Non-Union Construction Workers Need Not Apply

Photo credit: Joint Base Langley-Eustis

by Ben Brubeck

Democratic leadership in control of the General Assembly for the first time since 1993 is close to sending legislation to Gov. Ralph Northam’s desk that would raise the cost of construction and maintenance of schools, affordable housing, roads, transportation and other infrastructure projects critical to keeping Virginia economically competitive. Taxpayers should take note of the financial impact of these measures on infrastructure and development in their communities—and its anti-competitive effect on opportunity for Virginia’s construction industry.

Bills sponsored by Senate Majority Leader Richard L. Saslaw (SB 182) and Del. Alfonso Lopez (HB 358) has already been passed by their respective chambers following last week’s General Assembly crossover deadline. These bills would rescind a 2012 statute requiring state agencies to use a fair and open competitive bidding process to procure contracts for the construction of public works projects. The existing statute will be replaced with a controversial policy permitting government-mandated project labor agreements, or PLAs, on state and local construction projects.

Other bills by Sen. Scott Surovell (SB 995) and Del. Lopez (HB 1635) eliminate similar fair and open competition protections on Metrorail construction projects procured by the Washington Metropolitan Area Transit Authority, which would permit future PLA mandates on Metrorail construction projects similar to the controversial, failed attempt by the Metropolitan Washington Airports Authority to mandate a PLA on Phase 2 of the Silver Line.

When mandated by governments, PLAs discourage nonunion contractors and subcontractors—which employ 97.8% of Virginia’s construction industry—from competing to build projects funded by taxpayer dollars.

In short, government-mandated PLAs force contractors to follow union work rules and hire most or all workers on a job site from specified union hiring halls and union apprenticeship programs instead of journeyman and apprentices already employed by their company and enrolled in accredited apprenticeship programs. That limits the pool of bidders, since nonunion contractors don’t want to abandon their existing employees and quality-control practices—key components of a safe and productive workplace—for strangers from union halls governed by unfamiliar rules.

In addition, any nonunion workers permitted on a PLA project are likely to lose an estimated 20% of wages and benefits earned on the job unless they accept union representation, join a specific union, pay membership dues and meet the union benefits plan’s vesting requirements.

Studies on the effect of government-mandated PLAs in CaliforniaConnecticut, Massachusetts, New York, New Jersey and Ohio found PLAs increase the cost of school construction by 12% to 20%. Virginia simply cannot afford such waste with so many school construction and other infrastructure needs.

For these reasons, a total of 25 states, including Virginia, outlaw government-mandated PLAs on public works projects, thereby ensuring fair and open competition on taxpayer-funded construction projects so the public can get the best possible construction project at the best possible price.

Prevailing Waste

 Legislation introduced by Sen. Saslaw (SB 8) and Del. Jennifer Carroll Foy (HB 833) would result in prevailing wage requirements on construction projects at nonmarket rates set by the U.S. Department of Labor, via the 1931 Davis-Bacon Act. As amended, Sen Saslaw’s SB 8 sets a threshold of $250,000 on all state construction projects. And as amended, Del. Carroll Foy’s HB 833 requires prevailing wages on all state construction projects and allows localities to pass an ordinance requiring prevailing wages on local projects.

Unfortunately, the U.S. Government Accountability Office concluded the U.S. DOL’s wage determination process is unscientific and fundamentally flawed, because it typically sets rates that are anything but local, prevailing, timely or accurate. Instead of allowing contractors to pay their skilled workforce based on merit, experience and productivity via the free market’s nimble laws of supply and demand, construction workers must be paid at least a government-determined rate that is sometimes laughably below or above market rates.

Research suggests prevailing wage regulations increase compliance and regulatory burdens on small businesses and increases construction costs by 10% to 25%. For example, according to a 2017 report released by the Empire Center for Public Policy, New York’s prevailing wage law inflates construction costs by 13% to 25%. Additional studies examining the impact of the Davis-Bacon Act on federal and federally assisted construction projects have reached similar conclusions and estimate Davis-Bacon Act rates inflate labor costs by an average of 22% above mean free market rates, increasing overall construction costs by 9.9%.

