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Introduction
From a purely cost standpoint, labor is the single largest
component of any major civil construction project, including most,
if not all, megaprojects. We refer here, of course, not to the
design professionals, planners, politicians, regulatory agencies,
and other in-dividuals whose efforts also represent a portion of
the project costs, but rather to the construction labor that
directly contributes to the “brick and mortar” components of the
project. A typical rule-of-thumb estimate holds that one-third of a
construction con-tract’s price to an owner is the cost of craft
labor. Obviously then, efficiency and produc-tivity considerations
of that labor should be of paramount concern to all participants.
Construction contractors will also freely acknowledge that their
single greatest risk to cost overruns on a project revolves, around
labor productivity.
Objective measurements of construction labor productivity are
notoriously difficult to quantify, making comparisons difficult.
This is partly a result of the fact that each project is unique,
and while a class of laborers may perform the same task on numerous
projects year after year, no project is designed or built exactly
the same as the previ-ous one. Likewise, and probably more
importantly, no two projects are sequenced and managed exactly
alike. Therefore, any attempt to assess labor productivity is often
an assessment of construction management efficiency.
Notwithstanding the influence of management and leadership on labor
productivity, there is no substitute for an intel-ligent,
cooperative, and flexible workforce. Accordingly, it is in the
financial interests of an owner to take steps that promote those
positive attributes in the workforce.
Despite the difficulties of objectively measuring productivity,
the general perception of the industry is that labor productivity
has fallen, or at best has remained flat, over the last 30 years,
compared to a generally increasing trend in other sectors of the
economy.1 Many of these same studies show that a typical
craftsman’s actual productive time over the course of a
construction project amounts to no more than 3½ hours out of a
typical 8-hour day involved in direct labor. The balance, almost 60
percent, of the craftsman’s time is consumed by unproductive tasks,
such as administrative delays, inefficient work
CHAPTER 8
Labor RelationsJoseph Dennis, Esq., ArupTom Farina, Parsons
BrinckerhoffDavid H. Corkum, Esq., Donovan Hatem LLP
The Göltzsch Valley Bridge (Göltzschtalbrücke) in Saxony,
Germany, is the largest brick bridge in the world. A railway bridge
built between 1846 and 1851 (and still in use), it contains more
than 26 million bricks and is 574 meters long and 77 meters at its
highest clearance above the valley. Photo © 2009 by André
Karwath.
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methods, labor jurisdiction disputes, and other work
restrictions. Accordingly, it would appear the greatest potential
for increase in labor productivity is not with the worker but with
the management of that worker’s environment, scheduling, materials
delivery, etc.
A project’s design can either intentionally or inadvertently
require a greater or lesser amount of labor to accomplish a
particular task. Consider for example the use of a pre-cast
segmental tunnel lining compared to a cast-in-place lining.
Similarly, one design may favor one craft over another, such as in
the case of a post-tensioned segmental concrete bridge versus a
steel bridge. Some construction techniques may be impossible or
completely impracticable to implement, given the available labor
force. Attempting a New Austrian Tunneling Method (NATM) tunnel,
for example, without an experienced and trained crew, each member
of which knowing instinctively how to react to situa-tions in the
field, could prove to be a disaster. If the local labor force
objects to import-ing such a proven crew, then the owner should
consider rejecting the proposed tech-nique. Owner decisions about
contract packaging strategies will also have an impact on the labor
force size and makeup. A number of smaller contract packages will
likely result in a higher total workforce, as the efficiencies of
scale are not realized when using mul-tiple employers. A strategy
that promotes numerous smaller packages may also favor local small
businesses and contractors and their existing labor force.
Labor considerations are not just about money and the cost of a
project. An owner, particularly a public owner about to embark on a
megaproject, wields a powerful so-ciological stick. Within limits,
the owner can dictate labor force preferences, such as a preference
for local citizens, disadvantaged citizens, or workers of specific
gender and ethnic backgrounds. It can dictate community outreach
and training programs. The Helmets-to-Hard-Hats program, which
seeks to engage veterans in the construction trades, has gained in
popularity across the nation. The megaproject owner also has a
significant political trump card, which it can choose to hold or
trade for future favors.
Not only are labor considerations important to the bottom line
cost of the mega-project and the political/social aspirations of
the megaproject owner, but they can also have a significant impact
on the community in general. A depressed area with a high
unemployment rate will be hostile to a project that it perceives as
benefitting residents of other, “outside” areas. Similarly, a
megaproject requiring thousands of workers may upset the balance of
the existing economy in an area if contractors begin to offer
higher-paying jobs than the local market currently supports.
