Obama’s EO 13502, PLAs, and union hand-outs (again)

Posted by Clyde Middleton on May 18 2010 Filed under Economy, News & Opinion, Politics. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

I just interviewed Dick Lombardo, president and CEO of Harkins Builders, a general contractor with offices in Pennsylvania and Maryland. Listen to the audio here.

We discussed the recently enacted Executive Order 13502, “Use of Project Labor Agreements for Federal Construction Projects.”  Although signed just weeks after Obama entered office, the Final Rule was released in mid-April 2010 and went into effect May 12, 2010.

The heart of 13502 is that procuring agencies through GSA, DOD, and NASA are encouraged to consider the presence of a Project Labor Agreement when awarding contracts valued at $25 million and over.  Sounds pleasant.

A PLA is, in essence, a collective bargaining agreement for the proposed work represented by a prime-contractor’s bid.  In that agreement, all wages are set, benefits agreed upon, rights to strike waived, etc.  Again, sounds pleasant.

In fact, 13502 reads, in part, “Sec. 4. Any project labor agreement reached pursuant to this order shall: … (b) allow all contractors and subcontractors to compete for contracts and subcontracts without regard to whether they are otherwise parties to collective bargaining agreements;”  Pleasant.  Warm.  Comforting.

But is that the reality?  The National Right to Work Legal Defense Foundation sees it as a gateway:  A project labor agreement requires all contractors, whether they are unionized or not, to subject themselves and their employees to unionization in order to work on a government-funded construction project. This is done by including a union collective bargaining agreement in a public construction project’s bid specifications. In order to receive a contract, a contractor must sign the agreement and subject its employees to union control.

Project labor agreements usually require contractors to grant union officials monopoly bargaining privileges over all workers; use exclusive union hiring halls; force workers to pay dues to keep their jobs; and pay above-market prices resulting from wasteful work rules and featherbedding.

I’ll admit my gut instinct was that this forced unionization was piling on.  I assumed that the percentage of unionization was quite high in this type of work – large construction projects.  But I was wrong.  Only 14.5% of the construction industry is unionized.  That means that over 85% of the available talent is either being frozen out of these contracts or being forced to join the union, if only for that project.  That means union dues.  That means paying into union pension funds without the longevity to vest.  That means more union donations to dems running for office, more bussed-in town hall attendees, and more bullhorns and cute signs at MoveOn.org rallies.  Oh joy.

Further, the EO gets cute and then ominous all in one short section:  Sec. 5. This order does not require an executive agency to use a project labor agreement on any construction project, nor does it preclude the use of a project labor agreement in circumstances not covered by this order, including leasehold arrangements and projects receiving Federal financial assistance. This order also does not require contractors or subcontractors to enter into a project labor agreement with any particular labor organization.

Does not “require” a PLA?  How easy will it be for a pro-union executive agency to state, “This bid was not chosen because of the uncertainties associated with the proposal, i.e., without a PLA there is too much risk of cost increases and work stoppage.”  It will so common, I suggest Rahm will have rubber stamps made of the several lines.

The EO also seems to open the door for the encouragement of PLAs in all government contracts.

Yet the reality is that published studies have found significant cost increases when PLAs are used:  An October 2009 report by Dr. John R. McGowan of St. Louis University found that had Order 13502 applied to federal contracts in 2008, additional costs incurred by employers related to wasteful PLA pension requirements likely would have ranged from $230 million to $767 million. Lost wages for nonunion construction workers would have ranged from $184 million to more than $613 million. In total, McGowan estimates that the Obama order encouraging PLAs would have cost nonunion workers and their employers $414 million to more than $1.38 billion in 2008. These calculations would be similar in 2010 and beyond.

But let’s be fair.  Here’s another study that is less critical of PLAs:  Because they are negotiated pre-bid and specifically tailored to the needs of particular projects, PLAs give project owners, building contractors and trade unions a unique opportunity to anticipate and avoid potential problems that might otherwise arise and possibly impede project progress. They maximize project stability, efficiency and productivity and minimize the risks and inconvenience to the public that often accompany public works projects. This is why Project Labor Agreements have long been used in the private and federal sectors, and more recently by state, county and municipal agencies.

Ah, but do you see the assumption?  ”Trade unions.”

This study goes on:  On a typical construction project operating without the benefit of a PLA, there can be fifteen or more different collective bargaining agreements covering work being performed by various crafts. As many as fifteen separate union contracts are not generally coordinated in any meaningful way and this leads to certain inefficiencies — inefficiencies that can be addressed by a PLA.

Yes, assume the presence of trade unions, and perhaps a PLA makes sense.   Yes, assume that 14.5% of the workforce should drive the labor practices of the remaining 85.5%, then perhaps PLAs make sense.

But. The. Assumption. Sucks.

Unionization raises wages.  Is that good?  Not if it is my tax dollars paying for the raise, and a lower responsible bidder is available.  Here’s the data of increased wages for doing the same job union versus nonunion – the Y axis shows the “union premium”:  For the lowest-earning workers (bottom 10%), their union premium is 21%; medium-wage earners, 14%; and high-wage earner, 6%.

Put those wages in concrete terms – saved (or lost) taxpayers’ dollars:  Of the 117 schools examined by the researchers, 19 municipalities entered into PLAs for school projects. The researchers took into account differences in both the type of schools (elementary, junior and high schools) and the size (controlling for square footage). The majority of school districts that chose not to enter into such agreements saved between $2.7 million for a 100,000-square-foot building and $8.1 million for a 300,000-square-foot structure.

Now, explain to me, kindly, how an artifice such as a PLA reduces cost.  Further, since we have studies of projects that show increased costs and of unions that show increased wages, it doesn’t seem too far a stretch to tie PLAs to increased union presence.

The interests of the few (union workers and dem politicians) over the interests of the many (non-union workers and taxpayers).

Barry strikes again.  Remarkable.

Want more proof that this is a democrat/union scheme?  Barry’s 13502 revoked President Bush’s “Open Competition” 13202 and 13208, signed within weeks of entering office, which revoked President Clinton’s 12836, signed within weeks of entering office, which revoked President Bush the Elder’s 12818 and 12800.

Can’t wait until February 2013.

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