New Rule Benefits Unions

The Obama administration is the gift that keeps on giving for labor unions.

Tomorrow, the administration will issue a final rule that encourages federal agencies to require project labor agreements on construction projects that cost more than $25 million. PLAs are prehire collective-bargaining agreements with labor unions that spell out the terms and conditions of employment for a specific project. All contractors and subcontractors on the project must comply with the agreement.

The rule implements an executive order issued by President Barack Obama more than a year ago.

Obama contends PLAs promote economy and efficiency in federal procurement, prevent labor disputes from erupting during a construction project, and ensure compliance with a host of workplace safety and labor laws.

Nonunionized construction companies, however, said the rule will freeze them out of the federal marketplace and increase the cost for public projects.

“PLAs can drive up the cost for public construction by nearly 20 percent, while unfairly discriminating against the more than 85 percent of the U.S. construction workforce that chooses not to join a union,” said Jim Elmer, president of James W. Elmer Construction Co. in Spokane, Washington, and chairman of Associated Builders and Contractors.

ABC represents 25,000 nonunion construction firms.

Elmer said PLAs “end open, fair, and competitive bidding on public projects” and “are a handout to a politically connected special interest group.”

That group, of course, is organized labor, which was pleased when Obama rescinded executive orders issued by former President George W. Bush that barred agencies from requiring project labor agreements.

ABC contends that now is a particularly bad time to bar most of America’s construction companies from large federal projects, given the industry’s 25 percent unemployment rate.

“This final rule shows that the Obama administration is more concerned with paying back its political allies than putting America’s entire construction workforce back to work,” Elmer said.

Some federal agencies already are making wide use of PLAs. As of this summer, 21 of 25 construction projects at the Department of Energy were covered—or slated to be covered—by PLAs. These agreements also have been used by many state and local governments, and for high-profile private-sector projects ranging from the trans-Alaska pipeline to Disney World.

Just today, a unit of Fluor Corp. signed a PLA with the AFL-CIO for construction of two new nuclear power reactors at an existing nuclear facility near Houston. Fluor is the engineering, procurement, and construction subcontractor for the project, which is being developed by NRG Energy and Toshiba America Nuclear Energy Corp.

So PLAs might make sense for large, complicated projects. But $25 million doesn’t go as far as it used to, so lots of run-of-the-mill projects likely will be forced to go with union labor as a result of this new rule.

Other changes favoring unionized companies in federal contracting may be coming down the pike.

Business groups fear the Obama administration will issue a new rule requiring federal contractors to provide a minimum level of wages and benefits to their employees.

The president seems intent on using federal contracting as a tool for promoting economic justice, which in his view means promoting labor unions. Taxpayers, however, are more interested in getting the best value at the best price for whatever the federal government needs. That may not be compatible with slapping a union label on everything the government buys.

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Kent Hoover is the Washington bureau chief for bizjournals.