Around the country, states and municipalities are changing their procurement regulations to allow for more competitive bidding. That’s a best practice that saves money on government projects.
Hawaii, however, appears to be moving in the opposite direction.
This week, the Honolulu City Council’s Budget Committee considered Bill 37, a proposal that would create new hiring conditions, called “community workforce agreements” or CWAs, on all county projects worth more than $250,000.
The CWAs would drastically limit the use of nonunion workers on county public projects, even small government contracts. The inevitable result would be fewer competitive bids, resulting in higher costs for the county and ultimately Honolulu taxpayers.
In other states, there has been a move to reform such requirements, also known as “project labor agreements” or PLAs. In March, Kentucky became the 25th state to open up bidding on state construction contracts to all qualified bidders. As states have rid themselves of PLA requirements, they have been able to save taxpayers money.
In West Virginia, Massachusetts and New Hampshire, removal of PLA requirements resulted in larger pools of bidders and lower final bids. In New Hampshire, a public project that removed its PLA requirements not only lowered its costs, but elicited lower bids from union contractors.
Multiple studies have shown that projects with PLAs are more expensive. The Beacon Hill Institute found that PLAs increased construction costs per square foot of Ohio schools by 13%. A National University System Institute for Policy Research study of new school construction in California found that PLAs increased costs by about 13-15%.
In Hawaii, PLAs are “encouraged” for projects of $25 million or more, and our experiences with them mirror the delays and high prices faced by other states. The Honolulu rail is a PLA project that has become notorious for its delays, cost overruns and administrative irregularities. The University of Hawaii at Hilo College of Pharmacy Building, another PLA project, was plagued for years by delays.
There is little question that PLAs and CWAs shrink the pool of bidders, create a less competitive bidding environment, and lead to higher prices on government projects. That’s bad news for taxpayers, who are always the ones left paying the tab. But it’s also bad news for another group: non-union workers.
One of the rationales for Bill 37 is that it will protect local jobs. That’s not completely accurate; it would protect some local workers, but leave others out in the cold. There are approximately 4,500 licensed contractor companies in Hawaii, about two-thirds of which would be shut out of work on government projects, if this legislation is approved.
Blocking their thousands of local workers from local jobs doesn’t seem like a policy our lawmakers should be pursuing, and it might not even be legal. The city Department of Corporation Counsel apparently has raised questions about whether the Council has the authority to enact bills regulating procurement.
But even if it were deemed legal, our experience with PLAs — in terms of cost, efficiency, employment and taxes — is reason enough to think long and hard before requiring them as a condition of public contracts.
In the alternative, the County Council should follow the example of other jurisdictions across the nation and start removing regulations that restrict bidding on government contracts — not add more of them.