Video: David Tuerck testifies on H.R. 735

Testimony from BHI Executive Director David G. Tuerck begins at approximately 22:00 into this recording.

Text of BHI testimony in PDF is here.

Beacon Hill Institute testifies before U.S. Congress

Full testimony is available at BHI's website

David G. Tuerck
Department of Economics and Beacon Hill Institute
Suffolk University, Boston
June 3, 2011

Testimony Relating to the Government Neutrality in Contracting Act (H.R. 735) Before the Subcommittee on Technology, Information Policy, Intergovernmental Relations and Procurement Reform, Committee on Oversight and Government Reform, U.S. House of Representatives


Chairman Lankford, Members of the Subcommittee, I am Professor and Chairman of Economics and Executive Director of the Beacon Hill Institute at Suffolk University in Boston. I appreciate the opportunity to submit this testimony.

I will direct my comments at “H.R.735, and Project Labor Agreements: Restoring Neutrality to Government Construction Projects.” H.R. 735 effectively nullifies a February 2009 executive order from the Obama Administration “encouraging” federal agencies to consider using PLAs on construction projects costing $25 million or more.

My comments are my own and do not represent the sentiments my employer, Suffolk University. Nor do they represent my support for any organization or private interest that might stand to benefit from the passage of H.R. 735.

I would like to offer my strong support of this measure, subject to just one caveat. The caveat is that “neutrality” falls short of what is called for. What would be better is an outright ban on PLAs of the kind that was in force during the Administration of President George W. Bush, who forbade the use of PLAs on federal construction projects.

This subcommittee already knows how PLAs work. The adoption of a PLA amounts, in effect, to the conferral of monopoly power over the supply of construction labor on a select group of construction unions. The putative reason for adopting a PLA is to assure labor “stability.” But the real reason is to confer monopoly power on a select group of unions and to discourage bids from contractors who use other unions or nonunion labor.

The construction unions use the word “stability” as a euphemism for promising not to cause trouble. But the threat of trouble is mostly an empty one. A genuine worry arises only when an owner uses nonunion labor, in retaliation for which it has to put with antics of the kind for which Boston’s International Brotherhood of Electrical Workers is famous. But Boston building owners are on to the IBEW and are showing increasing willingness to say no to intimidation.

In my written testimony I provide the core argument against PLAs: PLAs are supposed to correct for a problem for which the best correction is simply not to adopt a PLA. The problem is that certain contractors – the PLA-union contractors – are so burdened with collective bargaining agreements that they would have a hard time performing a job on time and on budget, but for the PLA. The adoption of a PLA, however, amounts to a needless rescue operation for the PLA unions and their contractors. The best way to avoid cost overruns and delays is to encourage, not discourage, bids from contractors, whether unionized or not, who are able simply to bypass the collective bargaining agreements that hobble the competitiveness of the PLA-union workers and their contractors.

That’s the crux of it. A ban on PLAs is not an anti-labor measure. I am personally involved in a New York case in which the plaintiff contractor is suing because its union has been excluded from PLAs that are being foisted on the City of New York by a different union organization and a complicit mayor. And, anyway, there is nothing pro-labor about a practice that is aimed at protecting the jobs and wages of 13% of the construction workforce at the expense of the other 87%.

The research entity I direct at Suffolk found that PLAs increase school construction costs in two states by 12% to 18%. Reliable hard estimates of this kind are rare because the disparity between construction projects makes it difficult to get statistically significant results from sample data. Fortunately for policy makers grappling with this question, however, it is possible to dispel the case for PLAs merely by pointing out the fatuous reasoning on which that case is predicated.

Adopting a PLA serves no purpose other than to put the PLA-union fox in charge of the project chicken coop. Fortunately, and as I observe in my written testimony, there is growing recognition even on the part of union-friendly observers that the argument for PLAs, and to mix my metaphors, never held water in the first place.

No PLA for new Rockland school project

The Rockland School Building Committee has voted to turn down a request to slap a PLA on a new school project in town.

The Patriot Ledger:

The school building committee had a wealth of information for weighing the pros and cons, Chairman John Rogers said.
“A lot of Rockland people pay taxes and are not in the union; they deserve a crack at a cut of (the project),” said Rogers, who described himself as “not anti-PLA.”
Rogers said he voted in favor of a project labor agreement for redevelopment of the South Weymouth Naval Air Station several years ago, when he was serving on the board overseeing the redevelopment. He believes the school-project circumstances are different.
He said he was concerned about whether the committee would be able to successfully defend itself if it approved a project labor agreement and that approval was challenged in court.
A previous court decision suggests that the court would analyze the complexity, duration and size of the project.
“The cost of legal fees to defend a court challenge was also a consideration for committee members,” Rogers said.
“Union people can still bid on the project,” he said.

