The following letter is a template for you to use.  PLEASE cut and paste parts, or the whole document into an email document and forward it to Ms. Young at barbara.a.young@usace.army.mil.   "Be advised" you are to insert your comments into the doument. DO NOT FORWARD UNTIL YOU HAVE MADE YOUR COMMENTS.  Your help on this matter is vital.

[Insert Company Letter Head]

MayX, 2011

Ms. Barbara Young

U.S. Army Corps of Engineers District, Omaha

1616 Capital Avenue

Omaha, NE 68102-4901

In Reply to: Solicitation Number W9128F11SM003 on Potential Project Labor Agreement at Offutt Air Force Base.

Dear Ms. Young:

Thank you for soliciting comments from the contracting community on the U.S. Army Corps of Engineers (USACE) Omaha District’s potential use of a project labor agreement (PLA) for a building at Offutt Air Force Base (AFB) in the Omaha metro area.

[Note: Insert information about your company and your interest in responding to the PLA survey here or in appropriate places throughout the letter.

Suggested information: What type of contractor are you? How many employees do you have? Do you build federal projects? Where do you build federal projects? Have you ever built a project for the USACE? Was it without a PLA? Have you worked on an Offutt AFB project before? Share a bad experience on a PLA project in Nebraska or in the surrounding area. Do you employ veterans or have a connection to Offutt AFB or the USACE? etc.]

[Insert Company Name] is opposed to government-mandated PLAs because these agreements typically restrict competition, increase costs, create delays, discriminate against nonunion employees and place nonunion general contractors and subcontractors at a significant competitive disadvantage. Typical government-mandated PLAs are nothing more than anti-competitive schemes that end open and fair bidding on taxpayer-funded projects.

In the interest of understanding [Insert Company Name] perspective on the controversial PLA issue and putting our comments in the appropriate context, the USACE should understand that it is difficult to predict precisely how a PLA will impact the Offutt AFB construction project without knowing and reviewing the exact content of a PLA. A PLA is a contract, so the various terms and conditions contained in a PLA will significantly increase or decrease its anti-competitive and discriminatory effect.

It is difficult for federal agencies to know the effects and unintended consequences of a PLA on a contractor’s complicated employer-employee labor relations and successful business model, which is why PLAs should never be forced onto a contractor, but instead voluntarily entered into by a contractor if it feels a PLA will help promote the economy and efficiency in which a construction project is delivered to the federal government. 

Without knowing the exact contents of a PLA, our response assumesa USACE PLA mandate at the Offutt AFB will contain the following provisions that are particularly objectionable to nonunion companies and their employees: 

1.      Nonunion companies must obtain most or all of their employees from union hiring halls.  This means that if a nonunion contractor is able to use its existing employees, it has to send its workers to the union hiring hall and hope that the union dispatches the same workers back to the PLA jobsite, and/or the PLA requires existing nonunion employees to join a union within 8 days of employment on the project.[1]  In addition, this provides unions with the opportunity to dispatch “salts” (paid union organizers) with conflicts of interest in employment to nonunion companies. Unfamiliar union workers may be of unknown quality and may delaytime and cost-sensitive construction schedules that add uncertainty to the ability of a contractor to deliver a quality, on-time and on-budget construction product to the USACE.

2.      Nonunion employees must pay nonrefundable union dues and/or fees and/or join a union to work on a PLA project, even though they have decided to work for a nonunion employer.[2] PLAs require unions to be the exclusive bargaining representative for workers during the life of the project. When agreeing to participate in a PLA project, the decision to agree to union representation is made by the employer rather than the employees.[3] Construction union employees often argue that forced unionization and/or representation—even for one project—is an infringement of their workplace rights and runs contrary to their intentional decision not to join a union.  

3.      PLAs require contractors to follow union work rules, which changes the way they otherwise would assign employees to specific job tasks—requiring contractors to abandon an efficient labor utilization practice called “multiskilling” and instead assign work based on inefficient and archaic union jurisdictional boundaries that increase labor costs. Open shop contractors achieve significant labor cost savings through multiskilling, in which workers possess a range of skills that are appropriate for more than one work process and are used flexibly across multiple trades on a project or within an organization. This practice has tremendous labor productivity advantages for contractors, but it is forbidden by typical union work rules and, by extension, PLAs.[4]

4.      PLAs require nonunion companies to pay their workers' health and welfare benefits to union trust funds, even though these companies have their own benefit plans.  Workers cannot access any of their union benefits unless they decide to leave their nonunion employer, join a union and remain with the union until vested.[5]Few nonunion employees will join a union after working on a PLA project, so in order to ensure that nonunion employees have retirement and benefit plans that actually help their employees, companies have to pay benefits twice: once to the union plans and once to the existing company plans.  In addition, paying into underfunded and mismanaged union pension plans may expose merit shop contractors to massive pension withdrawal liabilities.  Depending on the health of a union-managed multi-employer pension plan, signing a PLA could bankrupt a contractor or prevent it from qualifying for construction bonds needed to build future projects for the USACE and other customers.[6]

