Obama Gives Unions a 'Massive Payback' with Executive Order, Contractors Claim

April 29, 2010 - 10:17 PM
Contractors say President Obama is helping unions secure billions of dollars in construction contracts on public projects – and forcing non-union employees to pay into under-funded union pension plans.

In this April 5, 2010 photo, a construction worker is seen at a home under construction in Sacramento, Calif. (AP Photo/Rich Pedroncelli)

(CNSNews.com) – The nation’s non-union contractors, who constitute the bulk of the construction industry, say President Obama has given a “massive payback” to unions by implementing an executive order that would help them secure billions of dollars in construction contracts on public projects -- and a House Republican congressman agrees.
  
The executive order, implemented in mid-April, encourages federal agencies to use “project labor agreements” or PLAs on their construction projects, which could require any non-union workers to pay into ailing union pension funds and follow work guidelines set out by a union.
 
Ben Brubeck, who is director of the labor and federal procurement department at the Association of Builders and Contractors (ABC), says the move is unfair to non-union workers who represent about 85 percent of the construction industry.
 
“PLAs basically discourage or cut competition from all of those potential (non-unionized) employees,” he told CNSNews.com before the implementation, “while a small group of employees are getting a massive payback and really getting a huge advantage.”  
 
On a conference call with reporters this week, Rep. John Kline (R-Minn.) agreed, telling CNSNews.com he believes the new policy will aid unions, whom he says are  “scrambling” to make their under-funded pension plans solvent by adding new contributors through PLAs. 

Union pension plans, Kline said, are “grotesquely under-funded.”

“(Unions) are desperate,” Kline said. "(T)he real solution here is for them to seriously look at the benefits and renegotiate the exorbitant benefits that they’re getting -- in other words tightening their belt --and they’ve been unwilling to do that, so they’re scrambling for anything else to make these things solvent.”

Brett McMahon, a vice president at Miller & Long Concrete Construction, explained that, through PLAs, union pension plans will benefit because workers at competitive companies will essentially be giving their wages to union retirees.
 
“We would have to divert contributions -- 4 or 5 percent of weekly paycheck, literally --into a pension fund where just by the rules of it -- just by the rules of the vesting schedule, which is a 5 year minimum -- there is absolutely no chance whatsoever that a new worker will be vested during the course of a project. How could anyone possibly rationalize taking 4 or 5 or 6 percent of a guy’s literal paycheck, and depositing something that he has absolutely no possibility whatsoever of being on?”
 
An employee’s retirement is “vested” if he has paid in long enough to mean he can start drawing retirement benefits.
 
“There’s zero, nil, no possibility whatsoever that (the funds) would accrue to the benefit of that individual. Absolutely zero. It’s a disgusting concept to take people’s money and it’s going to some fat retired guy out in the suburbs,” McMahon said. “It’s insane.” 
 
Explaining PLAs
 
Obama signed the executive order in February 2009, expressing his desire to “encourage” federal agencies to use the PLA’s on high-value ($25 million or more) building projects. On April 13, the final rule was printed in the Federal Register.  

The terms of a PLA would be set by the union running the work site, and contractors or subcontractors performing tasks on the site would be required to have a contract laying out the terms of the project. 

Along with paying into the pension plans, there would be stipulations about wages, workforce composition, and construction timeframes. Limits, for example, will be placed on a contractor's use of non-union labor -- and contractors will have to hire union labor through a hiring hall. 
 
The president’s executive order claims that PLAs, which replace the regular competitive bidding process from contractors, and give it more “stability.”
 
“The use of a project labor agreement may prevent (various) problems from developing by providing structure and stability to large-scale construction projects, thereby promoting the efficient and expeditious completion of Federal construction grants,” the order states.
 
Brubeck, meanwhile, says imposing PLAs on large projects will only exacerbate labor unrest.
 
“It’s absurd because PLAs essentially are being marketed as a way to prevent strikes and (discourage) labor unrest but the unions are the ones that cause them and they’re offering this solution that gives them a monopoly on the job site, which just makes no sense at all,” he said.
 
Unions deny that the new policy represents any favor to them.
 
“That just isn’t true,” said Tom Owens, communications director of the AFL-CIO building and construction trades department.
 
“(F)or public agencies that are looking to invest their construction dollars, they basically have two different business models to choose from. One is the PLA business model which is a model for job site efficiency, ensuring a local supply of highly-skilled, highly-trained workers and also providing career training opportunities through skilled craft apprenticeship programs.
 
“Now, that’s contrasted by the business model that’s advocated by the ABC and others, which is: ‘Hey, let’s just put together the lowest skilled, lowest wage workforce that we can in a race-to-the-bottom approach that does tremendous damage to communities.”
 
Owens denied Kline’s and Brubeck’s suggestion that the new executive order was another case of union favoritism.
 
“No, again -- I mean -- the Obama administration, they looked at the facts,” he said. “You know, if we’re going to invest all these tax dollars in these public infrastructure projects . . .  it just makes sense to utilize the model that’s going to give you project efficiencies, save you on costs and also provide those skilled workforce development opportunities.”
 
But McMahon, meanwhile, contends that use of PLAs will wind up costing more taxpayer money because projects will be costlier. Only 15 percent of construction workers are in union shops, he said. 

 “(The policy) is an attempt to make a market for organized labor because they can’t compete in the regular marketplace due to the overall price of the services that they are supposed to be offering. It’s really an issue with work rules and the types of things that really add up to huge cost-related issues with them. They could have five guys doing a two man job, that kind of thing."