Locked Out

Locked Out

With project labor agreements, unions say they're just trying to bring projects in on-time and under budget. But open-shop contractors say a 'psychological war campaign' is clouding their true intentions The past few years have been cruel to the building trades. With the exception of residential construction, most markets have languished in the early 21st century recession. While so many specialty

With project labor agreements, unions say they're just trying to bring projects in on-time and under budget. But open-shop contractors say a 'psychological war campaign' is clouding their true intentions

The past few years have been cruel to the building trades. With the exception of residential construction, most markets have languished in the early 21st century recession. While so many specialty contractors have chosen to diversify, find new revenue streams, and take what little work they can find, Tim Weir has let millions of dollars in public construction work pass him by without even bothering to bid. It's not that his St. Louis-based AMF Electric doesn't have the manpower to finish the jobs on time or under budget. And it's not that he wouldn't like to have the work. Despite tough economic times, he just doesn't want to have anything to do with the projects, because in doing so, the open-shop contractor believes he'd be submitting himself and his company to the “tender mercies of the IBEW” and the control of union leadership.

What could possibly make these projects so unattractive to him that he could afford — or think he could afford — to refuse to bid on them? Each of them was managed by a project labor agreement (PLA), a prehire collective bargaining agreement that stipulates employment regulations intended to guarantee labor harmony and ensure timely completion of the job. Contractors who bid on such jobs must agree to pay workers the locally negotiated wages or the prevailing wage and settle labor disputes without striking, requirements that few would dispute the need for. But opponents of PLAs say other rules that govern the selection of workers are included for the express purpose of reducing competition and preventing open-shop contractors from bidding. “PLAs take a management decision out of the hands of merit-shop contractors and force us to choose whether to become signatory to the IBEW,” Weir says. “As much as I might like to have one of those jobs, the consequences would be so disastrous that I would be a fool to make that decision.”

Under many PLAs winning bidders must draw their workers from union halls. Although this isn't a problem for union contractors who agree to such practices as part of their local collective bargaining agreements, open-shop contractors like Weir say it forces them to forfeit the independence they won by not joining the IBEW and alter the management practices they believe have allowed them to remain competitive.

Such claims that PLAs preclude open-shop contractors and eliminate competition are roundly dismissed by union leadership. Mark Ayers, director of construction and maintenance for the IBEW, says there's nothing to stop anyone from bidding on a PLA-managed project and that their intent is to ensure all workers on large public projects — whether union or non-union — enjoy fair compensation and comparable benefits packages.

Although he admits it's “somewhat different from the norm,” Ayers points to a PLA put in place for the upcoming construction of a Toyota manufacturing plant in San Antonio as evidence that not all PLAs require non-union workers to join unions. The agreement for the $800 million project stipulates that if an open-shop contractor wins the bid, he may use his own employees for the duration of the project and they needn't become signatories to the local unions. It should be noted that Texas is a “right-to-work” state that prohibits any labor contract from forcing workers to join a union (Figure above).

The agreement wasn't popular among many in strong union areas, but Ayers says it offers the IBEW an opportunity to expand its reach in the decidedly non-union state. “What a perfect place for us to get a firsthand look at the most talented non-union electricians in Texas,” he says. “If we can't sell them on becoming a member of IBEW, shame on us.”

The Toyota PLA differs from the typical agreement in one other important respect. Non-union contractors have the option of making contributions to their own health and benefit programs and retirement plans, as long they were in effect for the preceding 12 months. In many cases, though, non-union workers on PLA projects may not be able to recoup portions of the money they put toward benefit plans unless they remain in the union after the completion of the project.

Ayers bristles at the notion that PLAs take money away from non-union workers. “When [open-shop contractors] indicate concerns that their employees may have to pay union dues, it blows my mind,” he says. “At the same time, it doesn't bother a lot of these independent owners that they don't provide any health insurance or pension plans. But all of the sudden they're concerned that they're workers might have to pay union dues to belong to an organization.”

As far as Weir is concerned, though, those claims are just part of the “psychological war campaign the IBEW is waging.” His company provides all of the aforementioned benefits, including a 401K program that matches employee contributions up to 5%. His employees are fully vested as soon as they enter the program. “Obviously there are little fly-by-night contractors who don't protect their people,” Weir says. “But this is precisely the smokescreen the IBEW and AFL-CIO throws up. They don't talk about the merits of their proposed legislation. They throw scurrilous attacks.”

The politics of PLAs.

Less than two months after entering office, President George W. Bush fired the latest salvo in this highly politicized war that has pitted union and non-union contractors against each other for the past decade. By issuing Executive Order 13202 in February 2001, Bush effectively prohibited PLAs on federally funded construction projects. The AFL-CIO's Building and Construction Trades Department (BCTD) challenged the ban on the grounds that it violated Sections 8(e) and (f) of the National Labor Relations Act, which allow employers to both require all contractors to be bound by agreement terms and enter into prehire agreements, and succeeded in overturning the ban. However, the ruling was later reversed, and the U.S. Supreme Court denied the BCTD's subsequent challenge in January 2003.

