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Proposition S labor agreement good for taxpayers and local jobs

Today, the San Diego Unified School District board meets to discuss the extension of its project stabilization agreement. Looking at the positive outcomes so far, I’m hopeful that the San Diego Unified School District Board will renew this important policy that brings such important economic benefits to local taxpayers.

As I’ve written before in my columns, a project stabilization agreement, more commonly called a project labor agreement, is a contract between the owner or managing entity of a construction project or a collection of associated projects and a set of labor unions.

In many ways it acts like a “job-site constitution,” establishing worksite conditions, project execution and protocol to resolve labor disputes without resorting to labor strikes and employer lockouts. Aside from just the economic and time savings benefits of this arrangement, most PLAs/PSAs include community work force goals that increase access to construction jobs for veterans, local residents, disadvantaged workers and small businesses.

SDUSD negotiated its PSA to modernize schools under Proposition S with several goals in mind. By setting worksite standards, it intended to help SDUSD stabilize construction costs and its work force supply. Beyond these economic goals, it also set out to give SDUSD control over what type of jobs to create on the project. The PSA includes targets to create good, local jobs, particularly in ZIP codes with high unemployment.

Now, the results from the past two years are in. According to an independent study that the San Diego Unified School District just released, so far the PSA has produced the benefits it promised without impacting the cost or quality of the construction. The study found:

  • SDUSD set ambitious goals to hire local workers, and so far these goals are on track. Over the two years, an impressive 18 percent of all workers are from economically disadvantaged ZIP codes that SDUSD targeted, 30 percent of workers live within the district, and 94 percent of workers live in San Diego County. In 2011, workers from low-income SDUSD ZIP codes represented 41 percent of all workers, exceeding the aggressive PSA goal of 35 percent.
  • There was no change in project cost between PSA and non-PSA projects. The mean winning bid on the PSA projects is the same as the mean winning bid on the comparable non-PSA projects — both are approximately $4.3 million.
  • The number of bidders is lower (an average of 6.2 bidders per project), but it is still a competitive number and has had no impact on cost or construction quality.
  • PSA projects are on average completing faster than non-PSA projects. Under the PSA, SDUSD is saving on average 51 days per project.
These benefits are huge. This means the PSA is allowing SDUSD to deliver strong, long-lasting schools for our kids, and at the same time bring benefits to San Diego taxpayers. In tough financial times, I don’t need to say that it’s important to spend every public dollar wisely — everyone knows this. Projects like this give each public dollar a high return, bringing the double benefit of creating good, local jobs, with increased opportunities for veterans and small-business contractors.

This said, there are powerful lobby groups on the other side that would not like to see this passed. I think it’s worthwhile to clear up some of the false information that they will most likely bring up:

  • The opposition likes to claim that PSAs just benefit unions, but in reality the PSA is open to all contractors and brings benefits to all contractors. People may be surprised to learn that a majority of the work has been awarded to non-union general contractors who are Associated General Contractors members.
  • The opposition also keeps pressing that PSAs cost more. They point to a number that shows that PSA projects come in at 97 percent of estimate and non-PSA projects are 77 percent of estimate (a 20 percent difference). However, this should not be confused with higher costs to project owners, because the SDUSD research shows this was not the case. This number most likely reflects a difference in project cost estimation. One reason may be different cost estimating procedures in PSA versus non-PSA bidding processes. PSA projects have cost estimates that are 21 percent lower than non-PSAs, averaging $4.5 million in contrast to $5.7 million for non-PSAs.
  • The opposition also likes to say that PSAs reduce competition, yet the data does not back this up. As mentioned earlier, the number of bids on projects under the SDUSD PSA was competitive enough to keep the mean winning bid for PSA and non-PSA projects the same. And again, a majority of the PSA work has been awarded to non-union general contractors.
This is not to say that there is no room for improvement in the SDUSD PSA. There is definitely room to grow. However, the results so far show that the PSA has produced the benefits it promised without impacting the cost or quality of the construction.

The Los Angeles Unified School District PLA took five years to stabilize. In just two years, the San Diego Unified School District project stabilization agreement is already working well. Renewing the PSA is a great step to help the SDUSD control the outcomes of its construction projects, while creating benefits for local taxpayers at the same time.

Lemmon is the business manager of the San Diego County Building and Construction Trades Council AFL-CIO.

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1 UserComments
The Truth 1:18pm December 12, 2011

Sorry Tom, The truth is that the SDUSD PSA policy reduced competition and increased bid costs. The Rea and Parker Research report cherry-picked actual data to paint a rosy picture of PSA mandates. These high-priced consultants were clearly hired to justify the waste of tax dollars and discrimination against skilled local nonunion workers and qualified nonunion contractors created because of SDUSD's PSA policy. The actual record of SDUSD data demonstrates how SDUSD's PLA policy reduced competition and increased bid costs. This fact cannot be denied or manipulated by pro-PLA-mandate spindoctors.