Vermontbiz.com, July 2010

Vermontbiz.com

July 2010

Vermontbiz.com

Montpelier debates union role in Champlain Bridge construction

With the construction industry hit harder than most by the Great Recession and its “jobless recovery,” issues surrounding the anticipated $75 million reconstruction of the Champlain Bridge linking Vermont with New York, have had interested parties scrapping like drought-stricken animals at a waterhole. Just this week, Douglas rejected New York State's plan for a PLA, citing factors that could hurt Vermont's mostly non-unionized construction companies. In response, other politicians and labor unions said that it could save the project millions.

Senator Vince Illuzzi, R-Essex-Orleans, Chair of the Senate Economic Development Committee said, “We should be exploring this opportunity, not just shutting the door without attempting to negotiate a resolution.” He, Senator Peter Shumlin, D-Windham, and others said that the state could save $1.75 to $3 million. They have introduced a resolution today (see below) in the Senate to ask the governor to reconsider his decision. Vermont's congressional delegation also supported the PLA.

Meanwhile, representatives of construction companies see Douglas' rejection of the PLA as positive news for Vermont workers and taxpayers.

“Vermont Governor Douglas is standing up for workers and businesses by opposing this proposed union-favoring agreement for the Lake Champlain Bridge project. If a project labor agreement (PLA) is placed on this job, it will discourage, if not bar entirely, 9 out of 10 Vermont construction workers from competing. Our state needs job creation, not more unemployment,” said Mark Holden, president of the local Vermont chapter of Associated Builders and Contractors.

Background

To some degree this debate simply might have resulted because New York will manage the project, as it has managed maintenance, even though Vermont and New York will share the non-federal part of the cost (80 percent federal-10 percent Vermont-10 percent New York). A similar but opposite situation applies to the Rouse’s Point Bridge to the north: both sides pay, but Vermont manages.

The furor has arisen over whether non-union contractors, which prevail in Vermont, will be on the same footing as union contractors, which predominate in many parts of New York. Specifically, the controversy has focused on the likely use of a “Project Labor Agreement,” or PLA for short, to govern hiring, pay, conflict resolution and other matters during the construction of a new bridge.

PLAs have been around for about 60 years in the public sector, and longer in the private sector. Both Bush administrations rejected them, the Clinton administration supported them, and most recently, in February of 2009, they were reinstituted under the Obama administration. This alternation, between labor-friendly Democratic presidents and management-minded Republican presidents, gives some idea of where the conflict lies.

Both the Vermont and New York chapters of Associated General Contractors oppose the use of a PLA on the Champlain Bridge project, as do the two states’ chapters of the Associated Builders and Contractors (the former’s members typically are more involved in road and bridge construction, while the latter’s membership includes more residential and commercial contractors). Maintaining the contrary position on PLAs are unions, and backing them have been Vermont’s congressional delegation: Senator Patrick Leahy, Senator Bernard Sanders, and Representative Peter Welch.

The three issued a joint statement on January 25 saying, “While it's up to the State of New York to decide whether it will pursue a Project Labor Agreement, we believe the Champlain Bridge must be completed on time, on budget, and with fair wages and benefits paid to workers. Project Labor Agreements have consistently been shown to provide stability, efficiency, and productivity while ensuring fair compensation to all. These agreements will not prevent any Vermont contractor from successfully bidding on this project. We stand committed to putting Vermonters to work at decent paying jobs."

But the contractors’ organizations say that what happens after making a successful bid is so slanted toward the unions and so unworkable in terms of normal construction practice that Vermont companies may very well decide not to bid at all.

Immediately following the Leahy-Sanders-Welch release, Brent Tewksbury, vice president of FR Lafayette, Inc in Essex, told the Burlington Free Press, “What really irked us is our congressional delegation went ahead and supported a project labor agreement and didn’t speak to any of us.”

The AGC and ABC are urging the State of Vermont to take a more active role in preparations for the bridge project, to make sure the state’s overwhelmingly non-union contractors (said to be 96 percent) do indeed get an equal chance. According to New York sources, a possible PLA was going back and forth between the New York State Department of Transportation (NYS-DOT) and the Federal Highway Administration as of mid-March, the terms of which had not been revealed.

