Big Labor, Big Costs

Union-backed initiatives increase costs for government by requiring union labor

March 14, 2013

Government-mandated and union-backed project labor agreements (PLAs) are increasing costs on taxpayer-funded projects across the country even as local, state, and federal governments face a budget crunch.

A PLA sets construction conditions on bidding for federally funded projects. While the conditions for each PLA vary depending on the locale within which they are passed, they frequently require employees to join a union or force contractors to employ union labor exclusively.

PLAs also "require [non-union] contractors to pay their workers’ health and retirement benefits to union trust funds," causing the contractors to pay workers’ benefits twice—once for the union and once for their company plan.

Additionally, they often force nonunion employees to join union pension plans.

Contractors are frequently unwilling to take on these burdens in order to meet PLA demands, leaving only contractors that employ union labor left to place bids.

"PLAs helps unions regain lost market share, create jobs for unions member, and steer tax-funded contracts to unionized contractors," director of labor for Associated Builders & Contractors (ABC) Ben Brubeck told the Free Beacon.

These union-favored agreements come with a sharp downside for taxpayers, however. PLAs increase construction costs by 12 to 18 percent, an increase that mostly stems from higher-than-market union labor costs, studies have shown.

The combination of reduced competition and higher labor costs increase spending, assistant professor of political science at the City University of New York Daniel DiSalvo told the Free Beacon.

A PLA "increases costs not only because it’s a collective bargaining agreement, but it basically narrows the name of groups to those that are already unionized; therefore you are limiting the market in advance to those already that have unions," DiSalvo said.

DiSalvo said that the literature was divided. Those in favor of PLAs claim the agreements "limit [workers’] ability to engage in strikes and limit potential work stoppages and shutdowns" and that there is "a greater likelihood that it will be done on time and on budget."

Brubeck pointed to Maryland's Prince George’s County rebidding for the Brandywine Fire Station as a prime example of the higher costs resulting from PLAs.

Prince George’s County, which requires "the use of Project Labor Agreements (PLAs) on county construction projects exceeding $1 million," held the first round of bidding for the fire station as a government-mandated PLA.

The lowest bid for the project was at $4.2 million despite estimates from Prince George’s County officials that placed construction costs at about $3 million.

While Brubeck and other private contractors pushed for the county to rebid the project without the PLA requirement, the county released a notice to contractors that the project would indeed be subject to rebidding with the PLA mandate still in place.

"Prince George’s County is the first to enact such monumental and necessary legislation, mandating that Prince George’s County residents be given priority for work on county construction projects. Under CB-16, we will have regulations in place to put more Prince Georgians to work," Democratic councilmember Karen Toles, who sponsored the bill supporting government mandated PLAs, said in a press release announcing the legislation.

"Unions are offering a solution to a problem that they created," Brubeck said. "That solution gives them a monopoly on the project."

Members of the Prince George’s County council have received substantial funding from trade unions.

Toles received over 80 percent of her 2012 campaign funds from Ironworkers and Plumbing Union PAC contributions, which directly benefit from the PLA mandate.

Chairwoman Andrea Harrison received 30 percent of her 2012 campaign funds from the AFL-CIO and the slate fund "Women for Justice," which includes donations from the Ironworker trade union PAC.  Councilwoman Ingrid Turner received 28 percent of her 2012 campaign funds directly from unions or union PACs.

Prince George County, Md., councilmembers’ push to implement PLAs came after the AFL-CIO pressured councilmembers to support PLAs in 2010. "AFL-CIO will continue to refuse requests for any and all support from those elected officials who refuse to support us," according to a letter sent to council members.

Councilmembers Harrison, Turner, and Toles did not return a request for comment. The AFL-CIO also did not return a request for comment.

PLAs have contributed to soaring costs elsewhere as well.

The National University System Institute for Policy Research (NUSIPR) in California released a study showing PLA school construction projects increased costs by 13 to 15 percent compared to similar projects not under a PLA agreement. The Beacon Hill Institute came to similar conclusions.

The NUSIPR used an example from Burckhalter Elementary School in California, which attempted to renovate their school and made contractors bid without a PLA requirement in 2004.

"The original contract winner (and lowest bidder), M. A. Davies Builders, competed against seven other bidders and offered to complete the job for $1.8 million. After Oakland Unified rebid the contract under a PLA, only three companies placed bids, and the lowest bid came in at $2.2 million, a 22 percent increase," the NUSIPR report said.

Unions and government officials say PLAs provide "structure and stability to large construction projects as well as ensure compliance with laws and regulations governing workplace safety and health, equal employment opportunity, and labor and employment standards."

But "PLA mandates are almost always backed by unions that are supportive of the candidates," Brubeck said.

"They want to run for higher office, so they need the support of the building trades," he said. "It’s special interest promoting their own. It’s all politics."

Published under: Big Labor , Unions