The Unions Love L.A.Two More Los Angeles Area Construction Projects Suffer From Union-Only Project Labor Agreements
By Kevin D. Korenthal
Los Angeles- The City of Los Angeles has embarked on two of the most ambitious, multi-level, city revitalization and improvement projects in it's history. Decades after having outgrown the current facility at Parker Center, the new LAPD Headquarters promises to offer state of the art law enforcement support and security. By the same token the Grand Avenue Project will completely redefine some of the more worn out looking parts of Downtown Los Angeles, adding thousands of square feet of retail shopping and upscale living to a part of the city that has almost none. What could be wrong with a brand new law enforcement headquarters and the revitalization of downtown? As with many things in life, the problem is not with the idea but the execution. In the case of the LAPD Headquarters and the Grand Avenue Project, it's the inclusion of union-only, project labor agreements. These sweetheart deals for organized labor have and will continue to be troublesome to the on-time and on-budget completion of behemoth public works projects.
Project Labor Agreements (PLAs) are not a new phenomenon. For as many decades as organized labor has lost market share to merit shop (open shop) companies, project labor agreements have been instituted as a means to stop the bleeding. The fact that PLAs have been wholly unsuccessful in this endeavor is material for a future commentary. PLA's promise to cause projects to “come in on time and within budget” by reducing the risk of labor disruption. The thinking goes that having all labor either unionized or paying union dues and into the union health, welfare, and pension plans makes labor strikes unnecessary. Sounds like a form of the Mafia's protection rackets doesn’t it? In addition, non-union contractors must send their valuable employees to union hiring halls in the hopes they will be dispatched to the project. There is of course no guarantee this will happen and a great chance someone at the hiring hall all will attempt to coerce the employee into leaving his non-union employer to join the union shops working on the project.
In every case where a lowest bid was made on any given project with and without a PLA attached to it, the PLA bid has driven the winning bid up by approximately 15%. In the case of large public works projects like the LAPD Headquarters, only a few, very large building contractors are qualified to bid on these projects because of the mountains of red-tape and fine print that come with such endeavors. In every case, the higher labor costs and increased administration and oversight expenses reduces the number of eligible bidders on public works projects. The new LAPD Headquarters for instance had only one bid placed on it! And that bid was placed by a large construction firm, Tutor-Saliba, that has a history of bidding on, winning and subsequently jacking up the price on public works projects in the Los Angeles area. Tutor-Saliba just received a judgment that requires them to return hundreds of thousands of dollars they billed on the Los Angeles Subway System back to The City of Los Angeles.
The Grand Avenue Project, with it's $2.5 billion price tag, will be rivaled only by the Staples Center in terms of City-invested revitalization projects. But Staples center is an island of fortune in a sea of poverty. The area around the Staples center has its self been slated for a revitalization of its own called the L.A. Live project. Staples was built under a Project Labor Agreement and ballooned way past even the most generous initial estimates. Like the new LAPD Headquarters, it is assumed that the winning bid by Van Nuys based Tutor-Saliba was offered below expected cost with the understanding that estimates would be adjusted as “change orders” were requested and approved. So one might wonder if these projects would have been approved at all if the lowest bids equaled the eventual price tag of the total job.
An alarming trend in the public works arena is the acceptance of a single bid or very fewer bidders on public works projects. The PLA is precisely the reason only one construction firm stepped up the table to bid on the new home of the LAPD. Other construction firms knew they could not deliver the lowest bid honestly so they demurred to a firm with a track record of bidding low and then letting the change orders drive the budget to a more realistic figure. This is evidenced by the fact that the original bid by Tutor-Saliba was already $40 million above the original estimate of $243 million. Last September the City Council approved the most recent increase to $396 million. At this rate, the total price tag could come to half a billion dollars. This is not solely due to the PLA, but sweetheart deals to the labor unions are playing a huge role in increasing costs on behemoth public works projects. It is also not the taxpayer but the unions who promise these projects to be “on budget” if they sign the PLA in the first place.
The Grand Avenue Project in Downtown Los Angeles just entered phase 2 of development. It is not too late for the Grand Avenue Joint Powers Authority, overseeing the project to wise up and either remove or restrict the sweetheart deal it has made with organized labor. But alas the unions love L.A. And the L.A. bureaucracy reciprocates that love.
Mr. Korenthal is the Director of Government Affairs for the Los Angeles County Chapter of Associated Builders and Contractors, a merit shop association dedicated to the philosophy of fair and open competition in the building industry.
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