More from the Brockton Enterprise.

Cato Journal publishes BHI research on Project Labor Agreements

The latest issue of Cato Journal dedicated to current labor issues is now out and it includes the latest from BHI: "Why Project Labor Agreements Are Not in the Public Interest" by executive director David G. Tuerck.

Project labor agreements on federal projects are not a good idea

While not as prominent as the push for union card check elections, anti-competitive Project Labor Agreements are a significant part of President Obama's pro-labor agenda. Last February the President signed an executive order encouraging the use of union-only projects on efforts valued over $25 million. The problem is that PLAs are costly and counterproductive.

A new BHI report, Project Labor Agreements on Federal Construction Projects: A Costly Solution in Search of a Problem reviews the rationale for PLAs on federal projects and finds it wanting.

BOSTON, MA – A new study released today by the Beacon Hill Institute (BHI) finds that Project Labor Agreements (PLAs), which will be permitted under an executive order from President Obama, will significantly increase construction costs on federal projects while doing nothing to protect the interests of federal taxpayers. The executive order reverses a prohibition on PLAs that was in effect during the Bush Administration.

The purpose of the BHI study, which is entitled Project Labor Agreements on Federal Construction Projects: A Costly Solution in Search of a Problem, was to determine whether the reversal of this prohibition is in the interest of federal taxpayers.

PLAs are agreements with contractors that establish the rules to be followed by firms that bid on construction projects. PLAs typically require a contractor to hire workers though union hiring halls, require non-union workers to pay dues for the length of the project and force contractors to abide by union rules on pensions, work conditions and dispute resolution.

In February, President Obama issued Executive Order 13502, which allows executive agencies to require contractors to use PLAs on federal construction projects costing $25 million or more. The federal government’s deadline for accepting comments on the order is September 23, 2009.The purpose of a PLA is to assure labor “peace” during construction projects.

But a review by BHI of federal construction projects during the Bush Administration found no instances of labor disputes that resulted in significant project delays or increased costs.“Our examination of the record produces no evidence of any systematic connection between the absence of a PLA, on the one hand, and cost overruns or delays caused by labor disputes, on the other,” said David G. Tuerck, one of the authors of the study and Executive Director of the Beacon Hill Institute. Therefore, the justifications offered by the Obama Administration for reinstating PLAs are not supported by the evidence.

The full report can be obtained here.

Responding to Project Labor Agreement proponents

The Globe published our letter to the editor responding to Marc Erlich's defense of Project Labor Agreements.

For the record, here is the letter we sent to the Globe.

To the Editor:

In his op-ed defending Project Labor Agreements (“Unions a stabilizing force,” March 22), Mark Erlich claims that that our first 2003 study of Massachusetts school building projects had to be “completely revised” following “a stinging critique of the data, methodology, and conclusions.”

The fact is that we updated that study when several additional months of investigation permitted us to double the number of schools in our sample. In the second study, we found that PLAs added 14% to the minimum project bid, rather than 17%, as in our original study.

Somehow, Mr. Erlich did not feel compelled to recognize that finding, or our finding in subsequent studies, that, for school building projects in Connecticut and New York, PLAs increased bids by 17% and 20%, respectively.

PLAs and the Prevailing Wage Law are aimed at protecting the union monopoly over the minority of construction workers who belong to unions. The effect of that monopoly is limit the number of construction projects that can be undertaken and to limit the number of construction workers who can be hired – a result that gives the lie to Mr. Erlich’s hypocritical expression of sympathy for blue-collar workers.


David G. Tuerck
Executive Director
Beacon Hill Institute
Suffolk University

Crumbling Infrastructure: It's Not a Lack of Funding

Today's Boston Metro has a frontpage story on the release of a new report by the DC-Based TRIP which found:

• More than a third of major roads are rated in fair or poor condition.
• Driving on roads in need of work in Massachusetts costs the average driver about $156 in added repairs and extra gas;
• Traffic on major highways in Massachusetts is expected to jump 20 percent by the year 2025;
• Car crashes cost the state $6.3 billion a year in medical bills, delays, lost productivity and insurance costs; and
• 35 percent of interstate bridges in Massachusetts are one rating point away from being structurally deficient.

This is pretty scary stuff and the conditions of the Bay State's roads and bridges can no longer be ignored. I am a little bit skeptical of the authors' conclusion:

"The deficiencies cited in this report are not a reflection of the effectiveness of state and local transportation agencies, but a lack of adequate funding."

Oh right, our problem was that we just didn't throw enough money into that boondoggle we call the Big Dig.
But really, inadequate funding? You're telling me it has nothing to do with police details, project-labor agreements, or prevailing wage laws, all of which drive up the costs of public construction?
I doubt it.