The Truth About Project Labor Agreements

On Feb. 6, 2009, President Obama signed Executive Order 13502, which encourages federal agencies to mandate controversial project labor agreements (PLAs) on large-scale federal construction projects—those exceeding $25 million in total value—on a case-by-case basis, and permits states and localities to mandate PLAs on federally assisted projects.

Since President Obama issued Executive Order 13502, 23 states have adopted legislation or executive orders ensuring fair and open competition on state and local taxpayer-funded projects, bringing the total number of states to enact such measures to 24.

Simply put, these 24 states have adopted measures to create the conditions for the vast majority of skilled local labor and qualified contractors to compete to deliver to taxpayers the best possible product at the best possible price.

An inclusive policy that creates the best value for taxpayers and ensures that all Americans have a fair shot at improving their local communities and rebuilding U.S. infrastructure is a win-win for taxpayers and the economy.

In 2017, Iowa, Wisconsin, Missouri and Florida passed new measures or strengthened existing laws requiring fair and open competition on public construction projects.

In 2015, Nevada, West Virginia and Arkansas passed similar legislation, while Maine’s 2011 statute sunset in October 2015.

Fortunately, all legal challenges to state and federal policies ensuring government neutrality in contracting have failed.

Fair and open competition reforms in almost half of all states ensured that at least $258.53 billion of state and local government construction projects from 2007 through 2015 were free from government-mandated PLAs. In addition, an estimated $83.23 billion worth of taxpayer-funded state and local construction projects in 24 states will be subject these pro-taxpayer policies in 2018.

However, some states with Democratic governors or Democrat-controlled legislatures have enacted policies promoting government-mandated PLAs on state and state-assisted projects at the expense of taxpayers and the economy, even though just 14 percent of the U.S. construction industry belongs to a union.

PLAs typically ensure construction contracts are awarded only to companies that agree to recognize unions as the representatives of their employees on that job; use the union hiring hall to obtain workers at the expense of existing qualified employees; obtain apprentices exclusively through union apprenticeship programs; follow inefficient union work rules; pay into union benefit and multi-employer pension plans workers will never benefit from, unless they meet vesting requirements; and force workers to pay union dues and/or join a union as a condition of employment.

When mandated by a government agency on taxpayer-funded projects, PLAs drive up the cost of construction projects anywhere from 12 percent to 18 percent, on average, according to a series of academic studies. For example, a study published in May 2017 found Ohio school projects subject to government-mandated PLAs were 13 percent more expensive compared to school projects not built with PLA mandates.

In addition, federal agencies have permitted, and in some cases encouraged, state and local governments to require PLAs on billions of dollars’ worth of state and local projects receiving federal money and other forms of federal assistance.

It is unclear how many federally assisted contracts have suffered from state and local government-mandated PLAs, but snapshots of data demonstrate it is significant. For example, according to a U.S. Department of Transportation (DOT) Federal Highway Administration (FHWA) report of projects receiving FHWA funds from May 7, 2010, to December 11, 2017, state and local lawmakers mandated PLAs on 406 projects totaling an estimated $12.519 billion. (Note: FHWA’s previous report, issued 2/13/17, can be found here).

The Trump administration can follow the lead of 24 states and create the conditions to make America’s infrastructure great again by rescinding President Obama’s failed policy and replacing it with a win-win solution that protects taxpayers, spurs economic growth and allows all Americans to rebuild U.S. infrastructure.

A coalition of 14 construction and business associations sent President Trump a Jan. 24, 2018, letter urging the administration to eliminate government-mandated PLAs on federal and federally assisted projects, allowing all qualified contractors and Americans to fairly compete to build and work on these taxpayer-funded projects. This measure would allow firms to voluntarily enter into PLAs but would prohibit the government from requiring PLAs or giving preference to firms voluntarily utilizing PLAs.

The letter was signed by the following 14 construction and business groups:

American Council of Engineering Companies (ACEC)
American Fire Sprinkler Association (AFSA)
American Road & Transportation Builders Association (ARTBA)
Associated Builders and Contractors (ABC)
Business Coalition for Fair Competition (BCFC)
Construction Industry Round Table (CIRT)
Independent Electrical Contractors Association (IEC)
National Association of Government Contractors (NAGC)
National Association of Home Builders (NAHB)
National Black Chamber of Commerce (NBCC)
National Federation of Independent Business (NFIB)
National Ready Mixed Concrete Association (NRMCA)
Small Business and Entrepreneurship Council (SBEC)
U.S. Chamber of Commerce

Associated General Contractors sent a similar letter to the Trump administration on January 25.

In 2017, coalition members also sent a letter to the Senate and a letter to the House supporting the Fair and Open Competition Act (H.R. 1552/S.622), which would also boost competition on government construction projects and reduce building costs to taxpayers by preventing governments from forcing contractors to sign controversial PLAs in order to compete to build federal and federally assisted construction contracts.

H.R. 1552, introduced in the 115th Congress by Rep. Dennis Ross (R-Fla.), has 90 cosponsors and was reported favorably out of the House Committee on Oversight and Government Reform in March 2017.

The Senate version of the bill, S. 622, awaits further action in the Senate Homeland Security and Governemnt Affairs Committee.

Congress should pass the Fair and Open Competition Act and permanently ensure government neutrality in federal contracting.