Background
In considering the available labor force for a project, there
are two broad categories, union or nonunion, that serve as proxies
to define the roles and expectations of the em-ployer and employee.
It is the employer, the construction contractor, that decides in
the
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first instance whether it will operate as a nonunion (or
open-shop) contractor, or else bind the company to collective
bargaining agreements that are the hallmark of a union shop. Each
type of operation has its proponents and detractors, and the
validity of their arguments varies from region to region within the
country.
In an open-shop arrangement, a construction contractor hires and
fires its labor force as it sees fit and pays at a rate that the
market will bear, including fringe benefits, which are also a
function of market forces. The contractor has no set expectation as
to the skill level, training, and experience of its hired workers
and can tailor its compensation and benefit package
accordingly.
A variation on a pure open-shop arrangement is referred to as
merit-shop, which is more typical for the larger nonunion
construction contractors with a national book of business. These
merit-shop contractors adhere to policies and procedures of
contrac-tor associations, such as the Associated Builders and
Contractors, Inc. The merit-shop worker has the ability to move
from project to project and from contractor to contractor
throughout the affiliated merit-shop organization, and his
portfolio of past project per-formances will be recognized among
the contractors within that organization.
An open-shop — and particularly a merit-shop — labor force
probably has a closer affiliation with the management of the
construction company, and both benefit from successful completion
of projects. The open-shop/merit-shop contractor enjoys a degree of
flexibility and freedom in deploying its labor force and is
unrestricted by jurisdiction-al rules that require certain crafts
to perform certain types of activity. The construction contractor
is fully responsible for training and developing the skill level of
the workers, and its motivation to develop such skills is justified
by the greater efficiency and produc-tivity of that individual
worker.
Union-shop construction contractors agree to be bound by
collective-bargaining agree-ments with one or more of the labor
unions for the construction trades. These collec-tive-bargaining
agreements are typically negotiated between the labor union and a
rep-resentative group of construction contractors operating in the
region. The agreements set the hourly rates, working conditions,
hiring protocol, training programs, and benefits associated with
each worker in each category within the craft, i.e., journeymen and
ap-prentice. Most importantly, the construction contractors agree
to hire workers direct-ly from the union rather than seeking
employees on their own. In this way, the union controls the
referral of workers to the contractor organizations. Each local
union is, of course, organized to support a particular craft. The
workers within each local are skilled in that craft or, if an
apprentice, have some base level of skill and are in the process of
being trained to be full-fledged journeymen. Partly because of the
referral system in an industry that generally does not retain
workers 12 months out of the year, union labor-ers tend to align
their loyalties with the union rather than the construction
contractor. Laborers recognize that their future employment depends
on that referral from the union
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and that such referrals will be lacking if they fail to adhere
to recognized union rules.The local unions are typically affiliated
with an international union in some form of
association. These international associations have the power to
issue or revoke the local union charter but typically do not
involve themselves with the day-to-day operations of the union or
the collective bargaining of that local. With a large number of
construc-tion trade unions currently in existence, it is
unavoidable that there are disputes among unions as to who “owns” a
particular type or category of work. The contractors, particu-larly
out-of-town contractors not used to working with the union, may end
up assigning a particular type of work to one union that is claimed
to be under the jurisdiction of another union. Such an assignment,
no matter how innocently made, can result in la-bor unrest and
declining productivity, work slow-downs, or strikes as the two
disputing unions focus on the issue and old wounds, to the
exclusion of all else. Resolving the dis-pute can be expensive and
time-consuming, and it is rare that all sides are fully satisfied
with the resolution. The efficient and effective utilization of
labor on any constructed project requires diligent project
management in order to integrate the labor with the availability of
material and equipment in the planned-for sequence. Labor disputes
will challenge management to reach beyond the nuts and bolts of
construction skills and demonstrate an expertise in counseling and
psychological analysis.
Issue
An adequate supply of skilled labor, ready and willing to fill
the construction job openings, is critical to the success of a
project. For a megaproject, the demand could eas-ily outpace the
supply, which would result in slower progress or lower quality of
work-manship. An owner and its consultants must take stock of the
available workforce and attempt to shape and manage the project so
that it is feasible within the constraints of that workforce.
Analysis and Discussion
Simply put, a megaproject owner has too much at stake to dismiss
labor availability, quality, and cooperative disposition as being
only a contractor issue. Bad habits and un-safe practices developed
on one project with one contractor can infect the entire project
and haunt the owner in the form of low productivity, poor quality,
and a high accident rate for the duration of that project.
