There was a significant legal victory for taxpayers and merit shop construction firms in New York recently. As we reported in 2011, the New York State Department of Transportation (NYS DOT) implemented a project labor agreement (PLA) requirement on a highway reconstruction and bridge replacement project near Exit 122 on Route 17 in Orange County, NY. This mandate would cost taxpayers an additional $4.5 million, as this mandate disqualified the lowest bidder for this project.
An Albany County Supreme Court ruled March 1 that the government-mandated PLA issued by NYS DOT violated state procurement laws. The court found that the NYS DOT failed to demonstrate that the decision to require a PLA advanced the state’s interests in the procurement of construction services. The court ordered NYS DOT to re-bid the project.
Here are the highlights from the press release issued by the Empire State Chapter of Associated Builders and Contractors (ABC):
“The ruling effectively means the DOT was flawed in its decision to add a project labor agreement to the job, which would cost taxpayers $4.5 million more than necessary,” said Mark Galasso, President of Lancaster Development, Inc. “As a contractor and taxpayer I am pleased by today’s decision.”
The court on Friday ruled the PLA illegal and thus nullified the existing contract. This means the state DOT must rebid the project.
“The ruling shows a failure by New York State Department of Transportation officials to comply with the competitive bidding rules set out by state law,” said Steve Lefebvre, President of ABC. “Thanks to the court’s decision the project will be rebid, to the benefit of the taxpayers. When this project goes out to be rebid, I would caution the DOT not to attempt the inclusion of a PLA, as we have just seen an open and fair bidding process is the best way to maximize cost savings on public work projects.”
Lefebvre further added that the decision rendered by the court confirms what the ABC has said right from the start, that Project Labor Agreements are subjective and subject to questionable insider negotiations.
In this ruling, the judge points out several alarming issues that arose during the court’s examination of NYS DOT’s attempt to implement a PLA mandate.
Throughout the legal process, the courts ordered NYS DOT to hand over correspondence and other documents surrounding the process used to determine that a PLA is appropriate for this project. In the decision, the judge takes NYS DOT to task for not being able to produce all the documents involved in the decision to require a PLA despite repeated requests by the court. At best, this is evidence of sloppiness on the part of NYS DOT. At worst, it could indicate that they have something to hide. Either way, it is troubling.
The court also criticized the department’s handling of its feasibility study process. In New York, public entities are required to obtain a feasibility study prior to requiring contractors to sign a PLA as a condition of performing work. The study must demonstrate that the PLA mandate will promote the public interest through the: “(1) protection of the public finances by obtaining the best work at the lowest possible price; and (2) prevention of favoritism, improvidence, fraud and corruption in the awarding of public contracts.”
The court found the decision to require a PLA was not supported by either the first draft of the feasibility study developed by Arace & Company Consulting, LLC or NYS DOT’s own initial research. The department relied on the more PLA-friendly second draft of the Arace study to justify the PLA mandate. This second study was released to the department approximately one month after the first draft and with virtually no new evidence, endorsed the PLA mandate to a degree that the initial draft did not.
Clearly, the department wanted a PLA mandate on this project. You don’t need to look any further than the fact that they threw out a bid from a qualified contractor for nearly $5 million more than the next lowest bid to determine NYS DOT’s intent.
The project will now be rebid. We hope fair and open competition will trump Big Labor favoritism this time.
We also hope this incident will prompt lawmakers to take a closer look at The Public Construction Savings Act (S. 4121/A. 7855). This bill would prohibit government-mandated PLAs on public construction projects. It would guarantee that PLAs would be used when they make sense and ensure that taxpayers get the best construction at the best price.