Reforms changing how local governments negotiate with project contractors are included in the Ohio House of Representatives’ version of the biennial state budget and are intended to rein in the cost of taxpayer-funded construction.
The budget bill, House Bill 64, includes a prohibition on using state taxpayers’ money on government construction projects containing project labor agreements (PLA).
Opportunity Ohio President Matt Mayer says HB 64 will eliminate many problems caused by PLAs, which often contain provisions requiring the payment of “prevailing wages.” Mayer is also a policy advisor for The Heartland Institute, which publishes Budget & Tax News.
“Prevailing wages are the wages paid in a jurisdiction for government-funded projects,” Mayer said. “Typically, prevailing wages translates to union-required wages and are about 20 percent more than nonunion wages for similar work. A PLA is an agreement in force on a government-funded project that sets the terms and conditions of employment on that project, which are union-driven components.”
Driving Costs Up
“PLAs, like prevailing wages, drive the cost of a project well above what the project would cost without the PLA,” Mayer said.
“As evidenced by the Huntington Park project in Columbus, in which the project went over budget and took longer to complete due to faulty workmanship, neither prevailing wages nor PLAs solve the alleged problems of unskilled labor, cost containment, or predictability,” Mayer said. “The only thing those concepts guarantee is that unions can compete, because nonunion companies have to pay wages higher than they normally would.”
Mayer says both reforms are needed for taxpayers’ money to be used efficiently.
“Cities should fight for the right to be free of both prevailing wages and PLAs so they can let the competitive process get them the most work for the least amount of funding,” Mayer said. “Taxpayers’ resources shouldn’t be used to prop up unions. Those funds should be spent efficiently and effectively to get the best value for taxpayers.”
‘PLAs Are Anti-Competitive’
Cara Sullivan, director of the American Legislative Exchange Council’s Task Force on Commerce, Insurance, and Economic Development and Justice Performance Project, says the problems caused by prevailing wages and PLAs go hand-in-hand.
“In reality, prevailing wages can set wage levels artificially high, or, as one study found, artificially low,” Sullivan said. “Additionally, because wage floors price out less experienced and educated individuals, prevailing wages can be most harmful to new or would-be entrants into the marketplace. PLAs are anti-competitive and can drive up the cost of a project by discouraging the participation of certain contractors.”
Sullivan says PLAs benefit unions while harming taxpayers.
“Prevailing wages raise the pay and benefits of a chosen few at the expense of the many,” Sullivan said. “PLAs can result in higher costs to taxpayers by discouraging nonunion contractors, who make lower bids for the project, from competing for the work.”
Ashley Herzog ([email protected]) writes from Avon Lake, Ohio.
David J. Langworthy, William Mitchell Law Review, “Project-Labor Agreements after Boston Harbor: Do They Violate Competitive Bidding Laws?”: https://heartland.org/policy-documents/project-labor-agreements-after-boston-harbor-do-they-violate-competitive-bidding-la/