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OFFICE OF MANAGEMENT AND BUDGET STATEMENT OF JOHN KOSKINEN DEPUTY DIRECTOR FOR MANAGEMENT BEFORE THE COMMITTEE ON LABOR AND HUMAN RESOURCES UNITED STATES SENATE
APRIL 30, 1997
Mr. Chairman and Members of the Committee:
I am pleased to testify today concerning the President's proposed
Executive Order on the use of
project labor agreements for federal construction projects.
Let me begin by noting that the President has not yet issued the
proposed order. On April 8,
1997, the Office of Management and Budget (OMB) circulated a
preliminary draft of the
proposed order to federal departments and agencies for their review
and comment. A revised
draft is now being considered by the departments and agencies for
additional comment, so that
final drafting of the Executive Order has not been completed. Its
terms remain subject to revision.
I do not think that it is appropriate for me to get into the
intricacies of the Executive Branch's
drafting process. But let me describe in general terms what the
proposed Executive Order will
not do. It will not require agencies to use project labor
agreements. The agencies retain complete
discretion. It will not suggest that project labor agreements be used
where they would raise the
cost of a construction project. The point of the Order is for
agencies to consider whether project
labor agreements promote economy and efficiency. The proposed
Executive Order will not
change or extend the law regarding project labor agreements. It will
not shut out non-union
contractors from federal construction projects. Everyone is free to
bid. Finally, notwithstanding
much public comment to the contrary, the proposed Executive Order will
not require workers on
federal construction projects to join a union.
Let me briefly discuss project labor agreements in general. A
project labor agreement (PLA) is a
project-specific agreement, negotiated at the outset of a construction
project, between the
construction owner or contractor and all of the labor unions
representing the crafts that are
needed for the project. The agreement covers the wages, working
conditions, work rules, and
dispute-resolution procedures for the duration of the project. It may
also specify a source of
skilled labor for the project. Most important, a project labor
agreement generally guarantees that
the project will be built without strikes, lock-outs, or other
disruptions, which might delay
completion and increase costs.
Project labor agreements have proven valuable in both the public
and the private sectors. They
can help ensure that projects are completed on-time and on-budget--
without accidents, delays,
and unexpected costs. By fixing labor costs, specifying a source of
skilled, well-trained workers,
and eliminating the risk of work stoppages, project labor agreements
support the success of a
construction project.
In the private sector, project labor agreements have been used
successfully in building such large
facilities as the Trans-Alaska pipeline, Disney World, and the Saturn
Corporation automobile
assembly plant. State and local governments have funded many
construction projects--including
bridges, office complexes, transit systems, and airports--that were
built under project labor
agreements. Perhaps the best-known recent example of a public project
involving a project labor
agreement is the massive sewage-treatment system for metropolitan
Boston, ordered as part of
the clean-up of Boston Harbor. I understand that the Boston Harbor
project is on-schedule and
under-budget.
The federal government has long used project labor agreements on
large construction projects,
like dams, defense installations, and atomic energy facilities.
Today, project labor agreements are
in effect--and working well--at several Department of Energy sites,
including the Savannah River
Site in South Carolina, the Nevada Test Site, the Hanford Site in
Washington, the Oak Ridge Site
in Tennessee, and the Rocky Flats Plant in Colorado.
In light of positive experience with project labor agreements on
public projects, state governors in
New Jersey, New York, Nevada, and Washington have issued executive
orders authorizing their
use for state-funded construction, when such agreements will promote
efficient, timely, and safe
construction of a project.
In contrast, the federal government has not had a clear,
uniform policy addressing when project
labor agreements may be used on federal construction projects.
President Clinton's proposed
Executive Order is intended to establish such a policy. Under the
policy, the federal government
will be able, in appropriate circumstances where efficiency and
economy will be served, to reap
the same benefits that private firms and state and local governments
have obtained from using
project labor agreements.
The proposed Executive Order is a proper exercise of the executive
function. The Federal
Property Act--designed to achieve economy and efficiency in
contracting--gives the President
authority to prescribe policies and directives "as he shall deem
necessary to effectuate" the Act.
40 U.S.C. §486(a). The federal courts have made clear that this
statute gives the President broad
discretion. Because they related to economy and efficiency in
procurement, executive orders
denying contracts to companies that violated federal wage and price
guidelines, or that engaged in
discrimination, have been upheld by the courts. The proposed
Executive Order on project labor
agreements clearly meets this test.
The proposed Executive Order will not mandate the use of project
labor agreements. Instead, it
would simply encourage federal departments and agencies to consider,
on a case-by-case basis:
(1) whether using a project labor agreement will promote the
economical, efficient, timely and
high quality performance of a federal construction project; and (2)
whether laws applicable to the
construction project preclude the use of a project labor agreement.
