February 2021 Update: ABC’s Fight Against Government-Mandated Project Labor Agreements

0 February 10, 2021  Featured, Federal Construction

Among the many anticipated policy changes that will impact the construction industry following the November 2020 elections, the Biden administration and the 117th Congress are likely to attempt to enhance and expand the federal government’s current controversial policy of promoting costly government-mandated project labor agreements on taxpayer-funded construction projects. Doing so would create a rigged and corrupt bidding process that denies jobs to local construction industry workers and businesses, drives up the cost for taxpayers and yields fewer infrastructure improvements.

As discussed in this February 4, 2021, letter to the Biden administration, ABC supports fair and open competition and opposes government-mandated PLAs on federal and federally assisted projects because taxpayers deserve more efficient and effective policies that will encourage all qualified contractors and their skilled workforce to compete to build long-lasting, quality projects at the best price.

ABC’s Fight Against Government-Mandated PLAs Since 2009

In February 2009, former President Obama signed Executive Order 13502, which encourages federal agencies to mandate PLAs on large-scale federal construction projects exceeding $25 million in total cost on a case-by-case basis, and permits recipients of federal assistance to mandate PLAs on state and local public works projects.

Many merit shop advocates and public policy professionals predicted the policy would steer billions of dollars’ worth of federal and federally assisted construction contracts to unionized contractors and their all-union workforces—without true competition from qualified merit shop contractors and their nonunion employees, who compose 87.3% of the U.S. construction industry.

Industry experts feared the policy would result in hardworking taxpayers needlessly paying nearly 20% more per federal contract procured with a PLA requirement. Faced with finite building budgets, the order would effectively generate less public building and infrastructure improvements, and would create fewer jobs for the experienced men and women employed by merit shop contractors who deliver projects safely, on time and on budget every day to the federal government.

Stakeholders turned to Associated Builders and Contractors to defend fair and open competition in federal contracting. ABC and the merit shop contracting community mobilized an aggressive campaign of effective public relations, political, legal and legislative strategies to restrict the devastating impact of anti-competitive and costly government-mandated PLAs on federal, state and local public works projects.

It has been more than a decade since ABC began its fight against the Obama administration’s controversial pro-PLA policy, and the campaign continues to produce impressive results.

ABC’s campaign helped prevent PLA mandates and preferences on 99% of federal contracts exceeding $25 million during fiscal years 2009-2020, preventing PLA requirements on 1,877 contracts worth a total of almost $116.1 billion so all qualified firms could fairly compete to win these contracts.

ABC contractors have taken advantage of a level playing field. During fiscal years 2009-2020, ABC member prime contractors won 57.52% of the value of large-scale federal contracts subject to Obama’s pro-PLA Executive Order 13502. In total, ABC members have won 976 contracts valued at $67.5 billion from fiscal years 2009-2020.

Effective Tactics to Combat Government-Mandated PLAs on Federal and Federally Assisted Construction Projects

Legal tactics proved effective at stopping federal PLA mandates once regulations implementing Obama’s Executive Order 13502 went into effect in 2010.

Federal contractors, with the support of ABC, filed five Government Accountability Office bid protests against PLAs mandated by four different federal agencies on large-scale federal construction projects. In each instance, federal agencies abandoned the PLA requirements after GAO officials suggested they violate federal contracting laws in specific circumstances.

The most recent GAO legal victory, against a PLA mandate on a U.S. Department of Labor Job Corps Center in Manchester, New Hampshire, was the DOL’s second failed attempt to require a PLA on the project. It also resulted in the first apples-to-apples comparison during the Obama administration of a federal project bid with and without a PLA requirement. Advocates of fair and open competition were not surprised when in 2013, the PLA-free project drew three times as many bidders and bid prices that were 16% less than when the project was bid with a PLA mandate, saving taxpayers more than $6.2 million and ensuring a local firm with local workers built the project on time and on budget to the satisfaction of the DOL.

