Pros and Cons of Project Labor Agreements

Recently, President Joe Biden signed an executive order mandating Project Labor Agreements (PLAs) on all federal construction projects over $35 million. While this order does not affect construction projects that are funded by grants, it still impacts almost $262 billion in federal construction projects this year. President Barrack Obama signed a similar executive order in 2009 which only encouraged federal agencies “to consider requiring” PLAs on large-scale construction projects over $25 million.


What is a PLA? A Project Labor Agreement requires a construction contract to utilize unionized contractors and labor to complete a construction project. Union executives claim that PLAs allow for uninterrupted access to labor and standardized terms that assist with faster turnaround on large projects. This type of collective bargaining agreement (CBA) only lasts for the duration of the project. Before a company or owner begins seeking bids, contractors and subcontractors need to be aware of said agreement. PLAs also specify wages and benefits which reduces the amount of uncertainty of labor cost on a project. There are both advantages and disadvantages for a PLA.


PROS
  • Wages, benefits, hours, overtime, and work rules are all predictable

  • Due to the reliable supply of labor and qualified workers, PLAs help ensure that a project stays on schedule and budget

  • Strikes and lockouts are prohibited

  • Sometimes there can be programs included to recruit and train under-represented groups to participate on a project

  • More local labor and wages remain within a state

  • Project safety rules are standardized and can improve worker safety

CONS
  • Lack of competitive nature and may result in increased costs

  • Limits contractors and their ability to use their own workers if not unionized

  • May result in disinterest in bidding from nonunion contractors due to the requirement of unionizing and paying union dues

  • Project schedules are not guaranteed

  • Cannot use nonunion contractor training programs that may be more efficient, flexible, and project specific

  • Unionized contractors and subcontractors are not screened as heavily on their prequalification

  • Strong evidence indicates that union projects are not safer than nonunion projects

So why would the President require the use of PLAs on federal construction projects? There is conflicting evidence on some of the economic benefits. Some studies have concluded that PLAs raise the cost of construction projects, but others show that they reduce costs, especially in overtime. Overall, the belief is that a PLA can provide much needed structure and stability for large scale construction projects and the economic benefit stems from the timely completion of projects within budget. However, if these projects are not being competitively bid, there is little to no incentive for a contractor to find creative cost savings initiatives, which could result in a larger project budget.


What are your thoughts on PLAs? Do you think they provide more benefits to a construction project and positive economic impacts?



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