Productivity Enhancement: Project Labor Agreements

3. Interviews

Positive comments

Scheduling
Safety
costs
General comments
Negative comments
The effect of PLAs on local labor relations
The effect of PLAs on bidding and costs
When is a PLA appropriate?
Improving PLAs

It was essential to hear from individuals with experience with PLAs. The research team interviewed approximately forty people who shared a variety of thoughts. It spoke with both public and private construction users, contractors, contractor association representatives, labor union officials and two labor/management committee executive directors. Interviews were conducted in southern New England, the northern Midwest, and the West (mainly California). To comply with rules for research including human subjects, the names of the interviewees are not revealed. Below we discuss positive and negative comments about PLAs, suggestions for when a PLA should or should not be used and ideas for improving PLAs.

Positive comments

Favorable comments about PLAs came mainly through questions about how PLAs affect costs, scheduling, safety, training and minority employment.

Scheduling

Interviewees seemed most convinced that the greatest benefit of a PLA was in assuring timely completion of a project. Foremost, PLAs nearly guarantee a steady flow of qualified labor. A New England contractors’ association representative (who was generally ambivalent about PLAs) said, “If a nonunion contractor needs labor, he will have to put an ad in the paper and hope he gets people to apply. But the unions have a national network of referral and hiring halls, and a contractor can nearly always get qualified labor.”

Similarly, the construction manager for an Ivy League university stated: Anything above five to eight million dollars we will go to a project labor agreement because we find it a more effective management tool…Basically it’s the labor pool, the supply of labor, the quality of the workmanship.

In my experience we have had some jobs that had both union and nonunion contractors on them and from the point of view of the lump sum delivery of the job it was tough to manage. So from an owner’s perspective it’s a more effective management tool. In my experience, on our union (i.e. PLA) jobs we have never missed an opening date, and it is all driven by the academic schedule…We need to deliver this building by May 2006, and I get a better level of assurance building with a PLA.

The manager also noted that scheduling depended not only on getting qualified workers, but on keeping them working. Hence, the dispute settlement provisions of PLAs are also important. He added, “The only [job] action we had where we had a problem was on an open shop job. Generally PLAs will protect us from that type of action.”

The director of a hospital in the Midwest also noted the advantages of getting a quality workforce and being free from work disruptions:

Having an IMPACT agreement [i.e. a PLA] gave us peace-of-mind throughout all phases of the project. A new facility was a dream of our volunteers, board members and staff for many years. The planning phase was lengthy and thorough. Once we entered the construction phase, time was a crucial issue. The IMPACT agreement assured us of the full cooperation of the building trades. There were no work stoppages, and job harmony made for a project completed in a timely manner.

In the West, a public sector owner also commented on the scheduling advantages of a PLA, while noting the cost advantages of assuring quality:

With the PLA, we finish on time, no interruptions or delays associated with disputes. It isn’t just the dollar figure. When I put up a building, I stand back and take pride in it. When I see lousy work, I get angry. It isn’t a question of it costing us five dollars an hour more. My community wants their school buildings put up properly, and they want them to last and not to have to come back and fix things because somebody was not properly trained. The PLA saves us money on the final cost, which matters more than the bid price.

Adding some detail to concerns about scheduling, a public sector construction user in New England talked about assuring a proper flow of work on a project:

Delays in the project are what cause some of the most significant issues because it put trades out of schedule. They may have to go to another job. Then when you throw them off, you throw off the others…So in order to have the right order and to have people in the different trades, when they look across, say ‘we know they do good work. If somebody is falling a little bit behind, let’s work with them. Let’s figure out a way we can move on, and let’s resolve any issues.’ That aspect of PLAs was very appealing to the building committee.

Training and minority employment

Several interviewees remarked that PLAs enhanced training and fostered minority participation in the trades. A Boston area union official told us:

We have made provisions for intake of certain people from communities into our programs to give them a direct access. It could be a project where the school committee says, ‘any chance our young people might have a shot of getting into the training programs?’ and we will write something in…One thing we talk about in the PLA is getting the kids and actually putting them in our training program, so in three or four or five years they’re actually a journeyperson, as opposed to just throwing them on the job site for a few months, and then they’re gone, and they don’t learn anything…We give them more of a committed career path as opposed to just giving them a part-time job for the summer. [On one project] there was an agreement in order to take in minority, women, disadvantaged kids into the industry, the building trades set up a pre-apprentice program…They put 200 or 300 kids through the program every year. It’s a six month program, so they do two a year. Those kids are then moved into the apprentice program if they want…The six month program is really to give them a sense of what construction is as a career. But those that want to pursue it, they go into the apprentice programs, and they’re off and running from there.

