Project Labor Agreements: Political Payoff to Unions?

By Amanda Jarrett, Research Analyst

Project Labor Agreements: Political Payoff to Unions?

The Washington state Department of General Administration recently decided to adopt a project labor agreement (PLA) for a $105.5 million, seven-year renovation contract on the state capitol building. Private contractors injured by this sort of agreement often see it as little more than a political payoff to organized labor’s special interests.

Project labor agreements are made between the manager of a construction project and a group of local unions or a building trades council, and require that all employees on the construction project be represented by a union. A contractor who does not bargain with unions (open shop) and wishes to be awarded a construction project under a PLA must jump through a number of union hoops. For instance, the contractor is often forced to reduce his workforce to a handful of "core" employees; hire new workers from the union hiring hall; pay representation dues for all non-unionized employees; pay into union health and retirement funds; and agree to obey union work rules.

In 1996, Governor Mike Lowry issued an Executive Order directing state agencies to consider PLAs when a public construction project meets certain criteria. (Executive Order 96-08.) Under this executive order some of the things the overseeing agency should consider are the likelihood of labor disruptions; the number of trades and crafts involved in the project; the size and complexity of the project; and the urgency of completion.

If, after these considerations, an agency decides to go ahead and enter a PLA, the agency must provide written findings that clearly demonstrate how the PLA will benefit the project and the interests of the public and the state with regard to cost, efficiency, quality, safety, and timeliness. Regarding the state capitol renovation project, EFF staff have not seen documentation proving that these benefits will be achieved under the PLA.

Exclusion of Private Contractors
The stringent requirements PLAs place on construction discourage most private contractors from bidding on public projects since it upsets their current practices. Private contractors take a gamble when bidding under a PLA because, if granted the project, they must work with unfamiliar employees and adopt different labor practices than those which have made them successful in the past. It is estimated that this particular PLA would exclude up to 75 percent of the state’s construction workers.

When open shop contractors are granted a contract under a PLA, they are often forced to lay off some or all of their employees to make room on their payroll for employees from the local union hiring hall. If the union hall cannot supply the needed workers, a contractor may hire outside employees with the knowledge that these employees must be replaced as soon as the union can supply the necessary workers.

In addition, open shop contractors must pay union representation fees for their non-union employees. A contractor may also be required to pay into long-term union employee benefit trusts from which his or her employees will never even receive payments. These fees and contributions are on top of the benefits the open shop contractor regularly pays employees.

Existing law requires that a prevailing wage be paid to all employees working on public construction projects. In essence, employees, whether union or non-union, who work the same trade must be paid the same super-minimum wage. While this usually results in little difference between union and non-union salaries, an open shop contractor working under a PLA would be paying for regular employee benefits plus union fees and contributions. The added set of benefits puts open shop contractors at a disadvantage.

Union officials claim that women and minority construction employees will benefit from a PLA. This simply isn’t true. Traditionally, women and minority workers are under-represented in unions and are largely employed by open shop companies.

Allowing open shop contractors to bid on projects under a PLA does nothing to eliminate the injustice of discriminating against the majority of our state’s construction workers who are not union members.

No Delays Caused by Labor Disruptions?
Labor disputes often cause costly delays on construction projects. One of the most frequent arguments PLA supporters use is that they eliminate the possibility of delays by including provisions banning strikes and jurisdictional disputes during construction. The fact is, a number of large projects under PLAs have still had delays – some substantial enough to draw media attention. Some of these projects (e.g., the San Francisco International Airport) were the result of strikes which occurred despite no-strike provisions in the labor agreement.

The Puget Sound area has a long history of settling disputes and bargaining for new contracts without any labor unrest. The fallacy in the argument that a PLA provision will eliminate labor disputes can be seen when one considers that current union contracts already contain no-strike clauses. It appears the "labor peace" pitch is often used as a blackmail tactic against construction owners by implying that if there is no PLA, there will be trouble.

Private contractors have a better reputation for peaceful labor projects, yet they’re frozen out of an agreement in which one of the main selling points is peaceful labor. In effect, PLAs punish stable, peaceful employer-employee relations while rewarding threats of disruptions.

Worker Skill and Quality of the Finished Project
In government-mandated project labor agreements, decision-makers often assume that private contractors are not capable of managing large projects. But many large projects are completed within budget and on time without the use of a union-only arrangement.

Labor officials often claim union workers are better skilled and produce higher quality work. Not only is this claim undocumented, it doesn’t belong in a case for PLAs. Since non-union contractors may participate in projects under PLAs if they follow union procedures and pay union fees, it logically follows that workers become "better skilled" just by paying a fee to union officials. If it is true that open shop contractors produce inferior work, why are these contractors chosen to perform approximately 75 percent of construction in the United States?

Cost Predictability
Unionized contractors often find it difficult to compete with private contractors because of higher union labor costs and inefficient work practices. A Wharton Study shows that the "terms and conditions" costs of unionized labor add an average of 6.8% to labor costs. While estimates vary, projects built by union shops can increase the cost by 5% to 26% over projects built by non-union contractors.

When is it ever appropriate to pay taxpayer money for unnecessary construction costs?

Summary
In summary, unions use PLAs to corrupt the government contract process, override cost-saving measures, and prevent more efficient, non-union contractors from being awarded contracts. The purported advantages of PLAs are not supported by factual evidence. The logical conclusion is that PLAs and other government-imposed restraints on public construction projects are merely political agreements with little or no economic rationale. PLAs are a market recovery strategy for the unions; these agreements are meant to benefit union officials, not taxpayers. Such agreements cannot be rationalized by labor peace, safety or quality arguments.

It is an outrage that Washington state officials chose to violate the intent of the state’s competitive bidding process and adopt a project labor agreement for a public project on the "people’s capitol building."

Amanda Jarrett, Research Analyst, Evergreen Freedom Foundation

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org