In a trend that will raise the costs taxpayers pay for many public construction projects, there has been an uptick locally in the number of government-mandated project labor agreements (PLAs).
For example, the Sound Transit Board voted to extend its use of PLAs to $12 billion worth of its Phase 2 projects, and the Navy announced it will require a PLA on the building of the explosives handling wharf at Naval Base Kitsap-Bangor – the first PLA used on any Department of Defense project.
PLAs are collective bargaining agreements with labor organizations that establish the terms and conditions of employment. The difference between PLAs and traditional collective bargaining agreements is that PLAs are used for a specific project or set of projects, presumably because the project involves special circumstances not addressed by existing master labor agreements.
PLAs, per se, are not the issue; it’s how government agencies use them that can be problematic and costly for taxpayers.
When the public agency rather than the contractor negotiates the PLA with the unions, it interferes with the right of employers and workers to reach their own agreements with respect to working conditions and benefits.
For decades the building trades and union contractors, with Associated General Contractors as a facilitator, have hammered out collective bargaining agreements in good faith. There is no need for public agencies to bypass the contractor-union relationship.
Sound Transit’s own review of its PLA usage notes the agency’s steep “learning curve” with regard to negotiating PLAs. Public agencies have little experience negotiating conditions of construction work.
Government-negotiated PLAs invariably drive up the costs of projects. Sound Transit notes that contractors estimate PLA administrative costs increase bids by at least 10 percent. This is consistent with studies that indicate PLAs increase construction costs by 12 to 20 percent. Assuming an increase of just 10 percent, this is $1.2 billion on Sound Transit’s $12 billion link light rail program.
Government-negotiated PLAs are inefficient. A new layer of bureaucracy is created within the public agency in order to carry out the terms of the contracts negotiated by the agency. Plus, a construction firm’s costs are increased because it has to run its company by two sets of rules, one for the PLA it had no part in negotiating, and one for its other projects.
The PLA and existing labor agreements likely have different rules regarding grievance resolution, wage adjustments, drug testing and more. These differences can be minimized if it the contractors, who already negotiate master labor agreements with the unions, negotiate the PLA.
Many PLAs negotiated by government agencies add costs by reducing competition. Non-union contractors, which include most of the small and women- or minority-owned firms, must comply with union core employee limitations and union work rules contrary to their standard practices. They must pay a union representation fee for each employee. These and other factors make it difficult for those firms to participate.
Another way government-mandated PLAs can add costs is indiscriminate use. In the case of Sound Transit, not every Phase 2 project will need a PLA or the same PLA. Sound Transit says it needs a uniform PLA to preserve labor harmony, but there is no reason to think that PLAs are always necessary to achieve that harmony. After all, many Sound Transit projects performed without a PLA were accomplished successfully and without strikes.
Where labor harmony or other issues merit the consideration of a PLA, the public agency should make it a requirement of the selected prime contractor to negotiate an agreement without the discriminatory and competitive restrictions.
The public’s interest in completing construction projects on-time and on-budget can best be met through competitive bidding, use of existing master labor agreements and, when necessary, a judicious use of PLAs that involves contractor-union negotiations to address project-specific needs.
Steve Isenhart is president of the Associated General Contractors of Washington.