. PLAs eliminate these efficiencies and prohibit taxpayers and private project owners from getting the best possible product at the best possible price. It’s another reason to oppose PLAs and promote open and fair competition on public and private construction projects.

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