A massive federal economic stimulus package is expected to spur hundreds of billions of dollars worth of new construction projects across the country, and one of the questions at hand is who will benefit from this spending spree. A federal order has encouraged the use of project labor agreements — which limit work to union-only workers — on large, complex projects. Supporters of PLAs say they are needed to keep projects on time and on budget, while opponents say they drive up the cost of many projects and allow a ‘Big Dig mentality’ to proliferate.

On Feb. 6, President Obama signed into law an executive order that sent shock waves through the construction industry and reignited a debate that has raged for decades.

At the heart of the order is support for use of so-called project labor agreements, or PLAs, for large-scale, federally funded construction projects — and there will be many of these put in the pipeline over next several years as a result of a massive federal economic stimulus package. Under PLAs, those managing large construction projects — be they private corporations or government entities — agree to use exclusively union labor in return for the unions’ pledge not to strike.

And that’s where the debate begins — and seemingly never ends.

Supporters of the concept say PLAs are needed to ensure that large, often complex projects are completed on time and on schedule. Opponents, meanwhile, say PLAs are exclusionary, leaving non-union shops on the outside looking in. Meanwhile, they point to Boston’s massive Central Artery project, the ‘Big Dig,’ built entirely with PLAs, as a prime example of why the ‘on-time, on-budget’ argument isn’t valid.

“When the Big Dig was in its planning stage,” said Greg Beeman, president of Associated Builders and Contractors of Massachusetts, “and before the project was completed, there was much talk about how this was not just a ‘signature project’ for unions, but it was going to be seen as the way to build projects, and how the project labor agreement was successfully implemented.

“Well, now that it’s been completed,” he continued, “and we see what the result is, I think it certainly raises questions about its prominence or success as a project, and, quite frankly, when you see many rationales for PLAs which talk about large, complex, sophisticated projects … well, this would arguably be at the top of that list, and yet, the PLA did not ensure quality work or on-time, on-budget construction.”

But supporters of PLAs say they can site a number of cases in which the agreements work as advertised.

Francis Callahan Jr., president of the Mass. Building Trades Council for two years, said the building of Gillette Stadium in Foxborough, home to the New England Patriots, is an example of how a PLA can help a government entity or company meet a tight deadline. This inherent quality has prompted other builders — from Bristol Meyers Squibb, which is constructing a huge biotech manufacturing plant in Fort Devens, to Mass. General Hospital, to Baystate Medical Center, which is in the early stages of its ‘Hospital of the Future’ — to attach PLAs to their projects.

Baystate officials said their decision to go with a PLA sprang from a commitment to ensuring that local subcontractors, minorities, and Springfield residents were well-represented on the project.

“What’s been happening is that PLAs have been painted as these complex instruments,” Callahan said. “The complexity is part of an effort by those who are opposed to PLAs to turn them into something that they are not.

“PLAs do have some legal intricacies and some implementation intricacies, but at the end of the day, all a PLA does is to establish standard working conditions for the whole labor component of a construction project. It doesn’t tell the contractor how it has to perform the work. It doesn’t tell them how they have to run their companies. It essentially sets the wages, hours, and working conditions of the job.”

In this issue, BusinessWest takes an in-depth look at the PLA debate and what’s at stake for the construction industry and individual players as the country prepares for a building boom designed to help propel it out of the worst economic downturn since the Great Depression.

Shop Talk

While debate over the need for and success rate of project labor agreements has raged since the concept has been in existence, the controversy has heated up at times — usually coinciding with booms in construction and concentrations of large-scale projects. The stimulus package, which some project will contain $150 billion for infrastructure construction, is certainly one of those times.

And the debate has been fueled by Obama’s signing of a federal order titled ‘Use of Project Labor Agreements for Federal Construction Projects,’ which represents a profound change from the anti-organized labor sentiment espoused by Obama’s immediate predecessor. President Bush’s Executive Order 13202 forbade the use of PLAs on federally funded projects, while Obama’s order encourages PLAs on all federally funded projects with costs of more than $25 million.

As individual states prepare to spend their shares of the nearly $800 billion stimulus package, PLAs will be a subject of conjecture and strong rhetoric, and Massachusetts is certainly no exception.