So What Is A PLA?

PLA’s were re-instituted by President Obama, with input from the Federal Acquisition Regulation Council, through Executive Order 13502 on February 6, 2009. An introductory section of the order states that “it is the policy of the Federal Government to encourage executive agencies to consider requiring the use of project labor agreements in connection with large-scale construction projects ($25 million or more) in order to promote economy and efficiency in Federal procurement.”

These pre-hire agreements require exact bidding (no overruns, no surprises), and prohibit strikes and lockouts and other work disruptions. They “set forth effective, prompt, and mutually binding procedures for resolving labor disputes arising during the project labor agreement,” and “provide other mechanisms for labor-management cooperation on matters of mutual interest and concern, including productivity, quality of work, safety, and health.”

Any PLA must “allow all contractors and subcontractors to compete for contracts and subcontracts without regard to whether they are otherwise parties to collective bargaining agreements;” as much as to say, it is indeed true that non-union companies can bid.

In its prefatory material, the Executive Order observes that on large projects involving many contractors, “A labor dispute involving one employer can delay the entire project. A lack of coordination among various employers, or uncertainty about the terms and conditions of employment of various groups of workers, can create frictions and disputes in the absence of an agreed-upon resolution mechanism.”

The other rationale would not seem to apply well in Vermont: “Construction employers typically do not have a permanent workforce, which makes it difficult for them to predict labor costs when bidding on contracts and to ensure a steady supply of labor on contracts being performed.” Vermont firms do have such workforces, plus in a recessionary environment they may have laid-off personnel they can call back. Beyond that, typically they have subcontractors with whom they have worked before, so that the effective size of a project workforce expands and contracts in a way that is both efficient and well-coordinated.

Having such subcontractor relationships, and having well-worked out supply chains and project management, are keys to making competitive but realistic bids. But on a PLA job, say the critics, all hiring must be done through the union hall. If employees temporarily become part of the union to find work, then they will pay union fees for retirement, training, lobbying, etc that they will have to leave behind when they drop their union memberships.

According to Fred B Kotler, associate director of the Construction Industry Program at Cornell University’s School of Industrial and Labor Relations, the all-union provision hasn’t been that strictly interpreted in practice.

“Hiring is conducted through union referral procedures,” he wrote, but “nonunion subcontractors are often permitted to retain a defined percentage [“core” group] of employees outside of referral procedures.”

The Executive Order describes a PLA as “a pre-hire collective bargaining agreement with one or more (emphasis added) labor organizations that establishes the terms and conditions of employment for a specific construction project.” Conceivably, ongoing negotiations regarding the specific PLA for the Champlain Bridge may be trying to establish a middle ground along such lines.

At The Fight, A Hockey Game Broke Out

The conflict over the use of PLAs subdivides into specific issues, themselves much contested.

For non-union contractors, it may seem to defy common sense to say that PLAs help bring down the cost of major projects. (Note that the foregoing does not say “public projects;” PLAs have also been employed, so to speak, in the private sector, for instance by British Petroleum, General Motors, Toyota, and Disney, observes the NYS Building and Construction Trades Council.) Isn’t higher pay the main rationale for paying union dues? Isn’t it true that on union jobs, an idle worker can’t assist at another work site because of contract work rules?

The website TheTruthAboutPLAs.com, maintained by the ABC, asserts that “A 2006 study conducted by the Beacon Hill Institute at Suffolk University found that the use of PLAs on school construction projects in New York increased the cost of the projects by 20 percent.” A 2001 study by Ernst & Young commissioned by Erie County in New York found that “bidder participation was diminished because the county chose to utilize a PLA...the use of PLAs strongly inhibits participation in public bidding by non-union contractors and may result in those projects having artificially inflated costs.”

Jeff Potvin, president of the Vermont Building and Construction Trades Council, countered in a newspaper commentary, “There are well over 20 studies by academia that show PLAs deliver responsible economic development and do not drive up costs.” And they can help local development by keeping hiring local: “Where was the AGC when the Richmond Bridge, Vermont's first American Recovery and Reinvestment Act project, was built by an out-of-state contractor who was under no obligation to use local workers?”

