‘Project Labor Agreements’ Send Construction Costs Soaring

Published January 1, 2007

Government agencies across the country are being pressured by building trades unions to sign “project labor agreements” on public works construction projects.

A “project labor agreement,” or PLA, is an agreement between the government body and the building trades unions requiring all workers on the project either to be union members or to be obtained through union hiring halls.

Proponents of PLAs contend they reduce costs by ensuring on-time completion of the project. That is another way of saying the project will not be delayed by labor disputes, even though there are several examples of strikes delaying projects covered by PLAs.

Scrapped PLA, Saved Millions

There is evidence, however, that PLAs substantially increase costs, in part because they severely reduce the number of companies willing to bid on a project. Fewer bidders mean higher bids.

A clear example occurred recently in Fall River, Massachusetts. The city had agreed to a PLA for school construction. There were few bidders, and in some construction categories there were none. The bids that did come in totaled $9.6 million over budget.

Fall River scrapped the PLA, resulting in at least three bidders in each category and savings of nearly $5 million.

Ron Cogliano, executive director of the Merit Construction Alliance in Massachusetts, told the Fall River Herald News for an October 6 article, “It is no coincidence that the new bids on the schools are substantially less than the bids made under a PLA. PLAs are discriminatory, unfair, and costly to taxpayers, who pay a premium for union-only labor but see absolutely no benefit for the increased price tag.”

Unions Want Protection

From a union point of view, PLAs became necessary as a result of at least two converging factors.

Years ago almost all major construction companies were unionized, and small open-shop firms were not in a position to compete for major public works construction projects. Now there are many large open-shop construction firms capable of successfully bidding on even the largest projects.

Moreover, several decades ago most construction workers were union members. In those days there was always a strong likelihood that the prevailing wage would be the union wage. This is no longer the case, because of the rise of nonunionized construction firms.

Also, in some areas, prevailing wage laws no longer provide unions the protection from competition that they once did. Because the construction workforce is not as unionized as it once was–just 13.1 percent of construction workers in 2005 were union members–it is somewhat less likely that union scale will be determined to be the prevailing wage.

David Denholm ([email protected]) is president of the Public Service Research Foundation in Vienna, Virginia.