Concise Statement (With Citation Links) on How a Project Labor Agreement Would Increase the Cost of California High-Speed Rail Construction

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Based on a December 6, 2012 statement made by the executive director of the HSR Authority to a Fresno Bee reporter, it seems that all five pre-qualified design-build construction consortiums have negotiated or agreed to negotiate a Project Labor Agreement with the State Building and Construction Trades Council of California (an umbrella lobbying group for construction unions) for construction trades work on the first segment of the High-Speed Rail project.

Section 7.11.3 of the Request for Proposal for Design-Build Services for the first segment of the California High-Speed Rail project states that “Proposers are advised that, subject to FRA [Federal Railroad Administration] approval, the Authority intends to develop a Community Benefits Agreement consistent with the Community Benefits Policy adopted by the CHSRA [California High-Speed Rail Authority] Board at its December 6, 2012 meeting with which the Contractor will be required to comply.”

And Section 10.1 of the Request for Proposal states that  “The Authority [that is, the California High-Speed Rail Authority CEO Jeff Morales] will not make a recommendation for award of the Contract [to the California High-Speed Rail Authority Board of Directors] unless the successful selected Proposer has submitted the following: Escrowed Proposal Documents and corrected any deficiencies identified by the examination of the EPDs, and A letter of assent executed by the Proposer agreeing to be bound by the Community Benefits Agreement.” This indicates a government-mandated Project Labor Agreement!

In fact, a “draft” Project Labor Agreement is included as Addendum 8 in the High Speed Rail Authority’s bid documents for the Request for Proposal. This indicates that bidders that declare their intention to sign a Project Labor Agreement will boost their scores for “community benefit” in the somewhat-subjective best value procurement criteria.

Where this especially matters in terms of cost to taxpayers is the construction of the building structures, such as the stations in Merced and Fresno.

A 2011 study done by the National University System Institute for Policy Research determined that construction projects for which California school districts required contractors to sign Project Labor Agreements with unions were 13-15% higher in final cost than similar California school construction projects built under fair and open competition. This matches anecdotal evidence collected over the past 15 years on California construction projects with government-mandated Project Labor Agreements.

Why are costs higher? The union provisions included in Project Labor Agreements discourage non-union contractors from bidding. As expected, the resulting reduction in bid competition results in higher costs.

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