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The PLA Menace

January 28, 2002

     Politicians and bureaucrats seem to get their hands into everything, including a vast array of things they have no logical or constitutional reason to be involved in. If that wasn't bad enough, despite their constantly proclaimed commitment to stretching taxpayer dollars as far as possible, they often do such things very inefficiently, giving taxpayers much less for their money. One of the most rapidly growing but little noticed ways of doing this is for government agencies to mandate project labor agreements (PLAs) for government-funded construction, as a payoff for unions' political support.

    A PLA is an agreement negotiated between a government entity and unions (but excluding nonunion workers and contractors) prior to accepting bids on a public construction project, which establishes the terms and conditions of employment that will be mandated for all workers on the project, regardless of who wins the bid.

    PLAs are justified as a way to buy labor peace, "level the playing field" for competitors, guarantee projects are completed on time, and hold down costs. But they do none of these things. They restrict competition, raise costs, and pick taxpayers' pockets. As Wharton Professor Herbert Northrup wrote in the Journal of Labor Research, "restraints imposed by government directed PLAs are political decisions which have little or no economic rationale, nor can they be defended on the grounds of labor peace, enhanced safety, or other reasonable criteria."

    PLAs are supposed to buy labor peace because they require unions to promise not to engage in disruptive activities such as strikes, picketing, work stoppages, or slowdowns. Of course, that promise need not be kept, as shown by the San Francisco International Airport expansion project, the largest PLA ever granted, that was hit by strikes anyway. Further, as the New York Supreme Court held in the Albany Specialties case, adopting a PLA to buy such labor peace "smacks of capitulation to extortion" by unions.

    Union negotiators leverage the threat to strike unless a PLA is adopted (and have supplemented that by using environmental laws to halt projects until PLAs are imposed) into better terms for union workers. Of course, no-strike pledges would not be necessary for nonunion contractors, who make up the vast majority of the construction industry, because they guarantee not to strike on every job.

    In fact, PLAs punish nonunion workers and contractors who would never strike, in order to buy labor peace from unions who threaten strikes--which amounts to penalizing the innocent (including taxpayers) to deter the guilty, who are actually rewarded. But their supporters call this "leveling the playing field" for all bidders.

    PLA backers say they just impose equal labor terms on all project bidders, allowing equal competition. But those "equal" terms lead to anything but equal competition between union and nonunion workers. For instance, the terms of the San Francisco International Airport PLA included the requirement that all workers on the project, even nonunion workers, had to join the union and pay union dues and fees for the duration of the project, for which they would get no benefits. And these dues are far from insignificant, as a 1998 report put union fees for Sacramento electricians at $3.21 per hour ($28 monthly, plus 12 percent of their earnings). Nonunion workers also had to contribute to union health and pension funds, although they would never get a penny of benefits in return.

    Even apprentices had to be union members, and new workers had to come through union hiring halls. In addition, union wages, work rules, job classifications, amd hiring and grievance procedures were required, raising costs.

    Such PLA terms are so onerous to nonunion contractors and workers that most will not even bid on PLA projects (86 percent, in a 1997 survey of nonunion contractors in Washington). And with the restrictions leading to fewer bidders, particularly nonunion contractors who may have lower costs, the reduced competition leads to higher bids and a higher price to taxpayers, as well.  For instance, a 1995 study of the Roswell Park Cancer Institute in New York, which was bid both with and without a PLA, found bids without PLAs came in 13 percent under budget, while those with PLAs came in 10 percent over budget, with a project cost difference of 26 percent.

    Similarly, last February, the San Francisco International Airport project was reported as $259 million over budget and six months late.  Several other PLA projects, such as locally notorious Proposition BB-funded construction for the Los Angeles Unified School District (which had a citizen oversight committee as well as a PLA to ensure low cost and timely completion), have suffered a similar fate. These results reinforce a 1998 General Accounting Office investigation of PLAs that were unable to document any cost efficiencies that resulted.

    The primary defenses of PLAs stand up so poorly to real investigation that the unions have come up with other justifications as well, as sideshows to distract and confuse those who might want to understand how they really work.

    Unions claim that PLAs benefit minorities, and the semblance of truth in that claim is that some do have special programs for minority employment. However, in restricting competition to union members, when unions have a far smaller fraction of minority members than nonunion employers, the effect is actually to discriminate against minorities. This is reinforced by PLA requirements that apprentices be union apprentices, and restrictions on lower-skilled "helper" employees, because they might undermine union jobs, even though such jobs are the primary means by which many low-income and minority workers try to learn their way to higher paying jobs. This is why a laundry list of minority contractor and employee groups opposes the supposed help they get from PLAs.

    Unions also claim that projects are higher quality and safer because of the restrictions imposed by PLAs. But these claims don't hold up under examination, either. There have been many documented quality problems on PLA projects. In addition, of California's 132 largest construction projects in 2001, only seven had PLAs, which, if anything, points to a PLA quality disadvantage. Similarly, more than 70 percent of the safety excellence awards by the Business Roundtable since 1988 have gone to nonunion contractors, and a study of OSHA statistics from 1985-1993 found nonunion contractors safer.

    Given the support unions have provided for so many politicians, their support for PLA "sweetheart deals" for unions on public construction contracts is hardly surprising, particularly since very few Americans know about them. But they are doing no favors for taxpayers or for the vast majority of workers who are not union members. And in backing PLAs while preaching spending every government dollar as wisely as possible, they do nothing but display their hypocrisy.

Gary M. Galles is a professor of economics at Pepperdine University. Send him MAIL, and see his Mises.org Articles Archive.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.

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