5.      PLAs require nonunion companies to obtain apprentices exclusively from union apprenticeship programs. Participants in federal and state-approved nonunion apprenticeship programs and community or employer training programs cannot work on a job covered by a PLA.  This means young people enrolled in qualified apprenticeship programs could be excluded from work in their community if these training programs are not run by unions.[7]

This begs the question: Why not eliminate these provisions and therefore eliminate the controversy? The answer: Without these anti-competitive and discriminatory provisions that discourage nonunion contractors from competing for public projects, unions rarely agree to concessions regarding labor peace, work schedules and other provisions that are the cornerstones of the alleged benefits of a PLA. Union-favoring PLA proponents require these provisions because they are crucial to cutting competition and ensuring union contractors have an unfair advantage over nonunion contractors.

[Insert Company Name]trusts the USACE understands these provisions would be typical in a union-approved government-mandated PLA for the Offutt AFB project; there may be additional terms and conditions addressed in PLAs that nonunion contractors and their employees would find offensive and that ultimately would discourage competition from these qualified businesses.

The following are answers to the seven questions posed by the USACE in the sources sought notice W9128F11SM003:

1.      Should PLAs be executed on selected large-dollar contracts in the Omaha/Lincoln Metro Area?

[Insert Company Name] urges the USACE Omaha District to exercise discretion and refrain from imposing PLAs on any Offutt AFB construction projects.  

The USACE should allow contractors—the only parties with experience in labor-management relations in the construction industry, and the only ones that would be subject to the terms and conditions of a PLA—to decide whether a PLA is appropriate for a particular project.  The USACE should expect that contractors will voluntarily execute PLAs if they would lower their costs, make them more competitive, and help them achieve economy and efficiency in federal procurement.

It is difficult to make a convincing case that government-mandated PLAs are needed on any USACE project for a variety of compelling reasons addressed in answers to the questions posed by the USACE. However, here’s one key reason why a PLA mandate is not needed: The Bureau of Labor Statistics’ (BLS) most recent report indicates that the nonunion private sector workforce in the U.S. construction industry comprises 86.9 percent of the total industry workforce.^[8] Likewise, just 13.1 percent of Nebraska’s private construction workforce and 14.5 percent of Iowa’s private construction workforce were union members in 2010.[9]

In today’s construction marketplace, as has been the case for decades, there is a qualified, thriving and skilled alternative to union labor. There are quality merit shop contractors and skilled employees that will build these projects on time, on budget and without a PLA.

2.      Are there concerns by prime contractors on the availability of skill construction labor?

A shortage of union and nonunion skilled tradesmen in the Omaha area is very unlikely. 

The recession resulted in a decreased demand for construction services and pushed the U.S. construction unemployment rate to a high of 27.2 percent in February 2010—the highest level recorded since the federal government began making the data available in 1976.[10]

Construction industry economists predict the U.S. construction unemployment rate, which currently stands at 17.8 percent (nearly twice the overall national unemployment rate) to remain the same or increase in the long term as a variety of economic factors reduce construction demand.

The construction industry in the Omaha area has not been spared from the national trends of high construction industry job losses.

The pool of available skilled labor for USACE projects breaking ground in 2013 and beyond will depend on the economy and the current volume of local, state and private construction projects. However, a PLA may exacerbate shortages of skilled labor by discouraging and discriminating against the area’s existing nonunion construction workforce.

In contrast, a lack of a PLA does not discourage or restrict union members from working on these projects; furthermore, the Davis-Bacon Act requires federal prevailing wage and benefit rates, which are closely linked to union rates, to be paid to all construction workers on federal projects. Both union and nonunion construction employees are attracted to projects subject to federal prevailing wage laws.

[Insert information about local registered apprenticeship programs and/or craft training programs that you or the contracting community participate in to help develop tomorrow’s workforce. Also explain how these workers would be barred from working on a PLA project because they are not enrolled in a union apprenticeship program.]

3.      Would a PLA benefit a project which contains a unique and compelling mission-critical schedule?

No. Again, the USACE Omaha District should allow its contractors—the only parties with experience in labor-management relations in the construction industry, and the only ones that would be subject to the terms and conditions of any PLA—to decide whether a PLA is appropriate for a particular project.  The USACE should expect that contractors will voluntarily execute any PLAs that would lower their costs, make them more competitive and help them meet project schedules.

4.      What type of project should not be considered for PLA clauses?

No project should be subject to a PLA mandate. The Offutt AFB project appears to be the type of work we would normally bid on and build, if not for a PLA mandate.

5.      What is the time impact to the completion of the contract due to a PLA?

There are a number of reasons why a PLA may lead to project delays.

