Nonunion builders, contractors cry foul on new PLA directive

from Grassroot Institute, March 14, 2024

Hawaii taxpayers are going to be paying more for state government projects under a directive issued in February by Gov. Josh Green, according to the Hawaii chapter president of the Associated Builders and Contractors, which represents more than 170 contractors, suppliers and service providers.

During an interview for the Grassroot Institute’s YouTube channel, Jeff Alameida told Grassroot Executive Vice President Joe Kent that by lowering the threshold for so-called project labor agreements on state jobs from $25 million to $1.5 million, the directive is “catering to a select group” and will make it harder for smaller nonunion contracting firms to compete, since they cannot afford to meet all the PLA requirements that essentially favor union labor.

“It’s a significant detriment,” he said.

Alameida said the directive also will cause further delays in construction because Hawaii doesn’t have enough construction workers to meet the expected increase in jobs requiring union labor, which represents only about 40% of building trades workers.

Only 25 states have blanket PLA laws, he said, and Hawaii’s $1.5 million threshold is the lowest in the nation. New Jersey’s is $5 million, California is looking at $35 million and in Washington, D.C., it’s $75 million.

Asked by Kent what can be done about the directive, Alameida said it “should be torn up.” At the very least, he said, the threshold should be raised back to $25 million, or even $35 million, which is the standard for federal projects.

As a way to increase Hawaii’s construction workforce, Alameida proposed that the state “open up” its apprenticeship programs, which he called “incredibly restrictive.” 

TRANSCRIPT

3-8-24 Jeff Alameida interviewed by Joe Kent

Joe Kent: Aloha and welcome to the Grassroot Institute of Hawaii. 

Gov. Josh Green signed a project labor agreement in February that flew under the radar, but it could have big consequences for the cost of state government projects.

Jeff Alameida is my guest today. He’s the Hawaii chapter president and CEO of the Associated Builders and Contractors. And he’s also worked for Empower Oahu and the Colorado Enterprise Fund and the Blue Zones Project in Hawaii.

So he joins me today to talk about just what are project labor agreements and why they’re a bad deal for taxpayers. Welcome, Jeff.

Jeff Alameida: Aloha and thanks for the invitation. We appreciate it.

Kent: Well, thanks. I mean, we want to get the word out about this wonky subject in a way people can understand. But first, a little bit about you. 

So what’s your background? How did you become the chapter president at the Associated Builders and Contractors?

Alameida: Well, the opportunity to come on board with ABC came about in September of last year. So I’ve been in this role for just about six months.

My early career was actually in the construction industry, focusing more on the architecture and planning side of things. And I’ve had the opportunity to work on projects of all sizes throughout the country.

The last 20 years of my career I spent focusing on community development, economic development, working on projects, organizations that, here in Hawaii, for example, have been focusing on improving the health metrics of a community, or in other cases, scaling entrepreneurs, helping entrepreneurs scale their businesses.

This is a really nice addition, if you will. It gives me the opportunity to focus on something that’s really important to me, and that’s how we can improve the communities that we live in, we earn in, we pray and we play in.

Kent: Well, so what is the state of Hawaii’s trades workforce? How many union members are there and how many aren’t, as a makeup?

Alameida: You know, we have a significant shortage in the workforce, and we’re fortunate as there’ve been a number of other organizations that have really taken an interest in gaining an understanding of why we have such a shortage.

Right now, our estimates show that there are about 33,000 residents involved in the construction workforce, of which roughly 20,000 or so are non-unionized. So contrary to what many may think.

Kent: That’s over half.

Alameida: Yeah, it’s well over half. It’s about 60%, if you will. And that’s actually contrary to what many may believe, you know, thinking that the union workforce is the more significant.

Kent: And the Associated Builders and Contractors is union or non-union?

Alameida: You know, and I’m glad you asked. ABC at the national level has been around for 75 years. The Hawaii chapter, we’re celebrating our 35th anniversary this year. And our founding documents, our national founding documents, which we abide by, bottom line, what it says is our role is to support the construction industry. 

Union or non-union. It really doesn’t matter. It’s how can we improve the workforce, how can we support, build businesses that build up Hawaii?

Kent: I see. So, do you anticipate Hawaii’s existing skilled labor workforce is going to be able to handle all of the Lahaina rebuilding and cleaning and recovery efforts that need to happen there? Certainly, there’s an enormous amount of money going there, billions of dollars to rebuild it, but do we have the workers?

