Project Labor Agreements: The New Bid Rigging and Protection Racket

In cities and counties all across the country, public agencies are entering into agreements with labor unions restricting employment on public works projects to union members.

These agreements, referred to as Project Labor Agreements, are a bad public policy for a variety of reasons but most importantly they are, in essence, agreements that smack of the very sort of political cronyism and racketeering that ought to be illegal.

Construction Industry Unionism:

To fully appreciate the injustice of "Project Labor Agreements" requires some background on unionism in the construction industry.

In the late 1940's almost 90 percent of construction workers were union members. Inefficient work rules, craft jurisdictional disputes and excessive wage demands made it increasingly difficult for union contractors to compete for work in the private sector. As a result, the unionized percent of construction industry declined steadily.

So long as unions maintained a majority of construction employment in a locality, they were protected from competition on public works construction by prevailing wage laws, like the federal Davis-Bacon Act.

Even though their real purpose was to protect unions from competition, most such laws mandate the payment of wages "prevailing in a community" on public works construction projects. A few state prevailing wage laws avoided any pretense of fairness and simply mandated union wages.

Even after union membership fell below a majority of the construction workforce, unions were able to use their political influence to manipulate the administration of these laws to ensure that union wage scales were set as the government mandated wage.

When union membership fell to less than 30 percent of the construction workforce, it became difficult for government agencies, no matter how pro-union, to contend that the union wage was the prevailing wage.

By 1999, union membership in construction had fallen to less than 20 percent. This has reduced the pro-union bias of most prevailing wage laws, even in areas where unions are relatively strong.

Project Labor Agreements:

Organized labor's political response to these trends has been a greater reliance on Project Labor Agreements to guarantee union jobs on public works construction.

Project Labor Agreements are sold to politicians on the basis that they reduce costs and ensure "Labor Peace." Both of these propositions are obvious frauds.

In most Project Labor Agreements unions make some concessions on craft boundaries and work rules to reduce costs. The cost comparisons used to show that Project Labor Agreements save money are invariably based on comparing the cost of doing the job under the Agreement or doing the same job using union labor without the agreement. They do not even attempt to compare what the costs would be if union and nonunion contractors were allowed to compete in an open and free market.

Such open and fair competition would strip Project Labor Agreements of the pretense of saving the public money and expose them for what they are, agreements between politicians and their supporters to rig the bidding on public works construction projects to ensure that the work will be done by a favored class of bidders.

Since the cost savings of Project Labor Agreements are so obviously fraudulent, more attention needs to be devoted to the "Labor Peace" rationale.

Labor Peace:

In a Project Labor Agreement unions agree not to strike a project in exchange for the concession that all labor will be obtained through union hiring halls. This, they contend, saves the public money by avoiding costly delays in construction. The labor peace rationale for Project Labor Agreements is also a complete fraud but a more complex and compelling one.

Strikes take place when a union and employer fail to reach agreement on a contract, either an initial contract or one that is being renegotiated because it has expired.

Such problems only occur in a union setting. If avoiding the disruption of work, and therefore costly delays, were the only motivation for Project Labor Agreements, it would make far more sense, from a public policy point of view, to say that union members cannot be employed on the project. The obvious injustice of such a proposal immediately exposes the injustice inherent in Project Labor Agreements.

Beyond that, the labor peace rationale fails in practical experience because many strikes have occurred on construction covered by Project Labor Agreements.

If "labor peace" in the commonly understood sense is such an obvious fraud, it is worth looking a bit deeper to understand why public officials would tolerate the injustice and expense of these agreements.

Aside from the obvious influence of union political power on elected officials, there is a much deeper meaning to "labor peace" as understood by unions and public officials.

Despite the fact that unions represent less than 20 percent of people employed in the construction industry, union officials regard some jobs as "theirs" and do not hesitate to use violence and intimidation to stake their claim to those jobs. This is particularly true of public works construction.

The real meaning of "labor peace" in a Project Labor Agreement is that, since only union labor is being used on the project, unions will not engage in acts intended to disrupt the work.

In any other realm an agreement not to disrupt business in return for an economic concession would be clearly identified as a protection racket -- as extortion. Calling it a "Project Labor Agreement" and wrapping it in the window dressing of pretended cost savings and the motherhood and apple pie mythology of unionism doesn't make it any less a protection racket.

Project Labor Agreements drive up the cost of public construction projects at great expense to the taxpayers while discriminating in hiring against more than 80 percent of construction workers who have chosen not to be represented by a union.

They are bad public policy and should be rejected as the "Bid Rigging and Protection Racket" schemes they are.

The Nation's Press and Project Labor Agreements

"The California Supreme Court ruled Monday that governments can require contractors to use unions on public works projects. The decision is being called a victory for organized labor.

"The losers are the workers who'd rather not join unions. Nonunion shop owners will also take a hit.

"Taxpayers, who will have to bear the burden of more expensive projects, will lose, too. Estimates vary, but projects built by union shops can cost from 5% to 26% more than projects built by nonunion shops.

"That's a steep premium for the dubious privilege of using union labor. So what are taxpayers paying for?

"Likely political corruption. Politicians have been known to favor their contributors with legislation. And unions have a history of making heavy political donations."

Investor's Business Daily
August 18, 1999

"As a practical matter, PLAs may be a necessary evil. That's because public projects usually need legislative approval to get the authorized funding. Politicians who rely on labor money may never approve a public project without them.

"But that doesn't eliminate the basic injustice ingrained in PLAs, which often force contractors to lay off experienced and productive workers to employ people that unions foist off on them.

The Buffalo News
Buffalo, New York
June 28, 2000
"One thing is certain: PLA is rooted in blackmail. The unions say the agreement ensures uninterrupted construction. Translation: If you don't have PLA, we may see to it that there will be interruption.

"This utterly immoral arrangement is kept alive by spineless politicians who kowtow to the unions because much of their campaign contributions come from organized labor."

Sunday Telegram
Worcester, Massachusetts
September 26, 1999
"The essence of competitive bidding laws is to enhance competition. Project labor agreements violate this basic principal by effectively eliminating a whole class of competitor -- the nonunion contractors.

"One of the major justifications for PLAs is to preserve labor peace. But even in the San Francisco Airport case upheld by the California Supreme Court, there was a wildcat strike that disrupted the project for several days. The PLA was supposed to guarantee labor peace. It did not, undercutting one of the strongest arguments in favor of PLAs.

"Competitive bidding laws also are designed to avoid political favoritism in public bidding. But PLAs favor union contractors and, by extension, unions. Thus, public officials adopting a PLA are currying favor with, and possibly political campaign contributions from, unions. This is just the kind of cronyism the competitive bidding laws seek to avoid.

"We believe that all bidders should be treated equally when bidding on public works projects. Where a union contractor is the lowest qualified bidder, it should be awarded the contract. The same should go for the nonunion contractor. There should be no artificial, government-imposed barrier, like a PLA, to either side. With a level playing field, all workers will have equal cause to celebrate on Labor Day."

Engineering News-Record
September 6, 1999
For more information:

In Fall 2000, the Public Service Research Foundation published "Government-Mandated Project Labor Agreements in Construction, the Institutional Facts and Issues and the Key Litigation: Moving Toward Union Monopoly on Federal and State Financed Projects" by Dr. Herbert R. Northrup, Professor Emeritus of Management, The Wharton School.
This is the most comprehensive analysis of the issue available. For information about obtaining copies, please contact:

Public Service Research Foundation
320-D Maple Avenue East
Vienna, Virginia 22180
Phone: 703-242-3575
Fax: 703-242-3579