The Beacon Hill Institute (BHI) at Suffolk University in Boston, Mass. Sept. 23 released a new study that finds project labor agreements (PLAs) significantly increase construction costs on federal projects without adding benefits for taxpayers. The study is titled, “Project Labor Agreements on Federal Construction Projects: A Costly Solution in Search of a Problem.”
In February, President Obama issued Executive Order 13502, which encourages agencies to require contractors to use PLAs on federal construction projects costing $25 million or more. In addition, the Federal Acquisition Regulatory Council (FAR) issued proposed regulations in July that will turn the executive order into a formal rule that federal agencies must follow when procuring construction services.
“Our report shows that there is no reason to implement a PLA on a federal construction project, except perhaps for political payback to union leaders,” said David G. Tuerck, one of the authors of the study and executive director of BHI. “PLAs are anti-competitive by nature and add costs to the taxpayers. The federal government should consider this research when making its final decision about implementing the President’s order.”
BHI used the findings of three previous studies that analyzed the effect of PLAs on school construction projects and demonstrated that PLAs add 12-18 percent to construction costs, to estimate the effect Obama’s executive order would have had on projects initiated in 2008. According to the results, if President Obama’s Executive Order 13502 were in effect in 2008, construction costs would have increased an additional $1.6 billion to $2.6 billion.
The study pointed out that although taxpayers would have footed an unnecessarily large bill for these projects because of PLAs, they would not have received any benefits in return. Although the purpose of a PLA is to keep labor “peace” during construction projects, BHI’s examination of federal projects with a price tag of at least $25 million, initiated between 2001 and 2008, did not reveal any evidence that those built without a PLA suffered significant delays or cost overruns due to labor issues.
“The justifications for PLAs provided by Executive Order 13502 are, therefore, unproven,” the study pointed out. “What is proven is that PLAs add to the dollar amount of winning bids and increase construction costs…The Obama Executive Order should be seen as a costly giveaway to the construction unions with no proven benefit to the taxpayers.”
To read the complete BHI study on PLAs, visit http://www.beaconhill.org.
For more information on PLAs and Obama’s Executive Order 13502, visit www.thetruthaboutplas.comor www.abc.org/pla