First, the construction of the Offutt AFB project may be delayed due to litigation brought against a PLA mandate. Second, a project may be delayed if parties cannot successfully negotiate and execute a PLA. Third, inefficient and costly provisions of typical PLAs make it more difficult for merit shop contractors to meet construction schedules for a variety of reasons. For example, a PLA forces me and my employees to follow inefficient union work rules and prevents me from using my existing workforce, which can impact my ability to deliver a contract on time and on budget.

PLAs on any USACE projects will cause procurement delays and not achieve efficiency in federal procurement. All of the PLA procurement options permitted under the final rule create problems that may lead to costly delays and inefficiencies in the USACE procurement process. (Please refer to ABC National’s comments for a thorough explanation.)

PLA proponents argue that PLAs prevent strikes and ensure the delivery of an on-time project. PLAs are not the only way to deal with this problem. In addition, there is no persuasive (much less conclusive) evidence that a government-mandated PLA would increase the already considerable stability of labor-management relations in Omaha area. We have completed numerous strike-free projects without PLAs; obviously that stability is not dependent on PLAs, nor does it necessarily flow from such agreements. 

While a PLA can establish uniform standards and dispute resolution mechanisms that may help prevent or solve some workforce problems, a PLA can also exacerbate such problems.  First, strikes, lockouts, jurisdictional disputes, and similar work disruptions essentially never occur when merit shop contractors run a jobsite.  Second, a government-mandated PLA can actually cause friction that would not otherwise exist by forcing a new labor framework onto previously nonunion employees, by forcing contractors to assign work in unusual ways that differ from their standard practices, and by otherwise altering the well established status quo.  Third, a PLA cannot, as a practical matter, prevent any and all strikes, lockouts and similar job disruptions. 

There is compelling evidence demonstrating that PLAs aren’t effective at preventing strikes, notwithstanding the no-strike provisions including in the PLAs. For example, in 1999, union carpenters working on the union-only San Francisco Airport expansion struck over wages even though their union had signed a PLA.  The union electricians, plumbers and painters also went on strike in support of the union carpenters.^[11] The strike cost $1 million. The project, which was already a month behind schedule, lost even more time.^[12] Similar strikeson PLA projects occurred on public projects in the Chicago area in 2010 and on a private project in Chicago in 2006.[13]

Finally, in today’s construction marketplace, many union collective bargaining agreements already contain a promise against strikes, so the alleged need to enter into a PLA to prevent labor unrest may be a moot point.  Before deciding whether a PLA is appropriate for USACE work, it is important for USACE officials to become familiar with the collective bargaining agreements of trade unions that may work on Offutt AFB projects and have jurisdiction of the Omaha area.

6.      What is the cost impact to the bid/proposal due to a PLA?

If USACE were to require a PLA on the Offutt AFB and other USACE jobs, it would increase costs and create inefficiencies for contractors and procurement officials that could jeopardize the budget and schedule of these projects for numerous reasons.

First, despite little difference of wage and benefit rates between union and merit shop contractors because of federal prevailing wage rules via the Davis-Bacon Act, merit shop contractors will experienced increased labor costs under typical PLAs due to inefficient union work rules and requirements of double payment into union and existing nonunion pension and benefit plans.

Second, a PLA mandate makes submitting a bid more expensive, as contractors will be faced with increased legal and administrative costs if they are forced to negotiate a PLA and/or comply with a PLA if they are unfamiliar with operating under these union contracts.

Third, because PLAs discourage competition from qualified contractors, overall bid prices will increase when there is less competition from a smaller pool of qualified competitors.

Neither the executive order nor the final rule identifies any factual basis to support the claim that government-mandated PLAs will reduce the costs of construction on large federal projects.However, a number of studies have demonstrated that PLAs increase costs—typically in the range of 12 percent to 18 percent when compared to similar non-PLA projects.  (Please refer to detailed comments submitted by ABC National that includes a summary of studies and additional data indicating that PLAs increase the cost of construction.)

Finally, construction industry attorneys believe federal PLA mandates are illegal and violate a number of federal laws that govern federal procurement. For a detailed explanation, please review ABC National’s comments and examples of recent and successful bid protests and legal challenges to PLA mandates during the Obama administration. The USACE Omaha District will expose itself to costly litigation and related delays if it mandates or uses a PLA preference. 

7.      What other factors should USACE consider before deciding to include PLA provisions in selected Omaha District Corps of Engineers contracts?

I don’t believe that a government-mandated PLA is ever appropriate or lawful on a federal construction project. However, I defer to comments submitted by ABC National addressing additional steps the USACE should consider before requiring a PLA.

Conclusion

[Insert Company Name] appreciates the opportunity to share our perspective on government-mandated PLAs. We believe these anti-competitive and costly agreements have no place on USACE and federal construction projects at Offutt AFB and across the United States.  We encourage USACE to proceed with construction projects free from PLA mandates and in the spirit of fair and open competition.  Doing so will help USACE provide taxpayers with the best possible construction product at the best possible price.

Sincerely,

Name
Title
Company

cc:                          Ben Brubeck, ABC National