Virginia General Assembly Sends Project Labor Agreement and Prevailing Wage Legislation to Gov. Northam – Take Action

0 March 11, 2020  Featured, School Construction, State & Local Construction, Transportation & Infrastructure

Virginia’s General Assembly has sent legislation to Gov. Ralph Northam’s desk that will needlessly increase the cost of taxpayer-funded public works construction projects, discourage competition from Virginia’s construction workforce and businesses. In addition, the legislation will steer contracts to out-of-state workers and firms instead of creating opportunities for certified small, women and minority contractors to build and renovate schools, affordable housing, roads, bridges and other infrastructure projects across the Commonwealth.

Virginia residents are encouraged to contact Gov. Northam and oppose these measures through this grassroots campaign website.

Legislation introduced by Senate Majority Leader Dick Saslaw (SB 182) and Del. Alfonso Lopez (HB 358), will eliminate Virginia’s Fair and Open Competition statute restricting government-mandated project labor agreements, which will allow state and local governments to mandate PLAs on public works construction projects.

When mandated by governments, PLAs prevent nonunion contractors and subcontractors—which employ 97.8% of Virginia’s construction workforce—from building and working on projects funded by taxpayer dollars. As a result, taxpayers can expect to pay 12% to 20% more on all government-mandated PLA projects.

Government-mandated PLAs force Virginia contractors to follow inefficient union work rules, pay into union pension and benefits plans, and hire most or all craft workers on a jobsite from specified union halls and union apprenticeship programs instead of journeyman and apprentices already employed by their company. That limits the pool of bidders, since nonunion contractors don’t want to abandon their existing employees and quality-control practices—key components of a safe and productive workplace—for strangers from union halls governed by unfamiliar rules.

Members of Virginia’s construction industry could suffer wage theft due to government-mandated PLAs as nonunion workers (and some union workers) lose an estimated 20% of wages and benefits earned on a PLA project unless they accept union representation, join a specific union, pay membership dues and meet the union benefits plan’s vesting requirements.

In addition, legislation introduced by Sen. Saslaw (SB 8) and Del. Jennifer Carroll Foy (HB 833) would result in prevailing wage requirements on construction projects at non-market rates set by the U.S. Department of Labor, via the 1931 Davis-Bacon Act. These bills mandate prevailing wage requirements on all construction contracts exceeding $250,000 procured by state governments and permit local governments to pass an ordinance requiring prevailing wages on local public works projects like schools, affordable housing and other transportation and infrastructure improvements.

Research suggests prevailing wage regulations increase compliance and regulatory burdens on small businesses and increases construction costs from 10% to 25%, depending on the market, project and accuracy of the government-determined rates.

The net impact of both of these bills is that it will lead to state and local tax hikes or fewer public works construction projects procured by the Commonwealth’s state and local governments. In addition, it will needlessly steer contracts to out-of-state unionized businesses and unionized workers at the expense of Virginia’s construction industry and SWaM contractors.

Gov. Northam can amend or veto these bills by April 11. If amended, the General Assembly can approve the amendments by a simple majority in both chambers when they reconvene April 22.

Virginia residents are encouraged to contact Gov. Northam and oppose these measures through this grassroots campaign website.

Alternatively, stakeholders with employees, offices and contracts in Virginia can customize this message and send it to Gov. Northam via this webform and email it to targeted Virginia House and Senate lawmakers.

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FAQs

Won’t these bills undermine Gov. Northam’s commitment to creating opportunities for Virginia-certified small, women and minority contractors (SWaM) via Executive Order 35 and a recently announced SWaM contractor disparity study?

Yes. Almost 100% of Virginia’s SWaM-certified firms are nonunion and PLA and prevailing wage mandates would serve as another barrier to achieving Gov. Northam’s ambitious plan directing his administration and state agencies to exceed a target of awarding 42% of discretionary spending to small businesses certified by DSBSD. Read the National Black Chamber of Commerce’s March 17 letter to Gov. Northam urging a veto of these bills.