Helping merit shop contractors respond to more than 500 surveys issued by federal agencies to determine if a PLA is appropriate for a federal project has been another effective strategy in the fight against government-mandated PLAs. While ABC has asked the White House and Congress to reform the time-consuming federal agency PLA survey process, a robust response from the merit shop contracting community has resulted in no PLA requirements on any surveyed projects, to date.

More importantly, ABC’s campaign prevented the expansion of Executive Order 13502 onto federal projects costing less than $25 million, and thwarted an additional federal push for costly PLA mandates on private, state and local projects receiving federal assistance.

Since former President Obama issued Executive Order 13502 in 2009, 26 states have responded to the threat of discriminatory PLA mandates and preferences by enacting Fair and Open Competition Act legislation prohibiting government-mandated PLAs on state and local taxpayer-funded construction projects to some degree to send a message to the federal government that PLA mandates are not welcome on local projects.

Unfortunately, some of these states have rolled back common-sense FOCA measures following Democratic party takeovers of state government, bringing the total number of current states with active pro-taxpayer FOCA measures to 25.

To date, all legal challenges to state and federal FOCA policies ensuring government neutrality in public works contracting have failed.

ABC’s efforts to enact state FOCA laws prevented government-mandated PLAs on $633 billion worth of construction capital outlay through the end of 2019.

In addition, dozens of communities across the country have also enacted similar FOCA laws.

These efforts ensure a level playing field, increase competition, reduce costs and eliminate cronyism in public works contracting procured by state and local governments.

Government-Mandated PLAs Remain a Threat to Free Enterprise

Despite the campaign’s track record of success, government-mandated PLAs remain a threat to free enterprise and fair and open competition in certain markets.

Some municipalities and eight states controlled by union-friendly Democrats have enacted legislation or executive orders pushing the use of government-mandated PLAs on state, state-assisted and local public works projects, shutting out qualified contractors on certain public works contracts in states such as in California, Connecticut, Hawaii, Illinois, New Jersey, New York and Washington—and major municipalities including ChicagoHonolulu, Los Angeles, New York City, and Philadelphia—from opportunities to rebuild their own communities.

In addition, some Obama administration federal agencies  like the U.S. Department of Housing and Urban Development and U.S. Department of Transportation 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 PLA mandates, but snapshots of data demonstrate it is significant.

For example, according to a U.S. DOT Federal Highway Administration January 2021 report, state and local lawmakers mandated PLAs on 513 state and local construction projects (totaling an estimated $12.88 billion) that received federal assistance and formal approval from the FHWA.

While ABC’s campaign against these anti-competitive schemes on federal projects has been largely successful, lawmakers requiring and encouraging the use of special interest-favoring PLA mandates on non-federal projects continues to cost taxpayers a fortune and harm qualified merit shop contractors and their skilled trades employees.

According to a model developed by Markstein Advisors, every $1 billion in extra overall construction spending generates an average of at least 6,500 construction jobs, and every $1 billion in extra construction spending on infrastructure generates an average of at least 3,300 construction jobs. As the construction industry faces a 9.4% unemployment rate due to the recession caused by COVID-19 and America’s infrastructure remains critically underfunded, we need to be doing all we can to maximize taxpayer investments in infrastructure while helping all construction workers find quality jobs to rebuild their communities.

Corrupt Government-mandated PLAs Rig the Bidding Process

Problematic, anti-competitive terms in government-mandated PLAs require contractors to:

  • Use union hiring halls to obtain most or all workers instead of their existing workforce.
  • Obtain apprentices exclusively from union apprenticeship programs.
  • Follow inefficient union work rules.
  • Pay into union benefit and multi-employer pension plans that any limited number of nonunion employees permitted on the project will be unlikely to access unless they join a union and vest in these plans.

Research estimates that nonunion employees on PLA projects suffer an estimated 20% reduction in compensation and contractors pay an extra 25% in benefits costs to cover this PLA wage theft to union plans, making merit shop firms less competitive against unionized firms. In addition, any limited number of nonunion workers are forced to join a union and/or pay union dues as a condition of employment. The practical impact of government-mandated PLAs is that they discourage competition from qualified and local contractors and their skilled employees who want nothing more than to pursue their career dreams, provide for their families and rebuild their communities.

