Council explores 'local' labor lawConstruction defects, delays and cost overruns earned the Boston Central Artery Tunnel Project the nickname “the Big Dig" because the $2.5 billion, 7 1/2-mile highway project gouged $14.6 billion from taxpayers’ pockets. Now Superior City Council contemplates a law requiring a project labor agreement like the one many believe led to the boondoggle in Boston.
By: Shelley Nelson, The Daily Telegram
Construction defects, delays and cost overruns earned the Boston Central Artery Tunnel Project the nickname “the Big Dig.”
When the $2.5 billion, 7 1/2-mile highway project opened in December, it had gouged $14.6 billion from taxpayers’ pockets, and the Associated Press reported another $1 billion was still needed for demolition of faulty construction.
The project highlights pitfalls of a proposal facing the Superior City Council on Tuesday night.
Councilors will consider adopting an ordinance that would require project labor agreements on all city construction projects — similar to the used in Boston.
Councilor Dan Olson, business manager for the Building and General Laborers Local 1091 and member of the Northern Wisconsin Construction and Building Trades Council, is introducing the ordinance.
In his proposal, “the city of Superior is the owner of the project, and they enter into an agreement that would assure local employment,” Olson said. “...we have language in it that would assure local hiring with all the contractors that we have. If we had a contractor that came from outside the area, we have language that would assure us a percentage of local people.”
Project labor agreements are project-specific collective bargaining agreements between contractors and labor unions. They are unique to the construction industry, according to the Beacon Hill Institute of Boston’s Suffolk University. In general, the agreements recognize participating unions as the sole bargaining representatives for workers regardless of their union membership. They require workers to be hired through the union hall referral system, and nonunion workers must join the signatory union of their craft and pay dues for the length of the project. Wages, work hours, dispute resolution and other work rules follow prevailing labor union agreements.
Proponents portray project labor agreements as even-handed attempts to adjudicate conflicts between contractors and union officials before they degenerate into a strike or a lockout, Carl F. Horowitz wrote in a 2005 study for the National Institute of Labor Relations Research. He stated the agreements “binds a contractor and all subcontractors to organized labor-dictated terms and conditions of employment … virtually all require the construction owner/contractor to hire mainly or entirely union-affiliated workers.”
“Some of the arguments in favor of PLAs is that when you have union contractors, they’re safer, they’re better trained, they can come in under budget — ‘we don’t go out on strike,’” said Steve Stone, president of the Wisconsin Chapter of Associated Builders and Contractors. Other arguments include requiring contractors to pay prevailing wages and union-scale benefits regardless of union membership.
“This ordinance is attempting to fix something that isn’t broken,” said Mayor Dave Ross. “We’ve had a high level of labor harmony between the projects. In the five years I’ve been here, we have not had any labor issues on projects that have been initiated or in projects the city of Superior has participated in. The labor unions have worked cooperatively on a number of various projects.”
Ross’ five-year experience is similar to the 35 years experience Development and Government Affairs Director Jeff Vito has had as a member and leader of the city’s public works department, which manages the majority of city construction projects.
Vito has dealt with city contracts since the early 1970s, but he has only vague recollection of a labor dispute concerning a Tower Avenue project in all those years, he said.
“Generally, it has never been our practice to determine if a contractor is union or nonunion, but to require that they pay the prevailing wage rate,” Vito said.
Since 1988, Superior has had an ordinance that requires prevailing wages be paid by all employers on public works contracts. Olson said because of that, wages are less of an issue in the proposal he is presenting. However, the proposal before the council also requires nonunion contractors to contribute to union employee benefit funds, and subjects them to union audit for oversight.
“What we generally do on these in the public sector is that any company — union or nonunion — can bid on these projects; they just have to follow the local collectively-bargained agreements, and … they would have to hire a local union person,” he said.
Ross fears adding another layer of bureaucracy could limit the city’s ability to draw bidders for projects. He worries it could have the opposite impact Olson is trying to achieve when it comes to local hiring.
“Our major contractors are all unionized, and they use unionized labor on the projects they bid on,” Ross said. He said small, local contractors could be hurt by project labor agreements.
“If this is going to add another layer of bureaucracy — by the way, which we’re going to have to monitor and enforce — this could put a chill over small contractors … on these kinds of projects,” Ross said. He said it could actually tip the balance in favor of large, out-of-town contractors with the staff and knowledge to weave through the red tape.
It is widely believed construction projects are more expensive when a project labor agreement is in effect because the competitive pressure that holds down prices is eroded, according to researchers at Beacon Hill Institute. “Open shop” construction firms facing huge obstacles required by the agreement are often discouraged from bidding on publicly-financed projects, the report states.
Douglas County chill
One of three local refrigeration contractors in the area has already vowed not to bid on county contracts after the Douglas County Board adopted a resolution in January requiring project labor agreements for contracts exceeding $150,000.
