2024 Budget Testimony: Transportation
The Associated Builders & Contractors, Empire State Chapter (ABC) is a construction trade association representing hundreds of merit shop contractors, employing hundreds of thousands of workers across New York State. We thank the Legislature for the opportunity to speak on such an important topic that impacts the quality of life of every single New Yorker: transportation.
Our organization provides our members with education and world-class safety services. Our mission is to improve the construction industry in New York State, which is rated last in the nation for pro-construction growth. We work daily to support the hardworking men and women who make up New York's construction industry and protect taxpayers from mandates perpetuating the affordability crisis.
Governor Kathy Hochul's proposed FY 2025 Executive Budget includes funding for New York's transportation services to rebuild roads, bridges, highways, subways, and more. While we agree with the governor that funding to rebuild New York's crumbling infrastructure is vital to our economic recovery, our members are deeply concerned about the efforts to mandate Project Labor Agreements (PLAs) on all state-funded transportation projects.
As I previously stated, New York ranked dead last in the country for pro-construction growth. The Scorecard reviews and ranks state-specific information significant to the construction industry, such as job growth rate and workforce development. That rating is primarily fueled by costly mandates such as PLAs.
A PLA is a pre-hire mandate that forces contractors to hire most of their workforce, typically three out of every four workers from the union hall. For the contracting authority to put a PLA in place, it must first undertake a study, commonly referred to as a due diligence study, that allegedly demonstrates savings can be achieved using the PLA. These studies are highly criticized for their lack of specificity regarding how the savings can be achieved. Also, no post-project PLA studies have been conducted to determine if the alleged savings of any PLA have been attained.
In 2022, The Beacon Hill Institute analyzed PLA due diligence studies conducted by New York Engineering firms on projects throughout the state, and their findings should concern you. The report concludes that the engineering firms' methods do not serve their intended purpose and fail to determine whether PLAs save on construction costs. Beacon Hill went line by line through the so-called projected savings, and their analysis found that these "savings" are fictitious or could be realized without a PLA.
Contrary to what supporters of PLAs claim, these harmful mandates actually increase the cost of construction by eliminating competition during the bidding process. As noted, PLAs force contractors to hire most of their workforce from the union hall. PLAs force local, qualified contractors to use unknown individuals instead of people they currently employ and are loyal to. Due to this unfair requirement, they won't bid on the work. Why would they? What if you were forced to sign an agreement that would replace your current staff with people you've never met, haven't trained, and have no allegiance to your success? The answer is that you probably wouldn't sign that agreement. That is the decision that most contractors reach when they are faced with a PLA mandate. They simply won't bid on that project.
That leads to two significant issues: local qualified New Yorkers will be unable to benefit from these projects, and the final cost will increase remarkably. Just look at the data.
According to the Bureau of Labor Statistics data taken in 2022, over 75% of the construction industry chooses not to be a signatory to a union. This means more than half of New York construction workers and their families will be unable to work on and reap the rewards of these projects due to a PLA. It also means there are very few contractors bidding on these projects, as most aren't signatories to a union and don't want to sideline their employees.
The effects of the reduced competition due to the lack of bids during the bidding process result in devastating cost increases. While some will say we're prejudiced to one side of the issue, the experts agree that the lower the number of bidders, the higher the project cost. A study by Dr. Paul G. Carr, P.E., from Cornell University, illustrates what happens when the number of bidders on a project is reduced. The study looks at hundreds of public works projects in New York State. The study unequivocally found that the construction cost will increase by reducing the number of bidders on public projects. Reducing two bidders added more than 4% to the bid cost.
Right in Rochester, we've already seen the negative bid results a PLA can have on a project. The Seneca Park Zoo, an estimated $121 million taxpayer-funded project, had a PLA mandated. They had only one bid submitted, and it came in more than $52 million higher than the county's estimated cost, according to the Democrat and Chronicle.
New York has the workforce needed to complete these projects if they remove the PLA and allow both sides of the construction industry to win and bid on the work. Removing the PLA will ensure New Yorkers build the projects their hard-earned tax dollars are funding. It will also save taxpayers hundreds of millions of dollars a year which goes a long way as we all feel the impact of the affordability crisis.
To ensure the rebound and success of the construction industry in New York, the state must allow all qualified New York State contractors to bid for and win work funded by New York. Suppose PLAs are mandated on all state transportation work. In that case, qualified New York workers will be unable to benefit from the projects, and the cost of these projects will increase dramatically due to the lack of bidders. For these reasons, we oppose the implementation of PLAs on all state transportation work funded by the FY 25 Executive Budget.