Alameida: No, we don’t. You know, if we looked at just Maui County alone, there are, I believe, roughly — and this is looking at data that’s going back just a couple of years, but it’s the most recent data that’s been collected — there are roughly about 1,500 workers employed in the carpentry, the laborers and the electrical trades.

Kent: 1,500. 

Alameida: 1,500.

Kent: That’s it?

Alameida: On Maui.

Kent: On Maui. I see. 

Alameida: On Maui that are employed in the trades. Now, I had a conversation with an electrical contractor yesterday and we were talking about, you know, how many workers do you need on a project of any scope?

And he had gone through his records and what he looked at over the last number of years was if you had a project of about a million dollars or a million-and-a-half in scope, he would need at any point in time — this is an electrical contractor — two to three workers working on that project. 

Now, we’re looking at the PLA threshold dropping down to $1.5 million …

Kent: So now PLA, just going back …

Alameida: Sure.

Kent: So PLA stands for project labor agreement, and Gov. Green signed something that would change that agreement. So can you explain the nuts and bolts of that?

Alameida: Sure. Absolutely. Project labor agreement at the county level is known as a community workforce agreement …

Kent: Right. CWA.

Alameida: CWA. That’s correct.

What a project labor agreement basically is, it’s an understanding, an agreement that if I am going to embark on, if I’m going to work on a project funded at the county level, the state level, — and in this discussion, the state level or the federal level — I need to abide by certain rules and regulations. And these generally favor union contractors.

Now, I don’t recall if I mentions, but a little more than 60% of the licensed contractors in Hawaii are non-union. And so what’s really important is — and there’s two parts to this: There’s a prevailing wage. It originally was $25 million. And what the administrative directive that Gov. Green signed a few weeks ago did was it lowered that threshold down to $1.5 million.

Kent: I see. So you’re saying that now there’s going to be more government projects that the PLA applies to and the PLA, you said, favors in a way unionized workforce, but that may have an icing out effect for non-union workers?

Alameida: Absolutely

Kent: OK.

Alameida: And from a number of viewpoints. But let me also mention, though: The state with the next nearest lowest threshold is New Jersey at $5 million. 

Kent: Oh, wow.

Alameida: And only 25 states actually have blanket PLA agreements.

Kent: I see. The other 25, this doesn’t exist in those states.

Alameida: No.

Kent: So, for big government projects in those states, they can utilize the full gamut of workforce in the state, you’re saying.

Alameida: That’s right. And so they have the opportunity to get the most competitive rates. I mean, we all want to complete these projects safely — right? — on time and on budget. We’re expanding the competition for these eligible contractors, if you will, in these other states.

Kent: So more competition, though, if you have more workers, you’re saying that that benefits the taxpayer ultimately, because there may be more opportunities to lower costs?

Alameida: That’s right, absolutely. What we find through our studies, through our research, is the cost of a project under a PLA agreement, we’ve seen it range in terms of overruns anywhere from 12 to 30%, which is pretty significant.

Kent: Wow.

Alameida: Now there are government PLAs and there are private PLAs. 

Kent: Oh, OK.

Alameida: For instance, particular projects. I think, you know —

Kent: Oh wait, so you’re saying like a private company would impose its own requirements too.  

Alameida: A private entity who wishes to build out a particular project. 

Kent: OK, got it. 

Alameida: Originally, PLAs, the intent behind PLAs is, if I am the client, I want a project to run smoothly, free of any labor strife. And I also want to — and this is really important — I also want to provide good wages, create, you know, good, well-paying jobs for workers.

Now, in Hawaii, we have the prevailing wage rules and regulations, which says any government project exceeding $2,000 is subject to prevailing wages.

Kent: Oh, I see. So the process for PLAs, it’s not necessarily that these are locking in a certain wage because all government projects have a locked wage.

Alameida: Exactly. That’s right. But it’s adding this additional layer that says how the funds are used, what the non-union worker is entitled to, is subject to the rules and regulations, which primarily favor unions.

Kent: OK. But so then how — going back to the taxpayer though — how does that affect the taxpayer? Because if the wages are the same either way, then where’s the savings?

Alameida: Let me give you an example, and I’m gonna come at it from two different angles. One from the perspective of the business owner which ultimately will affect the client. And the second from the perspective of the tradesperson, the one who’s out there in the field doing really good work.