Jay Koning, co-owner of Gartner Refrigeration in Duluth, in March told the Daily Reporter in Milwaukee that he would no longer offer bids on county projects because the agreements require terms that his company won’t accept. Koning was out of the office this week and could not be reached for comment.
The Douglas County Board offered nearly unanimous approval in January to using project labor agreements after being approached by the Northern Wisconsin Construction and Building Trades Council last year. Supervisor Jeff Isackson, a member of Local 1091 and employee of a member firm of the council, abstained from the vote.
“To me, the resolution is just more sort of a concept,” said Doug Finn, board chairman. “Every project labor agreement would have to be approved by the county board, so it’s not real totally automatic.”
Under the proposal before the council, all projects that exceed $150,000 would require the agreement by law. Olson said city projects such as weatherization contracts would be exempt from the agreements.
Settling labor disputes
Douglas County has had success with project labor agreements, said County Administrator Steve Koszarek.
“I do know that when they did the Government Center, that was under a project labor agreement,” he said. During the project, he said a conflict did arise between union and nonunion workers, resulting in a union picket.
“Sometimes, trying to get through pickets is difficult,” Koszarek said. “And it makes the project a lot more difficult.” He said because of the project labor agreement the county signed, union officials ended the picket quickly.
However, organizations like Associated Builders and Constructors consider such accords to be capricious arguments designed to lock out nonunion contractors.
But if you build with a non-union contractor, “you have all of that automatically,” Stone said. “You don’t have to promise that they’re not going to go out on strike.”
Cost without competition
Nationally, project labor agreements are subject of much debate and numerous legal challenges.
“Public construction projects should be open to all responsible construction companies independent of labor affiliation,” Stone said.
Associated Builders and Contractors represents about 25,000 construction and construction-related firms nationwide. The group considers the issue a priority, believing they discriminate against nonunion trades’ workers and contractors on public projects. Unionized construction trade workers account for 15 percent of the trades workers nationally, and 19 percent in Wisconsin, according to the organizations’ Web sites.
Yet, Olson estimates about 90 percent of the major projects in the region are built by unionize labor.
Ross said studies show project labor agreements are costly to taxpayers.
Researchers at the Beacon Hill Institute found the cost of constructing schools in New York, Connecticut and Massachusetts rose 20 percent when project labor agreements were involved.
Horowitz said project labor agreements have become a hot issue because of the amount of money on the line. While no research has come up with a national figure “huge sums are spent … steering construction and renovation of highways, bridges, airports, stadiums, prisons and other public facilities toward unions and allied contractors,” he wrote in the 2005 study “Project Labor Agreements: Union Monopoly in Public Works Construction.” The study highlighted the impact the Boston Central Artery Tunnel Project and other projects had on taxpayers.
Closer to home
Stone said project labor agreements are rare in Wisconsin, but they have been a factor in projects like Miller Park Stadium in Milwaukee and Lambeau Field in Green Bay.
PLA Watch of California cites safety issues and delays as problems with the Miller Park Stadium project after three construction workers were killed in a crane accident during construction. The accident resulted in $100 million in repair costs — paid by insurance — and a one-year delay in opening the stadium.
Cost overruns were also an issue, Stone said. The stadium, proposed to the Wisconsin Legislature as a $250 million project, rose to almost $400 million, $310 million supported by taxpayers.
According to a 2001 analysis of stadium costs by the Milwaukee Journal Sentinel, about $117 million of the $150 million price difference was attributable to expected costs not included in the original proposal, such as infrastructure and technology.
However, determining what cost overruns, if any, can be attributed to Douglas County’s Government Center project labor agreement could take years to sort out.
Pitched as a $28 million project in 1999, estimates rose to $31.5 million before construction began. The price tag rose again to $42.8 million in 2000 after city officials made the decision to be included at city expense. The cost was about $4.1 million. The final budget figure approved in 2002 set project costs at $44 million.
Still, a secure courtroom included in the original $28 million estimate remains unfinished after county officials cut it out of the project when costs rose. The last estimate to finish the vacant space in the jail set that cost in 2007 at $1.7 million, but there are no plans to finish the project.
Olson said he doesn’t believe high costs will be an issue. He said the city already has prevailing wage ordinance, and local union contractors bid against one another all the time.
That’s precisely why city administrators are dumbfounded by the move to require project labor agreements in the city.
“We really scratch our head and say ‘what is the problem we’re trying to fix here?’ because we’re not seeing a problem,” Vito said. “What I see in reading this, it’s putting a lot of responsibility and liability on the city of Superior for functions that — in my personal opinion — I don’t think are our responsibility. If the union thinks it’s important enough to get a project agreement, they should do it on a project-by-project basis.”