Construction crews at work on a public building project.
Peer-reviewed studies find no significant effect on school construction costs or bid competition
A sweeping review of economic research finds that project labor agreements (PLAs) do not significantly increase public construction costs or reduce bid competition, according to a report from the Institute for Construction Employment Research.
Economists Russell Ormiston of Allegheny College and Kevin Duncan of Colorado State University-Pueblo examined every economic study on public-sector PLAs published since 2000. Their conclusion is direct: the most rigorous research contradicts claims that these agreements inflate taxpayer costs.
According to the report, “the most recent and methodologically advanced studies in the academic press reflect that project labor agreements do not have a statistically significant impact on school construction costs or bid competition.”
Three peer-reviewed studies anchor the review.
READ MORE: Do PLAs increase costs? Here is what the research shows
Research on California community college projects found PLAs had no statistically significant effect on either the number of bidders or construction costs. The most comprehensive academic study of the question, covering 70 Massachusetts school projects, reached the same conclusion on costs. A third study of 319 Ohio schools found that responsible contracting policies, which resemble and sometimes include PLAs, had effectively zero influence on construction costs.
So why do some reports claim PLAs raise costs by 15% to 20%? The authors point to a statistical flaw known as omitted variable bias. PLA projects tend to be larger, more complex and more often built in expensive urban markets. Studies that fail to account for those differences misattribute the added costs to the agreement itself. When researchers added proper controls for project complexity and location, the supposed PLA cost effect shrank sharply or disappeared entirely.
The review also offers a common-sense check. Labor accounts for roughly 23% of total contractor costs in construction. A 15% to 20% increase in total costs would require PLAs to nearly double labor costs, a result the authors call implausible.
Perhaps the strongest evidence comes from the private sector. Companies including Toyota, Apple, Intel and Honda have used PLAs for decades on their largest construction projects. Profit-driven firms with deep construction experience would not voluntarily choose a tool that dramatically inflates costs.
The authors call for more research, particularly on PLA benefits such as timely completion, craftsmanship and apprenticeship training.
READ MORE: Mid-Hudson News writer says PLAs protect workers and taxpayers