The owner needs to understand how its project and the
anticipated pay, benefits, and prestige fit into the pecking order
of the labor market. During the 1848–1849 Califor-nia Gold Rush,
sailing ships piled up and rotted in San Francisco as the sailors
deserted to hunt for gold. A pulp and paper company in Maine
refused to develop and exploit
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economical mineral deposits because of fear that the
higher-paying mining jobs would decimate its efforts to harvest
timber. In a tight market, the owner needs to promote its project
and offer the incentives to attract the desired labor. The owner
also needs to foresee what the impact of its project will be on the
community so that support for the project is not undermined. A
large number of transient workers, for example, may strain
relations with the local community. Similarly, the project may
drain workers from local businesses, causing distress to the status
quo.
For a publicly funded project where there are many stakeholders,
the owner may find itself under pressure to engage in unsupportable
levels of social engineering, by man-dates to hire disadvantaged
persons. These goals or mandates are often negotiated early in the
life of the project and should be carefully considered before being
accepted.
Throughout history, immigrant labor has been a factor for many
megaprojects. In much of the world even today, and particularly in
the Middle East, immigrant labor makes up the construction labor
force of large projects. In North America, the number of young
people choosing construction as a career continues to decline, and
if current trends con-tinue, construction projects may need to
begin importing its labor force. Indeed, immi-grant labor makes up
a large percentage of the generally open-shop housing construction
labor force. This sector of the labor force is usually considered
low-skill and low-pay and not suitable for a contractor’s demands
on a modern megaproject. If an owner is going to rely on this
sector of the market, then it will likely need to establish
aggressive training programs targeting the requisite skills very
early in the life of the project.
The owner’s team also needs to evaluate whether it is possible
and/or desirable to pre-fabricate large components or modules
off-site and then transport and erect them on-site. Such practice
is most feasible where barge access to the site is possible and
would facilitate large portions of the project being completed in
another labor market, perhaps another country. This practice can
take advantage of cheaper labor but may introduce strife and
discontent if that cheaper labor displaces underutilized local
labor. A cost sav-ings for one contractor may result in strikes,
slowdowns, or stoppages for others.
Recommended Practices
• Survey the existing labor force either through direct outreach
to unions and la-bor organizations or through discussions with
construction contractors operating in the area. Develop an
understanding of whether there is a clear preponderance of union
versus non-union labor that will likely contribute to the project,
but be aware that the sources of information on the union/non-union
preponderance are likely skewed toward the correspondent’s
bias.
• Survey other owners, both public and private, to determine
which projects will be competing with your project for the
available labor force. Recognize the “pull” of
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desirable projects in other geographic areas that could deplete
the workforce you are counting on.
• Evaluate the need for arrangements to import labor with
special skills, e.g., divers or NATM miners, and their ability to
work harmoniously with local labor. If that is not feasible,
mandate designs that can be accomplished with the existing labor
force.
• Consider the scheduling and sequencing of the project in a
manner that is sup-portable by the available labor force.
• Promote and support training and skills development of the
existing labor force if that level is unacceptably low. Absolutely
promote and demand that contractors provide safety training.
Regulatory Framework
In 1935, Franklin D. Roosevelt signed the National Labor
Relations Act (NLRA) protect-ing the rights of workers in the
private sector to organize labor unions and to engage in collective
bargaining. The act specifically allowed workers and unions to
initiate and take part in strikes or other work-related activities
to further their negotiating positions or en-force agreements. The
act was amended in 1959 to validate and protect master
collective-bargaining agreements that would bind all contractors
and subcontractors upon a con-struction project. The 1959 amendment
recognized the special arrangement and needs of the construction
industry to coordinate a variety of skilled labor crafts and
promote har-monious interaction among the crafts and with
management throughout the life of a proj-ect. These master
agreements, or project labor agreements, were particularly
important for large and long-duration projects over which a number
of specific collective- bargaining agreements with individual
unions would expire and be renegotiated. The problem, of course,
was that each renegotiation was an opportunity for a strike and
picket by the union, which could impact or stop the work of a
number of other crafts and contractors.
The NLRA’s recognition of the construction industry’s need for
unique considerations derives from that industry’s differences from
other typical labor-management arrange-ments. In the construction
industry, employment tends to be for shorter periods of time.
Workers often move from employer to employer as that contractor
wins, executes, and completes projects. For union workers,
long-term relationships with their union halls are stronger than
the employer-employee bond considered important for non-union
construc-tion companies. Moreover, post-hire bargaining is not
practicable between a contractor and its labor force. Rather, the
practice of pre-hire collective bargaining is the norm, where
con-tractors bidding for work know the cost of labor in advance of
retaining that labor force.
