Take Action: D.C. Council’s Pro-Project Labor Agreement Legislation Threatens Fair and Open Competition for DC Construction Contracts

0 July 6, 2016  Featured, School Construction, State & Local Construction, Transportation & Infrastructure

District of Columbia council members June 21 added language to Section 14 of The Procurement Integrity, Transparency and Accountability Amendment Act of 2016 (Bill 21-334) mandating the use of union-favoring project labor agreements (PLAs) on District of Columbia-funded construction contracts exceeding $50 million.

Update 7/6/16: The ABC Metro Washington Chapter issued this press release in reaction to the legislation, which passed first reading June 28 and will receive a second reading on July 12. They also sent this July 7 letter to lawmakers to describe how a proposed PLA will negatively impact District of Columbia construction workers, contractors and taxpayers.

District taxpayers should be concerned about this scheme by some lawmakers and construction union lobbyists to steer taxpayer-funded contracts to unionized contractors and create construction jobs almost exclusively for unionized construction workers, at the expense of everyone else.

Only 13.2 percent of the U.S. construction workforce belongs to a union, according to the Bureau of Labor Statistics. Construction union membership is even lower in the District of Columbia (8.9 percent) and the DMV region (6.7 percent). As a result, construction trade unions have turned to their friends in government to mandate PLAs on public projects to help regain lost market share and increase union membership.

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Union lobbyists contend PLAs—master collective bargaining agreements with multiple construction unions governing a construction project—are a tool to prevent union strikes, ensure the use of local labor, and deliver projects on time and on budget. But the truth is these goals already have been achieved without PLAs and many PLA projects have failed to reduce costsimprove local job creation, and prevent jobsite strikes, accidents and delays. PLAs contain anti-competitive and costly terms and conditions that favor union interests and hurt the district’s and region’s construction industry and taxpayers.

While all contractors are technically free to bid on construction contracts subject to a government-mandated PLA, the terms of a PLA require contractors to replace most or all of their existing employees with union members dispatched from union hiring halls, use apprentices exclusively from union training programs, follow inefficient union work rules and pay into union benefits plans even if firms have their own existing benefits plans. Additionally, nonunion tradespeople are forced to pay union dues and they forfeit benefits earned during the life of the project unless they join a union and become vested in union benefits programs.

Qualified local businesses and nine out of 10 of the district’s construction professionals can’t win a contract and work on a jobsite unless they agree to these anti-competitive and costly pro-union terms. It’s no surprise such red tape and discrimination discourages competition from experienced merit shop firms and well-trained nonunion craft professionals in the region.

Fewer bidders, coupled with costly and restrictive provisions in PLAs, needlessly increase construction costs. Academic research by the Beacon Hill Institute at Suffolk University found school projects subject to PLA mandates were 12 percent to 18 percent more expensive than projects not subject to PLA mandates.

Are D.C. residents willing to accept four schools, roads and transportation improvements for the price of five?

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Are taxpayers willing to support lawmakers who create jobs for out-of-area union construction workers and forego another school, road or infrastructure upgrade simply because of a PLA giveaway?

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Increasing costs, chilling competition, placing barriers to new jobs for qualified D.C. residents and rewarding well-connected special interests with government contracts is no recipe for economic development.

Concerned taxpayers can contact D.C. Council members and Mayor Bowser TODAY through this website and urge them to proceed with procuring construction contracts in the spirit of fair and open competition, free from costly PLA mandates. Tell them to strike Section 14 from the bill.

Update 7/12/16: During the D.C. council’s July 12 meeting, they passed the Procurement Integrity, Transparency and Accountability Amendment Act of 2016 (Bill 21-334) with a provision that will force Mayor Bowser to mandate project labor agreements (PLAs) on District of Columbia construction projects exceeding $75 million. Mayor Bowser can exempt projects from the PLA requirement under certain circumstances, but the city’s new policy is a default PLA mandate. Mayor Bowser is likely to sign this legislation, despite the pro-PLA provision. While the threshold was raised from the original base of $50 million, requiring wasteful and discriminatory PLAs on any construction contracts procured by the District of Columbia government is bad public policy—no matter the project type or size.

A July 12, 2016, fiscal note on this billl prepared by the District of Columbia Office of the Chief Financial Officer Jeffrey S. DeWitt concedes that government-mandated PLAs on applicable District of Columbia construction projects exceeding $75 million will “increase contract costs by an estimated 10%” and will “cost the district an extra $26.2 million annually or $157 million over the six-year capital improvement plan period…”:

The requirement to have Project Labor Agreements for construction projects over $75 million is expected to increase contract costs by an estimated 10 percent. Project labor agreements require non-union contractors to follow union practices, such as hiring through union halls and contributing to union pension plans. This is found to discourage contract bids from non-union contractors, thus removing some of the competitive pressure to offer lower-priced bids among the remaining bidders. Studies of school projects in Boston, MA and California demonstrate that a project labor agreement could increase construction project costs anywhere from approximately 4.9 percent to 14 percent, even when prevailing wage laws eliminate wage differentials between unionized and non-unionized labor. The midpoint of these estimates is a 10 percent cost increase. In the current six-year Capital Improvement Plan, construction projects over $75 million account for approximately $262 million in annual spending. Thus, the estimated annual cost of the Project Labor Agreements is $26.2 million annually or $157 million over the six-year capital improvement plan period. This amount must be budgeted in the Capital Improvement Plan to ensure that the District can deliver its planned construction projects.

Concerned citizens are encouraged to Take Action and write D.C. council and Mayor Bowser in opposition to this new policy today.

Doing so will help D.C. lawmakers keep jobs local and provide taxpayers with the best possible construction product at the best possible price.

