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Infrastructure Will Grow Faster Without Project Labor Agreements

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Infrastructure Will Grow Faster Without Project Labor Agreements

February 12, 2018

Today President Trump released his plan to stimulate $1.5 trillion in infrastructure spending to improve the country’s out-of-date structures. Unfortunately, his new plan misses an opportunity to reduce the cost of infrastructure by removing President Obama’s executive order that requires the use of Project Labor Agreements (PLAs) for federal construction projects. Since PLAs discriminate against non-union labor, they can be expensive, anti-competitive, and inefficient, and should not be mandated.

A PLA is a collective bargaining agreement approved prior to a specific construction project between one or more labor organizations and the hiring employer. The purpose of a PLA is to have the terms and conditions of employment established to reduce on-site friction that could lead to labor disputes.

During President George W. Bush’s time in office, he signed two executive orders (13202 and 13208) that prohibited the federal government or an agency working with federal assistance to require or prohibit construction contractors from signing a union agreement for federal or federally assisted construction projects. In 2009, President Obama repealed the executive orders and instead put in place Executive Order 13502 that encouraged federal agencies to mandate PLAs on large-scale construction projects exceeding $25 million.

Those in favor of PLAs argue that they provide more stability and structure to construction project, and that they increase project efficiency because they decrease the likelihood of labor disputes that would delay the project. Although proponents of PLAs argued that President Bush’s executive orders were contrary to the National Labor Relations Act, the Supreme Court ruled in favor of President Bush’s executive orders in Building and Construction Trades Department, AFL-CIO et al., v. Joe M. Allbaugh, Director, Federal Emergency Management Agency, et al.

Research does not show more labor-related problems during President Bush’s terms. In contrast, recent infrastructure projects in states illustrate how PLAs have reduced competition and increased construction costs. Additionally, projects have not been more efficient with PLAs and still run into many delays.

Although not mandated by the executive order to utilize PLAs, states have increased their use of the bargaining agreements on state-funded and federally-assisted projects, wasting more taxpayer dollars. Unfortunately, most of these projects have exceeded their timelines, their budgets, and have had ample other problems. For example, the Highway 99 tunnel in Seattle has had many problems including delays, a poor safety record and employees working on site while under the influence of alcohol.

Moreover, PLAs have decreased the competition in the marketplace for construction proposals. Lower supply results in higher prices. Some states are denying less expensive non-PLA construction proposals in favor of more expensive PLA bids. In New York, the Lancaster Development company submitted a PLA-free project bid to the New York State Department of Transportation (NYSDOT) for a federally-assisted contract to upgrade a highway interchange, but the NYSDOT later placed a PLA requirement on the contract. Although Lancaster Development’s bid was the lowest by $4.5 million, it was a nonunion, merit-shop firm which agreed not to sign a PLA. As a result, their bid was not accepted by the NYSDOT, which decided to forego the savings in exchange for working with a PLA company.

As of February 2017, the U.S. Department of Transportation had approved 381 Federal Highway Administration PLAs totaling $8.7 billion. Had these projects been non-PLA contracts, it is possible that the government would have saved a substantial amount of taxpayer dollars. Some states have already restricted PLAs. However, rolling back President Obama’s executive order on PLAs will make it easier and less costly to make progress on infrastructure development and deliver economic benefits across the nation.

 

Emily Top is a research associate at Economics21.

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