What impact do PLAs (project labor agreements) have on construction projects? That is the question one new study aims to answer out of the ILEPI (Illinois Economic Policy Institute) and the PMCR (Project for Middle Class Renewal) at the University of Illinois at Urbana-Champaign.
First, a definition and a bit of a history lesson. As most in the construction industry already know, project labor agreements are pre-hire agreements between the project owner and labor organizations. Often, they establish the terms and conditions of employment for skilled craft workers on large infrastructure projects. Most PLAs include provisions for preventing strikes and lockouts, creating uniform work rules and safety standards, harmonizing schedules between different types of crafts, and addressing skilled labor supply needs.
These agreements date back decades, ranging from the Tennessee Valley Authority in 1930s to the construction of most modern NFL stadiums today. In 2022, President Biden signed an Executive Order to require PLAs on federal projects valued at more than $35 million.
The new analysis looks at construction projects from the Port of Seattle between 2016 and 2023, which included both airports and seaports. Researchers analyze data from 95 projects and 366 bids between 2016 and 2023, as well as the Port of Seattle’s Apprenticeship and Priority Hire annual reports from 2020 to 2022. The Port Commission enacted a $1 million project threshold for implementing specific apprentice hiring goals. When all is said and done, 23 of the analyzed projects were covered by PLAs, 72 were not, and the cumulative cost of all projects was just under $1 billion.
Let’s take a moment to analyze the data. Researchers use industry-standard regression analyses to control the observable factors and identify the direct impact of PLAs—if any—on various project metrics. This process reveals bid competition was not statistically different on PLA projects relative to non-PLA projects, and that PLAs had no impact on overall construction costs.
Still, there were some interesting revelations. For example, PLA projects were more likely to be awarded below their engineer’s estimates, have smaller disparities between the winning bid amount and highest bidder, involve more usage of apprentices, and expand opportunities for women and people of color.
Looking a bit deeper at the question of bid competition and cost impacts associated with PLAs, researchers highlight a subsample of 31 projects where the winning bid was between $2.5 and $7.5 million, with $5 million being the Port’s guideline for PLA coverage. It found 10 projects in the subsample were covered by PLAs and 21 were not. PLA-covered projects had 16% more bidders and a 22% lower difference between the highest and lowest bids than non-PLA projects. PLA projects were additionally 23% more likely to cost less than their engineer’s estimates.
All this comes at an interesting time, as construction employers face a historically tight labor market. We see here in this study the especially important distinctions between PLA and non-PLA projects on both workforce development and diversity. Specifically, it shows PLA projects employ significantly higher rates of apprentices. PLA projects had 5% more labor hours by apprentices, are 23% more likely to achieve apprenticeship utilization goals, and nearly twice as likely to meet women apprentice goals (55% to 29%). People of color accounted for a larger share of apprentice hours on PLA projects (37%) than on non-PLA projects (35%).
The big takeaway here is we are in a tight labor market, and we must consider how to improve workforce development and diversity on projects. We must consider all opportunities if we want to solve this labor crisis together.
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