Biden and Treasury Promote Project Labor Agreement Schemes on Taxpayer-funded Construction Projects in American Rescue Plan

0 May 12, 2021  Featured, Federal Construction, State & Local Construction

The Biden administration and U.S. Department of the Treasury have taken another unfortunate step promoting anti-competitive and costly government-mandated project labor agreements on taxpayer-funded construction projects. The latest effort to steer public works construction projects to unionized contractors and union labor at the expense of taxpayers and fair and open competition is sure to create confusion for state and local governments and harm local construction workers and small businesses not affiliated with trade unions.

On May 10, Treasury released guidance on $350 billion worth of federal funding for state and local fiscal recovery allocated in the American Rescue Plan, which was signed into law by President Joe Biden on March 11.

As part of the interim final rule, Treasury released a fact sheet detailing how this money can be used to offset state and local budget shortfalls, support COVID-19 response efforts and address economic stabilization for households and businesses. Notable guidance impacting the construction industry includes:

  • Investing in water and sewer infrastructure: State and localities may use funding to invest in an array of drinking water infrastructure projects, such as building or upgrading facilities and transmission, distribution and storage systems, including the replacement of lead service lines. Recipients may also use this funding to invest in wastewater infrastructure projects, including constructing publicly owned treatment infrastructure, managing and treating stormwater or subsurface drainage water, facilitating water reuse and securing publicly owned treatment works.
  • Investing in broadband infrastructure: States and localities may use funds to ensure broadband be made accessible in areas that are currently unserved or underserved. They are also encouraged to prioritize projects that achieve last-mile connections to households and businesses.
  • Replacing lost public sector revenue: State, local, territorial and Tribal governments that are facing budget shortfalls may use Coronavirus State and Local Fiscal Recovery Funds to avoid cuts to government services. States and localities will have broad latitude to use this funding to support government services and may be able to apply it to infrastructure and transit projects negatively impacted by COVID-19. Additional details can be found on page 60 of the interim final rule (“Sections 602(c)(1)(C) and 603(c)(1)(C) of the Act provide recipients with broad latitude to use the Fiscal Recovery Funds for the provision of government services. Government services can include, but are not limited to, maintenance or pay-go funded building [123of infrastructure, including roads; modernization of cybersecurity, including hardware, software, and protection of critical infrastructure; health services; environmental remediation; school or educational services; and the provision of police, fire, and other public safety services.“)

Unfortunately, item 6 of the fact sheet, “encourages recipients to ensure that water, sewer and broadband projects use strong labor standards, including project labor agreements and community benefits agreements that offer wages at or above the prevailing rate and include local hire provisions.”

This section (page 62) of the Treasury interim final rule elaborates on this language further:

“It is important that necessary investments in water, sewer, or broadband infrastructure be carried out in ways that produce high-quality infrastructure, avert disruptive and costly delays, and promote efficiency. Treasury encourages recipients to ensure that water, sewer, and broadband projects use strong labor standards, including project labor agreements and community benefits agreements that offer wages at or above the prevailing rate and include local hire provisions, not only to promote effective and efficient delivery of high-quality infrastructure projects but also to support the economic recovery through strong employment opportunities for workers. Using these practices in construction projects may help to ensure a reliable supply of skilled labor that would minimize disruptions, such as those associated with labor disputes or workplace injuries.

To provide public transparency on whether projects are using practices that promote ontime and on-budget delivery, Treasury will seek information from recipients on their workforce plans and practices related to water, sewer, and broadband projects undertaken with Fiscal Recovery Funds. Treasury will provide additional guidance and instructions on the reporting requirements at a later date.”

To be clear, this is not a mandate requiring states and localities to use controversial PLAs and other pro-labor provisions as a condition of accessing federal ARP money for applicable water, sewer, broadband and other infrastructure projects.

However, the practical impact of this language is unknown at this time. State and local governments and construction industry stakeholders will have to wait for additional Treasury guidance and rulemaking about reporting requirements about “workforce plans” at a date to be determined to alleviate any questions or confusion.

Update: On May 17, the Federal Register published the Coronavirus State and Local Fiscal Recovery Funds interim final rule and comments must be received on or before July 16, 2021. Learn more about a May 24 letter ABC sent to the Treasury expressing concerns with this encouragement to use PLAs on state and local projects supported by ARPA federal taxpayer dollars.

Corrupt Government-mandated PLAs Rig the Bidding Process

The justifications cited in the Treasury interim rule encouraging states and localities to mandate PLAs is nonsense. PLAs contribute to a skilled workforce shortage by locking out nonunion construction workers and businesses from taxpayer-funded construction projects and undermining established workforce development pipelines preferred by industry. These extortionary schemes are an alleged solution to labor strikes. However, they are exclusively caused by the very lobby benefiting from labor monopolies for unions delivered via PLA schemes. PLA mandates undermine local hire and the 87% of the construction workforce not affiliated with unions and have been responsible for increased costs, reduced competition and a failure at preventing delays, accidents, labor law violations and other problems on federally assisted projects.

