The Truth About Project Labor Agreements

Eight senior U.S. General Services Administration (GSA) officials have been disciplined, fired or forced to resign since last Monday’s release of a scathing report by GSA Inspector General (IG) Brian Miller, whose staff spent a year reviewing waste, fraud and abuse related to $823,000 in spending to entertain 300 GSA employees at a regional conference held at the posh M Resort Spa Casino in Las Vegas.

The IG report, documenting the GSA’s excessive, wasteful, and in some cases impermissible spending, forced the resignation of GSA Administrator, Martha N. Johnson, and the firing of Public Buildings Service (PBS) Chief Robert A. Peck and another Johnson deputy. Four regional commissioners who planned the October 2010 conference are on administrative leave.

Linda Chero, previous Mid-Atlantic regional commissioner with the GSA’s Federal Acquisition Service, has replaced Peck. PBS oversaw billions of dollars worth of federal construction projects funded by the federal budget and the American Recovery and Reinvestment Act.

The scandal has grabbed newspaper headlines, sparked outrage from political commentators and drawn White House ire.

Inexplicably, there was little reaction from the media and no investigation from the GSA’s IG office when the GSA’s PBS wasted nearly four times as much money on a blatant handout to Big Labor in 2010.

GSA Policy Funnels Construction Contracts to Obama’s Political Patrons
The GSA approved a change order of an additional $3.3 million on a $52.3 million construction contract to ensure stimulus-funded renovations to the Lafayette Federal Building in Washington, D.C., were built with union labor through a union-favoring project labor agreement (PLA).

As a result of President Obama’s Executive Order 13502, issued Feb. 6, 2009, federal agencies like the GSA are strongly encouraged, on a case-by-case basis, to mandate PLAs on federal construction projects exceeding $25 million in total cost.

The order, which effectively steers federal contracts to unionized contractors and union workers, is a gift to well-connected special interests that have spent hundreds of millions of dollars in support of President Obama and his Democrat colleagues in Congress.

Executive Order 13502: Obama’s Gift to Big Labor. Image courtesy of The Boston Globe, “Obama kowtows to labor unions,” 10/07/09.

What is a Government-Mandated PLA?
Anti-competitive government-mandated PLAs are special interest schemes that require contractors to promise that most or all of their workforce building a PLA project will be hired through a union hiring hall or built by card-carrying (and unfamiliar) union members. The terms of PLAs vary from project to project because these pacts are one-time contracts between contractors and labor unions for a specific construction jobsite. However, when required by local, state and federal agencies, contractors can’t win taxpayer-funded contracts unless they agree to the government-mandated PLA.

In some PLAs, merit shop contractors are permitted to use a limited number of existing nonunion employees, but they are forced to join a union and/or pay union dues and fees in order to work on a project funded by their tax dollars.

It is a raw deal for an industry workforce already facing a 17.2 percent unemployment rate, according to government data. It is especially discriminatory to the 86 percent of the U.S. construction workforce that choose not to belong to labor union.

In addition, PLAs saddle contractors with archaic and inefficient union work rules that needlessly increase construction costs.

Finally, PLAs typically force merit employers to pay employee benefits into union-managed multi-employer pension funds, but employees do not see the benefits of the employer contributions unless they join a union and become vested in these plans.

Qualified Nonunion Employees and Experienced Contractors Victimized by PLAs
An October 2009 report by Dr. John R. McGowan, “The Discriminatory Impact of Union Fringe Benefit Requirements on Nonunion Workers Under Government-Mandated Project Labor Agreements,” found that nonunion employees of merit contractors forced to work under government-mandated PLAs suffer a reduction in their take-home pay that is conservatively estimated at 20 percent.

Merit contractors that offer their own benefits, including quality health and retirement plans, often continue to contribute to both existing programs and union programs under a PLA.  The McGowan report found that nonunion contractors are forced to pay in excess of 25 percent in benefits costs above and beyond existing prevailing wage laws as a result of this “double payment” attached to PLAs.

These requirements make it difficult for nonunion contractors to compete and results in increased construction costs. It is also unfair to employees who have earned this money for a secure retirement.

PLA Mandates Increase Costs and Reduce Competition
The costly and discriminatory terms and provisions in typical PLAs discourage competition from nonunion contractors and increase the cost of construction. Numerous studies have found that government-mandated PLAs typically increase the cost of construction between 12 percent and 18 percent. That translates into less building and fewer construction industry jobs.

PLA Mandates Are Politically Motivated Solutions in Search of a Problem
The Obama administration justifies the use of government-mandated PLAs because they allegedly produce “economy and efficiency” in government contracting. However, no credible evidence supports this claim. In reality, PLA mandates are an earmark for Big Labor bosses and contractors justified as a solution to a problem that doesn’t exist in federal contracting.

GSA’s PLA Policy Investigated by Congress, but Remains Unchanged
The GSA has taken an aggressive and indiscriminate approach to promoting the use of union-favoring PLA mandates.

GSA policy permits firms to submit a PLA offer or, a nonPLA offer (or both) on all GSA projects exceeding $25 million in total cost. However, PLA offers submitted by bidders receive extra credit in the technical evaluation category of the best value procurement process. The special treatment makes it difficult, if not impossible, for non-PLA offers to win contracts when competing against PLA offerors (see the 9/24/10 PBS Procurement Instructional Bulletin (PIB) 10-04-Revision 1 for more details on this policy).

The GSA’s discriminatory PLA preference policy has led to delays, reduced competition and increased costs. Requests for congressional investigation forced the GSA to testify at two 2011 House Oversight and Government Reform Committee hearings to justify its wasteful favoritism.

See GSA deputy administrator Susan Brita’s attempt to justify the waste on the Lafayette Building at 44:16 of this hearing video and check out more highlights from the hearing after the jump.

Despite the congressional investigation, the GSA’s wasteful and discriminatory PLA preference policy remains unchanged. They refused to answer tough questions regarding their PLA policy and have provided the public with no evidence that it is beneficial to the public.

Union contractors and union construction workers continue to receive a considerable advantage when competing for contracts to build taxpayer-funded GSA construction projects. Numerous projects have been awarded to contractors submitting PLA bids at the expense of qualified firms opposed to PLA mandates. Full and open competition has been curtailed in violation of the federal Competition in Contracting Act. Taxpayer dollars have been wasted. Skilled nonunion craftspeople and their qualified employers have been denied jobs and opportunity as a result of this needless policy.

The waste and favoritism of the GSA’s PLA policy is comparable to the waste documented in the recent IG’s report.  If unchallenged, federal agencies will continue their unfortunate track record of waste, fraud and taxpayer abuse.

Congress and the media should renew their interest in the GSA’s anti-competitive procurement practices and call for reform. The GSA needs to be held accountable for any instance of waste, whether it be procuring conferences or construction services.