Cornell’s Kotler said, “PLA opponents argue that PLAs limit the pool of bidders and that this drives up costs. There is no evidence to support these assertions. While there are many reasons why contractors – both union and non-union – may choose not to bid on particular projects, 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.”

Kotler took note of, but blasted, the aforementioned Beacon Hill study.

“One particularly vocal critic of PLAs is the Beacon Hill Institute at Suffolk University [Massachusetts], a “free-market”-oriented think-tank founded in 1991 by Massachusetts millionaire and politician Ray Shamie. Beacon Hill published a study in 2006, Project Labor Agreements and Public Construction Cost in New York State, which analyzed 117 public school construction projects conducted in New York State since 1996. Of the 117 projects, 19 were conducted using PLAs.”

“Beacon Hill’s conclusions should be dismissed as not credible for these reasons: 1) the study focuses on bid costs not actual costs; and 2) it fails to segregate labor costs or account for various factors that influence project costs,” Kotler went on. Including bids that could have been rejected as unrealistic based on the bidder’s background, and failing to compare labor costs with those of other projects, slanted the conclusions, he said.

“The 14-page report is notable for what it does not include,” Kotler continued. “There are, for example, no data broken down by the 117 schools it claims to have sampled, no detail about the nature and size of each project, no comparison of similarly-situated projects performed with and without a PLA…Beacon Hill focused on the size of the project in square feet but did not account for such important determinants of cost as these: whether the work involved new construction or renovation, site preparation, laboratories, classrooms, kitchens, lunchrooms, gymnasiums, auditoriums, or audio/visual facilities…(T)he study didn’t account for the likelihood that many PLA projects will be more complex, involve more amenities, be larger and operate under time constraints that can impact costs and that these same considerations are at issue when PLAs are authorized in the first place.”

“What PLA opponents have consistently failed to demonstrate is that the PLA is itself responsible for a project’s increased costs,” Kotler concluded. That was also the case for a project in Beacon Hill’s back yard: the Central Artery/Third Harbor Tunnel (“Big Dig”), then the largest public works project in American history, estimated at $2.3 billion in 1983 and pegged at $13.6 billion in 2000. “PLA opponents, including the Beacon Hill Institute, sought to pin the project’s mounting costs and overruns on the project’s PLA. This was not only simplistic. It is not true. The Massachusetts Transportation Authority conducted an extensive post-job analysis in 2007, a history of the project’s costs. At no point are labor costs or the PLA identified as responsible for the project’s increased costs. A US Department of Transportation fifty-page Task Force report in 2000, written in response to concerns about the project’s escalating costs, also found no correlation between the PLA and the cost increases.”

As an example of how PLAs save money, Kotler cited New York City’s Department of Education 2005-2009 $13.1 billion School Construction Authority Five Year Capital Program. Consultant Hill International determined that by the end, taxpayers had been saved more than $221 million.

Concerns over rights and fairness have also motivated opponents of PLAs. Statements by area construction executives may illustrate the tenor of the reaction.

Don Wells of DEW Construction in Williston has said, “People that run open shops take a lot of pride in what they do and the services and benefits they provide to their employees. Typically what happens in a Project Labor Agreement is you lose your right to negotiate with your own employees.”

Andrew Martin of Pizzagalli Construction in South Burlington has said that PLAs cost non-union workers when part of their pay goes to support union programs unrelated to the project.

“You’re going to have to pay as an open-shop contractor into those benefits set up in the PLA, but you’ll never see any of those benefits if you’re not in the union,” he said.

On the New York side, Ted Luck of the Luck Brothers highway contracting company in Plattsburgh predicted that “(l)ike the Global Foundries chipfab plant in Malta, a PLA on the Champlain Bridge project will guarantee that labor is imported from far away since there isn’t enough local union labor to meet the ambitious time schedule on the bridge. Why should my employees at Luck Brothers be denied the right to participate in this project just because they are nonunion?”

In a release from the Empire State Chapter of ABC, president Rebecca Meinking alleged that “Special interest PLAs result in increased costs and reduced competition. PLAs deny taxpayers the accountability in public works projects they deserve from government.”