While ABC’s campaign against anti-competitive PLA mandate schemes on federal projects has been largely successful, lawmakers requiring and encouraging the use of special interest-favoring PLA mandates on non-federal projects funded by federal, state and local tax dollars continues to needlessly cost hardworking taxpayers perhaps 20% or more per project.

PLA mandates rig the bidding process to discourage experienced nonunion and some union contractors and their qualified workforce from competing to build transformational taxpayer-funded projects. They also deny well-paying local jobs to the more than 87% of U.S. construction industry workers who choose not to affiliate with unions.

Problematic terms in government-mandated PLAs discourage competition by forcing 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 the few nonunion employees permitted on the project will be unlikely to access unless they join a union and vest in these plans.
  • Require their existing workforce to accept union representation, pay union dues and/or join a union as a condition of employment and receiving benefits on a PLA jobsite, resulting in an estimated 20% hit to the paychecks of local craft professionals.

Potential PLA mandates on taxpayer-funded contracts expose officials to intense political pressure, as construction unions raise and spend millions of dollars to help elect lawmakers willing to pass policies that grant donors a monopoly on public works construction projects.

Taxpayers and industry stakeholders should be deeply concerned that the 117th Congress and the Biden administration will expand the use of government-mandated PLAs on federal and federally assisted construction projects.

Government-mandated PLAs and the Future Infrastructure Legislation

Treasury’s pro-PLA language is consistent with language in the Biden administration’s March 31 release of the American Jobs Plan, an outline of $2.25 trillion of government spending that includes investments in infrastructure and clean energy that the administration wants to be built with union labor at the expense of the 87% of the construction workforce that freely chooses not to join a union.

In response, ABC has raised concerns about the AJP’s tax hikes on small businesses and language calling on Congress to pass the ABC-opposed Protecting the Right to Organize Act and tie controversial government-mandated PLAs to federal investments in infrastructure via forthcoming legislation.

On May 5, ABC and a coalition of 16 industry and employer groups sent a letter to President Biden raising concerns about the administration’s direct expansion and support of legislative policies encouraging or requiring controversial government-mandated project labor agreements on federal and federally assisted construction projects.

“Simply put, the Biden administration cannot meet its infrastructure, affordable housing and clean energy agenda without strong participation from the construction industry directly harmed by anti-competitive and costly government-mandated PLA policies,” said the coalition letter.

The coalition also launched a website, BuildAmericaLocal.com, to educate the public about government-mandated PLAs on federal and federally assisted construction projects and stakeholders can write their elected officials in support of fair and open competition.

In an April 28 op-ed published in The Hill, titled America can build back better through fair and open competition, ABC pushed back on controversial provisions in the AJP that would harm the merit shop contracting community:

“At a time when our economy is showing signs of recovery, the Biden administration and Congress should support policies that help bring our economic engine roaring back to life. Fair and open competition on taxpayer-funded construction projects will ultimately result in savings to taxpayers, more opportunities and jobs for all qualified local small businesses, minorities and women in the construction industry, and the construction of more quality infrastructure projects so America can Build Back Better and faster.”

On March 5, ABC and a coalition of 14 industry and employer groups sent a letter to President Biden raising concerns about the expansion of policies encouraging or mandating PLAs on federal and federally assisted construction projects.

ABC and the coalition are monitoring the Biden administration’s executive actions, federal agency policies and legislation introduced in the 117th Congress that might promote government-mandated PLAs and exclude quality contractors and 87% of the construction industry from competing to win contracts to build construction projects funded and authorized in forthcoming spending and infrastructure legislation.

ABC and the coalition also support the Fair and Open Competition Act (S. 403/H.R. 1284), reintroduced in the 117th Congress by Sen. Todd Young (R-Ind.) and Rep. Ted Budd (R-N.C.), which would restrict government-mandated PLAs on federal and federally assisted construction projects.

In a Feb. 24 press release, ABC applauded the introduction of the bill that would encourage more qualified construction companies to compete for federal and federally funded construction projects, providing value for hardworking taxpayers while benefiting the construction industry.

After the bill was introduced, an ABC-led coalition of 17 construction industry and business associations sent a letter to Congress in support of the bill, urging them to immediately pass this legislation.

ABC encourages ABC chapters, members and industry stakeholders to participate in a grassroots campaign urging their U.S. House and Senate lawmakers to sign on as a co-sponsor of FOCA in the 117th Congress.

ABC members can learn more about ABC’s historical efforts opposing government-mandated PLAsABC’s current campaign and the coalition’s campaign in support of fair and open competition benefiting taxpayers and the local construction industry.

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