New Bill Would Ban Mandatory Project Labor Agreements

In the construction industry, nothing exemplifies union monopoly, and its costs, quite like a Project Labor Agreement. A new proposal before Congress, the Government Neutrality in Contracting Act, would protect contractors from intrusion by organized labor upon contractual liberty. Sponsored by Rep. Mick Mulvaney, R-S.C., and Sen. David Vitter, R-La. (H.R. 1671, S. 71), the measure would bar the use of these agreements on federally-sponsored or subsidized public works.  In promoting open competition in bidding, hiring and other aspects of project labor, it effectively would overturn President Obama’s Executive Order 13502. Issued in February 2009, that order “encouraged” federal agencies to require such pacts on a case-by-case basis on projects of $25 million or more.

A Project Labor Agreement, or PLA, is a job-specific, pre-hire collective bargaining contract attached to a large-scale public works project, such a highway, a dam, a school or an arena. When required by state governments, they force public agencies to award contracts for a given project only to those firms recognizing unions as worker representatives. A PLA has little, if any, effect upon unionized firms, since these contractors already are committed to union rules. It is open shop (or “merit shop”) contractors who get squeezed. If those contractors don’t agree to play ball the union way, they don’t get work. A typical agreement requires a general contractor and subcontractors to: obtain workers from union hiring halls; hire apprentices from union training programs; contribute to union-sponsored benefit plans; obey union-established work rules and job classifications; and force individual workers to pay union dues.

These agreements have been in use for decades. The National Labor Relations Act of 1935 authorizes though does not mandate them. A lot of “private-sector” Project Labor Agreements are anything but voluntary. It is not ususual for contractors to sign a PLA in response to union threats of a strike, a picket or a boycott. Mandatory PLAs received their green light in March 1993, when the U.S. Supreme Court upheld the constitutionality of a master agreement imposed by the Commonwealth of Massachusetts upon the Boston Harbor cleanup. Since then, six states, each non-Right to Work, and with a strong union presence – California, Connecticut, Illinois, New Jersey, New York and Washington State – have come to require the use of PLAs for certain types of public works projects.

For over two decades, federal promotion of Project Labor Agreements, or the lack of such promotion, has been a function of which political party occupies the White House. Democratic administrations support them; Republican administrations oppose them. On February 1, 1993, less than two weeks in office, President Bill Clinton issued Executive Order 12836, “encouraging” the use of PLAs on federally-funded projects. The order effectively rescinded an order the previous October by his predecessor, George H.W. Bush, which barred such agreements. Clinton followed up on this in 1997 with a memorandum urging federal agencies to use PLAs on “large and significant” projects and to prepare an accompanying feasibility study. With the election of George W. Bush as president, the pendulum moved back toward the open shop. In February 2001, Bush issued Executive Order 13202 (amending it two months later with Executive Order 13208), guaranteeing government neutrality on federally-sponsored or assisted construction projects. Eight years later, with Barack Obama as president, the pendulum swung again back in the union direction. On February 6, 2009, Obama issued Executive Order 13502, “encouraging” federal agencies to require PLAs on a case-by-case basis on projects costing at least $25 million. The stated purpose was “to promote economy and efficiency in federal procurement.” The unstated purpose was to help unions.

A good many states, rather than chafe under this mandate, have reacted by banning Project Labor Agreements. Of the 22 states now barring them, fully 19 of them took such action after the issuing of Executive Order 13502. Even states that do require PLAs are growing wary of expanding their applicability. Union Corruption Update explained at length (here and here) the case of New Jersey. Hurricane Sandy had devastated the state’s coastline in late October 2012. In quick response, the New Jersey Assembly and Senate early in 2013 passed bills by a convincing margin to expand coverage of the state’s PLA mandate, ostensibly to hasten the cleanup process. The mandate had been established back in 2002, first by executive order and then by legislation. But in April 2013, Republican Governor Chris Christie vetoed the measure, fulfilling a campaign promise in 2009 to oppose such measures.

