Local Lessons on Contracting for both California and the Feds

There was a reason I was riding a car from Los Angeles to San Diego, and it was one that I’d cracked up to the failures of the California government. For decades, the state has talked about building a bullet train that will connect both cities, and the ones further north, at speeds of 220 mph. But none of the train has yet been completed, and so there I was late Saturday morning, still stuck in traffic outside downtown L.A.

The same lethargy that’s curtailed this project has affected similar ones across California. San Francisco’s BART system, which will eventually connect the East Bay to Silicon Valley, has remained incomplete for even longer. Future transit lines for Sacramento are also but a pipe dream. There still isn’t a subway that goes all the way down Los Angeles’ main boulevard, Wilshire, nor one connecting to its airport. And these examples, limited to passenger rail, don’t even begin to stress California’s shortcomings on other needed infrastructure.

The reasons for this are similar to those in other states: lack of funding, neighborhood resistance, and environmentalists who, wishing to save the trees over the forest, litigate against such projects because they harm natural areas. But perhaps the main reason is because of California’s union requirements for public construction. These have artificially inflated wages and limited labor and contracting pools, which has prevented competitive bidding on such projects, and thus increased their costs.

While this favoritism has long been the policy in many locales, it was mandated at state level in 2011, when Governor Jerry Brown signed SB 922, requiring municipalities who receive state funding for construction to sign Project Labor Agreements (PLAs). These are agreements between cities and their contractors to hire through labor unions, which provide not only their own workers, but independent ones who must pay union dues while on the project.

PLAs are favored by Brown as a way to streamline construction, since they produce contracts that discourage labor strikes; and because they ensure that projects are built by adequately-trained workers. But to critics it was seen as yet another kickback by a governor who has built a political career on pro-union policies, even as they’ve damaged the state budget and bankrupted several cities.

There’s a certain kind of person who, wishing to spoil the mood at any dinner party, will suggest that it’s just a matter of time before California’s political climate spreads nationally. But in the case of PLAs, these people actually have it reversed. In February 2009, just weeks into office, President Obama signed an executive order that encouraged PLAs on any federal construction project over $25 million. This overturned an order signed by President Bush in 2001 that banned them from becoming a requirement. Obama’s order, which slightly predated his stimulus package, was justified on the same rationales made by Brown. But according to David Tuerck of the Beacon Hill Institute, these justifications amount to red herrings. Citing before Congress a study he’d conducted at Suffolk University, Tuerck claimed that there was not one proven instance of labor unrest for federal projects over those eight years without PLAs. Instead this unrest was generally created by union workers, and was prevented not by luring them into PLAs, but by avoiding such workers altogether. There was also no proof that non-union labor produced inferior work. Rather, he continued, about the only thing PLAs ensured were higher construction costs, sometimes by 20%. This notion has been backed by other studies, and is particularly the case in non-unionized states, where PLAs have brought a flurry of unwelcome worker expenses and protections.

The California city that’s pioneering an alternate strategy was also the one I was visiting that morning—San Diego. Following SB 922, voters there approved a measure in June 2012 that also banned PLA requirements on public construction. The measure excludes projects receiving state and federal funding, since the city doesn’t want to lose millions in allocations. But even now the measure is predicted to generate vast savings on potential local projects, like a new football stadium. That same election, voters also chose to reform San Diego’s pension system, transferring new public workers into 401(k)’s. For these and other fiscal matters, the city runs to the right of most major ones in California. Perhaps it can serve as an example in a state whose high taxes and regulations have caused it to shed more jobs over the recession than any other; and one whose unions have produced inefficiencies in, amongst other things, the completion of growth-propelling infrastructure.


Leave a comment

No comments yet.

Comments RSS TrackBack Identifier URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s