The impact of Project Labor Agreements (PLAs) on the cost of construction projects is a topic of ongoing debate. Here are some key points to consider:
Cost Impact of PLAs
- No Significant Cost Increase: Several studies suggest that PLAs do not lead to significant cost increases in construction projects. For example, a study on Proposition HHH in Los Angeles found no statistically significant relationship between PLA usage and development costs. Similarly, research in New York City and the Port of Seattle indicated that PLA projects did not have higher costs and sometimes even resulted in cost savings.
- Potential for Cost Savings: Some cases have shown that PLAs can lead to cost savings by ensuring efficient project completion and reducing the risk of delays or disputes, which can drive up costs over time.
- Increased Costs in Certain Contexts: However, some studies argue that PLAs can increase costs due to reduced bid competition. For instance, a RAND Corporation study found an increase in project costs for Proposition HHH, attributing this to lower bid competition. Another study by the Beacon Hill Institute reported a nearly 20% increase in school construction costs in Connecticut.
Factors Affecting PLA Costs
- Bid Competition: Reduced bid competition due to fewer contractors willing to work under PLA conditions can lead to higher costs. Many contractors avoid PLAs because of withdrawal liability associated with union pension funds.
- Workforce Development and Efficiency: PLAs often promote workforce development and can enhance project efficiency, potentially offsetting some cost concerns.
Overall, the impact of PLAs on construction costs varies depending on the specific project and context. While PLAs can offer benefits like improved efficiency and workforce development, they may also lead to increased costs in certain situations due to reduced competition.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-plas-impact-the-cost-of-construction-projects/