States have good reason to bar, or at least restrain, these pre-hire arrangements. Not only do they restrict the range of choices available to procurement agencies, they also raise the cost of a project without necessarily improving workmanship. Empirical research bears this out. In 2003, researchers at the Beacon Hill Institute, a think tank affiliated with Suffolk University in Boston, released a study concluding that PLA usage in Boston-area school construction added to bid costs and actual costs on average by a respective 14 percent and 12 percent. Three years later, the institute, focusing on three school projects in Fall River, Mass., issued a report concluding that PLAs raised costs and created delays in the bidding process; when frustrated local officials decided to pursue the projects without a PLA, the result was a bid cost-saving of $5.8 million. In 2009, the worldwide consulting firm of Rider Levett Bucknall issued a report for the Department of Veterans Affairs concluding that Project Labor Agreements would raise costs by 5 percent to 9 percent on VA projects in the Denver, New Orleans and Orlando areas. My 2005 monograph for the National Institute for Labor Relations Research, “Project Labor Agreements: Union Monopoly in Public Works Construction,” explained at length why the case for these agreements doesn’t hold up either in terms of liberty, cost-efficiency or workplace safety. Likewise, a 2009 Beacon Hill Institute report debunked common assumptions about the efficacy of PLAs.

If states, one by one, are barring the mandatory use of public PLAs, certain lawmakers on Capitol Hill want to impose a federal ban. That’s what the Government Neutrality in Contracting Act is about. Rep. Mick Mulvaney, a third-term congressman from South Carolina, along with Sen. David Vitter, R-La., introduced this legislation (H.R. 1671, S. 71) on March 30 to “promote and ensure open competition” and “maintain neutrality towards labor relations” for federally-sponsored or funded construction projects. The head of each executive agency would award contracts in a manner barring any “bidder, offeror, contractor, or subcontractor” to give preferences to certain applicants on the basis of organizational affiliation. Vitter, along with Rep. Andy Harris, R-Md., had co-sponsored a similar bill in the previous Congress in January 2013.

Supporters of the legislation assert that by inviting participation from as many contractors as possible, government officials would be better able to achieve project cost-containment and resist political capture. Pamela Volm, current chair of Associated Builders & Contractors, a Washington, D.C.-based trade association representing more than 20,000 merit shop firms in dozens of chapters across the U.S., remarks: “By restricting the federal government’s ability to require or promote PLAs, the Government Neutrality in Contracting Act will create more construction jobs and help taxpayers get the best possible construction project at the best possible price by increasing competition, reducing waste, eliminating favoritism in the procurement of federal and federally-assisted construction contracts. We urge Congress to immediately pass this common-sense legislation and put an end to these crony contracting schemes.”

Union officials have a much different view. They argue that Project Labor Agreements expand access to construction jobs to those who otherwise wouldn’t have them. Summarizing a 2011 Cornell University study of 185 Project Labor Agreements nationwide, Mark Ayers, late president of the AFL-CIO Building & Construction Trades Department, stated: “The Cornell report confirms and illuminates the ‘untold story’ of PLAs. Not only are PLAs an effective project management tool that delivers ‘on time, on budget’ results…they are extremely effective at providing job and career training opportunities for historically disadvantaged communities. The bottom line…is that PLAs work.” Such a view, however, assumes that merit shop contractors, left to their own devices, can’t or won’t hire across a wide range of workers. This is a highly dubious assumption. Contractors have every interest in hiring and training in an impartial manner. Equally to the point, the public has a right to realize cost-savings without sacrifice in workmanship or on-the-job safety. The implication that nonunion contractors need to be corralled into serving “disadvantaged” communities is another example of noble-sounding egalitarian rhetoric that puts private interests over the public interest.

Government neither should suppress nor promote unionism in its contracting with construction companies. Its role should be to ensure an open and level playing field, where contracts are freely negotiated. Under such circumstances, unions on occasion will succeed in convincing contractors to sign a PLA; on occasion, they also will fail. It is not the job of government at any level to guarantee union jobs. The Mulvaney-Vitter bill, in seeking to overturn President Obama’s Executive Order 13502, rightly puts the principle of contractual liberty above the interests of labor cartels.