Lansing's new minor league baseball stadium was constructed using project labor agreements. Was the $1 million state subsidy necessary?
Generally speaking, privatization is about transferring duties and responsibilities
held by government to private agencies and individuals. Costs that burden taxpayers are
thereby reduced or eliminated. Another benefit is that the private sector often provides
services at higher quality than does the government.
Privatization plays a greater role in society than shifting government duties
and costs: It facilitates competition.
Privatization plays a greater role in society than shifting government duties and
costs: It facilitates competition. Without competition, one cannot determine the true
price (cost) of a commodity. Competition is often restricted on state and local government
construction projects. Open competition could help keep costs from being inflated.
Instead of competitive bidding on public construction contracts, many state and local
governments have formulated "project labor agreements" (PLAs) that designate an
exclusive bargaining representativethat is, a unionbefore workers have been
hired. In essence, these "prehire" agreements award a public contract to a union
before competitive bidding begins.
PLAs severely limit the number of contractors and subcontractors that are available to
perform work. According to the Bureau of Labor Statistics, over 82% of construction
workers in 1995 were not unionized. Because of PLAs, the vast majority of construction
workers and contractors are effectively removed from the bidding process, leaving only a
small slice of unionized workers to compete for public works contracts.
Artificially high labor costs can result from a unions domination of the
construction contract. On top of the higher wages usually demanded by unions, the lack of
competition in the bidding process invites higher-than-market prices on almost every
level. The burden of paying these escalated costs is directly transferred to working men
and women through higher taxes.
One example of the impact of PLAs is the Roswell Park Cancer Institute in New York. The
project consisted of several buildingssome built with PLAs, others not. A review of
successful bids showed that projected costs were 26% higher for PLA-built buildings than
for those bid more competitively.
The Calhoun County Jail and Lansing minor league baseball stadium are two Michigan
examples of PLA construction projects. The state subsidized the stadium with over $1
million. With a total price tag of about $10 million, savings from more competitive
bidding (versus a PLA) could have made the use of state tax money unnecessary.
When an individual or private corporation employs contractors to perform a job, the
competitive process tends to enhance quality and an efficient use of resources.
Specifications for a project are distributed to contractors and subcontractors in order to
solicit their bids and to ensure that safety is not sacrificed for cost savings. This
bidding process forces contractors to compete with one another to offer the lowest price
available that meets the project specifications.
When government engages contractors, considerations other than price and quality may
enter the equation. The duty to serve the publics best interests is sometimes
outweighed by politics: partisanship, logrolling (trading votes for favored programs),
various social agendas, and the personalities of the representatives.
Michigan citizens benefit from state statutes that require competitive bidding and
mandate that public contracts be awarded to the "lowest responsible bidder." The
Michigan Supreme Court and Court of Appeals have upheld these statutes and the underlying
policy of competitive contracting in a long line of cases.
Taxpaying men and women are not the only losers when PLAs restrict competition to union
contractors. The majority of workers, who choose not to belong to a labor union, are
systematically denied the jobs that arise from government construction contracts.
Nevertheless, the United States Supreme Court has upheld the use of PLAs by state and
local governments. The Court reasoned that, since private construction firms are permitted
to enter prehire agreements under the NLRA 8(e) and 8(f), the state is also granted
this power when acting as purchaser.
Instead of viewing the states action as discrimination against nonunion workers,
the Court held that the states construction contracts were subject to the same
"conditions specific to [the construction] industry" that allowed private
construction firms the ability to form project labor agreements.
It is important to understand, however, that the Court did not mandate that these
prehire agreements be used in awarding public contracts. The decision merely permits
states to have PLAs, holding that prehire agreements are not illegal under federal law.
State constitutions and statutes, though, may prohibit prehire agreements on public
State and local officials can be pressured into PLAs because being on big labors
bad side can have political costs, while courting organized labors affections can be
rewarding. The AFL-CIO, for instance, spent more than $35 million supporting favored
Congressional candidates in 1995.
The public will benefit from lower costs and higher quality services if all
workersnot just union membersare allowed to compete for the privilege to build
Michigans public works. That is something on which job providers, taxpayers,
economists, and laborers should agree.