Will this “pay to PLAy” scheme benefit out-of-state unionized labor and contractors at the expense of Virginia’s SWaM contractors and construction industry?

At least 46 construction unions gave a total of $1.68 million in direct contributions to Democratic political campaigns during Virginia’s 2018-2019 cycle, according to campaign filings compiled by the Virginia Public Access Project, a nonprofit that monitors campaign contributions by special interest groups. It isn’t a coincidence that almost 60% of the aforementioned $1.68 million in political contributions this election cycle—almost all to Democratic lawmakers—came from out-of-state construction unions with a vested interest in lobbying Virginia’s leadership to stifle competition from local and qualified businesses, which employ more than 97% of Virginia’s construction industry.

Why do PLA advocates argue PLA mandates are needed?

PLA lobbyists argue governments should mandate PLAs in order to ensure quality construction, prevent strikes, curb delays and cost overruns and create local jobs. But the truth is the public record of poor performance of government-mandated PLAs in the region and across the country undermine common pro-PLA arguments made by PLA lobbyists.

Don’t only construction unions strike? Is this extortion?

Arguments that government-mandated PLAs—which essentially grant unionized contractors and unionized labor a monopoly on public works projects—are needed to prevent strikes caused by unions is tantamount to extortion. In addition, strikes in this market are extremely rare. According to a list of construction industry work stoppages recorded by the Federal Mediation and Conciliation Service, there have been only eight construction industry work stoppages in Virginia since 1984. Outside of two Teamsters-led work stoppages in 2015 in Springfield, Virginia, the most recent work stoppage was in 1994 and no work stoppages have been recorded in neighboring Washington, D.C.

Won’t PLA mandates exacerbate Virginia’s skilled labor shortage in the construction industry?

Yes. The U.S. construction industry currently faces a severe shortage of skilled labor and in 2019, the industry needed to fill an estimated 440,000 skilled positions to meet industry demand. Unfortunately, PLA mandates will limit the ability of Virginia’s nonunion construction workforce—currently 97.8% of Virginia’s construction industry—and tomorrow’s construction workforce enrolled in government-registered and industry-driven merit shop and community apprenticeship and workforce development programs unaffiliated with unions from employment opportunities on PLA projects.

Will Virginia’s workers lose because these bills are an end around Virginia’s Right to Work law for the construction industry?

Yes. With typical government-mandated PLAs, contractors must get most or all of their skilled labor from union halls. All construction craft employees must join a union and/or pay union dues as a condition of employment. Some PLAs permit a limited number of nonunion construction workers to work on PLA jobsites if they already work for a nonunion business, but a PLA ensures they will never access employer and employee contributions to (sometimes troubled) union benefit and pension plans unless they join a union and meet vesting schedules.

In fact, workers employed in Virginia’s construction industry could experience wage theft due to government-mandated PLAs as nonunion workers (and some union workers) lose an estimated 20% of wages and benefits earned on a PLA project unless they accept union representation, join a specific union, pay membership dues and meet the union benefits plan’s vesting requirements.

Are government-mandated PLAs allowed on the Silver Line metrorail construction projects?

Phase 1 and Phase 2 of Northern Virginia’s multi-billion Silver Line project were not subjected to government-mandated project labor agreements. However, portions of Phase 1 and Phase 2 of the Silver Line were built with unique PLA agreements a handful of contractors voluntarily entered into with unions without government coercion. Firms were able to negotiate the terms and conditions of the agreements directly with PLA-signatory unions, including provisions making the PLA optional for subcontractors on Phase 1 of the Silver Line. Other 2020 General Assembly bills by Sen. Scott Surovell (SB 995) and Del. Alphonso Lopez (HB 1635) signed into law by Gov. Northam eliminate fair and open competition protections on metrorail construction projects procured by the Washington Metropolitan Area Transit Authority, which would permit future PLA mandates on metro construction projects similar to the controversial failed attempt to mandate a PLA on Phase 2 of the Silver Line.

