Union Only Contracts: Fewer Bidders = Higher Costs For Taxpayers

White House Federal-Contract Policy Rewards Big Labor Patrons

(Source: May 2010 NRTWC Newsletter)

Union-free construction workers, their employers, and taxpayers were all dealt fresh blows last month as President Barack Obama’s Administration implemented an executive order promoting union-only “project labor agreements” (PLAs) on federally funded public works.

On April 13, the Federal Acquisition Regulation (FAR) Council published a “final rule” implementing Executive Order 13502, issued by the President in February 2009.

“E.O.13502 itself and the final rule both pressure federal agencies to acquiesce to PLAs on all large public works,” said National Right to Work Committee President Mark Mix. “Experience indicates federal bureaucrats will not resist.”

“That means, until further notice, to participate in public works using $25 million or more in federal funds, nonunion companies will have to consent to impose union monopoly bargaining on their employees and hire new workers through discriminatory union hiring halls.

“Independent workers who already have their own retirement funds will nevertheless be forced to contribute to Big Labor-manipulated pension funds.

“Rather than compromise the freedom of their employees and the efficiency of their operations, most independent construction firms will, in all probability, simply refuse to submit bids on federal projects.

“And sharply reducing the number of bidders will surely jack up taxpayers’ bills. The nonpartisan, Boston-based Beacon Hill Institute estimates that construction costs will be inflated by at least 12% to 18% on every project that uses a PLA as a result of E.O.13502.”

Administration Knows PLAs Will Surely Reduce Number Of Bidders on Public Works

“The Obama Administration knows full well that its pro-PLA policy is extremely likely to reduce the number of bidders on public works,” Mr. Mix continued.

Well before issuing the final rule implementing E.O.13502, FAR Council bureaucrats admitted to having received hundreds of comments from construction industry employees and businesses opposing the Obama edict.

A significant number of these comments came from union-free firms, and employees of such firms, that had each already performed hundreds of millions of dollars worth of construction work on large government projects.

And the overwhelming majority of the many union-free construction firms that submitted comments vowed that neither they nor their subcontractors would be willing to bid on or perform construction work under government-imposed PLAs.

“According to the U.S. Labor Department’s latest estimate, just 15% of construction employees nationwide are unionized. That means 85% are union-free,” said Mr. Mix.

“In practice, PLAs rig the bidding process against union-free employees and employers to such an extent that they are all but excluded from the competition. There’s absolutely no plausible way you could drive out such a huge share of potential bidders and not drive up taxpayer costs.

“And, in fact, the Obama Administration clearly knows that, by slashing the number of bidders, its pro-PLA policy will force taxpayers to pay more for public works.”

Department of Veterans Affairs Expects Higher Costs

Last year, the Department of Veterans Affairs (VA), already headed by Obama appointees, commissioned an independent study of the potential impact of Obama PLAs on its own construction costs. As a Wall Street Journal editorial last month pointed out, the study found that PLAs “would likely raise the VA’s construction costs for hospitals by as much as 9%” in the Denver, New Orleans and Orlando markets.

The VA-commissioned study did not predict a net reduction in construction costs in any of the markets it examined, even heavily unionized New York City and San Francisco.

Overall, the study found “strong evidence to suggest that the result of a PLA that dictates work rules, double benefits, team structure and activities on non-union type contractors will be that production costs will increase — given these union-related requirements.”

“Even the Obama Administration’s handpicked researchers couldn’t avoid concluding that E.O.13502 will sock it to federal taxpayers, though the VA-commissioned estimate of the damage done is far lower than that of most independent researchers,” commented Mr. Mix.

“If the President’s PLA policy had anything to do with taxpayers’ interests, the Administration would have revoked E.O.13502 in light of the VA findings, instead of proceeding full speed ahead with the edict’s implementation.”

Worker Safety a Common Problem in Union-Only Projects

In addition to costing taxpayers more money than projects in which unionized and union-free firms are free to bid on equal terms, PLA projects often suffer from serious safety problems.

For example, the union-only Iowa Events Center suffered nearly 50 accidents in the first six months after construction began in 2002, including four linked directly to substance abuse by unionized workers.

One construction worker was killed when he was struck by a steel beam. Ironworkers had been working late shifts to catch up with previous delays on the project.

On the union-only Boston Harbor clean-up project, OSHA proposed fines totaling nearly $411,000 against four contractors in connection with fatalities of two workers who succumbed due to lack of oxygen.

“No legitimate public policy interest is served by union-only PLAs,” said Mr. Mix. “They are unfair to construction employees and construction firms as well as taxpayers. They undermine efficiency, quality and safety in public works.

“Yet President Obama seems determined to foist PLAs on the American public in order to advance his own narrow political agenda.

“Fortunately, Right to Work supporters and our allies still have a chance to stop him.

“First of all, there is a very strong case that FAR’s final rule implementing E.O.13502 exceeds the President’s statutory authority and violates the Competition in Contracting Act, as well as other procurement laws and regulations.”

Right to Work Leader Ready to Do Everything He Can to Block E.O.13502

Attorneys for the Committee’s sister organization, the National Right to Work Legal Defense Foundation, are now assessing how they can most effectively challenge the rule in federal court. (Mr. Mix is president of the Foundation as well as of the Committee.)

Last July, the Foundation filed a brief supporting union-free construction apprentices now effectively blacklisted from over 50 taxpayer-funded PLA projects in California.

“If the Foundation’s arguments prevail in the Rancho Santiago case, it will heighten the serious legal questions about the implementation of E.O.13502,” noted Mr. Mix.

“Meanwhile, the Committee is also supporting legislative efforts to roll back the PLA edict on Capitol Hill, even though, in the current Big Labor-controlled Congress, pushing for enactment of any such measure will be a steeply uphill fight.

“On the positive side, public opposition to union-only PLAs is already intense, and growing more so.

“If federal courts shirk their responsibility to overturn the White House’s policy of favoritism in federal contracts, there is real hope that the public can prevail upon a future Congress and/or President to do the job.”