Federal PLA on Navy Project in Washington Will Harm Local Construction Workforce and Procurement Efficiency

6 January 12, 2012  Federal Construction, Uncategorized

Naval Facilities Engineering Command (NAVFAC) Northwest has mandated a project labor agreement (PLA) on the construction of a $450 million to $550 million explosives handling wharf #2 (Solicitation No. N4425511R9004) at Naval Base Kitsap-Bangor in Washington.

The PLA mandate harms Washington’s experienced and skilled nonunion construction workforce and will discourage competition from qualified contractors that have successfully built federal projects in Washington and across the country without PLA mandates.  It will also needlessly increase costs.

According to an article in the Kitsap Sun, NAVFAC Northwest mandated a PLA after Sens. Maria Cantwell and Patty Murray, and Reps. Norm Dicks and Jay Inslee (all Democrats from Washington) wrote to the Navy in support of a PLA at the request of construction trades unions (“Navy to hire local workers for second explosives handling wharf,” 1/1/12):

The trades council contacted the area’s federal delegation — Sens. Patty Murray and Maria Cantwell and Reps. Norm Dicks and Jay Inslee — who wrote to the Navy supporting a PLA, Whetham said. Four trade council officials and seven from the Navy met in November to explore the benefits and arrived at cost savings and skilled labor.

Here is a copy of the 9/23/11 letter pressuring NAVFAC to mandate a PLA on this project. Rep. Norm Dicks (D-Wash.) is the ranking member on the U.S. House Appropriations Committee, a powerful position that controls the budgets for federal agencies such as NAVFAC.

Appropriator Rep. Dicks is retiring after his term is over.

According to information obtained from opensecrets.com, construction trades unions have donated the following political contributions totaling $814,375 to the four Washington Democrats who signed the letter:

Rep. Inslee:       $340,000   from 2000 – 2012
Rep. Dicks:        $183,125   from 1998 – 2012
Sen. Murray:      $279,250   from 1998 – 2012
Sen. Cantwell:    $ 12,000    from 2002 – 2012
Total:                 $814,375

Sen. Cantwell, Sen. Murray and Rep. Inslee celebrate a win for their political patrons (Big Labor).

Is this PLA mandate the product of a crony contracting scheme by federal officials?

Prior to mandating the PLA, NAVFAC Northwest did not consult with the merit shop contracting community about the negative impact of PLA mandates on qualified federal prime contractors, subcontractors and their skilled local employees.

First Navy PLA Mandate Under Obama Administration
This is the first PLA mandate on a Navy project since President Obama issued Executive Order 13502 on Feb. 6, 2009, just a few weeks after his inauguration. The order strongly encourages federal agencies to mandate PLAs on a case-by-case basis on federal construction projects exceeding $25 million in total costs.

As a result of Obama’s encouragement of federal PLA mandates, NAVFAC has issued several PLA surveys to the contracting community to determine if a PLA mandate will advance the economy and efficiency in federal procurement of numerous large-scale construction projects across the country.  ABC National and ABC members have responded to these PLA surveys.

NAVFAC Northwest did not issue a survey to evaluate if a PLA would be appropriate for this project.

In contrast, NAVFAC directly contacted ABC National and the merit shop contracting community for feedback on possible PLA mandates on other federal projects.

For example, after soliciting comments from ABC National and the contracting community in October 2010 concerning NAVFAC’s potential use of PLAs on billions of dollars worth of construction for Guam base realignment, NAVFAC elected not to mandate a PLA.

NAVFAC’s PLA Mandate Creates Inefficiencies
NAVFAC Northwest’s Dec. 13, 2011 amendment number 0008 to the solicitation instructs qualified contractors invited by NAVFAC to bid on Phase 2 of the solicitation (the short-listed contractors) to negotiate a PLA with specific trade unions and submit an executed PLA within 10 days of the contract award. These firms made it to Phase 2 of the solicitation under the impression there would be no PLA mandate.

NAVFAC supplied short-listed contractors with a pre-drafted PLA containing the terms and conditions NAVFAC already developed with specified construction trade unions and councils.

NAVFAC asked contractors to submit feedback on the pre-drafted PLA by Dec. 28.

ABC advised short-listed contractors about the numerous problems with NAVFAC’s mandatory PLA language and cumbersome and inefficient procurement approach. Some of these concerns were submitted by short-listed contractors to NAVFAC.

NAVFAC is expected to review and share these comments with unions and provide contractors with a final PLA at a later date that they must use as the starting point in PLA negotiations.

Proposals from short-listed contractors are due Feb. 13. It is unclear when NAVFAC will award the contract, although it should be in early 2012.

Under this inefficient procurement process, it is possible for contractors to not know the terms and conditions of the executed PLA – which impacts labor costs and final bid costs – before submitting a final price proposal to NAVFAC.  If PLA negotiations are stalled by unions or NAVFAC does not supply the final terms of the pre-drafted PLA in time, contractors cannot submit an accurate price proposal.

In addition, the project could be delayed pending the outcome of the post-award PLA negotiations.  The project may have to be re-bid if the final agreement cannot be executed.

In 2010, a General Services Administration (GSA) project, the GSA Headquarters at 1800 F Street in Washington, D.C., suffered delays as a result of labor unions refusing to agree to the terms of a PLA the contractor presented and signed with other labor unions. Congressional testimony from GSA deputy administrator Susan Brita described this scenario, which also required the contractor to present an executed PLA within 10 days post-award.