The construction industry is also unique in that a number of
different crafts and sub-contractor employers are compelled to work
in close proximity and often in interdepen-
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dent manner. NLRA sections (a), (e), and (f) specifically
recognize this unique arrange-ment and allow for project labor
agreements.
Project Labor Agreement
Project labor agreements (PLA) are multiparty agreements that
establish the param-eters of the relationships between ownership,
management, and labor for the duration of a particular project. The
agreement is negotiated between the project owner or its agent and
the representatives of the local labor force, typically the unions
whose charter grants them jurisdiction over the geographic area and
type of work involved in the proj-ect. This PLA sets the ground
rules for all labor relations on the project. The owner may
require, as a condition precedent to awarding a contract, that all
contractors submitting bids agree to become signatory to the terms
and conditions of the PLA. The contractor and the labor unions are
thus bound by that agreement for the duration of the project. That
agreement has absolutely no effect on other contracts or projects
that are not de-fined within the scope of the PLA.
During the course of project construction, the parties to the
PLA generally include the project owner, the general contractor(s),
all levels of construction subcontractors, and the labor trade
unions. In essence, the project stakeholders establish the basic
terms and conditions which describe how labor issues will be
addressed through the course of the work. They establish these
terms prior to commencing the work.
While sometimes characterized as a form of prehire
collective-bargaining agreement (CBA), project labor agreements
differ from CBAs in several important respects. First, although
either may be used in the context of a construction project, PLAs
are site- specific, while CBAs generally are not. PLAs include all
labor crafts as parties to the agreement, while CBAs are generally
executed with the crafts individually. In addition, the term of a
PLA is generally for the duration of a project, while CBAs are
generally ef-fective for a defined period of years.
When utilized on complex construction projects, which are
characteristically multi-year, multitrade, multimillion dollar
investments, whether public or private, PLAs can bring a degree of
certainty to the parties with respect to some of the inevitable
labor-related risks associated with such work.
Project Owners’ Perspective
PLAs have been utilized on complex construction projects in the
United States for de-cades. This country’s first PLA is generally
thought to have been executed for the Grand Coulee Dam in
Washington State. Shortly thereafter, a similar agreement was
drafted for the Shasta Dam in California. These two Bureau of
Reclamation megaprojects helped
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pull the western states out of the Great Depression and provided
enormous flood con-trol, irrigation, and power production benefits
for the region. The government relied on PLAs for a number of
domestic Department of War installations during World War II. More
recently, the Kennedy Space Center at Cape Canaveral, Florida, was
constructed under a PLA. Privately funded megaprojects such as the
Trans-Alaskan pipeline, Flori-da’s Disneyland, and a number of the
large nuclear plants and other power installations constructed in
the 1960s and 1970s routinely utilized project labor agreements
Whether a public or private entity, the interests of an owner of
a complex construc-tion project are primarily focused on efficient
delivery as defined in terms of cost, sched-ule, safety, and
quality of the work. Each of these important measurements of
project performance may be optimized by including the requirement
of a project labor agree-ment in the bid specification. A PLA will
typically be used to establish wage rates and benefits for the
duration of the project. Unexpected wage demands or disputes, which
have a tendency to arise during the course of a long-term project,
are effectively elimi-nated by such agreements.
No matter how well-meaning the parties may be, complex long-term
construction projects inevitably give rise to labor-related
problems or disputes. Schedule risks re-sulting from job actions,
in the form of work slowdowns or stoppages caused by labor
disputes, are minimized through PLA provisions that deal with the
swift resolution of disputes and by the inclusion of no-strike,
no-slowdown clauses. By minimizing disrup-tions and enhancing the
likelihood that the project will be delivered on time, the owner
may also realize lower finance costs and other benefits from
getting the project in com-mercial operation as quickly as
possible.
Enhanced quality and safety are generally a reflection of a
stable and well-trained workforce. PLAs foster the establishment of
such stability, which may also be reflected in reduced rework and
insurance costs for the project.
These benefits are balanced against the increased cost of labor
of a unionized labor force as opposed to open-shops. Opponents of
PLAs argue that they have the practical effect of eliminating
competition from merit-shop contractors and that the decrease in
the number of bidders increases the costs of projects. Contractors
argue that their com-panies would be discouraged from bidding on
projects resulting from a PLA’s effect of discriminating against
their employees. The view from this group is that PLAs increase the
cost of construction by mandating inefficient and archaic union
work rules and limit the pool of potential quality bidders, without
any increased economy or efficiency to procurement. A Beacon Hill
Institute study, released in 2009, analyzed Massachusetts school
construction during a period (2001–2008) when government-mandated
PLAs were prohibited. The study controversially concluded that PLAs
increased federal project construction costs and their absence
showed no material instances of labor disruption or significant
project delays.2
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Contractors’ and Subcontractors’ Perspectives
Contractors and subcontractors share some of the same interests
as the owner of a construction project, particularly with respect
to cost, schedule, safety, and quality of the work. To further
those interests, PLAs offer the same potential benefits to all
levels of contractors as they do to owners.
