Project Labor Agreement on Seattle Tunnel Mega-Project Fails to Deliver on Many Promises

0 January 23, 2014  Featured, Federal Construction, State & Local Construction, Transportation & Infrastructure

Bad news continues to plague Washington state’s $2 billion Highway 99 tunnel project underneath Seattle’s downtown waterfront, contradicting a number of key points lawmakers and construction unions use to sell government-mandated project labor agreements (PLAs) to owners, taxpayers and the media.

Despite promises by Big Labor and advocates of these union-friendly deals that allegedly prevent costly union disputes and labor-related delays, a disagreement between the International Longshore and Warehouse Union (ILWU) Local 19, and numerous construction unions signatory to the project’s 2010 PLA, shut down the project for four weeks from August 20 to Sept. 17, in 2013.

Longshoreman Picket Line Big Bertha

ILWU Local 19’s picket shut down the Seattle Highway 99 Tunnel jobsite for more than a month, despite a PLA promising to prevent labor disputes.

For an additional two months, the project suffered needless productivity delays caused by featherbedding – inefficient union “make-work” rules – agreed to by the warring unions during a temporary truce, which ended when a resolution was reached Nov. 22.

Since its arrival to Seattle by ship and assembly this summer, the $80 million tunnel-boring machine manufactured in Japan by Hitachi – nicknamed “Big Bertha” for its 326-foot-long body and 57.5-foot-diameter cutting head – has worked sporadically, suffering a number of mechanical and technical problems that has further delayed the tunneling portion of the Washington State Department of Transportation’s (WSDOT) decade-long $3.1 billion Alaskan Way Viaduct Replacement Project, funded by federal, state and local taxes, tolls and other revenue sources.

Bertha 2

Big Bertha and its cutting head at its launch pit this summer.

Last week the Seattle Times reported the WSDOT announced the winner of the tunnel project’s $1.44 billion prime design-build contract, Seattle Tunnel Partners (STP), a joint-venture between Tutor Perini of California and the New York-based Dragados USA, violated its contract by creating barriers preventing minority- and women-owned small businesses from winning project subcontracts, therefore breaking federal rules governing the project (“State: Too few minorities, women on tunnel project,” 1/13/14).

A Jan. 13, 2014, WSDOT media alert provides links to additional details about the controversy, including a recent U.S. Department of Transportation Federal Highway Administration (FHWA) investigation, stemming from an October 2013 King 5 News investigative report and related complaints from members of Seattle’s minority- and women-owned small business contracting community (“Small firms cut out of $1.3 billion Seattle tunnel project,” 10/2/13):

Small businesses have received just a fraction of the $90 million Washington state hopes to steer their way from the $1.36 billion Seattle deep-bore tunnel project.

With the project more than half-way complete, small and minority-owned construction companies have signed contracts potentially worth $25 million to complete tunnel-related work. But to date, just $7 million has been paid out to these small firms.

The Washington State Department of Transportation awarded the huge contract to Seattle Tunnel Partners in 2010 with a federally mandated condition: sub-contract a certain percentage of the work to small and minority-owned construction companies. If that condition isn’t met — or at a minimum, if the prime contractor can’t show a good faith effort was made to meet the condition — federal dollars for the project can be withdrawn. For the bored tunnel contract, the U.S. Department of Transportation is kicking in nearly $500 million.

WSDOT set the goal at 8 percent of the total contract value, or $91 million. Records obtained by KING show that currently $25 million in contracts have been signed with women and minority owned businesses, but to date, only $7 million has been paid to the small contractors. It’s unclear if STP will be able to make good on fully executing the contracts signed.  [snip]

The federal government has charged both companies with breaking minority contracting regulations on other projects. In 2009 Tutor Perini paid $9.7 million to the federal government for allegedly cheating minority contractors out of work in New York. Last spring, Dragados USA paid $7.5 million for the same sorts of allegations.

Minority and small business advocates have long argued PLAs disproportionately harm minority- and women-owned contractors and their diverse workforces (link to 1998 Congressional testimony) because most of these firms are not signatory to a union and their existing craft labor employees do not belong to a union.  Some critics call government-mandated PLAs blatant discrimination.

PLAs discourage competition from disadvantaged businesses because the terms of the PLA needlessly increases costs and force open shop small contractors to adopt inefficient union rules, making it impossible to compete against unionized competitors. For example, instead of utilizing their own employees to fulfill a contract, a PLA forces small businesses to hire unfamiliar union labor sent to companies by local union halls and pay fees to unions.

PLA proponents claim PLAs create jobs for contractors and skilled tradespeople from the local area, including disadvantaged contractors.

It is why Big Labor invested millions of dollars in 2009 rebranding unpopular PLAs as Community Workforce Agreements (CWAs) as part of a marketing campaign to improve public and private owner perceptions of construction unions in an effort to utilize PLAs/CWAs and other anti-competitive tactics to create more union jobs and regain lost union market share from open shop competitors.

Construction union market share is surprisingly small and has declined dramatically in the last 60 years. In the 1950s, it was estimated that more than two out of three U.S. construction workers were unionized. In 2012, just 13.2 percent of the U.S. construction workforce belonged to a union, according to the Bureau of Labor Statistics. In Washington, 19.8 percent of the state’s private construction workforce belongs to a union.

Despite claims made by Big Labor’s lobbyists and marketing campaigns that PLAs result in local jobs and include the minority contracting community, this project is one of many examples of recent PLA jobs that have failed to deliver on promises to hire a local workforce and award work to small minority-owned businesses and create jobs for women and minority tradespeople .

While this mega-project is not finished yet, STP will be hard-pressed to meet federal small business subcontracting goals and overcome delays and cost overruns caused by the labor dispute. will be following this story closely to see how much the delays will end up costing federal, state and local taxpayers, who are picking up the tab for this massive public works project.

Perhaps this project, and other problematic PLA projects in Washington state, will lead to repeal of Executive Order 96-08. Signed by Gov. Lowry December 6, 1996, it directs “State Offices” and other “State Agencies” to consider PLAs  for appropriate public works projects on a project-by-project basis which meet the criteria established in Executive Order 96-08. Washington is one of seven states with a pro-PLA policy while 18 states have laws or executive orders restricting government-mandated PLAs.

If you have any tips about this project, please leave a note in the comments section.

Primary Documents:

Packet of articles on project.

Link to 2010 Seattle Highway 99 Tunnel Project PLA with STP.

July 13, 2013, arbitration decision, which provides additional details about the cause of the labor dispute. post, “Despite Project Labor Agreement, Union Dispute Shuts Down Seattle Tunnel Job for Four Weeks,” 9/18/13.

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