Yesterday afternoon, Fox News Channel’s Megyn Kelly interviewed ABC Northeast Region Chair Kirby Wu about the potential for union-favoring government-mandated project labor agreements (PLAs) on Hurricane Sandy cleanup projects due to NJ Senate bill 2425. Besides serving as a volunteer leader of ABC, Wu is an executive at Wu and Associates, a general contractor from Cherry Hill, NJ, specializing in federal, state and local public works construction projects.
Check out a video of the interview here.
As if things weren’t bad enough for New Jersey’s merit shop contractors and their skilled nonunion employees, Wu’s company was previously victimized by President Obama’s pro-PLA Executive Order 13502, which encourages federal agencies to mandate PLAs on large-scale construction projects.
In 2010, the United States Army Corps of Engineers (USACE) mandated a PLA on a large-scale federal construction project in Camden, NJ, effectively prohibiting nonunion general contractors like Wu’s company from bidding on this project.
In June 2011, Wu testified before a U.S. House subcommittee about this ordeal, his successful bid protest against the PLA, and the unfortunate pattern of needless union favoritism in federal contracting. (View analysis, transcripts and video of the hearing here).
This week the U.S. House passed a $51 billion Hurricane Sandy relief bill stuffed with money for federal construction projects controlled by federal agencies like the USACE. Some of these projects will exceed $25 million in total cost, triggering a greater probability of federal agencies steering lucrative construction contracts to unionized firms and union members thanks to President Obama’s Executive Order 13502.
The bill also contains federal assistance for local governments and state agencies to rebuild the Garden State, which could be saddled with PLA mandates if Gov. Christie fails to veto the New Jersey Senate bill 2425.
So if a qualified firm tries to compete for contracts to build local, state and federal construction projects in New Jersey without union labor, they are treated by President Obama and New Jersey politicians like a second-class citizen for reasons unrelated to whether the business can deliver the best possible product at the best possible price to taxpayers. Builders aren’t evaluated based on merit, experience or value. Instead they are discriminated against because of the influence of powerful union special interests. What a shame.
Let’s hope Gov. Christie ends this blatant discrimination.
Write Gov. Christie on twitter (@GovChristie) and tell him to veto Sen. Sweeney’s bill, S2425.
It’s time for the entire construction industry and all politicians to create the conditions to rebuild New Jersey safely, ethically and at the best possible price and value for taxpayers.
Are Sandy Projects Already Subject to Union Scale Wages and Benefits?
If you watched the interview, you may have noticed Kirby Wu report Sandy reconstruction projects receiving federal dollars are already subject to union-scale wage and benefit rates.
Contractors building almost all federal and federally assisted construction projects must pay their craft employees government-determined “prevailing” wage and benefit rates established by United States Department of Labor (DOL) because of a depression-era law called the Davis-Bacon Act.
The Davis-Bacon Act authorizes the DOL to determine the ”prevailing” hourly wage and benefit rate of construction craft workers in each trade classification for four different types of construction (Residential, Heavy, Highway and Building) through a convoluted process of surveying contractors performing work in a locality and/or deferring to local union collective bargaining agreements. Over the years, the powerful union lobby has expanded the reach of the Davis-Bacon Act and perverted the DOL “prevailing” wage determination process.
Today, government-determined rates are nearly identical to union rates in most crafts in most parts of the country even though just 14 percent of the U.S. private construction workforce does not belong to a union.
In New Jersey, 23 percent of the private construction workforce is unionized and almost all of the federal prevailing wage rates are union scale.
A DOL website, www.wdol.gov, posts the government-determined wage and benefit rates of craft employees building different types of construction projects. For example, pipefitters in employed on a “Building” project in Monmouth County are paid $42.38 plus $30.80 in fringe benefits per hour, for a total compensation package of $73.18 an hour. This also happens to be the union rate. It is estimated Davis-Bacon rates, in general, are about 25 percent greater than the hourly rate of a tradesperson performing the same exact work on a private project in the free market.
Wu says nonunion contractors are required to pay Davis-Bacon rates, even without a PLA. Kelly asks how it is possible for PLAs to increase costs if every contractor, whether union or nonunion, has to pay the same government-determined hourly rate to craft workers. Wu replies that despite the federal government’s artificial price control on labor via the Davis-Bacon Act, PLAs still increase the cost of construction by reducing competition to only unionized bidders. This is correct and numerous studies support this claim.
In addition, Wu did not have enough time to explain how government-mandated PLAs needlessly increase costs because of reduced competition and provisions in PLAs that force contractors to spend money on legal review of the PLA contract, follow inefficient union work rules, pay fringe benefits into union and existing benefits plans for nonunion employees (double benefit costs), and absorb costs associated with additional delays caused by PLAs gumming up the procurement and construction phases of the project.
PLA proponents, namely union members and unionized contractors, are already granted a “level playing field” through the Davis-Bacon Act on federal and federally assisted projects, and state and local projects subject to state and local prevailing wage laws. Some argue it is a form of union welfare that stifles innovation, increases costs and must be repealed in a free market economy. Yet, merit shop contractors still win the lion’s share of public works contracts, despite the Davis-Bacon Act, by embracing strategies to boost efficiency, safety, quality and value to their clients. In turn, PLA proponents resort to their hand-picked pals in government to mandate PLAs and eliminate competition.
Wu is right, government-mandated PLAs are an underhanded scheme construction trade unions use to secure a virtual monopoly on taxpayer-funded projects and it is costing taxpayers a fortune and harming the construction industry.
Kudos to The New York Post Editorial Board
Yesterday, The New York Post ran a great editorial blasting New Jersey pols for turning Sandy relief aid into a grab bag for powerful special interests, resulting in increased costs, reduced competition, fewer construction jobs and slower recovery (“Sandy Aid Shenanigans,” 1/17/13).
This bit is great:
…Those who attacked House Republicans for not simply waving the bill through would have more credibility had they also criticized the extra goodies loaded into that relief package.
Now those critics have an opportunity to show their denunciations can go both ways. Because New Jersey’s Democratic-controlled Senate has just given the nation an indication of the games local pols are willing to play.
On Monday, Jersey’s Senate expanded its “Project Labor Agreement” law to cover the kind of projects likely to need rebuilding post-Sandy. Under this law, only companies with workforces that are 80 percent unionized are eligible to do the work.
That’s a costly rule: Studies show that PLAs add anywhere from 18 percent to 30 percent to construction costs.
Surely the point here is that the priority for state and federal dollars should be rebuilding in the most efficient and cost-effective way.
We trust that those who were so quick to savage Republicans in Washington will be equally scathing about this extraordinary act of public cynicism by Democrats in Trenton.
When running for office, Gov. Christie identified PLAs as one more thing that made New Jersey too costly.
Now would be an especially good time to repeat that point.