In the context of the owner’s source selection process,
contractors and subcontrac-tors are typically required to submit
their bids and await the owner’s decision regard-ing contract award
before they begin the process of hiring their workforce. As a
prehire agreement, the PLA is often negotiated among the owner, the
contractor, and the labor unions as representatives of the
employees prior to the employees being hired. The PLA permits
construction subcontractors at any tier to establish what their
costs will be for specific labor classifications. The PLA provides
the basis for their bids. Upon award, con-struction subcontractors
execute letters of assent, whereby they agree to be bound by the
terms of the PLA.
In most construction projects, subcontractors providing
differing labor trades work side by side on the job site. For
example, employees of a plumbing subcontractor may be present with
the employees of a specialty welder. Carpenters may work alongside
elec-tricians, masons, or plasterers. The job may call for the
installation of underground and above-ground piping. Absent a
single agreement that includes all of the project partici-pants,
such an environment has the potential for giving rise to many
issues. In projects where the different trades have individual
labor agreements, the probability is greater for disputes to arise
between the trades about issues such as jurisdiction over the work.
The implementation of project labor agreements minimizes the
likelihood of such dis-putes by establishing the jurisdictional
parameters of each trade for the project. In the event disputes do
arise, the PLA defines an agreed-upon resolution process with
mini-mal disruption of the work.
PLAs and the Workforce
Project labor agreements typically create a labor policy that
will apply uniformly to all construction workers involved in a
specific project. Proponents claim that PLAs create and enhance a
stable environment for the workforce by establishing a systematic
treat-ment of wages and benefits, including overtime, starting
time, holidays, health benefits, and overall working conditions for
the duration of the project. In addition, PLAs pro-vide for the
peaceful settlement of disputes between labor and management,
through the use of an agreed-upon dispute resolution process, which
minimizes the potential for disruption of the work by specifying
that there will be no strikes or lockouts.
The terms of each PLA are unique to each project, and some do
require the use of
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union labor. Under the National Labor Relations Act,
construction contractors and their employees may choose whether or
not to unionize. While there are certainly so-called “union-only”
PLAs — those which exclude merit- or open-shops — PLAs need not
limit their participation to unionized labor. While a PLA may
require all employees to be hired through a union hiring hall, the
hiring hall may not discriminate between union and non-union
workers. It is not a necessary element for a PLA to require workers
to join the local union in order to be referred for work, nor is it
a general requirement that non-union workers must pay union dues,
as they would with a collective-bargaining arrangement.
Effect on the Community
The execution of megaprojects requires the mobilization of a
workforce that may con-tain many different job classifications with
a wide array of skill levels. While the com-munity is not a party
to a PLA, such agreements arguably benefit the community in the
vicinity of the project by turning the need to fill those positions
into employment opportunities for local residents. PLAs may include
provisions that require the project workforce to have a composition
of certain percentages of local hires. They may also require that
local residents receive priority over non-residents in hiring for
specific job classifications. In addition, PLAs may require the
establishment of a certain number of apprentice-level positions and
the sponsorship of training or mentoring programs to encourage the
long-term development of the skills of the local labor pool. They
may also establish subcontracting goals based on contract dollar
values or percentages of project capital cost for the participation
of specific levels of minority, women-owned, and small
disadvantaged business enterprises.
The proportion of union to non-union labor in the United States
construction indus-try peaked in the mid to late 1970s. Since that
time the number, and perhaps more im-portantly, the political
influence of merit-shop construction contractors has increased.
With a continuing rise in numbers and influence, merit-shop
contractors began to ques-tion the legality of project labor
agreements on public projects. These non-union con-tractors
objected to being precluded from competing on these publicly funded
projects and challenged them through the courts.
Legality of PLAs
The legality of a public owner choosing to enact such an
agreement was fairly well settled by the Supreme Court in the
Associated Builders and Contractors challenge to Massachusetts
Water Resources Authority’s project labor agreement for the Boston
Har-bor Project.3 Since that decision, three states — Montana,
Utah, and Missouri — have enacted legislation that prohibits
project labor agreements on state-procured projects.