However, the president's order had no bearing on state-funded projects, and Governors Blagojevich of Illinois and McGreevey of New Jersey, among others, have since issued executive orders requiring PLAs on state-funded projects estimated at $5 million or more. In doing so, McGreevey also established the New Jersey School Construction Corp. (NJSCC), a state-funded organization responsible for managing $8.6 billion earmarked for state school construction projects. The NJSCC has already committed almost $3 billion to New Jersey contractors, the majority of which were represented by unions, for work on almost 2,500 projects. Jack Spencer, CEO of the NJSCC, says that PLAs have made it easier to manage such a large amount of work in the last year-and-a-half. “The process is working very well,” he says. “I'm putting an awful lot of work out there in a short period of time, and the PLA guarantees that the supplying of that necessary trade labor is the union's responsibility.”

Gov. McGreevey's executive order became effective in February 2003, and the NJSCC has 27 PLA-managed projects currently under construction, totaling $359 million. Spencer only had figures for 22 of those projects, and of the 96 bids he received for them, 61 came from union contractors and 35 came from open-shop contractors. Five of those projects went to open-shop contractors.

New Jersey has long been a union stronghold, somewhat accounting for the disparity between number of bids won by union and non-union contractors, but Spencer says project size is also a factor. “You have to remember, these jobs are so large that they're usually union jobs anyway,” he says. “Most of these projects are $15 million to $60 million projects.”

Like Ayers of the IBEW, Frank Wade, director of the New Jersey State Building and Construction Trades Labor Management Council (LMC), insists PLAs aren't intended to prohibit open-shop contractors from successfully bidding on these projects. Instead, he says, it may be a matter of work skills and training that has prevented open-shop contractors from securing more of the jobs in New Jersey. The union-based LMC launched a statewide awareness program in March 2003 to promote the benefits of PLAs. “The only thing necessary to bid or receive a publicly funded contract is to demonstrate the ability to provide skilled, qualified workers,” Wade says. “The unions have some of the best standards, and they turn out some of the best workers. My reading of the open-shop contractor is that they do not have the apprenticeship programs that we are privy to.”

To be expected, that argument that union workers are better trained and therefore better suited to work on large construction projects puts open-shop contractors and their supporters on the defensive. Geoff Burr, director of legislative affairs for the Associated Builders and Contractors (ABC), says the quality of non-union work speaks for itself. “I would contend that [non-union] workers are very well trained,” he says. “Just look at the quality of the work they put out there. I guess in general, it depends on the individual's ability to do work. It's not based at all upon their union affiliation.”

Opponents of PLAs have also been busy proposing legislation at the federal and state level. State laws in Montana and Utah have banned the use of PLAs on publicly funded projects, and Ohio came close to passing a similar law. The state's House Bill 101, which would have prevented PLAs from including language that forces open-shop contractors to become signatories to the local unions, became law in 1999. It met opposition, however, and was overturned in the Cuyahoga Court of Common Pleas. Supporters of the bill won a short-lived victory when the Eighth District Court of Appeals reversed that decision, but the Ohio State Supreme Court ultimately declared the law unconstitutional.

Burr says the ABC was disappointed Ohio Attorney General Jim Petro didn't appeal the ruling to the U.S. Supreme Court. Such a case could have ended the debate by setting a nationwide precedent for the application of PLAs at the state level. “We would liked to have seen the Supreme Court review the decision because of the federal pre-emption question under the National Labor Relations Act,” he says. “But it's hard to tell what the Supreme Court would have done because they're so hesitant to infringe upon a state's rights to enact its own laws.”

One of the more recent pieces of proposed legislation to challenge PLAs on a state level is Missouri's Open Contracting Act, which would prohibit public agencies from requiring contractors that bid on public projects to sign agreements with or become signatories to local unions. Although the Missouri House of Representatives passed the bill, the Senate version has yet to be signed. Weir, whose business would be directly affected by the passage of the bill, says the state Senate's unwillingness to act on it is a result of both the high concentration of union workers in the St. Louis area and political pressure from union supporters. “These [Missouri senators] who grew up in metropolitan St. Louis, all they've heard their whole lives was ‘union, union, union,’ and they assume that's the way it is nationwide,” he says. “Unfortunately, we have people like that in key places in the Missouri Senate who lack the courage of their convictions, who maybe know better but don't believe it's worth their own political risk.”

State Sen. John Loudon, R-West St. Louis County, is sponsoring the bill in the Missouri Senate, and though it has met with little success, he plans to continue pushing it this year. “If it were to get past the Senate, I'm sure [Missouri Gov. Bob Holden] would kill it,” Loudon says. “But if we get a governor in there who's friendlier to our cause, things might change.”

Who has the better study?

