What happens when a government tries to fix a system that isn’t broken?
Usually, the taxpayers pay the price.
That is what might happen if Honolulu’s mayor approves a measure that would restrict the use of nonunion labor on city contracts worth over $2 million.
As Jonathan Young, Hawaii chapter president of Associated Builders and Contractors, has pointed out, there are about 6,700 licensed contractors in Hawaii, 66 percent of whom are nonunion, which means about 4,500 local contractors would be blocked from bidding on such city projects.
Young was the guest this week on the latest episode of “Hawaii Together,” the interview show on ThinkTech Hawaii usually hosted by me but this time featuring Joe Kent, Grassroot Institute of Hawaii executive vice president.
Young told Joe he is concerned that the Honolulu City Council’s approval of Bill 37 is likely to hurt local contractors — the smaller ones in particular — by requiring for the specified city projects so-called project labor agreements, which are crafted to favor union contractors and workers.
In testimony before the City Council, supporters of the measure repeatedly claimed it is intended to help local workers. However, this is not a bill to protect Hawaii workers; there is already a state law that requires a certain proportion of local labor on government contracts.
More important, said Young, is that Bill 37 conflicts with Hawaii state procurement law and addresses a problem that doesn’t exist.
Since an executive order was issued in 2012 by then-Gov. Neil Abercrombie, Hawaii already “encourages” PLAs for government projects worth $25 million or more. Young said nonunion contractors have no issue with that figure because “99% of our contractors don’t do that. We know that we can’t. It’s not our forte.”
Setting the threshold at $2 million, however, would be a hardship for the small businesses and mom and pop contractors who work the smaller jobs, which in turn would help consolidate the power of the larger companies.
“People that do these projects will push their way down and mom and pops will get pushed out,” Young said.
At the same time, cutting out two-thirds of possible bidders means that the city would end up with fewer options and higher bids, which ultimately would have to be covered by the taxpayers.
As Young explained, independent studies have confirmed that PLAs consistently raise the cost of government contracts by 12 percent or more. That’s why many states and municipalities are moving away from them as a matter of policy.
Honolulu, however, is moving in the opposite direction. Young predicted that if the city adopts these PLA rules, they will have a negative effect on the economy, crushing competition and creating slower, costlier and less efficient government projects.
According to Young, even some union members are opposed to the city’s bill. He explained that union companies don’t necessarily want to work on the smaller three-week projects, preferring instead the larger two- or three-year projects. He added:
“We’ve even had union contractors who don’t want this bill because they’re going to be taking workers from the bench that are earmarked for other union projects to work on those projects”
In the end, the bill would create an unnecessary division between local contractors. It’s not about the value of unions or the quality of work. Rather, it’s about a bill that seeks to artificially limit bids on government contracts and drive up costs.
Taxpayers should be asking why the City Council, in a 7-2 vote, decided to interfere with state procurement law and defy recent research on PLAs.
As Young put it, “What was broken with the way the city was doing business? Nothing was broken.”