D.C.’s and the DMV’s Past Government-Mandated PLA Projects Have Failed to Deliver on Promises

Despite claims to the contrary by PLA proponents, the region’s federal, city and local government-mandated PLA projects have suffered increased costs, delays, accidents and poor local hiring outcomes.

In 2010, the General Services Administration (GSA) awarded a $52.3 million contract to a general contractor to build the Lafayette federal building in Washington, D.C., but then forced the contractor to sign a change order and build it with a union-favoring PLA that cost taxpayers an additional $3.3 million.

In 2010, the GSA Headquarters at 1800 F St. in Washington, D.C., suffered a 107-day delay and millions of dollars in cost increases as a result of failed PLA negotiations by labor unions.

In 2013, data collected by Del. Eleanor Holmes-Norton (D) on federal projects subject to PLA mandates located in the District of Columbia demonstrated that PLAs delivered worse local hiring outcomes than other large-scale federal projects not subject to a PLA.

Research from 2009 found D.C. council’s required PLA on the budget-busting Washington Nationals stadium failed to deliver on promises. Just 26 percent of journeymen hours went to D.C. residents, rather than the 50 percent unions promised in the PLA. Half of the contractors involved in the project hired no new apprentices and of the companies that hired new trainees, only 17 of 56 met the PLA requirement that 100 percent of new apprenticeships go to D.C. residents. Due to a special interest handout by ex-Mayor Vincent Gray, the new DC United soccer stadium will be subject to an even more restrictive PLA mandate, despite the failure of the PLA requirement on the Nationals stadium. [Update: According to the Washington Post, the DC United soccer stadium, “Initially estimated to cost $300 million, the project has swelled to about $400 million.”]

Local hiring data collected in 2012 by the Metropolitan Washington Airport Authority (MWAA) for Phase 1 of the $2.8 billion Silver Line project in Northern Virginia found subcontractors performing work without a PLA hired a greater percentage and number of local workers than the prime contractor performing under a voluntary PLA. Bids for Package A for Phase 2 of the Silver Line were 16 percent to 27 percent below the $1.4 billion to $1.6 billion estimate following the removal of a MWAA PLA mandate and PLA preference.

In 2014, the The Baltimore Sun reported that a union-favoring PLA required by Prince George’s County on the construction of the library in Laurel, Md., was scrapped because it caused delays, increased costs, and reduced competition from local contractors and construction workers.

In 2012, bids for a fire station construction project in Brandywine, Md., that was estimated to cost $2.9 million came in at $4.2 million – a 41 percent increase over the estimated cost of the project. The fire station was subject to a PLA mandated by Prince George’s County.

In 2003, the District of Columbia Convention Center finished 40 percent over budget, used out of town contractors and labor, failed to meet LSDBE contractor and local labor participation targets, and experienced an accident when the roof collapsed, which investigators said was due to the improper installation of a 180 foot steel truss by union ironworkers employed by a contractor from Texas.

In 2001, the Woodrow Wilson Bridge’s superstructure contract was temporarily subjected to a union-favoring PLA requirement by former Maryland Gov. Parris Glendening (D). Originally estimated to cost $450 million to $500 million, in December 2001 the Wilson Bridge’s superstructure contract received just one bid at a price of $860 million – $370 million more than engineering estimates, (a 78 percent cost overrun). Eventually, the Wilson Bridge superstructure project was rebid without the government-mandated PLA into three smaller bid packages. In October 2002, multiple bids were received on each of the smaller contracts, and the winning bids came in significantly below the engineering estimates.  While the bridge was delayed more than a year for re-bidding, it was eventually completed below the original budget and completed on time, free from a government-mandated PLA.

In contrast, hundreds of PLA-free private and public projects, such as the district’s recent successful completion of the $376 million 11th Street Bridge project, demonstrate PLA mandates are not needed to deliver a project on time and on budget, while creating jobs for local companies and construction professionals.

In 2010, the D.C. Council considered the District Resident Employment and Trade Stimulus Act of 2010 (Bill 18-650), which would have mandated PLAs on all government-assisted projects costing more than $200,000 in Washington, D.C. The fight over this bill received considerable media attention and additional coverage at TheTruthAboutPLAs.com. Following a June 30 hearing, community outrage, a new report and a damaging fiscal impact statement from the D.C. CFO, bill 18-650 eventually died.

The pro-PLA language contained in Section 14 of The Procurement Integrity, Transparency and Accountability Amendment Act of 2015 (Bill 21-334) also needs to die.

Click here to write or tweet your D.C. Council members TODAY in opposition to Section 14 of Bill 21-334.

7/12/16 Update: PLA schemes tilt the playing field in favor of contractors that agree to use non-local union labor, which hurts the District’s construction industry. They also drive up construction costs for taxpayers because responsible local contractors that do a quality job at the best price refuse to compete for contracts when politicians require them to sign union agreements. With local jobs and your hard-earned tax dollars at stake, now is the time to educate D.C. council members about your opposition to government-mandated PLAs. Tell them you oppose this new discriminatory policy today by clicking this link.

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On July 12, the D.C. council unanimously passed the Procurement Integrity, Transparency and Accountability Amendment Act of 2015 (Bill 21-334) including anti-competitive and discriminatory language that would force Mayor Bowser to mandate project labor agreements (PLAs) on most District of Columbia construction projects exceeding $75 million. I am very disappointed you supported language requiring wasteful and discriminatory PLAs on construction contracts procured by the District of Columbia government. This is bad public policy because it harms the District of Columbia’s taxpayers and contracting community. Costly special interest handouts have no place in this great city. Please keep jobs local and provide taxpayers with the best possible construction product at the best possible price by reconsidering this controversial policy.

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