NCPA - National Center for Policy Analysis

Do Project Labor Agreements Save Taxpayer Dollars?

February 4, 2003

Project Labor Agreements (PLAs) are collective bargaining agreements that often set the terms of employment on large publicly-financed construction projects. Supporters of PLAs, most notably construction unions, argue that such agreements ensure labor harmony, and, in the long term, save taxpayer dollars. Under PLAs, contractors must hire all workers, including workers who are not members of the union, through union halls and submit to union working rules in exchange for pledges not to strike or initiate any job actions.

Critics, mostly non-union contractors, have argued that PLAs nullify their key competitive advantages, particularly those governing worker flexibility. In addition to raising costs by requiring firms to follow union rules, the smaller pool of bidders for public contracts that require a PLA reduces competition, raising bid prices further still.

A new study by the Beacon Hill Institute shows that Project Labor Agreements (PLAs), which effectively limit municipalities to union-only contracts, add millions to the cost of building new schools.

Reviewing construction expenditures of 52 schools in the Greater Boston area, economists from the Suffolk University Department of Economics have found:

  • A PLA adds $31.74 per square foot to the cost of school construction.
  • Cities and towns that sign PLAs spend, on average, 17.3 percent more than they would under a more competitive open bid process.
  • The potential saving from not using a PLA ranges from $1.6 million for a 50,000-square-foot structure to $7.9 million for a 250,000-square-foot structure. A typical structure of 130,000 square feet would save $4.1 million.
  • If the 15 schools built under PLAs were built under an open competitive bidding system, state and local government would have saved a total of $62.8 million.

The BHI study is the first attempt to provide formal statistical evidence on the cost of PLAs to cities and towns.

Source: Jonathan Haughton, Darlene C. Chisholm and Paul Bachman, "The Effects of Project Labor Agreements in Massachusetts," January 2003, Beacon Hill Institute at Suffolk University, 8 Ashburton Place, Boston, Mass. 02108, (617) 573-8750.

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