RESEARCH/BACKGROUND

Study Finds Union-Only Project Labor Agreements Increase School Construction Costs by 20 Percent in New York State
           
An April 2006 study by the Beacon Hill Institute (BHI) at Suffolk University in Boston, Mass., found that the use of union-only project labor agreements (PLAs) on school construction projects in New York increased the cost of the projects by 20 percent or nearly $27 per square foot relative to non union-only PLAs.

The New York study – based on findings on a sample of 117 schools – follows a similar extensive statistical analysis of the effects of union-only PLAs in Massachusetts and Connecticut, both of which found bid costs to be significantly higher when a school construction project was executed under a union-only PLA. 

Project Labor Agreements and Public Construction Costs In New York State

The report concludes that, “given ongoing budget constraints and the uncertainties of revenue forecasts, New York policymakers and taxpayers should carefully consider these substantial additional costs when determining whether [union-only] PLAs are best for school construction projects in their towns or school districts.”

Other Studies that Measure the Negative Impact of Union-Only PLAs

The problems associated with union-only PLAs are not limited to New York State.  Numerous studies conducted across the country in recent years have shown the negative impact of union-only PLAs on school construction projects as well as other public construction projects. 

Union-Only PLA Studies

A Similar Union-Only PLA for Buffalo School Construction Project is Over Budget and Failing to Meet Diversity Goals

A $1 billion, 10-year school construction project now underway in Buffalo is already reportedly $16 million over budget and LP Ciminelli, the project manager, recently blamed a “lack of competition among subcontractors” for helping to drive up the costs. 

According to a published report in The Buffalo News, supporters originally gave the project the bold slogan, “the Promise,” saying that, “In most people’s eyes, the first wave of renovated schools, nine in all, fulfilled that hopeful pledge of modern, suburban-style schools with lots of educational enmities.”

The newspaper said “a string of new obstacles, most notably a big increase in construction costs, raises questions – even doubts – that the 10-year program can guarantee the same 21st century learning environments in future phases of the project.”

Meanwhile, New York State Comptroller Alan G. Hevesi, a Democrat, recently issued a scathing report urging the Buffalo Joint Schools Construction Board, which manages the project, to withhold payment or cancel the contracts of contractors who are not meeting the workforce and business goals for minorities and women. 

Hevesi also said several building trades unions have failed to live up to their pledge to increase the number of minorities and females in the construction trade unions.  He called for greater oversight and monitoring of union efforts.

The state comptroller criticized the board and Ciminelli for failing to take tough actions against contractors that are not complying with diversity goals, saying, “The [board] needs to take a greater role in ensuring that its diversity plan is successfully implemented,” adding, “The [board] and Ciminelli are not actively using all the means available to them to pursue full implementation of the workforce and business development diversity goals.”

According to the report, another problem has been the building trades’ inability to maintain training programs established under the union-only PLA.

“To put this into perspective,” the report said, “since the current pre-apprenticeship training programs, which were developed to help prepare and qualify individuals for union membership and for working on JSCB projects, produce an average of six graduates a month, it would take 32 years to produce enough new union members to achieve the diversity goals, if all the training graduates were minorities and women.” 

The diversity report is available at: http://www.osc.state.ny.us/localgov/audits/2006/schools/buffalodiversity.pdf

The audit is available at:
http://www.osc.state.ny.us/localgov/audits/2006/schools/buffalo.pdf

 
How Broken Promises on the Onondaga Lake Cleanup Project PLA Can Serve as a Wake-Up Call for Syracuse School Construction Project

On September 19, 1997, Onondaga County signed an Amended Consent Judgment (ACJ) for the Onondaga Lake Improvement Project.  The project calls for significant capital improvements to be made to the Metropolitan Wastewater Treatment Plan (METRO) and to the wastewater collection system for the purpose of abatement of combined sewer overflows and improving water quality in Onondaga Lake. 

The improvements were budgeted in the neighborhood of $385 million (in 1998 dollars) with an additional $63 million (in 1998 dollars) in the year 2010 if certain future compliance determinations require additional facilities.  The ACJ is designed to improve the water quality of Onondaga Lake and achieve full compliance with state and federal water quality regulations by December 1, 2012. The ACJ specifically includes a listing of more than 30 projects to be undertaken over 15 years.

The project is being built under the terms of a union-only PLA.  That union-only provision was implemented to provide economic savings in the amount of $11 million, according to an analysis of the merits of using a union-only PLA for the project that was conducted by the firm of Camp, Dresser & McKee.  These projected savings are what the County relied upon to meet the requirement that the utilization of the union-only PLA allow for obtaining the best work possible at the lowest possible price.

However, here’s where these projected savings stand today:

• Workers Comp Alternative Dispute Resolution (ADR) - was projected to save more than $1.7 million over the life of the project, according to a study done by CDM to detail costs savings to justify a union-only PLA on the Onondaga Lake Cleanup.  According to contractors performing work on the project, the ADR program has never been implemented.  A similar CDM study projects a savings of nearly $7.7 million over the life of the Syracuse city school rehab project if a similar ADR provision is implemented.  History is destined to repeat itself – these savings will never be realized.
  
  
• Management Rights – the ability of individual contractors to control the level of staffing/scheduling on the Onondaga Lake Cleanup Project was to save more than $2.1 million over the life of the project.  According to contractors who have performed work on the project, this concept is a “smokescreen,” because if the staffing issue is not specifically addressed in the PLA, the contractor is obligated to staff the job according to union collective bargaining agreement rules.  For example, according to the Operating Engineers CBA, for every crane on the job, there must be an “oiler” on site.  So even though a contractor with two cranes at work on site wants to have just one “oiler” for efficiency/productivity/cost reasons, he is required to have two, and the Management Rights concept embodied in the PLA does not allow him to do otherwise.  The nearly $1.5 million in savings that CDM says it will realize over the life of the school renovation project is yet another smokescreen.
  
  
• 3:1 Apprentice ratio across all trades – in direct violation of New York State Labor Law, as the NYSDOL mandates ratios by trade, and those ratios must be followed regardless of a PLA.  So the savings of $1,205,000 that this provision of the PLA was to save has never been realized.
  
  
• Productivity - the ability for workers to work four 10-hour days at a regular rate was to save four hours per worker per month in “productivity,” a total savings of more than $2.5 million.   However, a review of certified payrolls on several of the Onondaga Lake Cleanup projects shows virtually no utilization of this concept, so these savings are not being realized.
  
  
• Less restrictive off-site fabrication rules - were to realize savings over the life of the Onondaga Lake Cleanup Project of $1.7 million.  There is no evidence in a review of payroll records that this provision is being implemented.
  
  
• Elimination of guaranteed pay – The proposed savings of nearly $1.7 million is bogus because if non-union contractors are employed on the project, they do not have a guaranteed pay provision that they must abide by.  Of the $11.9 million in labor costs savings that the CDM study indicated would be realized as justification to implement a PLA, $11,001,000 are NOT being realized.