“This area of New York State – Essex and Washington Counties – and the State of Vermont are largely served by nonunion contractors,” Meinking said. “More than 70 percent of the construction workforce in this area of New York and 95 percent of Vermont’s construction workers do not belong to a construction labor union, according to government data. The use of a PLA will actually mean that the majority of local labor will be shut out of the opportunity to work on this bridge replacement project in a time when the unemployment rate in the construction industry is 24.7 percent nationwide, and even higher in the areas where this bridge project is located.”

Mark Holden, president of Associated Builders and Contractors Inc, based in Concord, NH, said that he sees a larger pro-union agenda in the use of PLAs.

“Project labor agreements, established years ago to create harmony and reduce disruptions among construction trade unions on union-only projects, have today become politically motivated market recovery programs for the construction trade unions. In Vermont, statistics for 2009 show total construction trade employment at 13,987 with 625 or 4.5 percent being union members. A project labor agreement is authorized discrimination against nine out of 10 Vermont construction workers who choose not to join a union. Great news with construction employment at over 20 percent.”

Holden pointed out that a PLA is not necessary to govern wages on the Champlain Bridge project, because it would fall under the federal Davis-Bacon Act. Since the 1930s, that law has required that workers on federal projects be paid the prevailing wage in that county – which would probably be to Vermont’s advantage if the bridge project was deemed to be based in New York.

Critics of PLAs are likely to cite a study by John R McGowan, professor of accounting at St Louis University, titled, “The Discriminatory Impact of Union Fringe Benefit Requirements on Nonunion Workers Under Government-Mandated Labor Agreements.” (The title is somewhat misleading: PLAs are “encouraged,” not mandated, says Kotler – the word used in the Executive Order – and for one to be used in New York, “(t)he burden is on the New York public owner to demonstrate, typically through a consultant’s feasibility or due diligence report, that a PLA has a proper business purpose, that it will provide direct and indirect economic benefits to the public and promote the particular project’s timely completion.”)

In the executive summary to his 2009 report, McGowan said that, “The economic disadvantages faced by nonunion employees and employers related to a PLA’s fringe benefit requirements explains why many nonunion construction companies are discouraged from participating in the bidding process for government-mandated, union-only PLA projects.” The problems came in three areas, he said:

– Nonunion workers lost $184-$613 million in pay for all federal PLA projects, the figure depending on assumptions. Money sent to union pension funds, etc reduces take-home pay about 20 percent.

– Nonunion contractors pay extra costs, by a factor of 25 percent or more, to work under PLAs. Had the Executive Order been in effect during 2008, such losses would have amounted to $230-$767 million, again depending on assumptions.

– “Nonunion contractors will face increased and unnecessary exposure to pension fund liability if they perform work under PLAs, including possible withdrawal liability when the project is completed.”

VBM asked the offices of Vermont’s two Senators and Representative if there was someone on their staffs who could explain their support for PLAs and respond to anti-PLA assertions about them. The only such source was someone connected with Senator Bernard Sanders, but he does not go on record to make statements, and in any case he was out of the office and unavailable. The question was referred to Jeff Potvin, president of the Vermont Building and Construction Trades Council.

Potvin agreed that PLAs support unions, but said that was not a bad thing.

“They can look at it that way, I suppose,” he said, “but it could be a lot better than that. (Nonunion contractors) could just sign as unionized contractors and their employees would get all those benefits.”

In Potvin’s view, the higher labor costs said to exist on PLA contracts are the same as paying local workers living wages. Those workers are also members of the general public, and the money benefits people generally when it goes into local circulation and has an economic multiplier effect.

The higher cost argument can be turned around to say that nonunion workers are being exploited in non-PLA projects, he said. Were construction workers being exploited in Vermont? “In some cases, not in all cases,” Potvin said. The worst problem comes when, on non-PLA jobs, workers are brought in by out-of-state contractors and those in the region get paid nothing on that job, he said. He prefers the term “community workforce agreement,” under which “you have to hire from within the community.”

It’s wrong to think that Vermont’s trade union are working at cross purposes to the interest of contractors, Potvin said.