When forced to defend the benefits of PLAs, unions frequently argue that PLA-managed projects come in on- or under-budget. When workers are prohibited from striking and have no need to argue the finer points of the labor contract, proponents of PLAs argue, work stoppages will disappear and the projects will be completed on-time. No delays means the jobs are less likely to exceed bid costs, and the taxpayers won't have to pay more for a construction project that should have been finished months earlier. “You aren't going to find many project labor agreements that didn't actually produce what they said they would,” says Ayers. “Usually a PLA comes in within budget and everyone is happy. If they didn't, you wouldn't see PLAs continue to grow.”

A recent study by the Beacon Hill Institute (BHI) at Suffolk University in Boston shows otherwise. First published in March 2003 and later revised and expanded in September 2003, the study polled school construction projects in Massachusetts and found the bid prices of PLA projects were $18.83 per square foot, or 14%, higher than bid prices on non-PLA projects, and the actual costs of construction were $16.51 per square foot, or 12%, higher on PLA projects. Encouraged by those figures, the ABC has touted the study's results as undeniable evidence that PLAs are do more harm than good.

The authors of the study compiled statistics from 126 construction and renovation projects at schools in the Boston area since 1995-21 of which were managed by PLAs — and compared the figures to come to their conclusion that PLAs raise the cost of construction. Jonathon Haughton, associate professor in the economics department at Suffolk University and a co-author of the study, says BHI focused its attentions on schools because they're relatively comparable in size and difficulty, and that the results could speak to the construction industry in general, but only on an informal level.

While the ABC and open-shop contractors are confident in using the study's results as one of their major talking points against PLAs, Ayers, the IBEW, and other PLA supporters scoff at them. They question the study's methodology, sample size, and accuracy of data, and pass it off as little more than ABC propaganda. At the behest of the IBEW, three professors from various state universities reviewed the first version of the study released in March and found problems with it, namely the fact that it focused on only bid costs. BHI corrected that problem by including actual costs in the second version of the study and increasing the sample size from 54 to 126.

Matthew Bodah, associate professor in the Labor Research Center at the University of Rhode Island and one of the three persons to review the study, hasn't had a chance to analyze the results of the second version, but he still has his doubts. After statistics for more school construction projects were added in the second version of the study, the bid price increase for PLA projects decreased from 22%, suggesting that as sample increases, the effect of PLAs decreases. Not only that, Bodah says, the study failed to factor in other elements of construction that could have raised costs.

Despite those concerns, Haughton is still confident with the study's conclusions. “The March study was much more iffy, mainly because the data set was much smaller,” he admits. “We've tried a number of different specifications on the link between price and whether there's a PLA, and the results keep coming through.”

The Electrical Contracting Foundation, a group funded by NECA, has enlisted Bodah, Dale Bellman of Michigan State University, and Peter Philips of the University of Utah to undertake their own study. The three will conduct an 18-month study beginning this month on PLAs that will examine costs on projects across the country and look at variables like the effects on minority hiring and training.

The field narrows.

With or without the study, though, ABC's Burr says PLAs increase costs strictly based on the fact that they reduce competition. In the '30s and '40s when the first PLAs were used on large public and private projects at hydroelectric dams and atomic energy facilities, the issue of open-shop contractors losing out to unions was a non-starter. In 1947, 87% of construction workers belonged to unions. Since then, however, 22 states have passed right-to-work legislation that allows workers to decide whether to join a union, and membership has been on the decline. In 1973, the percentage of union workers had fallen to 40%, and by 2002 slightly more than 17% of construction workers were unionized. The figures are higher in the electrical industry, but not by much. In 2002, 30% of electrical workers were unionized, and according to Ayers, 44% of electrical construction dollars spent went to IBEW contractors.

Taken another way, that means that 70% of electrical workers are non-union. If such a large portion of contractors are precluded from the bid process because they're either unable or unwilling to ask their workers to join unions or submit to jurisdictional rules, argues Burr, the potential bidding pool is drastically reduced and prices will inevitably go up. “The less people are forced to compete, the more your price is going to go up,” he says. “And that's really the issue at hand.”

Jack Spencer of the NJSCC points out that the bids for the 22 current projects for which he had numbers came in 4% lower than what he had estimated the construction costs at, which would seem to negate the anti-competitive effect that the ABC argues PLAs create. But just one-third of those bids came from open-shop contractors, begging the question, How much lower might those bids have been if more bidders had been compelled to participate? “The only logical consequence of this is a higher cost to the tax payers who are funding these publicly funded projects,” Weir says.

With the Open Contracting Act stuck in the Missouri State Senate, Weir and his business partner John Frisella are engaging in self-described “guerilla warfare” with local union leadership in their quest to outlaw PLAs on projects in St. Louis and across the state. In addition to organizing pickets at local aldermanic meetings that discussed the benefits of PLA-managed projects, the two have met with St. Louis Mayor Francis Slay to propose a dual-bid process, in which public projects would be bid with and without PLAs to see which garners the lowest bids and determine whether PLAs do offer an economic advantage to the city. “If our bid is low, then they'll use us,” he says. “They're businesspeople, so if our bid isn't lowest, they won't use us. If it's bid both ways in a publicly funded project, the taxpayer is ultimately going to get the best for his dollar.”

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