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Minnesota and Arkansas are states where PLAs are prohibited
through executive order of the governor. Illinois, New York, and
New Jersey, on the other hand, are states where the legislature has
taken steps to encourage PLAs on state and municipal construction
projects. Notwithstanding the politics of a state’s or its
governor’s apparent predisposi-tion for or against using a PLA in
situations where a project labor agreement has been successfully
challenged, the opponents of a PLA are usually able to demonstrate
that the public owner failed to demonstrate “more than a rational
basis” for implementing it.
Not satisfied to allow the legality of project labor agreements
to be decided in the court system, nor to allow the advisability of
employing such agreements to be left to the construction project
administrators, four presidents have weighed in on the use of
project labor agreements for publicly funded construction projects.
In 1992, President George H. W. Bush issued an executive order
forbidding project labor agreements on any federally funded
projects. Within a month of taking office in 1993, President Bill
Clinton rescinded the executive order of his predecessor and, over
the course of his administra-tion, supported and promoted project
labor agreements for federal construction projects. Indeed, the
Clinton administration attempted to enact legislation that would
require all of his administrative agencies to utilize project labor
agreements. President George W. Bush demonstrated that turnabout is
fair play by cancelling Clinton’s order within one month of
becoming president. His February 17, 2001, executive order stated
in part:
Section 1: To the extent permitted by law, any executive agency
awarding any construc-tion contract after the date of this order,
or obligating funds pursuant to such a con-tract, shall ensure that
neither the awarding government authority nor any construc-tion
manager acting on behalf of the government shall, in its bid
specifications, project agreements, or other controlling
documents:
(a) Require or prohibit bidders, offerors, contractors, or
subcontractors to enter into or adhere to agreements with one or
more labor organization on the same or other related construction
project(s); or
(b) Otherwise discriminate against bidders, offerors,
contractors, or subcontractors for becoming or refusing to become
or remain signatories or otherwise to adhere to agreements with one
or more labor organizations on the same or other related
construction project(s).
(c) Nothing in this agreement shall prohibit contractors or
subcontractors from volun-tarily entering into agreements described
in subsection (a).
. . .
Section 3: To the extent permitted by law and executive agency
issuing grants, provid-ing financial assistance, or entering into
cooperative agreements for construction proj-ects shall ensure that
neither the bid specifications, project agreements, nor other
con-trolling documents for construction contracts awarded after the
date of this order by
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recipients of grants or financial assistance or by parties to
cooperative agreements nor those of any construction manager acting
on their behalf, shall contain any of the re-quirement prohibitions
set forth in sections 1(a) or (b) of this order.
And on February 8, 2009, less than three weeks after his
inauguration President Obama signed Executive Order 13502, entitled
“Use of Project Labor Agreements for Federal Construction
Projects.” This new and latest order revokes President George W.
Bush’s Executive Order 13208 and announces a policy that encourages
executive agen-cies to consider using project labor agreements in
connection with large-scale con-struction projects in order to
promote economy and efficiency in federal procurement. Obama’s
executive order only encourages the use of PLAs in such large-scale
projects, it does not mandate them: “Executive agencies may, on a
project-by-project basis, require the use of a project labor
agreement by a contractor where use of such an agreement will . . .
advance the Federal Government’s interest in achieving economy and
efficiency in Federal procurement.” Under the order, the government
cannot compel a contractor to enter into an agreement with any
particular labor organization, and it does not explic-itly exclude
non-union contractors from competition.
Key Attributes of Project Labor Agreements
The modern project labor agreement has taken on a fairly
familiar form with a gener-ally expected set of terms and
conditions. The key attribute from management’s per-spective is the
so-called “no-strike” and “no-walkout” provision. This provision
requires that trade work continue in the face of disputes, removing
the risk of delay and disrup-tion that might otherwise be
experienced. Subsidiary to this “no-strike,” “no-walkout” provision
is a mechanism for resolving disputes, both those between labor and
manage-ment and also the more common jurisdictional disputes
between various trade unions. Using binding arbitration or
designated third-party neutrals, preselected to hear and resolve
disputes, accomplishes this element of the agreement on an
expedited basis.
From labor’s perspective, the “must-have” attribute is the
requirement that all con-tractor hiring on the project be
accomplished through the applicable local union’s hiring hall. This
is not a requirement that union-only labor be utilized, which would
be patent-ly illegal for a publicly procured project, but rather
that the hiring hall, and its protocol for referring workers to
various construction projects, be the clearinghouse for all labor
assigned to the project. Non-union workers can register at the
hiring hall alongside of union workers, and the hiring halls cannot
discriminate between union and non-union workers when making
referrals to contractors. Approximately half of the states in the
United States are so-called “right-to-work” states, which prohibit
the excluding of work-ers based on their non-affiliation with a
particular union. PLAs in those states will re-
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inforce this point of law, as well. Federal and state laws also
prohibit discrimination on the basis of race, gender, age, etc.,
and these nondiscriminatory statutes are typically reinforced in a
project labor agreement. Contractors signatory to a PLA are
required to recognize the local unions as the representative of all
workers on the project.