For example, in a recent op-ed piece in the Boston Globe, Beeman lashed out a state task force’s recommendation that the Commonwealth require or encourage (depending on the legality) the use of PLAs on large construction projects, and the signal he believes it sends.

“In 2006, Deval Patrick campaigned for governor by running against the Big Dig culture on Beacon Hill,” Beeman wrote. “Three years later, he wants to build construction projects paid for with federal stimulus money exactly the way the Big Dig was built — using union-only project labor agreements.”

Beeman’s piece ran opposite one from Mark Erlich, executive secretary-treasuer of the New England Regional Council of Carpenters, in which he wrote: “For years, PLAs have been used to ensure the delivery of large construction projects on schedule based on a supply of skilled union labor. Critics charge that PLAs exclude non-union workers and escalate project costs. Both claims have been made before, have been refuted, and yet continue to be heard.”

Indeed, Beeman stated in his piece that, if the $150 billion in infrastructure projects contained in the stimulus package were built under PLAs, it would cost the taxpayers an additional $20 billion due to less competition in the bidding process.

But cost is simply one of the points of contention for opponents, whose main criticism is that PLAs create an uneven playing field with regard to construction work — in this case, at a time when virtually all shops, union and non-union, are hurting due to the downturn and its across-the-board impact on building.

“Our experience with PLAs as they relate to our membership with open-shop, non-labor contractors is that they are discriminatory and our people can’t work under them,” said Beeman, “because of the requirement in the PLA that calls for all of the labor to come from the union hall.”

He told a story which illustrated his thoughts on the matter.

“In my 18 years working in this industry, I am familiar with one situation with an open-shop contractor that decided to accept a PLA job, and his story was not a good one. He would never work on a PLA job ever again.

“What happened in his case,” he continued, “is he got workers that were referred to him through the local unions that were not of the skills and capabilities necessary to complete the job. He felt that there was not an effort on the union side to provide him with labor that would allow him to successfully complete the job, and it ended up that he was not able to complete it on time nor to fulfill the necessary requirements because he felt that he was … well, there was no desire to give him the workers necessary to do that.”

Beeman and others in the open-shop camp, the voice of non-organized labor, also feel that PLAs do not adequately represent the overwhelming majority of the construction sector’s workforce. With 85% of the state’s building-trade workers non-unionized, the use of PLAs will effectively cut out the competitive nature of project bidding, which ultimately means higher prices for those projects.

“Let union companies and workers win and bid jobs based on their bids,” he continued, “and let open-shop companies do the same. One of the things that sometimes is misconstrued is the notion that, without PLAs, unions are disadvantaged, that they need them in order to get public work projects. That is simply not the case. By their own admission, they do quite a bit of public work, on an ongoing basis, without PLAs, and they are fully able to successfully bid. It’s already a prevailing wage—which is required on all Massachusetts jobs, PLA or not — so you’ve already got union-scale wages, which means that they are not disadvantaged on the wage end of things.”

Eric Forish, president of Forish Construction in Westfield, finds himself squarely non-biased when it comes to union and open-shop perspectives.

“We’re open-shop for self-performed labor,” he said, “and merit-shop for our construction contracts, and by that I mean that we will take the most qualified vendors, suppliers, and contractors. And that’s regardless of labor affiliation. We are not biased pro or con.”

Forish considers many of his comments on PLAs to come outside of the boardroom, and when considering what is seen to be higher prices for PLA jobs, his concern is focused on those costs more than anything else.

“It has been proven in the workplace, through bids that have gone PLA and then to have that PLA removed, that to have that PLA in place adds from 10-15% to the cost of a project,” he said. “Now, speaking as a taxpayer, not as a contractor, I certainly want my tax dollars used to the best of their ability. I don’t want, especially in this difficult economic time, to see my tax dollars buy less. I want to see them buy more.”

As for the impact that a PLA might have on successfully amassing a skilled workforce for large, costly, and complex projects, Beeman said that the argument is moot. “The notion that unskilled, disreputable, unqualified contractors are going to be coming into the mix,” he said, “just doesn’t mesh with the reality of the licensing requirements necessary in the state of Massachusetts.”