Are PLAs a pathway to local hiring?

In past PLA lobbying efforts across the region, PLA proponents claim government-mandated PLAs create a pathway to jobs for local residents. For example, proponents of a government-mandated PLA on Audi Field, the D.C. United soccer stadium,[1] predicted successful local hiring outcomes as a result of the Nationals Park PLA mandated by the Washington, D.C. City Council.[2]  However, following a review of publicly available data on local hiring outcomes on the Nationals stadium, the truth is the Nationals Park PLA failed to deliver on many of its local hiring promises.

According to the November 2009 D.C. Progress report, The True Cost of the Washington Nationals Ballpark Project Labor Agreement:[3]

“The Nationals Park PLA created a huge barrier for the District’s non-union workforce: 85% of construction workers and 95% of minority-owned contractors were left out of the work.”

In addition, the study found reduced competition in bidding and other problems needlessly increased construction costs:

“The cost of the ballpark may reach $800 million,[4] more than double the initial cost estimate of $395 million. The union-only PLA increased costs by reducing the pool of potential bidders. Future PLAs will do the same.”

The Nationals Park PLA established three main goals to track and measure the PLA’s success in local job creation. However, the PLA only met one goal. For example, the PLA was supposed to ensure Washington,  D.C. workers performed 50% of journeyperson hours, but the report found that goal was not met:

“A whopping 74% of the higher paid journeymen hours went to non-residents.”[5]

Another study, Broken Promises, Big Losses: The Story of D.C. Workers Watching From the Dugout as the $611 Million Washington Nationals Ballpark Is Built, also found that the PLA couldn’t deliver on local hiring promises:[6]

“…non-D.C. residents worked 506,926 journeyperson hours (71.1% of total journeyperson hours), while D.C. residents worked just 206,444 journeyperson hours (28.9%), far below the PLA requirement that D.C. residents work 50% of total journeyperson hours.”

Additionally, this study found that half of the contractors involved in the project hired no new apprentices; of the 56 companies that hired new trainees, only 17 met the PLA requirement that 100% of new apprenticeships go to Washington, D.C., residents.

Other PLA projects in the region have a disappointing record of local hire.

In 2012, it was reported that the majority of craft workers (58%) building Phase 1 of the Silver Line under the prime contractor’s voluntary PLA were from Maryland or other states, despite the fact that the project is located in Northern Virginia.[7] In contrast, the project’s subcontractors that were not subject to a PLA reported the majority of their workforce came from Virginia.

In 2013, data collected by Rep. Eleanor Holmes-Norton (D-D.C.) on federal projects located in the Washington, D.C. subject to PLA mandates demonstrated that PLAs delivered worse local hiring outcomes than other large-scale federal projects not subject to a PLA mandate.[8]

Projects subject to government-mandated PLAs often fail to deliver on local hire promises and do not lead to any net local job creation because:

  • Guaranteeing a local workforce is against most union hiring hall rules, which dispatch workers on a first-in, first-out basis, giving preference to workers who have been out of work for the longest amount of time.
  • In a booming construction market, there is not enough available skilled union labor to meet project demands and needs.
  • Even in a normal construction market, there is not enough skilled local union labor in certain crafts to meet local hiring demands, and unions signatory to PLAs are located as far away as Philadelphia.
  • Out-of-area union members called “travelers” or “boomers” are given hiring preference over local nonunion construction workers under a typical PLA.

