At the November 16th Omaha Network luncheon Senator Jim Smith presented his draft bill to promote fair and open competition for all publicly-funded construction projects.
Under the proposed bill, the State of Nebraska and all political subdivisions entering into a contract for any construction project shall not include in the contract documents, requests for proposals or bid specifications:
· a term that requires, prohibits, encourages, or discourages bidders or contractors from entering into or adhering to agreements with a labor organization;
· a term that discriminates against bidders or contractors based on status as party or nonparty to, or the willingness or refusal to enter into an agreement with a labor organization relating to the project; or
· a term that requires any bidder or contractor to agree to require its employees as a condition of employment to become members of a labor organization or pay dues or fees to a labor organization.
· a term that requires any bidder, public contractor or subcontractor to pay: wages that exceed the state’s most prevailing wage scale: a specific dollar amount for fringe benefits for employees: or into a designated fund.
However, the bill does not prohibit the awardee of the final contract from entering into a voluntary project labor agreement if they so desire too. In addition, it does not prohibit any party from entering into any agreement or engaging in other activity protected by federal law, including the National Labor Relations Act. Nor does it interfere with labor relations of parties that are protected under the federal law.
Senator Smith agrees with the ABC Cornhusker Chapter that this is the best way to deal with mandatory public project labor agreements that have been becoming a trend in some areas of the country. Locally, a project labor agreement was contained in bid documents from the Metro Community College but was eventually removed and there attempted effort to include them in the Haymarket Arena bid specs.
A publicly mandated project labor agreement comes in a variety of forms but is required by the public entity as part of the bid specs or RFPs or is included in the general conditions. These types of requirements can result in limiting who will bid. The argument is that by using project labor agreements will result in cost savings, faster construction without labor disputes, increased safety, quality construction and benefits to local businesses run by minorities and women. All of these assertions have not been proven to always be true.
The reason why merit shop contractors won’t bid is the future liability that PLAs carry. The scary downside for a contractor occurs when he has to make payments on a one time basis (for only the life of the contract) on behalf of the employees into a union pension fund. To John Q Public that does not sound too onerous. But the smart contractor realizes that if payments are going to a pension fund that has an unfunded pension deficit ERISA laws kick in that obligates him to pay the pro-rata portion of the unfunded pension, deficit. This is a legal, but not a readily apparent obligation that results in a very heavy financial burden some time in the future for that contractor. So now you understand why a merit shop contractor would be quite hesitant to bid.
The track record of publicly required project labor agreements is that the pool of bidders is limited which often leads to inflated bid prices. So by not allowing public entities to make such requirements the bill insures competition and a better value for taxpayer-funded construction projects.
If you have questions regarding this proposed bill, please feel free to contact Bruce Kevil, ABC President at 402-477-4451.