Project labor agreements in Illinois did not have a statistically significant effect on projects’ construction costs, as the award amounts for winning bids were not higher on PLA projects compared to those without PLAs, after accounting for other factors.
That’s according to a new report from the Illinois Economic Policy Institute detailing the economic impact of PLAs on construction in Illinois.
By analyzing more than 2,500 bids on 773 Illinois Capital Development Board building projects valued collectively at over $1.2 billion between 2017 and 2023, the ILEPI deduced that PLAs increased bid competition by an average of 14%, with each additional bid increasing the likelihood that projects would be awarded below their official engineer’s estimates by 6%.
Frank Manzo, an economist at the ILEPI and a principal author of the report, noted this is a first-of-its-kind study, as it evaluates the impact of PLAs on state building projects and is the largest data set ever used for PLA studies.
“We accounted for important factors such as the size and complexity of each project, location — which is very important in Illinois — and we also accounted for whether it was new construction or a rehabilitation of an existing project,” he said.
Impact on overall construction costs
Manzo claimed that the numbers prove PLAs do not detract from overall cost containment and asserts that PLAs can promote increased competition and lower costs for taxpayers. He said competition generated by PLAs appears to stabilize costs while still allowing for greater bidder diversity.
These findings challenge the conventional narrative that PLAs unnecessarily inflate costs and reduce market competition, demonstrating instead that they can foster cost-effective, competitive and equitable construction practices within Illinois, the study said.
Ben Brubeck, vice president of regulatory, labor and state affairs for the Associated Builders and Contractors, disputed its accuracy pointing to multiple studies on the effect of government-mandated PLAs on school and affordable housing construction costs across the country, which generally find that PLA projects are 12% to 20% more expensive, on average, compared to non-PLA projects.
“The claim that PLAs can promote increased competition and lower costs flies in the face of more than two decades of survey results of ABC contractor members and anecdotes from union and nonunion contractors as well as federal, state and local procurement officers, who have generally shared real-world experiences suggesting the opposite is true,” he said.
The study also found that PLA-covered projects had more bidders compared to non-PLA projects, though Brubeck maintains that Illinois is a market that is not representative of the rest of the country, so the numbers can be skewed.
In 2017, the average number of bids on Illinois Capital Development Board building projects was 3.3, which decreased to 3.1 bids per project in 2018. However, following the issuance of President Joe Biden’s executive order mandating PLAs on many major federally funded projects in 2019, there was a significant increase in bid competition, rising to 3.8 per project, per the study.
This upward trend continued for two years, with averages of 3.9 bids per project in 2020 and 3.6 in 2021. However, by 2022 and 2023, the average number of bids per project dropped below 3.0.
“Projects with PLAs averaged more bids than projects without PLAs,” Manzo said. “More competition drives down cost with each additional bid improving [the chances] that a project comes under budget by 6%. PLAs create conditions for responsible contractors to enter the market based on their ability to compete on quality, workforce productivity and their materials usage, and that’s why we are seeing more bids on projects with PLAs.”
Diverse participation
PLAs were associated with a higher share of construction work awarded to minority-, women- and veteran-owned businesses. Specifically, these groups saw market shares increase between 1 to 2 percentage points in PLA-covered projects.
“This increased opportunity facilitates broader access to public contracts for historically underrepresented groups — an important factor in promoting equity and diversity in the construction industry,” said co-principal author, Robert Anthony Bruno, director of the labor education program and a professor in the school of labor and employment relations at the University of Illinois, Urbana-Champaign.
Brubeck believes diversity goals can be achieved through contracting policies and requirements independent of government-mandated PLAs.
“The coupling of diversity hire goals with a PLA is like putting lipstick on the PLA pig,” he said. “It is a statistical fact that there are more minorities and women in the construction industry on the nonunion side of the ledger simply because almost 90% of the U.S. construction industry is nonunion.”
The final word
The report theorizes that PLAs may serve as valuable tools for stabilizing project costs and enhancing competition without additional burdens on budgets. Bruno said while they can introduce complex management elements, these agreements have resulted in increased bids and inclusive contractor participation without negatively affecting project costs
“Use them,” Bruno said. “It’s a skillful, rational way … to attract responsible bidders to ensure you will get high-quality work and a mix of craftworkers around different price points that will allow you to be competitive.”
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