P-L-A spells bad news

By Jason Mercier, Evergreen Freedom Foundation

Is anyone really surprised by the lone, high bid for the Woodrow Wilson Bridge project? It can be explained in three little words: project labor agreement (PLA). PLAs require that contractors use union labor and comply with onerous union rules.

Maryland officials said that a PLA would lower costs, not raise them, and tried to persuade the Federal Highway Administration to sidestep a presidential executive order that prohibits the use of federal funds on projects governed by PLAs.

The state's request was denied on Dec. 12; bidding for the project opened and closed on Dec. 13. That means potential bidders didn't know until one day beforehand whether they would be forced to operate under the costly labor agreement. No wonder Maryland officials received only one $860 million bid, 75 percent higher than original estimates.

What is it about PLAs that drives potential bidders away? Simply put, the labor agreements inflate costs. While PLAs benefit unions, they are costly for private contractors and, ultimately, for taxpayers.

A Wharton Business School study on PLAs determined that the "terms and conditions" in the labor agreements add an average of 6.8 percent to labor costs. Though estimates vary, projects built by union-only shops cost 5 percent to 26 percent more than comparable projects built without the union restrictions.

When open-shop (nonunion) contractors choose to adopt a PLA in order to win a contract, they often are forced to lay off some or all or their employees to make room for union workers. If the union is unable to supply all the needed workers, a contractor is able to hire outside employees with the understanding that these employees will be replaced as soon as union workers become available.

However, the contractor still is required to pay union representation fees for nonunion employees retained under a PLA. In addition, a contractor may be required to pay into long-term union benefit trusts from which nonunion employees will never receive vested payments. These union fees are in addition to the benefits an open-shop contractor already provides for employees.

Maryland officials now are deciding whether to reopen the bid for the Woodrow Wilson Bridge project or enter into redesign to help reduce costs. Either choice is likely to set project completion back by months. Still, now that the PLA is off the table, multiple bids are likely to be submitted if a new bid is permitted. They will undoubtedly come much closer to the original $500 million estimate.

One thing is sure, though. Now that a PLA is out of the question, the true market cost of the Woodrow Wilson Bridge will be reflected in any new bids submitted -- which will be a win for commuters, contractors, construction workers and taxpayers.

Jason Mercier is Deputy Communications Director for the Olympia-based Evergreen Freedom Foundation. He can be reached at (360) 956-3482 or jmercier@effwa.org.

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