Agencies would make these
determinations according to objective, published criteria. This
approach will promote more
systematic decision-making by federal agencies and will facilitate
oversight of their decisions.
But let me emphasize again: Federal agencies will retain discretion
in each case to decide if a
project labor agreement should be used on a particular construction
project. The proposed
Executive Order will not require that a project labor agreement
be used on any individual project,
much less on every project. We have taken pains to make this clear in
the Order.
If a federal agency did choose to require a project labor
agreement, no business would be
excluded from bidding on the contract for the project. Any contractor
could bid on--and win--a
federal contract that required a project labor agreement, whether or
not the contractor's
employees were represented by a labor union. That same principle of
open competition would
protect subcontractors, as well. Again, we have taken pains to make
this abundantly clear in the
Order. Project labor agreements will be made available to all
contractors and subcontractors
wishing to compete for contracts and subcontracts on the project.
Subcontractors whose employees are not represented by a union
nevertheless have bid
successfully on construction projects covered by project labor
agreements. For example, I am
told that roughly one-half of the subcontractors on the Boston Harbor
project and at the Energy
Department's Savannah River site do not have employees who are
regularly represented by a labor
union.
Just as all bidders would be free to compete for contracts, so all qualified workers would be eligible for employment on projects covered by project labor agreements, whether or not they were members of a labor union. On this issue, too, the proposed Executive Order will be specific. Project labor agreements are to be made accessible to employees without discrimination on the basis of union membership or non-membership. Certainly, it is true that some project labor agreements call for
recruitment of some workers at
union-administered hiring halls, a provision that helps ensure a
reliable source of skilled, qualified
workers. But under the National Labor Relations Act, union hiring
halls must be open to all
workers, union members and non-members alike. And under the same law,
no worker can ever
be compelled to join a union, or to pay fees for union activities that
are unrelated to collective
bargaining. In so-called "right-to-work" states, workers cannot be
required to pay any union fees
at all. All workers, of course, receive the benefits of any
collective bargaining agreement that
covers them, and would be governed by the agreement's no-strike and
dispute-resolution
procedures.
The proposed Executive Order is fully consistent with the National
Labor Relations Act. In a
1993 case involving the Boston Harbor project, the Supreme Court
itself has upheld a
state-required project labor agreement, rejecting the claim that the
National Labor Relations Act
pre-empted the state's use of such an agreement. Building &
Construction Trades Council v.
Associated Builders & Contractors of Massachusetts, 507 U.S.
218 (1993). As the Supreme
Court observed, "To the extent that a private purchaser may choose a
contractor based upon the
contractor's willingness to enter into a pre-hire agreement, a public
entity as purchaser should be
permitted to do the same." That principle supports the use of project
labor agreements by federal,
as well as by state, agencies. And, indeed, a federal appeals court
has upheld the use of a project
labor agreement at a Department of Energy facility. Phoenix
Engineering, Inc. v. MK-Ferguson of
Oak Ridge Co., 966 F.2d 1513 (6th Cir. 1992).
In this important respect, the proposed Executive Order on project
labor agreements is easily
distinguishable from the President's earlier order addressing the use
of striker replacements by
federal contractors. And unlike the earlier order, the proposed order
will not bar federal agencies
from dealing with certain contractors. Instead, agencies are
permitted to consider, case-by-case,
whether a project labor agreement would promote efficiency and
economy. As I have explained,
all contractors will remain free to compete for contracts, including
contracts that incorporate a
project labor agreement requirement.
Apart from attacking the legality of the proposed Executive Order,
some critics of the order
suggest that project labor agreements will necessarily increase the
cost of federal construction.
This argument is premised on the notion that unions typically win
higher wages and benefits for
workers. Even accepting that premise, the fact remains that wage and
benefit rates cannot be
considered in isolation from the over-all cost of a project. Project
labor agreements are intended
to keep these costs down. Lower wages and benefits for workers in the
short-term do not benefit
the Government, if a project ends up costing more because of factors
that project labor
agreements are designed to address: like work stoppages, labor
shortages, unexpected increases in
labor costs, accidents, low productivity, or poor quality work. These
considerations will have to
be weighed by federal agencies on a project-by-project basis, just as
the proposed Executive
Order contemplates.
I hope that I have been able to clarify what the Administration
intends to do--and what it has been
careful to avoid--in connection with the proposed Executive Order.
The Order will reaffirm that
federal agencies may use a project labor agreement, when it serves the
ends of economy and
efficiency. State governments, local governments, and private firms
all have found that project
labor agreements, in the right circumstances, make good sense. The
federal government should
be able to follow their example. That is all that the proposed
Executive Order is intended to
permit.
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