The Truth About Project Labor Agreements

On May 28, 2019, Nevada Gov. Steve Sisolak (D) signed a bill (SB 231) that will hurt Nevada’s taxpayers and construction industry by reinstating controversial government-mandated project labor agreements on certain Nevada public works projects.

SB 231 repealed a 2015 law (AB 159) passed by the then GOP-controlled legislature and signed by Gov. Sandoval (R).

AB 159, with certain exceptions, prohibited a Nevada state or local government from requiring or prohibiting a bidder, contractor or subcontractor from signing a union agreement with a labor union (like a project labor agreement) as a condition of winning a public or publicly financed construction project.  Nevada’s Fair and Open Competition statute ensured government neutrality in Nevada’s public works contracting and protected $4.7 billion in state and local construction from government-mandated PLAs in 2016 and 2017 and billions of dollars worth of public construction in 2018 and 2019. Supported by taxpayers and the merit shop contracting community, NRS 338.1405 will no longer be law on July 1, 2019.

Passage of SB 231 (and AB 136, a measure rescinding modest 2015 prevailing wage law reforms) was a signature campaign promise of Gov. Sisolak and the Nevada legislature’s Democrats to construction trade unions, following the Democrat party’s takeover of the Nevada legislature and governor’s mansion in the 2018 elections.

Earlier this year, Kentucky passed a pro-taxpayer fair and open competition law, joining 24 other states that have created opportunities for all Americans to rebuild their communities by restricting anti-competitive and costly government-mandated PLAs. A total of 24 states will have active fair and open competition laws once SB 231 is in effect on July 1, 2019. The only other states to rescind fair and open competition policies are Maine (sunset in October 2015), and Minnesota (Executive Order 05-17, signed in 2005 by Gov. Tim Pawlenty (R), expired 3/11/11).

Curious why Nevada’s SB 231 is bad public policy? The Las Vegas Review-Journal published this #NoPLAs op-ed by ABC Nevada President Mac ByBee opposing passage of SB 231 and government-mandated PLAs last month (“Commentary: Let all Nevadans rebuild our infrastructure,” 5/4/19):

Let All Nevadans Rebuild Our Infrastructure
By Mac Bybee, Special to the Review-Journal
May 4, 2019

The Nevada legislature is rapidly advancing legislation, SB 231, that would allow government agencies to deny Nevada construction workers the opportunity to work on taxpayer funded projects. Government-mandated project labor agreements could effectively prevent 80% of Nevada’s construction workforce who don’t belong to a union from competing to build and work on projects funded by our tax dollars. If signed into law, SB 231 will also needlessly increase the cost of construction and contribute to the skilled labor shortage that is plaguing America’s construction industry and Nevada’s economic competitiveness.

When mandated by a government entity like a state agency or county government, PLAs typically force builders—union or not—to follow union work rules and hire most or all workers on a jobsite from union hiring halls. That effectively limits the pool of bidders, since nonunion contractors don’t want to abandon their employees and quality control practices—key components for a safe and productive workplace—for strangers from union halls governed by unfamiliar rules.

The negative impact of government-mandated PLAs on Nevada’s nonunion construction workforce, who comprise almost eight out of 10 members of the state’s construction industry, is especially severe. They lose the wages and benefits they are required to contribute to union plans during the life of a typical PLA project unless they join a union and/or pay union fees and meet plan vesting requirements. It’s a form of wage theft that will harm working families employed in Nevada’s construction industry.

Many lawmakers state they support policies to ensure local construction jobs go to local residents and help women- and minority-owned businesses. However, the truth is, PLAs ensure that out-of-state union travelers have priority over Nevada’s local skilled construction workforce that has chosen not to join a union. In addition, women- and minority-owned businesses are largely nonunion and unlikely to benefit from PLAs promoted by SB 231.

In a March 1, 2019, letter opposing SB 231 sent to Nevada’s political leaders, National Black Chamber of Commerce Chief Executive Officer Harry Alford wrote, “Government-mandated PLAs are opposed by the NBCC because 98 percent of minority-owned contracting firms are not affiliated with unions. African American-owned contracting firms are typically small businesses and employ their own core workforce of skilled construction workers who are not unionized and are generally more diverse than construction workers coming from union hiring halls.”

The truth is, the impetus to pass SB 231 is purely political—to create jobs for union labor and steer contracts to unionized contractors supporting their campaigns. But the unfortunate effect is that they drive up costs.

A May 2017 study by the Beacon Hill Institute in Massachusetts found that PLAs raised the base construction cost of Ohio schools by 13 percent—$23 per square foot in 2016 prices—relative to non-PLA projects. Studies on the effect of PLA mandates on California, New Jersey, New York, Connecticut, and Massachusetts school construction all reached similar conclusions—PLAs increase the cost of construction between 12% and 18%. Simply put, Nevada cannot afford such waste.

For these reasons, in 2015, the Nevada legislature wisely passed a law inviting all Nevadans to compete for construction work on a level playing field by prohibiting government-mandated PLAs. The law protected $4.7 billion in state and local construction from PLAs in 2016 and 2017. A total of 25 states have passed similar measures ensuring fair an open competition on taxpayer-funded construction projects, so the public can get the best possible construction project at the best possible price.

Elections have consequences. And while we understand construction labor unions are a core constituency of the Democratic Party, which currently controls all the levers of government in the state, it makes little sense for elected officials to turn their backs on hard-working Nevadans and waste taxpayer dollars because it is politically expedient.

By rejecting SB 231, Gov. Sisolak and the Nevada legislature can champion the benefits of fair and open competition and welcome all of Nevada’s construction workforce to rebuild Nevada at a price that’s right for the taxpayer.

Mac Bybee is President/CEO of the Associated Builders and Contractors Nevada Chapter.