How Much Construction Work is Subject to Project Labor Agreements?
Proponents of project labor agreements (PLAs) are in the habit of overstating their use in public and private construction markets.
In an April 2012 letter in support of federal government-mandated PLAs to the U.S. Department of Labor, Building Construction Trades Department (BCTD), Council Victoria L. Bor stated:
“These agreements are also commonly used by states and municipalities, as well as throughout the private sector. In fact, in 2010 and 2011 alone – hard times for the construction industry – the BCTD’s affiliated state and local building and construction trades councils from around the country reported signing PLAs for 300 private and public construction projects that together are valued at more than $66 billion.”
That might sound like a lot of work if you are unfamiliar with the construction industry economy. But in reality, it is just a drop in the bucket.
To put these numbers into context, government data pegs the value of total construction put in place at $805.561 billion in 2010 and $778.238 billion in 2011, totaling roughly $1.584 trillion.
If the BCTD’s unverifiable* claim is accurate, a little more than four percent ($66 billion) of all construction put in place was covered by a PLA.
PLA advocates might object to this estimate because it includes the value of residential construction put in place. PLAs rarely are used in the residential construction market, with the exception of multi-story/multi-family buildings in urban areas in markets with relative high union density such as New York, San Francisco and Philadelphia.
Even after eliminating a total of $494.79 billion worth of residential construction from 2010 and 2011, just six percent ($66 billion of the remaining $1.089 trillion) of the combined public and private construction market were subject to PLAs.
Maybe four percent to six percent of an industry market share is worth bragging about when just 13.2 percent of the U.S. construction workforce belongs to a union, but it certainly doesn’t meet the definition of “widespread” use, as PLA advocates erroneously claim.
PLA proponents overstate the use of PLAs—especially in the private sector—to encourage lawmakers to mandate PLAs on additional taxpayer-funded construction projects. They claim “cost-conscious and profit-oriented corporations in the private sector are increasingly turning to PLAs to achieve on time, on budget results for their construction needs.”
Translation: Inefficient government should take a cue from the private sector and require more PLAs on public works projects.
While the use of PLAs in the private sector has increased slightly, the truth is many private owners are coerced by construction unions and PLA advocates into requiring PLAs on private construction projects as part of a strategic campaign to regain lost market share. In short, some private owners use PLAs not because they provide value as PLA advocates claim, but rather, they are extorted by PLA advocates into requiring them.
Next week we will examine the tactics used by PLA advocates in, Nine Ways Private Owners Are Coerced Into Mandating Project Labor Agreements.
* NOTE: The BCTD’s claim of a total of 300 PLAs signed for $66 billion worth of construction in 2010-2011 is unverifiable because no government or independent private source collects data on the use of PLAs.
It is unclear if the PLAs were for 300 construction projects currently underway in 2010 and 2011 or if the 300 PLAs simply were signed contracts. Construction unions have secured PLAs on a number of large-scale projects that have yet to break ground (and may never break ground) such as the Keystone XL Pipeline. It is unknown if these PLAs are included in the BCTD’s dataset.
In addition, it is unclear if this dataset includes PLAs voluntarily entered into by contractors. The National Labor Relations Act permits contractors to voluntarily execute PLAs with multiple labor unions (learn more about the difference between mandated and voluntary PLAs and here). Voluntary PLAs are different than controversial PLA mandates, which is when a private or government owner requires their use in advance of the competitive bidding process. When mandated, PLAs typically increase costs, reduce competition, and harm qualified merit shop contractors and skilled employees when compared to similar projects bid without PLA mandates.
If the BCTD dataset includes voluntary PLAs executed between contractors and unions free from owner requirements, the BCTD again is exaggerating the construction industry’s use of PLAs.