Virginia and 22 other states—including neighboring West Virginia, Kentucky and North Carolina—have no prevailing wage laws, and eight states have repealed or significantly reformed their laws since 2015, resulting in savings to taxpayers and no reduction in construction quality. In fact, no state has implemented a new state prevailing wage law since Minnesota in 1973, 47 years ago.

The Bottom Line

The net impact of all six of these bills is that Virginians can expect tax hikes and/or fewer public works construction projects procured by the Commonwealth’s state and local governments.

As Dick Hall-Sizemore pointed out in his post last week, the largest segment of the state’s outstanding debt has been issued for construction of the physical infrastructure. These controversial bills will ensure all future projects in Gov. Northam’s very large capital budget package will be subject to costly prevailing wage requirements and possibly government-mandated PLAs. Localities will also be able to require both prevailing wage and PLAs on local schools and other infrastructure projects funded by local tax dollars.

It is no surprise that construction unions and their members—who make up just 2.2% of Virginia’s private construction workforce—have made passage of these pro-PLA and prevailing wage bills a top priority this legislative session. It will mean more contracts for union-signatory contractors and more jobs for union members—likely from out of state.

If these bills become law, large companies and their unionized workforce from Maryland, Washington, D.C., and other states would have an unfair advantage and disrupt the local market at the expense of the Commonwealth’s small businesses and skilled construction workforce.

It isn’t a coincidence that 46 construction unions gave a total of $1.64 million in direct contributions to Democratic political campaigns during Virginia’s 2018-2019 cycle, according to campaign filings compiled by the Virginia Public Access Project, a nonprofit that monitors campaign contributions by special interest groups. Almost 60% of these political contributions came from out-of-state construction unions with a vested interest in getting the Virginia’s new leadership to stifle competition from local and qualified businesses.

In addition, under these measures, Virginia’s small, women- and minority-owned businesses will have fewer contracting opportunities because they are predominately nonunion and will be discouraged from competing for projects subject to these special-interest schemes. Gov. Northam recently announced a disparity study assessing contracting opportunities for Virginia’s SWaM-owned businesses. Will that study evaluate the negative impact of these new policies?

In short, these bills increase the cost of taxpayer-funded construction projects, eliminate opportunities for Virginia’s construction industry and serve as another hurdle for the Commonwealth’s SWaM contracting community, all while steering contracts to donors—many out of state.

Virginia residents can contact their lawmakers and oppose these six bills through this grassroots campaign website. But do it today, because both HB 358 (PLAs) and HB 833 (prevailing wage) are on second reading on the Senate floor today, meaning they will be up for a full vote tomorrow.

Ben Brubeck is vice president of regulatory, labor and state affairs of Associated Builders and Contractors, a national construction industry trade association representing more than 21,000 members.

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8 responses to “Non-Union Construction Workers Need Not Apply

  1. “In fact, no state has implemented a new state prevailing wage law since Minnesota in 1973, 47 years ago.”

    No matter which side is in power Virginia is where bizarre, bad ideas go to live out their retirement years. From Massive Resistance fueled segregation to eugenics to one term governors, odd year elections, unlimited campaign contributions, independent cities, no annexation … Virginia is the dusty museum of bad ideas. Why is anyone surprised that we would be the first state to adopt prevailing wage law in half a century? If an idea is corrupt or stupid (and especially if the idea is corrupt and stupid) our General Assembly is ready to act.

  2. This seems like just another chapter in Ralph Northam’s Book of Socialism. Does anybody believe that these actions will make for higher quality of construction in public infrastructure and schools? Faster construction? Safer construction?

    Obviously raising the price per bridge or school will result in fewer bridges or schools being built if budgets are held constant. Obviously construction companies undertake these projects today without these changes. So, what’s the point? Wealth transfer. From taxpayers to union officials, construction company executives and (perhaps) to construction workers. But why? Is there any evidence that union officials, construction company executives and (maybe) construction workers are unfairly underpaid? Is there some good reason that a security guard should pay more in taxes so that a union plumber can earn more that the market rate for his or her work?

