Two weeks ago I received a series of calls from a number of local businesses that do work with the City of Santa Cruz, who were outraged about an item that was appearing on the City Council’s agenda that would severely favor out of the area businesses for all future contracts. It seems, without first reaching out to any business organization or local vendor who might be affected by this new policy, that a majority of the current Council thought it was a good idea to pursue mandating project labor agreements (PLAs) as standard practice for all City contracts. Now before getting into why this could be a death knell to many a local contractor, and most certainly more taxpayer dollars than the status quo, it’s important to understand what a PLA is, and why they have been adopted in other areas, to mixed results.
A project labor agreement at the most basic level is an agreement with the primary vendor/contractor and labor parties involved in a given project that gets decided on beforehand. Typically it is done in concert with an employee labor union, and it establishes wages, terms and conditions for subcontractors, responses to project milestones, rules against striking or lockouts, and outlines future bargaining. They are used on both public and private projects, but are typically reserved for larger infrastructure and construction projects, though not always.
Now for a City like Santa Cruz, which is relatively small, they tend to utilize a lot of local contractors and service vendors for a wide variety of services. Whether it’s replacing a sewer main, building a new library, or building out public internet infrastructure, there are a lot of things the City does not do entirely “in house” because obviously it doesn’t have the capacity to operate at the economies of scale necessary to do every specialized form of construction or service nuance by itself. It relies on other companies and vendors to do most of the work, and it employs a competitive bidding process to make sure the cost of performing these services is within line to what would be paid on an open market.
However, many local municipalities go a step further in their own competitive bidding process by weighting certain criteria over others, with things like “local preference”, extra consideration if the vendor is formally recognized as a women or minority owned business, etc. A City, or County, or special district usually has a rolling list of pre-qualified contractors that they have built up over multiple similar projects and services, usually by having these organizations submit their information via an RFQ (Request for Qualifications). The next step in this process, after a particular project or service is identified, is to begin an RFP (Request for Proposals) process, whereby these companies and organizations can submit bids, which are weighted based upon the above mentioned criteria, and ultimately a vendor is chosen.
A PLA goes even further, usually by attempting to impose additional constraints on how the vendor can perform it’s work, and it’s relationship with its workers. This can come in form of even forcing the vendor to only utilize workers of a specific union, mandating that it unionize it’s labor force outright (oftentimes against the will of the company and its employees), or even that the public entity be a party to future negotiations between the vendor and it’s workforce.
Now regardless of where you stand on unionization and the merits of organized labor generally, PLAs undoubtably add additional layers of bureaucracy to the competitive bidding process (and therefore associated costs), and no doubt favor union shops beyond the competitive bidding process. Why would this be catastrophic to local businesses in Santa Cruz? And why were existing City vendors not made aware of this looming change before it was introduced haphazardly on a Friday agenda with a timeline for approval of LESS THAN 2 MONTHS?
Starting with the first question, the reason why mandating PLAs on every City contract is probably a bad idea is threefold:
- It Would Discriminate Against Locals. Most of the City’s existing local vendors are not represented by a union, and mostly by choice, because they are smaller contractors who have very few employees to begin with. If these vendors were ruled out simply because they didn’t have the administrative capacity to implement a PLA, then a majority of the contractors able to perform the work would undoubtably be from outside of the area.
- It Would Result in Job Losses. Forcing these locals to change their business practices just to remain in consideration for contracts they have already been pre-qualified for is an affront to existing agreements. All contracts with the City already require that each company pay prevailing wage, which means they have to pay equivalent to union wages and benefits no matter what. Therefore the PLA’s would explicitly harm these companies by adding more layers of compliance and cost that don’t directly help workers, which will significantly burden smaller contractors.
- Taxpayers Will Pay More. The cost of any additional constraints to those working for the public sector will be borne by taxpayers. Less competition in bidding, among fewer firms, with more of them being from outside the area, means higher costs. The Salinas Valley Chamber of Commerce recently conducted a study of PLA versus non PLA contracts for public projects and found that PLA contracts resulted in 46 percent less money staying local than non PLA contracts. Other similar contract constraints, such as those found in the PLA governing the Rancho San Juan High School (Salinas) renovation have led to similar results, as quoted in this report to the Superintendent:
In many of the trades, local union labor is not available.
The workforce is tapped out in many areas.
Therefore, workers are being brought in from anywhere available including labor from as far away as Florida.
Structure of the PLA is posing challenges when labor is not available.
So why did members of the Santa Cruz City Council seemingly ignore these concerns and not do a lick of outreach to their own department heads or vendors beforehand? That’s a really good question, and one that might have to do with the potential for the organized labor backed majority of the Council to lose said majority in the upcoming March primary. Fortunately though, the same City bureaucracy which these PLAs attempt to codify more of in City contracts, also runs both ways, and it may take too long to study before they can bring back anything more substantial.