Project Labor Agreements A Home Run for Your Community Project Labor Agreements A Home Run for Your Community The purpose of this booklet, and the accompanying video, is to show how Project Labor Agreements are a winning opportunity — not just for workers and contractors, but also for public and private project owners, and especially for taxpayers. We traveled up and down California interviewing people who have been responsible for billions of dollars of construction work. They shared why they decided to use a Project Labor Agreement for their project, and the benefits that decision has brought. Pacific Bell Park is referred to as the miracle on 3rd Street. We delivered a fantastic ballpark—on time and on budget. John Yee Chief Financial Officer San Francisco Giants PLAs: Saving money for owners and taxpayers Project Labor Agreements History of PLAs Projects completed with a PLA Hoover Dam . . . . . . . . . . . . . . . .1931-1936 Grand Coulee Dam . . . . . . . . . . .1933-1942 Shasta Dam . . . . . . . . . . . . . . . . .1938-1945 St. Lawrence Seaway . . . . . . . . . . .1954-1959 Disney World . . . . . . . . . . . . . . . .1967-1971 Trans-Alaska Pipeline . . . . . . . . .1973-1977 NUMMI — Fremont . . . . . . . . . .1983-1984 A Project Labor Agreement (PLA) is a type of pre-hire agreement designed to facilitate complex construction projects. Each PLA is negotiated and designed individually – tailored to meet the needs of a specific project or owner/manager. A product of collective bargaining, PLAs govern the work rules, pay rates, and dispute resolution processes for every worker on the project. PLAs were first used on the big public works projects of the 1930s. Grand Coulee Dam, Hoover Dam, and Shasta Dam all were built using a PLA. In those days, virtually every construction worker belonged to a union. Project managers foresaw a potentially endless series of labor negotiations as one contract after another came up for renewal, causing expensive delays and generating a steady threat of strikes or other labor actions. The elegantly simple solution to the problem was to put all workers under a separate, umbrella contract that applied only to the specific project. It worked beautifully. Since then, scores of large projects, public and private, have been built across the nation using PLAs. The efficient management of these projects has saved taxpayers and investors billions of dollars. Current PLA Projects in California Cities of Sacramento, West Sacramento, Los Angeles and Concord Contra Costa Water District County of Orange Lawrence Livermore National Laboratory Los Angeles Unified School District Metropolitan Water District Port of Oakland Sacramento Regional Transit San Diego Water Authority San Francisco Airport Santa Ana Unified School District Larry Gallagher Former Director of Risk Management Metropolitan Water District of Southern California Charles Ramsey The proof is in the pudding – a project that is virtually on budget with absolutely no labor problems. You can talk to contractors in Southern California, union and non-union, in their private moments they’ll tell you this was one of the smoothest public works projects they’ve ever worked on. I’d like to see PLAs happen in other school districts because I believe it’s a good thing. And I know it’s going to make a difference for all of our students. Board Member, West Contra Costa Unified School District PLAs: A good tool for risk management PLAs in the California economy PLAs at work The California economy is booming. New citizens are pouring into the state in record numbers. But the state’s infrastructure is not prepared for exploding growth. Existing facilities are under strain, showing signs of age and in need of renovation. New capacity is urgently needed. Officials charged with meeting the challenges of growth must spend every dollar wisely. A PLA helps them do that. The giant East Side Reservoir Project, built by the Metropolitan Water District near Hemet, California, used a PLA. The $2 billion project involved building two dams to create a 4-1/2 mile long lake. Each day of delay caused by a labor stoppage would have cost the District $300,000. In fact, there were no labor delays over the entire life of the mammoth project, even though there were 20 major contracting packages involving nearly 150 subcontractors. The Port of Oakland is using a PLA to cover its multi-year maritime and airport facilities modernization program. This is an excellent example of how PLAs are custom made for individual projects and owners. In an effort to strengthen its relationship with the local community and reach out to women and minority contractors and workers, the Port’s PLA includes a “Social Justice Program.” This unique program works closely with community agencies to provide aggressive outreach and pre-apprenticeship training. Community outreach was also important to the owners of the San Diego County Water Authority’s Emergency Storage Project. They made sure their PLA provided training to disadvantaged young people — training that could not only be put to use building this project, but also further developed into a lifetime career. A Project Labor Agreement represents a meeting of the minds between the owners of a project and the people who will build it for them. It is an agreement designed to provide fair and safe working conditions, bring the project in on time, and save the owner money. Mark Watton Board Member San Diego County Water Authority As you really understand the agreement you find out that the insurance that we’re going to have for workman’s comp and other things is really superior—going to save us money. The safety program is also really superior. PLAs: Saving money for owners and taxpayers Establishing a PLA Who benefits from a PLA? PLAs by definition are designed to give maximum benefit to all parties involved. Workers, union and non union, benefit because their wages and benefits are protected. Contractors, union and non-union, benefit from the assurance of a level playing field, and a skilled workforce is guaranteed. Lenders and insurers benefit from lowered risk. But the owner/taxpayer benefits most. The virtual elimination of costly delays due to labor conflict is a vital factor in completing the project “on time and on budget.” How are PLAs devised? PLAs are a product of collective bargaining, and are negotiated to meet the needs of the individual project and owner. Each PLA is unique. Does a PLA enhance the value Yes. Lenders look more favorably on projects being conof the project? ducted under a PLA because they know the probability of on time and on budget completion is greatly increased. Do all projects benefit from a PLA? PLAs are ideal for complex projects that have an extended construction schedule and involve multiple crafts and trades. The Agreement can cover one large project or several related smaller projects. Small, relatively simple projects do not usually need a