Multiple studies all point to the same thing: PLAs increase cost

In late July 2011, a study was released on the impact of government-imposed project labor agreements, sometimes called project stabilization agreements. It was found that such agreements increase the cost of publically funded school construction by as much as 15 percent.

Representatives of organized labor immediately responded with several arguments. The first was that the National University System Institute for Policy Research, which did the study, cherry-picked the projects it reviewed. Another argument was that PSAs were never really intended to provide lower costs, a surprise to every public body that has in the past listened to unions promoting these special, restrictive deals.

This study was the largest of its kind, evaluating more than four times the number of public construction projects than any other. The authors, Vince Vasquez, Dale Glaser and W. Erik Bruvold, contacted every school district in California and requested construction data. That’s a lot of cherry-picking.

If the researchers did select data that supported a preconceived notion, the Keston Institute for Public Finance and Infrastructure Policy at the University of Southern California must condone something everyone considers a statistically invalid study approach. Quite the opposite. The institute reviewed the methodology used by the authors and found “the analysis … employed proven and well-accepted statistical techniques, and the conclusions drawn regarding project cost differentials between school projects that utilized project labor agreements and those that did not follow logically from this analysis.” In other words, the study drew the reasonable conclusion that PLAs increase costs.

After surprising people with that initial statement that PSAs were never intended to reduce costs, critics quickly backtracked, saying “preventing strikes and lockouts, PLAs create substantial cost savings to the public.” Which is it? Nearly every study that compares the square-foot cost of school construction free of a PLA with square-foot costs for similar school construction regulated by a PLA has come to the same conclusion. PLAs increase cost.

We are not talking here about one or two casual reviews. On three separate occasions the Beacon Hill Institute at Suffolk University in Boston concluded PLAs increase costs. A study by Ernst & Young drew the same results. The Worcester Municipal Research Bureau, a study commissioned by the Jefferson County Board of Legislators and another by the Clark County School District all found the same cost increase impact of PLAs.

In addition, there is significant empirical evidence that adding a PLA to a project raises costs. A school renovation project in Connecticut was bid first with a PLA for a proposed price of $600,000 over the project’s $8.5 million budget. It was then rebid without a PLA requirement and saved the town $1.5 million. A power plant bid initially without a PLA and then, with reduced scope, bid with a PLA increased the proposed cost by about 10 percent.

The latest barrage of wishful thinking by those who think PLAs are a gift to the public says look at the facts. The data offered above and much more are the “facts.” All of the work reviewed for this locally generated study was of school construction in California. Keston and the authors both say the analysis was adjusted for anomalies, differences in regional characteristics, and other variations that would improperly and adversely affect the results. Work done by San Diego Unified was also included, although the current PSA was not in place at the time. The authors say they wanted to compare completed projects and new construction. Most of San Diego Unified’s work is renovation and remodel construction. Schools built under PLAs in other districts were included in the study.

Now, my disclaimers. Associated Builders and Contractors California Cooperation Committee provided much of the funding for this study. I have a close association with ABC-CCC. I am also acquainted with one of the authors of the study.

For those and other reasons, I read the study carefully, something many of its critics must have failed to do. While I wanted to accept it as valid, I also wanted to be comfortable that it was reasonable and properly crafted. I believe it is.

The authors, of course, also maintain the accuracy of this study. If they are to retain credibility in the community they wish to serve, they have to produce a supportable result. Their reputation depends on it. It appears their reputation is intact.

Hawkins is retired after 35 years as a construction industry association manager. He was a broadcast reporter and news anchor in Denver. As a Navy officer, he saw action in Vietnam in the River Assault Squadrons and is the recipient of a Silver Star and Purple Heart.

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