Forish agreed.

“We’re all interested in the same thing, which is to have workers trained properly in safety, and in the skills necessary for their job.

“In order to obtain the license,” Forish continued, “union or non-union, they need to have the same skill set and education and to pass the same tests, regardless of their labor affiliation. There is no difference between a unionized electrician and a non-unionized one. Both are licensed by the state of Mass. To suggest that one is better than the other, well, that suggests that the licensing system is somehow flawed.”

Framing Their Arguments

Mary Vogel, executive director of the Construction Institute in Boston, a non-profit labor-management organization, told BusinessWest that she spends considerable time trying to dispense with what she has found to be incorrect perspectives from non-union detractors. When talking of the reported cost overrides on PLA projects, she countered with some additional research.

She cited a study by three American professors — Dale Belman of Michigan State University, Matthew Bodah of the University of Rhode Island, and Peter Philips of the University of Utah — who tracked 100 PLA projects across the nation. “What they found was that the claims indicating PLAs increased project costs were found to be untrue. They found that the number of bidders was not decreased. Both of these arguments are the central focus of opponents of the PLA.”

Both Callahan and Vogel also debate the publicly stated numbers of union workers in the industry. Based on figures from the state, out of some 125,000 to 135,000 trades workers in Massachusetts, more than 75,000 are union. “It is patently false that 85% of the workforce is non-union,” Vogel said. “There are current studies to dispel that notion altogether.”

Looking at some of the benefits of the PLA, Callahan stated that, overall, one of the most important facets is the skilled workforce that organized labor can draw upon for complex projects, and the benefits to a construction project’s backers.

“The construction companies and their clients get access to a skilled pool of labor,” he said. “We have 44 training centers around the state. We spend more than $20 million dollars a year of our money — no public money is used — in training for apprentices, for upgrade training. So it’s a highly skilled workforce, often with three to five years of training, depending on the trade.”

When dealing with projects of particular sensitivity and complexity, access to such a workforce can prove effective with time and the bottom line. Callahan pointed to a few examples.

“At Gillette Stadium, home of the New England Patriots, they came to us with a PLA. They had a rush schedule because they had to be open in time for the season. The Mass. General Hospital just last year came to us in building a $350 million building in downtown Boston, and they came to us with a PLA. Bristol Meyers Squibb had a big biotech facility at Fort Devens, and not a lot of people are aware, but at that time, Massachusetts was competing to be a player in the biotech industry. It was in competition with New York, the Carolinas, and I believe Rhode Island. They all offered tax incentives and streamlined permitting.

“BMS knew that there was going to be a great demand for very specialized and skilled manpower,” he continued, “and they approached us, and we were able to give them all the guarantees that the project would get done the way they wanted. Massachusetts was the only state in that mix where labor was at the table. I’m not saying that was what made the deal, but it certainly was a component.”

In a local project, Callahan pointed to the union’s commitment to providing health insurance to all workers as one of the determining factors behind Baystate Medical Center’s decision to go with a PLA on its ‘Hospital of the Future’ project.

While organized labor is known to claim higher wages in the trades, Callahan is quick to point out that, in the long run, people get what they pay for. “They more than make up for that with the productivity,” he said, and cited the factors behind those skilled workers.

“UMass Boston just did a study of the data for the state division of apprentice training, and 81% of all registered apprentices in Mass. are registered in union apprenticeship programs.

“These are the best training programs in the industry,” he continued. “We’ve been doing it for over 100 years, and we are very proud of our programs. With thousands of hours of classroom training, and on-the-job training, it’s like the Harvard of trades programs.”

Overall, Callahan acknowledged that PLAs are not appropriate for all construction projects, but that they are “a good and valuable tool for government and for the private sector.”

He continued, “business groups are constantly saying government should act more like the efficient private sector. Well, government is now taking advantage of a successful business model in the form of PLA.”

The Bottom Line

The arguments posed by supporters and opponents of PLAs are not new — they’ve been basically the same for years, if not decades. This time, though, the stakes are seemingly higher as an industry waits to see who will benefit from an enormous government spending spree.

Suffice it to say that the controversy is building — literally and figuratively.