“I work hand-in-hand with my contractors,” he said (Potvin is the business manager of UA Plumbers and Pipefitters Local 693 and serves on the Vermont Apprenticeship Council, as well as heading the Building Trades Council). Notably, hourly pay includes 70 cents that goes toward union-run professional training for the workforce, he said.

“We’re just trying to do the right thing for our workers and for our contractors,” Potvin said. “They want to be able to hold their own on a level playing field.”

And VTrans?

“We are on record with New York as thinking that a PLA is not necessary,” said Secretary of Transportation David Dill. New York does think that if a PLA is justified, it must be managed so as not to be unfair to Vermont’s overwhelmingly nonunion companies, he said.

“I just don’t see a PLA as being a part of this process.” He added, “I may be wrong.”

Potvin may have spoken for many when he said, “I’m waiting to see what happens.” Holden, too, may have expressed the general feeling when he said, “The devil’s in the details.”

In any case, there may be plenty of non-PLA work to go around in the near future, at least if the Obama administration can persuade Congress to continue making infrastructure improvement the keystone of economic recovery. According to the VTrans 2009 annual report on structures, of 2,688 bridges in the state, 464 are “functionally obsolete,” 494 are “structurally deficient,” and 139 have posted restrictions due to structural problems.

Ed Barna is a freelance writer from Middlebury.

Senate Resolution

By Senator Shumlin,

Senate resolution urging the Douglas administration to reconsider its decision to reject the implementation of a Project Labor Agreement for the new Lake Champlain Bridge.

Whereas, the construction of the new $75 million Lake Champlain Bridge between Crown Point, New York and Chimney Point, Vermont is one of the largest transportation projects in Vermont in decades, and

Whereas, the New York State Department of Transportation (NYSDOT) has proposed that the two states adopt a Project Labor Agreement (PLA) to ensure that work proceeds effectively and without conflicting labor contract provisions, and at the lowest possible cost, and

Whereas, a PLA is a negotiated, pre-hire, collective bargaining agreement with one or more labor organizations that establishes the terms and conditions of employment for a specific construction project, and pursuant to President Obama’s Executive Order 13502, federal agencies are encouraged to use PLAs in connection with large-scale, federally financed construction projects, and

Whereas, according to testimony before both the Senate Committees on Economic Development, Housing and General Affairs and on Transportation, harmonizing conflicting labor agreements takes on added importance on the Lake Champlain Bridge project because many of the trades working on the project are expected to be union trades, each with its own collective bargaining agreement with terms that may conflict with agreements of the other trades, and

Whereas, before issuing the draft PLA, the NYSDOT commissioned Arace & Company Consulting, LLC, an outside expert firm with no financial stake in the project to conduct an analysis of the PLA’s impact, and the analysis concluded a PLA will harmonize conflicting contracts on this particular project, and save an estimated $1.75–$3.0 million, and

Whereas, the cost savings achieved with a PLA result when labor unions agree to forego overtime and other contract benefits in exchange for an opportunity to work on a project, and

Whereas, without a PLA, there is no guarantee that Vermonters and New Yorkers will be employed on the $75 million project, thus preventing qualified Vermonters who work in the building trades from benefiting from a major employment opportunity in this region, and

Whereas, PLAs have been used successfully in other states, and

Whereas, the Douglas administration has directed the Vermont Agency of Transportation not to negotiate a PLA, and

Whereas, this refusal is based on the mistaken premise that the PLA will prevent nonunion Vermont subcontractors from applying for work on the project, and

Whereas, some Vermont subcontractors have opposed the PLA on “philosophical grounds,” now therefore be it

Resolved by the Senate:

That based on available information, the proposed Project Labor Agreement will reduce the overall cost of the project and help to ensure Vermont and New York residents will obtain some of the work on the project, and be it further

Resolved: That the Senate of the State of Vermont urges the Douglas administration to reconsider its decision not to attempt to negotiate a Project Labor Agreement for the new Lake Champlain Bridge, and be it further

Resolved: That the Secretary of the Senate be directed to send a copy of this resolution to the Secretary of Administration.