Project labor agreements increase cost of construction

by Kenneth Girardin |  | Albany Times Union

Gov. Andrew Cuomo last week effectively promised — loudly, proudly and publicly — that New York state will overspend on public works projects.

“Every project we build is going to be built with organized labor — every project,” the governor told a gathering of construction trade unions in Washington.

Can he actually deliver? The answer, to a great extent, is “yes.”

As a result, New York taxpayers won’t get maximum value for their construction dollars, and thousands of non-union workers will be unfairly shut out of the competition for government contracts to build, overhaul and expand bridges, highways and other critical infrastructure.

Public works contracts generally must be awarded to the lowest responsible bidder — but with important added strings attached. The state’s Labor Law gives state agencies and public authorities broad discretion to require bidders to enter into project labor agreements (PLAs), essentially collective bargaining agreements with groups of labor unions.

PLAs typically involve commitments to steer at least 80 percent of jobs to union members, disqualifying contractors whose employees haven’t chosen to join a union. Even in New York, 70 percent of construction workers are not union members. New York’s PLA push actually began with Republican Gov. George Pataki in the late 1990s, but Cuomo has taken it to a new level. In addition to reducing work opportunities for non-union members and their employers, the insistence on PLAs ultimately drives up costs and soaks up more scarce capital resources.

That impact was put on display in 2011, soon after Cuomo took office, when the state Department of Transportation put its thumb on the scale for Hudson Valley labor unions and required a PLA on a reconstruction project of Exit 122 of Route 17 in Orange County — after the bidding process was already under way. As a result, the lowest bid was discarded because it didn’t use a PLA, and the contract was awarded to the second-lowest bidder — whose price tag was $4.5 million (6 percent) higher.

The state fought in court for its right to impose the PLA requirement. After a judge sided with the lowest bidder, the DOT decided to rebid the job entirely, rather than let a non-union company get the work.

State taxpayers ultimately had to pay millions more to cover the costs of the work disruption that resulted from the litigation.

PLA proponents, such as the governor, rationalize mandatory PLAs by saying that the deals save money by negotiating efficiencies and preventing strikes, but both claims are questionable: Years before the Exit 122 incident revealed how much PLAs were driving up roadwork costs, a 2006 study by the Beacon Hill Institute found that school construction costs in New York were 20 percent higher when a project labor agreement was used.

Meanwhile, union carpenters walked off about 30 job sites in and around New York City in July — despite being covered by a PLA that specifically forbade strikes. They only went back to work after a federal judge intervened.

Behind the policy debate lies the basic fact that if PLAs actually delivered reliable cost savings, there’d be no need to require them. After all, contractors looking to win competitive bids already want to keep their costs low.

So why is the governor going to force them to use project labor agreements?

Cuomo made his commitment to steer public-works contracts to union labor just minutes after thanking union representatives for supporting him in previous elections.

“Without the friendship, the support, and the kindness of the people in this room, I don’t believe I would be governor of the state of New York,” Cuomo said. “They’ve had my back every step of the way and I will never forget it.”

New York’s infrastructure needs require stretching every penny of public money to address the crumbling roads, deficient bridges and other assets that need immediate attention. Taxpayers will be better off if the governor sticks to showing his gratitude with cards, not contracts.