PLA. Can a PLA cover more than one project? Yes. PLAs can be used as an umbrella labor agreement for a series of projects. For instance, a school district could design a PLA to cover renovation work on several schools. Are PLAs only good for PLAs are being used successfully by cities, counties, school billion dollar projects? districts, and private owners to build a wide range of projects. The desire for smooth project coordination, enhanced by a stable labor base, drives the need for a PLA — not the size of the project. Are PLAs limited to new construction? PLAs are used for all types of construction work including expansion, modernization, maintenance and repair. Can a PLA extend beyond the Yes. Modern PLAs are frequently designed to cover several completion of the project? years of maintenance work, after the project is completed. Tay Yoshitani First and foremost, we want to make sure that the money is well invested and we get the value that we pay for for. That translates into a facility that is obviously well designed and is also very well constructed. Deputy Director Port of Oakland PLAs: Provide a stable and trained workforce Cost Savings Do PLAs save owners/taxpayers money? Yes. PLAs were devised to eliminate costly labor-caused delay in large construction projects — and they work. Millions of dollars are also saved in health and safety costs, thanks to programs and standards established under a PLA. How do PLAs generate savings in workers In 1993, the Legislature authorized parties to engage in colcompensation & other insurance benefits? lective bargaining for alternative workers compensation procedures. Only available in the construction industry, these agreements, known as “carve outs,” allow for Alternative Dispute Resolution and modified health-care delivery and claims management procedures, which have drastically reduced workers compensation costs. For instance, the Metropolitan Water District estimates the carve out on the East Side Reservoir project saved $30 million. What about cost overruns and delays? PLAs are created to minimize cost overruns caused by labor problems — and their record of performance is superb. Cost overruns can happen on any project. They are usually caused by unexpected bad weather or by changes in the design and planning of the project. How are labor-caused delays avoided? The central part of every PLA is the “no strike” pledge given by the workers. Each PLA designs its own system of mediation and arbitration to resolve labor disputes. PLAs exist independently of local union agreements and are therefore not affected by local union disputes or organizing efforts. The Competition Issue Do Project Labor Agreements shut out Definitely not. On public works projects, the lowest responnon-union contractors and workers? sible bidder wins the contract. Most PLAs expect a mix of union and non-union workers. Do PLAs restrict competition? No. Public works projects require that all contractors, union and non-union, pay the prevailing wage. PLAs create a level playing field for contractors by standardizing all labor conditions. Does a PLA discourage bidding? No, in fact, many contractors prefer to work on jobs covered by a PLA. An example is the Southern Nevada Water Authority’s Improvement Project. It was conducted in two phases, the first in 1997 without a PLA. The second phase—begun in 1999 utilizing a PLA— received a 32 percent increase in bids per package. The PLA creates competition — it doesn’t restrict it. In fact, had I known that we would’ve had the success that we’ve had today, I would have had the project labor agreement much earlier. John Palacio President Santa Ana Unified School District PLAs: Smart fiscal planning Do union hiring halls dispatch workers No. Federal law mandates non-discriminatory dispatching. based on union membership and seniority? Do PLAs bring value to the Yes. Project owners can design their PLA to address a wide community beyond the efficient range of local needs. PLAs can make sure that the project is building of the project? built by the community’s workers through local hire agreements. Many recent PLAs are initiating community outreach efforts, enrolling minorities and women in pre-apprenticeship programs. These programs are a first step in the creation of a lifetime career in the construction industry. Because local workers build the project, the project’s payroll stays in the community and contributes to its prosperity. Do non-union workers have to give PLAs set up their own system of benefit management, up their company benefits if they including health and pension plans, and though non-union go to work under a PLA? workers are not required to leave their prior benefit programs, most do. The benefit plans set up for PLAs are usually more generous than non-union plans. In fact, many non-union workers earn the best pay and benefits of their working lives under a PLA. Why not have two rates of pay for union PLAs treat every worker equally. No worker makes less for and non-union? doing the same work. Public works projects mandate the payment of the prevailing wage, and the oversight systems built into to a PLA ensure that all wages are paid accurately, and on time. Are all PLA’s the same? In summary . . . No. Each PLA is negotiated through a process of collective bargaining and each one is unique, designed to fit the needs of individual projects and owners. Project Labor Agreements are negotiated labor agreements, designed to provide a uniform labor policy for all construction workers involved in the building of a specific project, or series of projects. As part of the stabilization of wages, benefits, and working conditions, the workers agree to use the PLA’s specific dispute resolution process and forego strikes and other work actions. The primary goal of the PLA is to save the owner of a project significant amounts of money by dramatically reducing the risk of delay and cost overruns due to labor disputes. The reduction in risk also results in lower financing and insurance costs for the project — driving even more savings to the owner’s bottom line. A Project Labor Agreement is an elegant device that delivers benefits to all parties involved. Monsa Nitoto Taskforce Co-Chair., Coalition for West Oakland Revitalization To come into a situation where labor and the community had a strategic relationship, and then to come to the Port and build a partnership is something unique for us and it’s a new beginning. PLAs: Tailored to meet the needs of your community The video was produced by Debra Chaplan, in association with Firestar Productions. Jay Chance, Editor Credit Roll This booklet was written by Bill Rickman, with editorial assistance from Debra Chaplan. Design by Barbara Nishi. © 2000 State Building and Construction Trades Council of California 921 11th Street, Suite 400 • Sacramento, CA 95814 916-443-3302 • www.sbctc.org Robert Balgenorth, President Richard Zampa, Secretary Treasurer