    • DJ, based on the comments made by various bill patrons as they present these and related bills in committee: 1) Most Virginia employers rip off their workforce shamelessly, denying benefits, not paying them on time, or not paying them the correct amount, or…not paying them; 2) most Virginia employers blatantly discriminate against women, blacks, Hispanics, the disabled, the poor, the cross dressers, the tall, the short….in effect, everybody; 3) all non union contractors are incompetent and only union-built buildings can stand up in a 20 mph breeze and 4) the best way to fix all that is to unleash an army of plaintiffs’ attorneys who are whipped to a frenzy by the promise of unlimited punitive damages and attorney fees. Our activist Attorney General will be too busy running data studies on every company payroll searching for gender and race bias.

      I….do….not….exaggerate. The disdain and distrust for business large and small has been palpable. The word will be out that Virginia is hostile territory. Amendments to soften some of this have been pulled from comparable statutes in NY or CA (!), but they were not acceptable to this new crowd.

      • I’ve attended many hearings this session and couldn’t agree with you more. With respect to policies impacting the business community, there is little consideration of policy nuance/everything is black and white so they don’t want to work on carefully crafted language with feedback from impacted parties. The lawmakers either don’t know what they are voting on or they don’t care about the unintended consequences of passing policy they don’t understand. It is reckless.

      • “I….do….not….exaggerate. The disdain and distrust for business large and small has been palpable. The word will be out that Virginia is hostile territory.”

        Your comment is spot on, Steve.

        The damage now being done to Virginia’s business, civil and livability reputation (locally, regionally, and nationally) by what has been going on in Richmond is beyond calculation.

        Particularly hard hit will likely be new business development for Virginia, and the state’s ability to market of the state to affluent migrants, including retirees.

        You mentioned, by way of example, the new bills and laws designed to “unleash an army of plaintiffs’ attorneys who are whipped to a frenzy by the promise of unlimited punitive damages and attorney fees. Our activist Attorney General () busy running data studies on every company payroll searching for gender and race bias.”

        Add to that another example, passage by the lower house of overly Ex post facto laws that retroactively change earlier and long standing lawful constitutionally protected acts into illegal acts, thus by the stroke of a pen turning lawful citizens in criminals, absent forcing them into highly dubious corrective action, as required under narrowly defeated gun law. Combine all this with new government taxes, fees and regulations, the plummeting quality of public schools, pressure for unionization, and the growing negative track record of those running state (the Blackface meme has gone national, and Virginia then has a self inflicted man made toxic quality of life debacle on its hands, a marketing nightmare, as if the 2017 Charlottesville riots could go statewide, along with plaintiffs’ attorneys whipped to a frenzy against citizens and businesses by the promise of unlimited punitive damages and attorney fees.

        Remember, and this in key. Most new migrants, commercial and otherwise have many options and choices of which Virginia is only one. These migrant are easily scared off. They have no reason to take gratuitous risks, ones that cannot be calculated or managed, or otherwise protected against. How do you protect your business against a rabid, vicious opponent eager for political advantage by attacking your business, along with politicians who are building a track record of such behavior, and actively designing and implementing laws in Virginia to wreak such harm on Virginia businesses and its citizens who easily are targeted.

  3. I was under the impression that VDOT uses PLAs. No?

    • VDOT cannot require firms to execute PLAs with labor unions as a condition of winning a contract (as of 2012). Firms that have won some projects have voluntarily entered into PLAs covering all or portions of self-performed work on a project. We take issue with government-mandated PLAs because they distort the competitive bidding process for public works construction contracts. We don’t have a problem with firms negotiating the terms and conditions of a PLA with various unions, free from government coercion.

  4. Here is a quick update. Yesterday, the Virginia Senate passed Del. Caroll Foy’s HB 833, which mandates prevailing wage rates on state public works construction projects exceeding $250K and permits localities to mandate prevailing wage rates on local public works projects. It passed 21-19. The House Labor and Commerce Committee passed Sen. Saslaw’s SB 8, which is HB 833’s Senate companion bill, and it has been referred to the House Appropriations Committee. The full House will likely take action soon once it is voted out of committee.

    Regarding the PLA legislation, the full Senate has not taken a final vote on HB 358, which is Del. Lopez’s PLA bill. The House Labor and Commerce Committee passed SB 182 last night so it will also move to the full House floor for a vote soon.

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