Last week, the Metropolitan Washington Airport Authority (MWAA) gave Big Labor Bosses a generous Valentine’s Day gift.
On Wednesday, MWAA passed a resolution adopting a new policy needlessly favoring contractors that submit proposals promising to use a union project labor agreement (PLA) to construct Phase 2 of the $2.8 billion Silver Line metro extension project in Northern Virginia. (Learn more about the project and PLA controversy here.)
Obtained from MWAA staff, here is a copy of the unofficial language the MWAA board approved unanimously, with the exception of MWAA board members Dennis Martire and Michael Curto. They recused themselves from the vote, presumably because they have come under fire for cronyism related to their active promotion of a PLA mandate on Phase 2 (learn more about this controversy here).
MWAA’s new policy discriminates against contractors unwilling to enter into a PLA on Phase 2 construction work and puts them at a significant competitive disadvantage. It awards contractors willing to build the project under a PLA a 10 percent bonus in the Phase 2 procurement process.
It is a de facto PLA mandate because it will be virtually impossible for contractors that do not want to build the project with a PLA to make it to the next phase of the procurement process, where technical and price proposals will be evaluated.
Explanation of the Phase 2 Procurement Process
At the end of February, MWAA is expected to release a request for qualifications (RFQ) to all contractors interested in bidding Phase 2. The presentation on Phase 2’s procurement process, given at January’s MWAA meeting, suggests contractors will be evaluated on the following factors contained within the RFQ: Performance History, Management Plan, Qualifications of Key Personnel, Description of Project Challenges, and Safety Plan.
MWAA will evaluate and score each factor in the contractor RFQ response. (The public won’t know whether each factor is given equal weight and if these are the final evaluation categories until MWAA releases the RFQ). Each contractor response to each evaluation category will be assigned a point value out X possible points. A contractor’s aggregate point score will receive a 10 percent bonus if it agrees to build Phase 2 with a PLA.
The five highest scoring firms will be selected to participate in step two of the procurement process, where they will be invited to respond to a request for proposal (RFP) to be issued by MWAA in May. Each of the five firms will receive a $1.5 million stipend because it will cost between $5 million and $6 million for each firm to compete in the procurement process from start to finish. The five finalists, or short-listed contractors, will be evaluated based on their response to the RFP’s technical proposals, due in September 2012, and price proposals, due in December 2012.
For arguments sake, let’s assume each of the five RFQ evaluation categories is worth 20 points for a total of 100 points. If a contractor receives an aggregate score of 85 and agrees to a PLA, it will receive an additional bonus of 8.5 points (10 percent of 85 points), for a final total of 93.5 points. If an equally qualified contractor receives an aggregate score of 85 and does not agree to a PLA, it will only receive a final total of 85 points.
It will be virtually impossible for non-PLA contractors to overcome the 10 percent disadvantage because only the top five firms will be invited to the second phase of the project, where they will respond to the RFP. The “spread” between the highest and lowest scores of the top five likely will be very small. The 10 percent point bonus is a significant handicap and likely will lead to only PLA contractors being invited to submit a cost offer in step two.
In short, MWAA is rigging the competitive bidding process to produce a result that will guarantee the contractor building Phase 2 will do so with a PLA.
Non-PLA contractors will not waste their time and money chasing this work, which will reduce competition and increase project costs because everyone will be stuck with the same expensive union rules contained in the PLA. The public will never know how much cost savings MWAA left on the table to satisfy their pro-union de facto PLA mandate policy.
MWAA’s new policy replaces the controversial April 6, 2011, resolution No. 11-08, which permitted MWAA staff to include in Phase 2 construction contract procurement documents a PLA similar to the PLA voluntarily entered into by the Phase 1 prime contractor, Dulles Transit Partners. However, the Phase 2 PLA was mandatory.
In November 2011, a proposed MOU between MWAA and the Commonwealth of Virginia – although not signed by Virginia – clarified that MWAA intended to require the Phase 2 prime contractor to negotiate and execute a PLA with construction labor unions in order to win Phase 2 construction contracts. The MOU exempted subcontractors from signing the mandatory Phase 2 PLA, just as Phase 1 subcontractors were exempted from signing the voluntary Phase 1 PLA.
