Legislation eliminates construction PLAs

July 8, 2011
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Unionized workers and construction companies may have a tougher time getting contracts for public building projects in Michigan now that state lawmakers have passed legislation that bans union-only labor agreements for government construction projects statewide.

Senate Bill 165, called the Fair and Open Competition in Governmental Construction Act, impacts the use of “project labor agreements” in public building projects. A PLA is a binding agreement negotiated between a construction project owner, developer, and the buildings and trades labor unions. In short, it is a pre-hire agreement that is negotiated before any employees are hired. A PLA becomes part of a bid specification that all winning contractors must follow.

The belief behind the bill is that union contracts normally pay employees higher wages than non-unionized agreements, so the cost of a project is higher.

The bill went to Gov. Rick Snyder for his signature last week. The state House approved it June 30, while the state Senate did the same two weeks earlier. Both chambers are controlled by Republicans.

“The measure creates open and fair competition in participating in state construction contracts and will directly result in cost savings for taxpayers,” said State Sen. John Moolenaar, R-Midland, primary sponsor of the bill, in a statement.

Moolenaar added that the bill ensures that every qualified contractor can bid on public contracts for government, school, college and university projects that involve tax dollars.

“Taxpayers also benefit from having public construction that is completed by the lowest, most qualified bidder,” he said. “This is a common-sense bill that will promote two important objectives that all residents can support: equal opportunity and fiscal accountability.”

“In today’s economy, the state cannot afford to pay for what amounts to special interest kickbacks to favored political groups,” said Chris Fisher, president of the Associated Builders and Contractors of Michigan, in a statement.

ABC is a statewide association that represents the commercial construction industry.

“The end to anti-competitive picking of winners and losers means the beginning of a new era of fiscal accountability on construction projects paid for by tax dollars,” said Fisher.

A fiscal analysis of the bill determined it would have an indeterminate impact on the state and on local units of government, as research on the cost of PLAs is mixed. A House analysis reported that university researchers in Massachusetts and Connecticut found that PLAs increased the cost of school construction by 14 percent and 18 percent, respectively, in those states.

But researchers at Michigan State University, the University of Rhode Island and the University of Utah analyzed the same studies and found that the use of PLAs did not have a statistically significant effect on the projects’ cost.

“The extent to which project labor agreements are used in public construction projects in the state isn’t immediately known,” read the House fiscal analysis. “This analysis will be updated as more information is available.”

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