What is a PSA?

A Project Stabilization Agreement (PSA) protects the community by setting worksite compensation and other standards for public investment projects, including access to healthcare; by providing middle-class career opportunities for our children, and by guaranteeing that our bond funds are reinvested into the local community they came from. It accomplishes all this without increasing cost.

Project Stabilization Agreements establish the terms and conditions of employment on construction projects. The U.S. Supreme Court in the “Boston Harbor” case states that these agreements accommodate conditions such as the contractor’s need for predictable costs and a steady supply of skilled labor.1 On February 6, 2009, President Obama issued an executive order encouraging the use of project labor agreements for federal construction projects to “. . . advance the Federal Government’s interest in achieving economy and efficiency in Federal procurement, producing labor-management stability, equal employment opportunity, labor and employment standards, and other matters”.2

PSAs have no impact on cost or number of bidders.

Studies and high-court opinions show that PSAs do not increase cost nor decrease the number of bidders on a project, but may be advantageous for complex projects where timeliness is crucial.

Rather than increase cost, the agreements provide benefits to the community. Indeed, studies have shown that project cost is directly related to the complexity of a project, not the existence of a PSA.3 Cost is strongly correlated with size, location, whether the school is an elementary school, and the amenities provided such as cafeterias and swimming pools.4 Across the nation, complex projects regularly use this type of agreement to reduce and control difficulties.5

The U.S. General Accounting Office (GAO) issued a report on PSAs (referred to as project labor agreements) noting an overall lack of data but reporting that both “proponents and opponents of the use of PLAs said it would be difficult to compare contractor performance on federal projects with and without PLAs because it is highly unlikely that two such projects could be found that were sufficiently similar in cost, size, scope, and timing.” In conclusion, the GAO said, “drawing any definitive conclusions on whether or not the PLA was the cause of any performance differences would be difficult.”

The relationship between size of the bidding pool and project cost is difficult to study for the same reasons. In two studies in New York State, the statistics show that the research model accounts for only 11% of the variance in project cost.6 This suggests that there are many critical variables that more significantly impact project cost.

Another study performed by the GAO on contracts on the Idaho National Engineering Laboratory, which was governed by a PLA, showed that non-union contractors did bid on the project and were awarded 30% of contracts, despite having told the GAO that they would not bid because of the PLA.7

References

1. Building and Construction Trades Council of the Metropolitan District, et al. v. Associated Builders and Contractors of Massachusetts / Rhode Island, et al., 507 U.S. at 231 (1993), hereinafter “Boston Harbor.”

2. Executive Order: Use of Project Labor Agreements for Federal Construction Projects

3. Government Accounting Office. 1998. Project Labor Agreements: The Extent of the Their Use and Related Information. Washington, D.C.: Government Printing Office.

4. Dale Belman, Matthew Bodah and Peter Philips. Project Labor Agreements. http://massbuildingtrades.org/sites/massbuildingtrades.org/files/PLA_NECA_Report.pdf

5. Fred Kotler. Project Labor Agreements in New York State: In the Public Interest. http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1021&context=reports

6. Dale Belman, Matthew Bodah and Peter Philips. Project Labor Agreements. http://massbuildingtrades.org/sites/massbuildingtrades.org/files/PLA_NECA_Report.pdf

7. Dale Belman, Matthew Bodah and Peter Philips. Project Labor Agreements. http://massbuildingtrades.org/sites/massbuildingtrades.org/files/PLA_NECA_Report.pdf