Even regulatory comments  filed by Frank Dean, NAVFAC’s labor advisor, on the FAR Council’s proposed rule implementing Executive Order 13502 identify concerns with this inefficient post-award PLA procurement approach.

PLA Will Harm Local Nonunion Workforce and Small Businesses
From 2001 to 2009, when President George W. Bush’s Executive Orders 13202 and 13208 prohibited PLA mandates on federal and federally assisted construction projects, Washington’s skilled nonunion tradespeople constructed large-scale projects for the Navy, Army and other federal agencies absent a PLA mandate with no reported problems.

This union-favoring PLA is sure to serve as a barrier to new jobs for 84 percent of Washington’s private construction workforce and 86.9 percent of the U.S. construction workforce that has chosen not to join a construction labor union.

The Washington State Building and Construction Trades Council, AFL-CIO announced “construction labor on this project will be provided by Olympic Peninsula Building Trades and the Northwest Regional Council of the National Construction Alliance II (NWNCA),” and it is unlikely this project’s PLA will allow nonunion contractors to use few, if any, of the existing skilled nonunion employees they have invested training and resources in while employed at the company.

As this letter to the editor in the Kitsap Sun points out, if the PLA even allows nonunion construction workers to build this project, they will have to join a union and/or pay union dues and pay into union pension plans that they will never benefit from unless they join a union and meet vesting requirements.  The PLA results in a huge financial windfall for Big Labors coffers.

Favoritism for unionized construction workers is especially despicable because the construction industry is plagued by high unemployment in Washington and across the country. The number of construction workers employed in Washington in July 2011 was as sparse as the number of workers employed in Washington in August of 1997. Meanwhile, the U.S. construction industry is suffering from an unemployment rate of 16 percent as of December 2011.

Don’t nonunion construction workers deserve a fair shot at new federal construction jobs?

Provisions in a PLA that force contractors to swap their existing workforce out for unfamiliar union labor is problematic for short-listed contractors that self-perform specific trade work, as well as subcontractors performing specialty trades.

This PLA mandate will make it difficult for short-listed contractors to meet NAVFAC’s small and disadvantaged business subcontracting targets because small businesses are traditionally not unionized:

  FY2011
SB 65.75%
SDB 16.51%
WOSB  14.7%
HUBZone  8.5%
VOSB 2.62%
SDVOSB 2.62%

Because building trades union membership is traditionally not diverse, a PLA mandate also may make it difficult for short-listed contractors to meet minority and women hiring goals set by the FAR’s Equal Opportunity and the Affirmative Action Compliance Requirements for Construction regulations required in federal construction contracts.

The PLA mandate’s inefficient procurement approach and pro-union language will discourage competition and increase costs to remaining competitors. Studies indicate PLA projects subject to prevailing wage laws increase construction costs between 12 percent and 18 percent compared to similar projects subject to prevailing wage laws not subject to government-mandated PLAs.

ABC Committed to Fair and Open Competition
ABC is opposed to government-mandated PLAs because these agreements typically restrict competition, increase costs, create delays, discriminate against nonunion employees and place merit shop contractors at a significant competitive disadvantage. Typical government-mandated PLAs are nothing more than anti-competitive schemes that end open and fair bidding on taxpayer-funded projects.

ABC has led industry opposition against federal PLA mandates, utilizing a variety of educational, public relations, grassroots, political and legal strategies to ensure fair and open competition on taxpayer-funded construction projects.

ABC has helped ABC member contractors file bid protests against federal PLA mandates during the Obama administration, which resulted in the removal of PLA mandates on a Veterans Affairs medical center in Pittsburgh, an Army Corps of Engineers project in Camden, N.J., a General Services Administration project in Washington, D.C., and a Department of Labor Job Corps Center in Manchester, N.H.

ABC National also has responded to and helped ABC members participate in more than 50 PLA surveys issued by federal agencies to determine the feasibility of a PLA on a federal project.

ABC supports the Government Neutrality in Contracting Act (H.R. 735/S.119), cosponsored by 31 Senators and 172 Representatives and supported by a diverse industry coalition. The measure would eliminate waste and favoritism in federal contracting by prohibiting federal agencies and recipients of federal assistance from mandating PLAs, yet it would allow contractors to voluntarily enter into PLAs. This bill is good for taxpayers and the principles of free enterprise.

In 2011, House committees held two hearings in Washington and three field hearings on the negative consequences of federal PLA mandates and the benefits of H.R. 735.

Additional hearings and votes are expected in 2012.

Stay current on government-mandated PLAs and “Like” us on Facebook at www.facebook.com/TheTruthAboutPLAs and visit TheTruthAboutPLAs.com often.

To help fight this PLA and other federal PLA mandates, please contact Ben Brubeck or TheTruthAboutPLAs.com here.

Update: This project was in the news in March 2014 over a labor/contracting dispute about whether boat operators are construction workers and are covered by the PLA and should receive union-scale wages or Davis-Bacon wages.

In August 2015, Rep. Derek Kilmer (D-WA) and Rep. David Joyce (R-OH) sent this letter to the White House asking them to push federal agencies into using more PLAs, which resulted in this media coverage in the Kitsap Sun.

In November 2015, Rep. Kilmer and U.S. Department of Labor Secretary Thomas Perez toured the project at the request of building trades unions in an attempt to show lawmakers and the Obama administration this PLA was a success and generate positive press like this and Obama administration and Congressional champions for labor’s anti-competitive agenda. However, this Nov. 27, 2015, press release indicates the wharf project is $13 million over budget:

“The wharf was awarded at $331 million and the cost today is at $344 million. The wharf is on track to be completed in early 2016.”

 

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