A New Haven area union official added: [The city] had done a lot of projects without PLAs, but the PLA projects invariably came in on time and on budget and, two, they demonstrated, as contrasted with the non-PLA jobs, a clear superiority in numbers in terms of [city] residents and minorities…and they still came in few cents per square foot cheaper than the other jobs.

For the larger cities, it’s important to them that they get local residents and minorities and women, and we demonstrate to them the successful programs that we’ve implemented within PLAs in other areas. The state projects, and even a lot of the local projects, it’s important for them to understand that the PLA is the only way you can really guarantee a local workforce. In the public sector any person can bid, and the successful bidder can bring his workforce from wherever he so chooses, and we’ve seen people coming in from Arkansas, Texas and Maine. The PLA doesn’t prevent anyone from bidding the project. All it says is that the successful low bidder is going to employ local building trades people. And we’ve done things in those agreements to give local residents a first off the bench hiring preference.We guaranteed one community ten apprentices into the trades during the building project.

Safety

Even some of the skeptics we interviewed said that PLA covered jobs were marked by a heavy emphasis on safety. Some, like the following interviewee, linked safety performance to the labor/management committees found in many PLAs:

Under the PLAs, more so than absent a PLA, there is usually more emphasis on safety and more so, there is more emphasis on joint participation around safety. On almost all the agreements, we insist there be a joint safety committee formed for this project so that on a regular basis, once a month, the agents get together with the stewards and contractor and talk about safety related issues. Now, on the private side, something like this is very demanded, and it is starting to come more and more from the owners, even if we had [started] it initially. On the public side it’s asked for less often by the construction manager, but we think it is an advantage.

A contractor’s representative stated: “A contractor can’t say ‘I can’t afford to buy a harness’ or lanyard or whatever on a PLA project. The costs are built into the bid process, since they are required on the PLA.”

Costs

Since concessions on compensation are rare in today’s PLAs, few interviewees made mention of direct cost savings. Rather, savings were implied through better scheduling, higher quality, etc. One interviewee, a union official, commented:

You know time is money, too. I think the PLA jobs—at least the one hundred percent union jobs—are better scheduled and usually come out ahead of schedule, and I think because of that there is a lot of value added.

An interviewee in the West offered an interesting take on PLAs and costs:

When the union brought the PLA to me, I didn’t like it. I don’t like anybody dictating what the terms of my project should be. But after I stepped back and talked with other people and after rereading the PLA, I saw the pony in the coral. Low ball bids are not necessarily a great deal. A way-low bid probably means somebody missed something. With the PLA we now have in place, we have a more experienced group of bidders providing a much closer range of bids compared to the mom and pop organizations that were bidding on our projects previously. By law, we have to accept the lowest responsive and responsible bid. [The] mom and pop organizations come in thinking they can take on a major project, and they lose their shirts. Contractors have left. Contractors have been fired. Contractors have gone broke on our projects. Those are things we don’t want to get into.

The traditional low-bid approach to awarding public school jobs rewards stupidity. Let’s say a project entails three parts—A, B and C. Everybody bids on A, B and C except Stupid. Stupid is stupid, so he doesn’t see the third part. So Stupid bids only thinking about A and B. Guess who’s the lowest bidder? Stupid! Now Stupid starts the work. The summer goes along. School’s coming and the project has got to be completed. Now Stupid sees the third part of the project, but Stupid doesn’t have the money to get it done. So Stupid comes to me and asks for change orders.Now he has no business asking for change orders. We could fire him; we could sue him; we could go after his bond. But like I said, school’s coming. The kids have to have somewhere to go. So we bite the bullet and pay Stupid his change order. We reward Stupid for being stupid. It’s stupid! PLAs cut through this crap by either chasing Stupid out of the game or getting him to pay attention.

