Daily Labor Report, April 24, 2009, Friday

Daily Labor Report

April 24, 2009, Friday

Daily Labor Report

Construction
PLAs Help Predict, Control Project Costs
Cornell Study Says, Challenging Critics

Project labor agreements help predict and control publicly funded construction projects costs, despite criticism that the pre-hire agreements limit the pool of bidders and discriminate against nonunion contractors and workers, according to a recently released study by Cornell University.

The report, Project Labor Agreements in New York State: In the Public Interest, was done by the School of Industrial and Labor Relations at Cornell University. The report reviewed the legal standards used tojustify the use of project labor agreements on public works projects in New York state and New York City.

Its author, Fred Kotler, the associate director of the Construction Industry Program at the Cornell School of Industrial and Labor Relations, told BNA April 20 that he hoped the study would prove helpful for providing guidance, particularly to public sector decisionmakers, “who are now receiving economic stimulus money and making decisions on public works projects.” He also said he hoped the report would clarify when and how PLAs are used, and that PLAs do not drive up costs and do not negatively impact bidding.

Kotler said that as a single, project-specific, labor relations agreement that sets uniform terms and conditions for all crafts for as long as a construction project lasts, PLAs make sense for public works projects. Otherwise a project could require 15 or more different collective bargaining agreements, he said. Kotler said PLAs offer a good approach to labor relations, as they allow contractors to “more accurately predict labor costs and schedule production timetables, reduce the risks of shoddy work and costly disruptions, and encourage greater efficiency and productivity,”.

According to the report, the appropriateness of a PLA, which is determined on a case-by-case basis, can provide job stability. It said that Executive Orders 170 and 170.1, issued in 1993 by former New York Gov. Mario Cuomo (D), established uniform guidelines for determining the responsibility of PLA bidders. Those executive orders have been continued by all three succeeding gubernatorial administrations, the report noted, adding that Cuomo's successor, former Gov. George Pataki (R), issued Executive Order No. 49 in 1997 to encourage the use of PLAs.

The report took issue with a critical assessment of PLAs in a report published in 2006 by the Bostonbased Beacon Hill Institute for Public Policy Research at Suffolk University. That study maintained that project agreements limit competition for projects to union-only construction firms and close off bids from nonunion or open-shop contractors.

Kotler said in the Cornell report that both union and nonunion contractors bid on, and are awarded, projects covered by PLAs. He also said “unions cannot lawfully favor their members or discriminate against equally qualified non-members” and that it was not uncommon for nonunion contractors to employ a certain percentage of “core employees”on a project.

According to Kotler, “There are no studies demonstrating that a PLA in the bid specifications is itself responsible for a decrease in the number or bidders; there is also no analysis showing that fewer bidders translates into higher actual project costs.” He also said that PLAs help predict and control both the direct and indirect labor costs that can occur over the life of a project.

David Tuerck, executive director of the Beacon Hill Institute, April 22 rebutted Kotler's criticism of the Institute's 2006 report. The institute asserted, he said, that PLAs increased bid prices on a sample of New York construction projects by 20 percent. For example, he said, the Cornell study erroneously claimed the institute's researchers looked at bid figures that were rejected, submitted by unsuccessful bidders, which Tuerck said was incorrect.

“We did three studies of PLAs, one for Connecticut, one for Massachusetts and one for New York,” Tuerck said. In all three studies, regression analysis attempted to determine how the presence or absence of a PLA affected a winning bid, he said.

The Beacon Hill Institute's Web site says the institute engages in economic research and educational program based on the principles of “limited government, fiscal responsibility and free markets.”

Unions, Nonunion Employers Respond

Mark H. Ayers, president of the Building and Construction Trades Department, AFL-CIO, commented on the report in an April 16 statement. “As we have known for some time—and which this study re-affirms— ...Project Labor Agreements are a valuable tool for ensuring a quality return on construction investments,” he said.

Rebecca Meinking, president of the Associated Builders and Contractors Empire State Chapter, told BNA in an April 21 statement, “I find it striking that this study which contends that PLAs protect the interests of the public never once quantifies any realized cost savings from any of the PLAs that have been implemented over the years in New York State.”

Meinking said the Cornell study analyzed pre-bid factors that quantify possible cost savings if certain concessions are made, but did not offer evidence that “projected” cost savings were actually realized. “Why don't they offer up the Orange County Jail PLA, or the PLAs on the Buffalo or Albany school construction projects, or the PLA on the Onondaga Lake Cleanup project?” she said. “All these PLAs were ‘justified' through feasibility studies that said the PLA would result in labor cost savings.”

But, according to Meinking, “in 32 pages of ‘analysis'about all the benefits of PLAs, there is absolutely NO evidence provided that these PLAs actually realized the cost savings that the feasibility studies said they would realize. Why? Because that evidence simply does not exist.”

Similarly, Ben Brubeck, labor and state affairs director for government affairs for the Associated Builders and Contractors, said the national organization disagreed with many aspects of the study. “For instance, the premise that there is ‘no evidence to support claims that project labor agreements either limit the pool of bidders or drive up actual construction costs' simply ignores the facts and questions the validity of other claims made in this biased paper,”he said.

According to Brubeck, an overwhelming body of evidence suggests that PLAs have the practical effect, if not the stated purpose, of eliminating competition from merit shop contractors and their employees— qualified and skilled craft professionals—who compose 84.4 percent of the U.S. private construction workforce. The public and the construction community know that free and open competition, without discriminatory and costly PLAs, is the best and most rational way to ensure quality construction at the best possible price, he said.

“It is a shame that PLA proponents have to rely on dishonest academic papers, pro-PLA laws passed by political cronies, and union corporate campaign threats to private construction owners to regain lost market share,” Brubeck said.

By Sheila R. Cherry

The Cornell University report can be accessed at http://digitalcommons.ilr.cornell.edu reports/22.