Contracts subject to government-mandated PLAs steer work to benefit union-signatory contractors and well-connected construction unions favored in PLAs, who use their members’ dues to support the political campaigns of candidates who pledge to push PLA mandates on taxpayer-funded projects that deny opportunities to the more 87% of U.S. private construction workers who choose not to join a union.

Potential PLA mandates on taxpayer-funded contracts expose officials to intense political pressure, as unions spend millions to secure a monopoly on public works construction projects.

According to public filings, in the 2019-2020 election cycle, the 14 construction trade unions affiliated with the North America’s Building Trades Unions disbursed nearly $66 million in federal PAC dollars to federal, state and local candidates, committees, joint fundraising committees, national state and local parties and various other expenses.

These PACs contributed almost $15 million to federal candidates, and $13.51 million—90%—went to Democratic candidates.

Continuing the #NoPLAs Fight in 2021

As we have done throughout the Trump and Obama administrations, ABC and a diverse coalition of organizations will continue to prioritize defending fair and open competition in public contracting during the Biden administration and the 117th Congress.

In the 116th Congress, ABC and the coalition were strong supporters of federal legislation called the Fair and Open Competition Act (H.R. 1858/S. 907), introduced by Rep. Ted Budd (R-N.C.) and Sen. Todd Young (R-Ind.), which prevents federal agencies and recipients of federal funding from requiring contractors to sign controversial PLAs as a condition of winning federal or federally assisted construction contracts.

This measure will be reintroduced in the 117th Congress. Unfortunately, House Democrats controlling the House agenda will make sure this bill does not pass. In fact, in the 116th Congress, House Democrats pushed for PLA mandates on infrastructure projects (see page 1139 of H.R. 4447, the Clean Economy Jobs and Innovation Act), but the Republican-controlled U.S. Senate stripped such anti-competitive language from the bill in conference.

Because FOCA is a win-win for taxpayers and the U.S. economy and it creates an inclusive policy allowing all U.S. workers and all qualified companies to fairly compete to rebuild America’s infrastructure, more than 100 lawmakers cosponsored FOCA (H.R. 1552/S. 622), introduced by Rep. Dennis Ross (R-Fla.)  and Sen. Jeff Flake (R-Ariz.) in the 115th Congress. The bill was reported favorably out of the House of Representatives Oversight and Government Reform Committee. However, it never received a formal vote on the House floor.

ABC and a coalition of stakeholders urged the Trump administration and Congress to eliminate government-mandated PLAs on federal and federally assisted projects. Coalition letters have stressed that such reform would create a level playing field in the procurement of government construction contracts, increase competition, curb construction costs and help small businesses grow.

Unfortunately, the Trump administration failed to rescind the Obama administration’s pro-PLA policy and replace it with pro-taxpayer and pro-infrastructure FOCA policies like President Bush’s Executive Orders 13202 and 13208.

However, the Trump administration did not mandate PLAs on any federal projects or encourage their use or expand the Obama administration’s pro-PLA policy in any way.

In 2021, ABC will continue to implement effective legislative, legal and regulatory strategies complemented by communications and grassroots campaigns to educate federal agency procurement officials, lawmakers, industry stakeholders, the media and hardworking taxpayers about the harmful effects of special interest PLA schemes.

ABC will fight for federal, state, and local policies that create a level playing field in the procurement of government construction contracts, increase competition, help small businesses grow, curb construction costs and spread the job-creating benefits of taxpayer- funded contracts throughout the entire construction industry.

But we cannot do it alone. The merit shop contracting community can overcome these discriminatory PLA schemes as long as industry leaders remain diligent, support candidates who believe in free enterprise, and continue to educate lawmakers, employees and stakeholders about this campaign until a political or legislative solution is achievable.

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