Finally, union contractors often engage in “checkerboarding” to meet local hiring goals, which is the practice of taking local workers off other projects and using them on PLA projects subject to local hire regulations, and then backfilling those vacated jobs with non-local union workers. As such, there is no net gain in local employment for the community.[9]

[1] The D.C. United Stadium Project Labor Agreement can be accessed here: http://thetruthaboutplas.com/wp-content/uploads/2013/09/DC-United-Stadium-Project-Labor-Agreement.pdf.
Learn more about the D.C. United stadium PLA here: http://thetruthaboutplas.com/2013/09/10/mayor-grays-project-labor-agreement-on-new-dc-united-stadium-deserves-a-red-card/.

[2] See Nationals Stadium PLA at http://thetruthaboutplas.com/wp-content/uploads/2013/09/DC-Nationals-Stadium-PLA-As-Issued.pdf

[3] DC Progress, The True Cost of the Washington Nationals Ballpark Project Labor Agreement, November 2009.

[4] Washington City Paper, Please Stop Calling It a $611 Million Ballpark Please, March 31, 2008.

[5] Data used in the D.C. Progress report is from a September 2008 report from the Clark/Hunt/Smoot JV to the DC Sports and Entertainment Commission, which indicates contractors missed multiple hiring goals set by the PLA. See Clark/Hunt/Smoot JV report, Setting a New Standard for Economic Inclusion for District Businesses and Workers in the Construction of the New Nationals Ballpark, A Report to the DC Sports & Entertainment Commission, Sept. 9, 2008, and Washington Post, Stadium Project Falling Short Of City’s Ambitious Hiring Goals. Feb. 24, 2008. http://www.washingtonpost.com/wp-dyn/content/article/2008/02/23/AR2008022301651.html.

[6] District Economic Empowerment Coalition, Broken Promises, Big Losses: The Story of DC Workers Watching from the Dugout as the $611 Million Washington Nationals Ballpark is Built, Oct. 2, 2007. 

[7] See Washington Examiner, Virginia, Maryland workers split Dulles rail jobs. May 21, 2012 https://www.washingtonexaminer.com/virginia-maryland-workers-split-dulles-rail-jobs and TheTruthAboutPLAs.com Data Shows Project Labor Agreement on Phase 2 of Silver Line Could Hurt Virginia’s Construction Industry. May 18, 2012. https://thetruthaboutplas.com/2012/05/18/data-shows-project-labor-agreement-on-phase-2-of-silver-line-could-hurt-virginias-construction-industry/

[8] See TheTruthAboutPLAs.com http://thetruthaboutplas.com/2013/03/11/data-busts-myth-that-project-labor-agreements-result-in-increased-local-hiring/.

[9] See TheTruthAboutPLAs.com http://thetruthaboutplas.com/2010/08/05/project-labor-agreements-and-big-labor-fail-at-local-job-creation/, Aug. 5, 2010.

Will local governments mandate PLAs and prevailing wage requirements on every construction project?

Under current law, all federal and federally assisted construction projects exceeding $2,000 are subject to federal prevailing wage requirements subject to the 1930s-era Davis-Bacon Act. However, those requirements do not extend to state or local projects unless they receive federal money.

Under the proposed legislation (SB 8/HB 833), prevailing wage regulations will be required on any state construction contracts exceeding $250,000, which is just about everything procured by the state. Local governments would be allowed to mandate prevailing wage requirements via ordinance or on specific public works projects such as schools, libraries, hospitals, police stations, affordable housing and local infrastructure and transportation projects.

Government-mandated PLAs would not be required on all state and local projects, but the legislation allows (SB 182/HB 358) state and local governments mandate PLAs on a case-by-case basis or via more comprehensive ordinances.

We expect prevailing wage and PLA mandate ordinances to be pushed by PLA advocates before many local governments, especially in Northern Virginia, Richmond and in the Tidewater area, if this law is enacted July 1, 2020. Taxpayers should be ready for PLA and prevailing wage lobbyists to run a sophisticated playbook in Virginia, as they have done so in California, Hawaii, Illinois, New York, Connecticut, New Jersey and other markets across the country, resulting in increased construction costs and reduced competition for public works contracts.

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