General comments

Construction users in a Midwest city offer a couple of comments that do not easily fit in a category are offered by construction users in a Midwestern city. In the area, a labor/management committee developed a model PLA known as an IMPACT agreement. A hospital and museum official offered us the following comments on the advantages of using the agreement:

Having an IMPACT agreement facilitated a positive partnership between [the medical center] and the subcontractors who worked on our 7th Street campus project. It gave us the assurance of quality workmanship with stringent safety and production standards. We had confidence in a stable, reliable workforce that completed the project on schedule. We were very pleased with the teamwork on our campus and with the benefits gained from our IMPACT agreement.

At [this organization], we know that success is found in uniting the talents of many and building strong relationships. Our IMPACT agreement has been a critical relationship in our effort to build the institute and advance the cardiovascular health of our community. We take pride in being the Quad City’s very own health system. Relying on the talents of local people who share a stake in the Quad Cities only makes sense and has always brought us tremendous results.

The $14 million construction of the museum’s IMAX Theater created numerous challenges as we nestled a 38,000 square foot addition between two existing facilities, while continuing to invite the public to participate in a full range of educational programs and exhibitions on Museum Hill. There is no question in my mind that the IMPACT agreement enabled us to achieve our construction time line.

The successful presentation of IMAX films requires a high degree of precision and attention to detail in the construction process. The complex includes a 270 seat auditorium with its centerpiece of a five story-high, seven story wide flat screen. The talents and dedication of the highly competent workers employed through the IMPACT agreement enabled us to prepare the building to accept the highly technical IMAX equipment.We are assured that the Quad Cities will have one of the finest large format theaters in the nation.

The men and women who worked on this project took pride in their work and shared the excitement of bringing this spectacular new attraction to the region.We look forward to seeing them come back to enjoy the product they created for all of us to enjoy for many years to come. The IMAX Experience will be another point of pride for everyone in the Quad Cities.

Negative comments

Not all comments about PLAs were positive. And, in fact, nearly all interviewees had some criticisms of their use or overuse.

The effect of PLAs on local labor relations

The strongest negative comments about PLAs were not about their impact on construction outcomes, but rather on how PLAs affect local labor relations. Three respondents from a large Midwestern city told a similar of how PLAs had emboldened building trades unions to seek larger than normal bargaining settlements. Since a majority of workers in the area were covered by the nostrike/ no-lockout provisions of various PLAs, they did not fear the consequences of a job action and were not, therefore, as willing to compromise their bargaining position. The result was, in the opinions of our interviewees, an overgenerous settlement with electricians that then spread to other trades.

Subsequent negotiations with the plumbers and pipefitters resulted in strike, under local agreements, of seven weeks. Although work continued on PLA projects, it slowed as traveling workers—at the first hint of labor troubles—left the area, making it difficult for the union to staff PLA jobs. Although the owner and employers were able to find sufficient labor, in part by shifting labor from less urgent work, the situation was viewed as burdensome and not in keeping with the commitments made by labor in the PLA.

The interviewees believed PLAs covered too much work in one area. This, in turn, led to greater worker militancy arising from a lowering of the consequences of such militancy.More expensive and more difficult local area settlements resulted.

It should be noted that interviewees mentioned a considerable evolution in labor relations in the area since that problem. The plumbers and pipefitters and Mechanical Contractors Association agreed to use a dispute resolution procedure in place of a strike in future negotiations, and there has been a general mending of relations.

A New England contractors’ association representative also noted problems in local labor relations caused by PLAs. His particular complaint was with unions using the grievance/arbitration mechanisms in the PLAs to make gains that might not have been possible at the bargaining table.

An example he gave was of shacks provided to workers on worksites. A practice had developed in the area of contractors providing such shacks in which workers would take breaks, change clothes, etc. However, the shacks were not guaranteed by the local collective bargaining agreements.When contractors balked at providing a shack on a particular PLA project, a grievance was filed and, an arbitrator determined that the contractors must provide a shack in accordance with established past practice. Our interviewee was convinced that this decision would be used as precedent on future projects.

Since his industry relies on a bipartite employer/union panel, not neutral, third-party arbitration, he feared the imposition of an outside voice on industry practices. The problem would be most pronounced when a majority of work in an area was covered by PLAs.

The effect of PLAs on bidding and costs

A few respondents indicated that they did believe that PLAs raised the costs of projects, particularly by limiting the number of bidders. A public sector construction user in Connecticut, though generally happy with his PLA covered project, noted that only one bid had been received on drywall contract and that the job had to be put out to bid a second time.