The PLA also generally provides that management’s rights to
manage are not usurped by the agreement. Contractors are entitled
to establish and enforce reasonable work rules and to introduce
labor-saving techniques, processes, equipment, and materials
without objection from the labor force or its union representation.
Similarly, non-union contractors awarded contracts on the project
are allowed to import, engage, and employ their own key employees
for the project. The size of this core group of employees differs
from agreement to agreement. The purpose, however, is to allow a
non-union contractor to execute its construction tasks with
first-line supervision and key laborers in the man-ner in which it
is used to working.
The final key element of nearly all project labor agreements
permits the standardiza-tion of shift starting and ending times,
rules for overtime, holidays, breaks, show-up times, and travel
time, etc. Wages and benefits are also set at union scale and, for
pub-licly procured projects, at no less than the minimum prevailing
wage rates for the state. Similarly, classes of worker, the rate
structure for apprentices versus journeyman, and the proportion of
each within a crew can be negotiated in the PLA. For all practical
pur-poses, an owner has very little hope of negotiating more
favorable labor rates because it is about to become a very large
procurer of labor. Certain project labor agreements have included
prescribed rate increases over the life of the project, eliminating
one source of uncertainty. An owner may be in a position to
eliminate some of the arcane work-force requirements, work rules,
or overtime policies of some local unions that seem to be most
abhorrent to proponents of open-shop/merit-shop contractors. Yet,
it is these same hard-won benefits that the unions are notoriously
stubborn to concede.
The owner should strive to anticipate the needs of its
contractors over the entire life of the project and address these
needs in the agreement. For example, there may be a need for a
contractor to resort to a 24-hour-a-day, 7-day-a-week operation for
an ex-tended period of time. A shift-crew schedule of rolling
four–10s, or four–12-hour days plus three–12-hour days, or other
nonstandard arrangement may be impossible or pro-hibitively
expensive to implement after the PLA has been signed.
Issue
Whether or not an owner chooses to enter into a PLA for a
megaproject will undoubt-edly spark an emotional debate within the
community. The main protagonists in that de-bate with the loudest
and most influential sway over public opinion usually prove to be
extremely self-interested in wanting their positions to prevail.
The sides generally align
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behind the union proponents and the non-union opponents. Each
side will support their arguments with biased studies and
slippery-slope public policy predictions. The owner responsible for
the decision will be forced to cut through the rhetoric,
objectively weigh the evidence, and carefully consider the
political ramifications in order to make a sound decision. As with
all major decisions, the owner will likely rely on its planning and
project management consultants to assist in this decision. Many
owners also turn to public policy consultants for recommendations
concerning the impact of enacting such an agreement.
Analysis and Discussion
Unlike some of the earliest PLAs for public construction
projects, union-only agree-ments are no longer legal in the United
States. While a privately funded project’s owner is free to
contract in any manner it desires, if state or federal funding is
used in the project, then both union and non-union contractors must
be allowed to bid on contracts being executed under a project labor
agreement. Those bidders will be instructed that as a condition
precedent to awarding a contract, that winning bidder must sign on
and agree to the terms and conditions of the previously negotiated
PLA. In the early 1990s, in the face of anticipated challenges to
the legality of its project labor agreement, the Massachusetts
Water Resources Authority’s precedent condition stated only that
the responsible low bidder had to demonstrate that it was able to
promote and maintain labor harmony on the project, and that one way
of demonstrating such harmony was to execute the project labor
agreement. All contractors executed the PLA.
In those states where they are not prohibited from doing so,
public owners and (at least for the pendency of the current
administration) federal agencies are free to con-sider whether a
PLA makes sense for their project. Notwithstanding the legislative
or administrative preferences, restrictions, or guidance on them,
PLAs have also been re-peatedly challenged by private court
actions. In those situations where a project labor agreement has
been successfully challenged, the opponents of the agreement were
usu-ally able to demonstrate that the public owner’s inclusion of a
PLA represented a viola-tion of the public bidding laws. In a case
brought by non-union subcontractors in New York and often cited by
PLA opponents, the court found that the owner had failed to
demonstrate “more than a rational basis” for implementing the PLA.4
For a public own-er to show that a PLA is necessary or desirable
for its particular project, it will likely be required to
demonstrate that the PLA would somehow fulfill its governmental
objectives of achieving the best constructed project for the lowest
price without running afoul of the public procurement laws. The
standard of review is that there must be more than a rational basis
for that owner believing that a PLA is in the best interest of the
public. In order to satisfy this standard, articulated in the New
York State Thruway Authority case, the court stated:
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The standard of more than a rational basis cannot be based on
loose projections, un-verifiable calculations, or a project which
lacks unique history or complexity such that otherwise applicable
provisions of the General Municipal Laws should be ignored. Here,
the legislature based its decision on unverifiable dollars, lack of
history of labor unrest, and a lack of showing of any type of
unique complexity to this project. These omissions make it
impossible for the County to establish that their action was even
reasonable let alone more than rational.
