A project labor agreement (PLA) is a pre-hire collective bargaining pact establishing the terms and conditions of employment for a specific construction project. PLAs have been used for public and private construction projects since the 1930s. Like other states across the country, Ohio has begun to discuss whether PLAs are the most effective method for managing labor costs for state-funded construction projects.
One proposed version of Ohio’s biennial budget would prohibit state agencies from discriminating against a contractor for refusing to sign a PLA. Under the new guidelines, unions would still be able to negotiate a PLA and contractors could still agree to their terms, but the door would be opened to more competitive bids. Under a PLA, contractors bidding for a job are required to negotiate with labor unions. Once the PLA is in place, construction unions are granted bargaining rights to determine the wages and benefits of all project employees, including contractors and subcontractors.
Proponents of PLAs, including major labor organizations, argue they keep government construction projects on schedule and limit disruptions. They tout the inclusion of clauses that create internal processes to address issues, such as scheduling, safety, and quality control, without involving outside management.
Critics of PLAs, including major contractors and business organizations, argue the restrictions unfairly benefit organized labor and increase project costs borne by taxpayers. Studies by the Beacon Hill Institute and New Jersey Department of Labor found PLAs increase a project’s base construction bid and is associated with higher building costs. A recent Buckeye Institute report found PLAs can increase the cost of construction projects by 12–18 percent. When projects remove PLAs, bid costs drop: “When PLAs are dropped between rounds of bidding, bids on the same projects have come back by as much as 22 percent lower.”
Union hiring requirements do little to improve the quality of the project workforce because all licensed tradesmen have comparable skill and education levels. PLAs require contractors to hire through unions, freezing non-union workers, who comprise a large part of the construction workforce, out of these projects.
Ohio should join other states considering limiting or eliminating PLAs to create a system that benefits workers and saves taxpayers money by keeping construction costs low.
The following documents examine provide additional information about labor agreements.
Ohio Budget Bill Ends Union Project Labor Agreements in Bidding Process
http://watchdog.org/214116/union-project-labor-agreements/
Maggie Thurber of Ohio Watchdog discusses a proposed bill that would remove the requirement for all state projects to have PLAs. She interviews several experts on the possible effects of the reform.
One Step to Restore Competition to Public Works Bidding
https://heartland.org/policy-documents/one-step-restore-competition-public-works-bidding
Tom Lampman of the Buckeye Institute discusses the need for PLA reform in Ohio. Lampman argues a more competitive bidding system will increase opportunities for contractors and workers while allowing more efficient contractors to compete with union shops on equal footing: “Equal competition will help both union and non-union contractors become more efficient, and more efficient bids will mean more savings for taxpayers.”
Project Labor Agreements: Economic Illiteracy 101
http://heartland.org/policy-documents/project-labor-agreements-economic-illiteracy-101
Writing in Ideas on Liberty, Steven Greenhut discusses how PLAs are created and implemented, their negative effects, and why workers and taxpayers should oppose them.
Local PLAs Bite the Hand Feeding the Beast
http://heartland.org/policy-documents/local-plas-bite-hand-feeding-beast
Jim Waters of the Bluegrass Institute for Public Policy Solutions examines PLAs and their flaws. “PLA agreements often require non-union workers to join unions, be hired through union halls, pay union dues and they or their companies must donate to union pension funds—even though they will never benefit from such ‘contributions,'” Waters writes.
‘Project Labor Agreements’ Send Construction Costs Soaring
http://news.heartland.org/newspaper-article/2007/01/01/project-labor-agreements-send-construction-costs-soaring
Writing in The Heartlander, David Denholm of the Public Service Research Foundation reports on how states are being pressured by building trades unions to sign PLAs on public works construction projects. Denholm points out evidence shows 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.”
Project Labor Agreements and Public Construction Costs in New York State
https://heartland.org/policy-documents/project-labor-agreements-and-public-construction-costs-new-york-state
This statistical analysis from the Beacon Hill Institute studies the effects of PLAs on public school construction projects in New York State. Beacon Hill applied the methodology and procedures used in similar studies in Connecticut and Massachusetts and compared the results with those for public school construction projects in New York since 1996, basing their findings on a sample of 117 schools. They found the presence of a PLA increases a project’s base construction bids by $27 per square foot in 2004 prices compared to non-PLA projects.
The Project Labor Agreement for the Iowa Events Center: An Unnecessary Burden on the Workers, Businesses, and Taxpayers of Iowa
https://heartland.org/policy-documents/project-labor-agreement-iowa-events-center-unnecessary-burden-workers-businesses-an
This study from the Public Interest Institute criticizes the use of PLAs for the Iowa Events Center construction project. The study found the PLA unnecessarily burdened workers, shut construction companies out of the project, and forced Iowa taxpayers to pay more for the project than they would have had to do without the PLA.
Measuring the Cost of Project Labor Agreements on School Construction in California
https://heartland.org/policy-documents/measuring-cost-project-labor-agreements-school-construction-california
The National University System Institute for Policy Research examines the relationship between PLAs and public school construction costs in California. Using inflation-adjusted square foot construction costs for 551 school projects in California built between 1995 and 2009, the study found costs were 13–15 percent higher when school construction was completed with a PLA in place.
Use of Project Labor Agreements in Public Works Building Projects in Fiscal Year 2008
https://heartland.org/policy-documents/use-project-labor-agreements-public-works-building-projects-fiscal-year-2008
This report from the New Jersey Department of Labor summarizes the use of PLAs in public building projects completed between July 1, 2007 and June 30, 2008. The study found school projects using a PLA had higher building costs, as measured per square foot and per student, than those not using a PLA.
Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For additional information on this subject, visit Budget & Tax News at https://heartland.org/publications-resources/newsletters/budget-tax-news, The Heartland Institute’s website at http://heartland.org, and PolicyBot, Heartland’s free online research database at www.policybot.org.
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Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance.
