Governor Tina Kotek gave her labor union allies a very special present the week before Christmas. Even if their employees aren’t unionized, Kotek’s unexpected executive order requires contractors working on large state-funded projects to collectively bargain with labor unions over pay, benefits, and other terms for their employees.
Unfortunately, Oregonians must pay a price for Kotek’s kindness. The open and competitive process that is required by state law and good governance is undermined by such project labor agreement mandates.According to research and experience, they usually increase the cost of public projects, which already confront rising material prices. Additionally, the governor’s poorly worded order, which was issued without consulting contractors, has raised concerns about whether the mandate applies to school renovations, university projects, and local affordable housing initiatives. Now, her office is making it clear that it will only apply to state-owned projects. Given the numerous serious issues confronting Oregon that require the governor’s concentrated attention and practical leadership, Kotek ought to pay attention to the numerous valid concerns raised by contractors, steer clear of the possibility of protracted legal disputes, and rescind her broad directive.
As drafted, the order mandates that project labor agreements (PLAs) between contractors and labor unions that represent plumbers, electricians, and other crafts be required by all state agencies that award contracts or provide funding for major building projects. In order to bid on the project, contractors are required to agree to negotiate a detailed set of terms with labor unions. Wages, which already have to satisfy statutory minimums for projects of a particular size, are only one aspect of these agreements. Instead, they can stipulate that contractors can only employ workers through union-controlled procedures, that workers must pay union dues, and that workers must contribute to the union’s health and retirement plans, even though they are unlikely to benefit from them. Approximately 75% or more of contractors and subcontractors are estimated to be nonunion shops, meaning that the vast majority of them are not unionized.
There are undoubtedly cases where labor unions and contractors have willingly established project labor agreements, especially for complicated, time-sensitive projects. However, the Oregon Supreme Court is currently considering a legal dispute involving the state’s attempts to compel contractors to accept labor union involvement in significant transportation contracts. In addition to intensifying that conflict, Kotek’s decision requiring PLAs for state projects where labor contributes at least 15% of the cost seems to go beyond what any other state has already done. Once more, Oregon is leading an economic experiment with little to no positive effects on the general populace.
Kotek argues that because the project labor agreements will forbid strikes and other expensive work stoppages, her executive action will provide predictability and aid in cost control. Her office, however, was unable to identify a single instance that would demonstrate that this is an issue that requires attention. Instead, when asked for an example, her office stated that Kotek was looking forward to a number of significant infrastructure projects that will require steady and adequate skilled workers to finish, rather than backwards. By implementing PLAs widely throughout the company, Oregon will be able to develop a skilled labor pool, reducing the need for contractors to hire people from outside the state. Additionally, Kotek’s order states clearly that by incorporating specified targets, the labor agreements will contribute to the advancement of racial and gender fairness in contracting.
However, the governor’s move disregards the labor-building efforts contractors are currently making and does not account for the financial implications. A law that would have required project labor agreements for state projects worth at least $35 million was rejected by California Governor Gavin Newsom last year, citing the plan’s substantial financial ramifications.
Oregon has first-hand knowledge of this. In addition to requiring a project labor agreement, the Oregon Department of Transportation put out a bid for businesses interested in working on the Newberg-Dundee bypass last September. The Oregon Transportation Commission sent an extra $5.9 million for that project phase since just one company put in a proposal, and that price was 22% more than the agency’s estimates. ODOT noted higher staff costs for missing the estimate, even though higher material costs contributed to portion of the increase.
The governor’s administration acknowledges that fewer bids were received for projects requiring PLAs in the past due to the state’s irregular and rare usage of PLAs. However, Kotek’s solution is perplexing. According to her office, this problem will be resolved in the future if the instrument is widely used and accepted.
So raising the operating costs for more projects will in some way lead to a higher number of bids and cheaper estimates? It’s some interesting math.
Even the contractors Kotek claims will benefit are not buying it. The National Association of Minority Contractors’ Oregon chapter president, Nate McCoy, stated that his group is adamantly against the executive order. According to him, a large number of members are small businesses that cannot afford the additional operational and administrative expenses associated with project labor agreements. He told the editorial board, “We think the best way to achieve racial equity is to create opportunities for minority-owned businesses to thrive in an open and competitive environment, with equitable access to resources and support.”
The executive director of the Associated General Contractors Oregon-Columbia chapter, Mike Salsgiver, also questioned what advantages Oregon would experience. According to his statement, PLAs raise project costs, which means taxpayers will receive less for their money in the form of higher taxes or fewer finished projects. According to him, AGC is considering its options for how to react to the order. AGC is already a party to the action before the Oregon Supreme Court.
However, Kotek may put an end to this by rescinding her executive order, which is the rational thing to do. She should return this particular present.
-The Editorial Board of Oregonian/OregonLive