Discriminatory Preference Policy Under Fire
Virginia’s construction industry and lawmakers are not happy about MWAA’s PLA preference/de facto PLA mandate policy.
“MWAA has once again demonstrated they are determined to ensure their cronies benefit from some type of anti-competitive and discriminatory contracting scheme on this multi-billion dollar construction project,” said Patrick Dean, president of the Virginia Chapter of Associated Builders and Contractors. (Take a look at ABC-VA’s press release below).
The Washington Times covered opposition to the PLA preference policy from Virginia lawmakers (“Labor pact for Dulles Metrorail opposed,” 2/21/12):
“I think we’ve had grave concerns,” Mr. Hugo said. “And we’ve expressed it repeatedly that we want a level playing field. I think, point blank, that the actions of the … authority are on the verge of killing this project.”
Mr. Hugo added he supports the project, but “thinks the board’s actions are going to kill it.”
The Fair and Open Competition in Government Contracting Act (HB 33/SB 242), which would prohibit the state from mandating PLAs and giving state assistance to projects mandating or giving preference to PLAs, is close to becoming law in Richmond (TheTruthAboutPLAs.com covered this legislation here). Update: The bills are headed to Gov. McDonnel’s desk.
Is a PLA Mandate or Preference Bad for Virginia’s Construction Workforce?
Lawmakers and representatives of Virginia’s construction industry, where 97.4 percent of the state’s construction workforce do not belong to union, have good reason to be concerned about the impact of a PLA on local job creation and the overall cost of the project.
A report presented at last week’s MWAA meeting by a representative from the Phase 1 prime contractor, Dulles Transit Partners (DTP), revealed that the majority of DTP construction workers employed on Phase 1 are union members from Maryland, despite the fact the project is in Virginia. (See coverage in “Maryland workers outnumber Virginians on Dulles Rail project,” 2/17/12).
DTP provided a snapshot of its workforce building Phase 1 from December 2011. Data showed that 304 of 602 DTP construction workers came from Maryland, 18 of 602 came from DC, 27 of 602 were from other states and 253 of the 602 were from Virginia.
DTP gets almost all of its craft workers exclusively from union hiring halls, as required in the Phase 1 PLA it voluntarily entered into.
Data in the report only represents DTP employees who were building the project under the terms of the PLA. The data does not include close to 400 employees of subcontractors, which are not required to operate under DTP’s Phase 1 PLA.
If Phase 2 has mandatory or bid-rigged PLA preference, Virginia public officials should be concerned about similar local job creation results. Is it fair for other states to benefit from this project considering it is slated to be supported by Fairfax and Loudoun Counties, the state of Virginia and Dulles Toll Road users (likely mostly Virginia drivers)?
Will a PLA Mandate or Preference Increase Costs?
It is unclear how much a PLA mandate or preference will increase Phase 2 construction costs. Studies have demonstrated that PLAs increase the costs of construction between 12 percent and 18 percent because they reduce competition and shackle contractors with expensive union work rules.
However, those studies do not pull from a sample size of large projects such as Phase 2.
The cost increase also may depend on how much work prime contractors would be forced to self-perform under the PLA and if subcontractors are subject to the PLA.
In addition, it is important to know how MWAA intends to implement a PLA mandate or preference in the procurement process, if contractors are bound by the same PLA, and if firms have the chance to review the terms and conditions of the PLA before submitting a final bid with their price.
Finally, the only way to know if a PLA mandate or preference increases the cost of construction on Phase 2 is a direct comparison of bids submitted with and without a PLA mandate or preference.
The only way to ensure that project financers receive the best bang for their buck is for MWAA to abandon its PLA scheme altogether. Why not let contractors decide if a PLA is appropriate without giving contractors a dramatic incentive to use a PLA? Why not take steps that will increase competition and reduce costs?
Speaking of costs, here is a link to a report given at the last MWAA meeting on Phase 1 Costs (note an expected $150 million cost overrun) and here is copy of their consultants’ Toll Rate Study, which lays out the projected toll rates needed to finance Phase 2.
Stay tuned, TheTruthAboutPLAs.com will be following this closely.
ABC Virginia Press release after the jump.