PLAs have been upheld in all cases except those in which the
public owner failed to properly document that it carefully
considered the decision to adopt a PLA and perform the due
diligence necessary to demonstrate the economic benefit of the
agreement to the public. The legality of PLAs, in the absence of
specific state legislation to prohibit them, has seemingly been
settled. Executive orders of presidents and governors come and go.
The real debate over whether or not a PLA makes sense for a project
seems to re-volve around public policy issues. That debate
typically focuses on the following issues: (1) Is it fair to
require contractors to agree to the terms of a PLA? (2) Will the
PLA de-crease the competition from the contractors in discouraging
the non-union contractors from bidding on the work? (3) Will the
PLA actually drive up the cost of construction? (4) Does a PLA
amount to discrimination against non-union construction
workers?
Recommended Practices
• First and foremost, the owner’s decision whether or not to
enter into a project labor agreement will be a function of the
location and timing of the project. Mega-projects in the heavily
unionized Northeast during an active construction market are more
likely to benefit from a PLA than those in Southern or Midwestern
states during a slow construction market.
• Second, the attributes of the particular megaproject, how
geographically diverse it is, and whether the various contracts are
piled one on top of the other or are spread out over time and space
affect labor relations. The more congested the site and the tighter
the schedule, the greater the risk of labor unrest affecting the
proj-ect and the more attractive a PLA’s no-strike clause will be
to an owner. On the other hand, if the disgruntled craft or labor
force can be isolated from the rest of the project, the no-strike
provision is of less value to the owner because the strike is of
less consequence.
• Consider the entire spectrum of pros and cons, not just the
immediate unit cost of labor. Consider the collateral impact that
adopting a PLA will have on the commu-nity, i.e., whether it will
bolster or detract support for the project.
• Negotiate the most positive terms possible. Union
representatives will be hard
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pressed to give up any of their hard-won work rules, but other
provisions, such as mandatory drug and alcohol testing at the point
of hiring and dismissal “for cause” or suspicion during the
execution of a project, will promote project safety. Requir-ing
certification of safety training, such as an OSHA 10-hour course,
is a reasonable expectation of a labor force on a megaproject. If
unions are to be the brokers and labor referral agents for the
project, these two safety precautions should be doctrin-ally
noncontroversial. Push for a reasonable number of key contractor
travelers to be assigned to the project without being held up in
the generally accepted referral protocol. If there is a need for
specialized labor forces, such as NATM miners for a portion of the
project, carve out the ability to specially and specifically assign
work-ers with unique skills for that particular project. Anticipate
the needs of contractors over the life of the project and address
their labor needs as best you can.
• If the owner decides to adopt a PLA, then it must do so in a
manner that is unas-sailable by opponents. Retaining a third-party
consultant to study and determine that the PLA is in the best
interest of the public and consistent with procurement laws, rather
than a rush to sign an agreement, will eliminate the expensive and
embarrassing court challenge that, if the opponents prevail, could
severely disrupt the project.
Notes
1. Haas, C., Borcherding, J., Allmon, E., & Goodrum, P.
(1999). U.S. Construction Labor Productivity Trends, 1970–1998.
Center for Construction Industry Studies Report No. 7. Austin: The
Univer-sity of Texas.
2. Tuerck, D., Glassman, S., & Bachman, P. (August 2009).
Project Labor Agreements on Federal Construction Projects: A Costly
Solution in Search of a Problem. Boston: Beacon Hill Institute,
Suf-folk University. Retrieved on March 14, 2010, from
http://www.beaconhill.org/BHIStudies/PLA2009/PLAFinal090923.pdf.
3. Building & Construction Trades Council of the
Metropolitan District v. Associated Builders & Contrac-tors of
Mass./R.I. (91-261), 507 U.S. 218 (1993).
4. New York State Thruway Auth., 207 A.D. 2d 26 (3d Dept.
1996).
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