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The president's executive order could lock out non-union construction companies.

By 11.12.09

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Non-union construction workers could be locked out of new federal projects thanks to an executive order President Obama signed back in February on the sly as part of a payback to organized labor.

The election of Republican governors in Virginia, and especially New Jersey, who are both opposed to union-only favoritism in contracting, could complicate the administration’s efforts, at least on the state level. The loss of New Jersey must be viewed as a particularly acute setback, given how active labor bosses and White House operatives were in their failed effort to secure re-election for a long-time ally.

Industry leaders have responded vociferously to Obama’s order in detailed press releases that fault the administration for advancing discriminatory procurement practices in violation of competitive bidding laws. The directive received scarce media attention for months, even after the Office of Management and Budget (OMB) issued a memorandum to federal agencies in July encouraging them to implement the new rule.

In his order, Obama calls for project labor agreements (PLAs) to be used, when the cost to the federal government exceeds $25 million. PLA’s are set up as multi-employer, multi-union, pre-existing agreements designed to harmonize labor relations between construction trade unions and contractors.

The July memorandum is of particular concern to representatives with the Associated Builders and Contractors (ABC) because it was issued before the public comment period had expired and did not include any meaningful criteria or data that could be used to assess the merits of PLAs.

The proposed rule itself contains many serious flaws, particularly with regard to the impact statement, the absence of any meaningful criteria for agencies to use in deciding whether to impose PLAs, and the absence of any empirical justification for PLAs on federal projects,” said Geoff Burr, ABC vice president of government affairs.

The U.S. Department of Labor’s Bureau of Labor Statistics shows only 15.6 percent of America’s private construction workforce is unionized. This means PLAs could be used to discriminate against the more than eight of out of 10 construction workers who are not part of a union, ABC officials have observed.

In his analysis of the order, Maurice Baskin, the legal counsel for ABC, wrote:

The Order will result in widespread discrimination against the many construction workers who do not belong to unions, and denies their right to Freedom of Association and Equal Protection. The Order will cause money to be unfairly taken from such workers and funneled into under-funded union pension plans, from which the workers can receive no benefits. The Order will increase costs to the federal taxpayers by arbitrarily limiting competition for federal construction work.

Obama’s executive order 13502 claims that PLAs would heighten efficiency and alleviate labor disputes that prevent projects from being completed on time. The order reads in part as follows:

The use of a project labor agreement may prevent these problems from developing by providing structure and stability to large-scale construction projects, thereby promoting the efficient and expeditious completion of federal construction contracts, the order says. “Accordingly, it is the policy of the federal government to encourage executive agencies to consider requiring the use of project labor agreements in connection with large-scale construction projects in order to promote economy and efficiency in federal procurement.

But the ABC takes issue with the idea that PLA’s are necessary to ensure labor cooperation to keep projects running on time.

This is a particularly disingenuous argument that flirts with blackmail, because unions cause many project delays through illegal organizing and jurisdictional disputes on jobsites,” according to an analysis posted on the ABC website. “Merit shop workers do not strike, yet they are excluded from working on PLA projects.

Moreover, there are a number of studies that show PLAs will increase the cost of construction projects, Brett McMahon, an ABC representative explained in an interview.

Decades of studies have shown that PLAs increase the cost of construction,” said McMahon, who is also vice-president of Miller and Long, a Maryland-based concrete construction company. That's a bad idea during good economic times, but it's utterly foolish when we are already financially upside-down as a nation. We are financing these projects with debt that is underwritten by taxpayers -- many of whom are not going to be able to work on these projects without paying union dues.

A new study from the Beacon Hill Institute shows that PLAs would increase construction costs anywhere between 12 and 18 percent in comparison to projects that are not subjected to union rules.

Our examination of the record produces no evidence of any systematic connection between the absence of a PLA, on the one hand, and cost overruns or delays caused by labor disputes, on the other,” said David G. Tuerck, one of the authors of the study and Executive Director of the Beacon Hill Institute. Therefore, the justifications offered by the Obama Administration for reinstating PLAs are not supported by the evidence.”

Back in New Jersey, Gov.-elect Chris Christie was very explicit in opposing perks for organized labor that would further inflate costs for the already beleaguered state taxpayers. On his campaign website, Christie pledges to end the use of PLAs in New Jersey. Item No. 50 of 88 ways to fix New Jersey reads as follows:

I will eliminate special interest labor union giveaways that increase spending and taxes by ending the use of project labor agreements, which drive up the cost of public construction projects and fail to deliver a public benefit at a time when the economy is shedding jobs and taxpayers are struggling to make ends meet.

Organized labor remains a potent political force in New Jersey, where a majority of the congressional delegation has signed off on legislative favors for unions. Republicans Chris Smith and Frank LoBiondo are no less than co-sponsors of the so-called Employee Free Choice Act (EFCA), which includes the anti-secret ballot card check provision.

This makes Christie’s stance all the more remarkable.

“The voters now equate unions with big-government and they are reacting to these costly paybacks,” said McMahon, the ABC representative. “Christie was more firm in his opposition to union favoritism than any other Republican I can recall from New Jersey and this helped him in the election.”

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About the Author

Kevin Mooney is an investigative reporter with free market think tanks associated with the Franklin Center for Government and Public Integrity. He has also written for the Daily Caller, the Washington Times, the Washington Examiner, NetRightDaily.com and NewsBusters.