Two Western respondents seemed most concerned about the effects of PLAs on bid activity and costs. A public sector user stated:

We’ve got a lot of nonunion shops that do really good work. I wouldn’t be doing the community a service if I excluded the nonunion contractors. Sixty percent of our contractors tend to be union contractors.We don’t have any problem with unions; we’re happier with their work but not with the price. We have to get through our scope of work with very limited funds.

A traditionally nonunion general contractor in a western state, who had just become a signatory contractor, agreed that PLAs reduce or at least change the number of bidders on a project; although, he was more optimistic about their ultimate effects:

Any conditions or restrictions you place on a bid will decrease the number of bidders. If you prequalify your contractors, that will reduce the number of bidders. If you go design-build, that will reduce the number of bidders. If you require a certain [workers compensation] experience modification rate to influence safety on the job, that will reduce the number of bidders on your job. And a PLA will reduce the number of bidders on your job. Anytime you reduce the number of bidders on your job, you will increase the [accepted] bid price. But in the absence of a PLA, prequalification, etc. you increase the possibility that you’ll get an irresponsible contractor. That means excessive change orders, litigation as the architect and the contractor fight, scheduling problems, inferior work, and increased construction management costs. PLAs are like insurance. An increased bid price is buying insurance against downstream costs.

When is a PLA appropriate?

Most interviewees agreed that PLAs are not appropriate for all types of work. The regional vice president for construction operations for a large, northeast-based, construction management firm, who often counsels clients in PLA use, said that size and scheduling were the two main factors he urged clients to consider when contemplating a PLA. Moreover, he implied that considering the nature of the work was important. In parts of the Northeast, for example, it is difficult to find nonunion contractors capable of doing certain types of work (e.g. site excavation and iron work). When, on a large project, it is inevitable that much of the basic work would go union, this construction manager advises clients that a PLA makes sense.

Although a PLA would require all contractors to operate in accordance with collective agreements, problems that might arise by having both union and nonunion contractors on a site will be forestalled, and the construction user might, along the way, gain some important concessions. A contractor’s association representative also offered that there is “too much conflict on hybrid jobs” to make them worthwhile on large projects where most of the work will go union anyway.

A midwestern respondent offered that PLAs are not a good idea when there are not a sufficient number of union contractors capable of performing the required work in an area. The danger of receiving too few bids under such circumstances is too great.

Although different interviewees suggested different parameters, generally PLAs start to make sense when projects are at least in the five to ten million dollar range. Further factors include the complexity of the work, how tight a schedule the construction user is on and how high the likelihood of essential work going union anyway. According to our interviewees, when such conditions exist, PLAs make sense. Otherwise, the recommend open bidding and construction under area agreements.

Improving PLAs

Now that PLAs have reached a level of maturity and, to an extent, standardization, interviewees did not offer many comments on how PLAs could be improved. But not surprisingly, contractors and contractors’ association representatives saw the most room for improvement. The improvements they sought were principally in the ways most PLAs are negotiated. Currently, contractors usually have no formal role in negotiations, which are conducted between the building trades unions and a representative of the construction user, generally a construction manager. As mentioned, the construction manager must be a construction employer under the definitions of the National Labor Relations Act, but most prime and subcontractors, as well as their associations, have no role at the table.

Occasionally, it is clear that the contractors have had input into the process. A Michigan PLA, for example, excluded grievances arising in the electrical and sheet metal industries from the PLA’s grievance/arbitration machinery in deference to the bipartite arbitration panels in those industries.

Where such exclusions do not exist, however, contractors and particularly association representatives are put in a bind. First, their members are clearly bound by the provisions of PLAs. However, since the contractors’ associations are not signatory to the PLA, they do not have standing in the grievance/arbitration process and cannot offer full representation to member contractors as a party to the agreement. A further problem is that some PLAs exclude per capita payment to the types of administrative funds that support the involvement of associations in the process.

One possible solution is the development of PLAs through multicraft, multiemployer labor/management associations similar to the National Maintenance Agreements and the IMPACT agreement mentioned above. In fact, in a number of areas, labor/management committees are the main vehicle for developing and promoting PLAs. In such cases, the contractors have a forum to make sure that their concerns are brought into any PLA negotiations.

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