MWAA Officials Understimate Economic Impact of Phase 2 PLA

0 October 6, 2011  State & Local Construction

In July, the TruthAboutPLAs.com wrote about correspondence and public statements from the Metropolitan Washington Airports Authority (MWAA) officials indicating they do not fully understand the potential negative economic impact of its April 6 resolution mandating a union-favoring project labor agreement (PLA) contractors are required to agree to in order to win construction contracts on the $3.5 billion Phase 2 Dulles Metro Rail Silver Line project in Northern Virginia.

(See previous blog posts from TheTruthAboutPLAs.com on this project and MWAA’s resolution here).

Essentially, MWAA officials believe a Phase 2 PLA will have no impact on labor or construction costs because the payment of Davis-Bacon prevailing wage and benefit rates to construction workers is already required on the project regardless of whether a PLA is mandated on the project.

While it is true wage and benefit rates will be similar regardless of whether a PLA is used on Phase 2 because of the applicability of federal prevailing wage laws via the Davis-Bacon Act, MWAA officials have failed to acknowledge that other provisions in a PLA will increase overall construction costs.

PLA opponents object to the Phase 2 PLA for a variety of reasons. A primary reason is that a PLA will needlessly increase costs as typical PLAs force archaic and inefficient union work rules and fees on nonunion firms and employees they must agree to in order to work on a PLA project. Reduced competition from qualified prime contractors (and possibly subcontractors) discouraged from bidding due to the PLA will increase overall construction costs. In short, provisions within typical PLAs absolutely impact overall labor costs.

Like the previous correspondence and statements from MWAA officials, this Aug. 22, 2011 correspondence between MWAA and the Purcellville Business and Professional Association recently received by TheTruthAboutPLAs.com indicates nonunion contractors built a significant potion of Phase 1:

“Indeed, through April of this year, almost 60 percent of the value of contracts awarded by the Phase 1 prime contractor have been awarded to non-union contractors.  This experience stems, we believe in significant part, from the fact that the Phase 1 PLA does not require subcontractors to become a signatory to the PLA.”

The letter also indicates Phase 2 nonunion subcontractors may be exempt from signing a Phase 2 PLA:

“As I indicated previously, we expect the PLA in Phase 2 to be similar to the Phase 1 PLA.”

However, the letter demonstrates that MWAA officials have again incorrectly assumed that construction costs will not increase as a result of a Phase 2 PLA:

“To your first point, Phase 2 construction costs are not expected to be affected in any significant way by the wage and benefit provisions of a PLA.  Those PLA provisions will likely call for the payment of wages and benefits at or close to the prevailing wage and benefit rates established by the U.S. Department of Labor pursuant to Public Law 107-217 (Davis-Bacon). Federal law requires that construction projects receiving federal assistance must apply these Davis-Bacon rates.  Since some form of federal assistance is expected to be provided for Phase 2, Davis-Bacon rates will apply to Phase 2 whether or not there is a PLA.  As a result, Phase 2 construction costs will not be driven higher by a PLA which provideds for the payment of wages and benefits based upon the David-Bacon (sic) prevailing rates.

Numerous studies conducted on public works projects subject to prevailing wage laws indicate PLAs typically increase construction costs between 12 percent and 18 percent compared to similar non-PLA projects. PLA opponents attribute anticipated additional costs due to archaic union work rules, double payments of benefit costs into union plans and existing nonunion plans, and overall reduced competition.

Because the controversial financing plan for Phase 2 – which will result in increased costs shared by tollway motorists (via more expensive tolls) and local and state stakeholders – has stalled this project, it is unsettling that MWAA officials are ignoring a major cost factor for Phase 2 of the Silver Line.

To make matters worse, recent reports by the Washington Post indicate that Phase 1 may be behind schedule and over budget, which puts additional financial pressure on toll road users and state and local financial stakeholders.

Meanwhile, the unfairness and added costs resulting from government-mandated PLAs has not been ignored by one of Virginia’s prominent political figures, former Virginia Governor and U.S. Senator George Allen (R). Allen, who is running for Virginia’s U.S. Senate seat against former Virginia Governor Tim Kaine (D), recently unveiled a Freedom to Work Agenda.  Opposition to government mandated PLAs is one of the plan’s key planks.

Here is more on PLAs from a Washington Examiner op-ed by Allen (Op-Ed: Advancing a new freedom-to-work agenda for America,”  10/5/11):

Secondly, we need to protect the Freedom to Contract by eliminating mandatory Project Labor Agreements (PLAs) and Depression-era Davis-Bacon wage laws that diminish competitive bidding and inflate the costs that taxpayers pay for construction when the federal government is involved.

Under an Obama Executive Order, Washington is using mandatory PLAs to impose union work rules on federal construction contracts – despite the fact that the overwhelming majority of construction workers (over 86 percent) choose not to be represented by labor unions  (only 4 percent of Virginia’s private construction workforce belongs to a union).

The Metropolitan Washington Airports Authority (MWAA) is attempting the same in Northern Virginia with Phase II of the Dulles Rail project, over the protests of the taxpayers and users of the Dulles Toll Road who will foot the bill.

A further example of Washington’s misguided mandates is the onerous and outdated Davis-Bacon wage laws, whose reach has expanded under the failed Stimulus.

These federal strings take away the competitive advantage of Virginia’s contractors and workers by imposing union pay scales – often well in excess of local rates – when federal funds are involved.  And they drive up costs – renovations for a high school here in Virginia shot up $1.6 million because of Davis-Back wage premiums.

It is a punishing disgrace for the federal government to impose higher costs to taxpayers or toll road users with less competitive bidding.  And, it is truly aggravating that the construction jobs job to union contractors from outside of Virginia since nearly all Virginia contractors are not unionized.

TheTruthAboutPLAs.com applauds this provision in Mr. Allen’s Freedom to Work Agenda.

It is too bad MWAA staff and officials have failed to recognize the negative economic consequences on federal and Virginia taxpayers, businesses and citizens if Phase 2 of the Silver Line moves forward with a PLA mandate.

Learn more about Allen’s Freedom to Work Agenda here:
Allen Campaign Website
Washington Examiner: “
Allen targets pro-union law as campaign issue,” 10/5/11

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