So, I am a carpenter. This is my first year on the job and I’m an Apprentice I, ss an example.  I’ve worked with my employer for a number of years. My base pay under a prevailing wage project is roughly $25 an hour. About $50,000 a year.

Kent: And this is for a union carpenter, you’re saying?

Alameida: This is for a union or non-union carpenter working under a prevailing wage for a government project that is not subject to PLA. 

Kent: Got it. I see, I see. OK.

Alameida: I’m earning $25 an hour, $50,000 or so a year. I also will receive an additional roughly $9 an hour in fringe benefit. 

Kent: OK.

Alameida: OK, Now it’s expensive to live here at home, isn’t it? 

Kent: Yes. 

Alameida: The average household needs $130,000 just to make ends meet. So oftentimes, me, myself, the worker, that fringe benefit that I’m earning — working on a government job, earning a prevailing wage — I wanna receive that in cash. I want $35 or so an hour in cash, $70,000 a year to make ends meet. And many employers, that’s what they do. They pay out the fringe benefit in cash.

Kent: OK. 

Alameida: Now, if my employer is awarded a job under a PLA — that’s subject to a PLA — my employer is paying me my prevailing wages. But you recall that fringe benefit, that $9 or so an hour? It now has to be paid to the union.

Kent: OK. 

Alameida: Now, I’m a non-union worker. Those funds, that $9 an hour is used to pay benefits and such dictated by the particular union. I’m non-union. When the project is done, I do not receive those funds back. It goes. The only way I can benefit from the programs and benefits that that fringe paid for is if I leave my employer and join the union and get vested.

Kent: I see.

Alameida: Now, we have had contractors, we have had owners say, “You know, it’s wonderful. We just got awarded a contract under a PLA, but I lost two employees. Because they came to me and said, ‘Listen, that $9 an hour that we were earning in fringe, you know, it now has to go to the union under PLA requirements. I’m out of here. I’m going to go work for a company that’s going to pay me more.’”

Kent: But why would employees not want to work for the union? If we’ve got over 60% of our construction labor force non-unionized, what is the incentive for those people not to just join?

Alameida: What’s really wonderful is people want choices. And so, many individuals want the ability to be rewarded based on their skills and the effort they put into a project. That’s the same with business owners.

Business owners, they believe in free enterprise. They believe in open competition. They believe that it’s really important to put out a good work product and you’re rewarded for it. That’s I think the biggest reason. That is the biggest reason why.

And also the other — if we think about this — when we look at the construction industry, there’s three stakeholders in the industry. There are the folks working out in the field; there are the folks that are working in the offices, the support staff; and then you have the management leadership group.

What’s wonderful working for a non-union company is, if I’m in the field and I decide I want to go start my own business, I can do it.
Kent: I see. There’s more freedom.

Alameida: There’s more freedom to choose. And what’s really interesting, we have a significant shortage of workers entering the trades. The Gen Zers, one of the things that we’ve recognized is number one: they want freedom to pivot. They want the ability to have multi-path opportunities to move their career forward.

Kent: They don’t want to stick with one employer for the next 30 years. That’s an old model, right?

Alameida: That’s right. Or if they do, they want to be with an employer that gives them the opportunity to pivot into leadership. 

Kent: I see. 

Alameida: To pivot into different components. 

Kent: Move up and all of that. I see, I see.

Alameida: That’s right. That sort of thing. 

We have had a ton of members and non-members who originally they may have started off in the union marketplace, if you will, working out in the field, they decided they wanted to become business owners. And business owners, is small business the foundation of our economy.

Kent: Would you say then that a lot of the non-unionized construction workforce in Hawaii is like mom and pop shops and the smaller guys that are maybe upstarts, like what you were just saying? Whereas the unions are more of the bigger businesses and bigger projects and so on?

Alameida: Absolutely. Because they’re able to compete to that because they’ve been able to scale to that.

One of the things that we recognize is in construction, women-owned businesses, minority-owned businesses, they’re in the minority and it takes significant capital to get to the size of businesses — these larger businesses — and compete. 

And many of them don’t want to do that. What they want to do is put out a good work product, take care of their employees and continue to do good and it’s gotten very, very difficult.

Kent: So the new PLA puts the threshold at, what is it, $2 million, $1 million? 

Alameida: They took it from $25 million down to $1 million. $1.5 million, I’m sorry. 

Kent: $1.5 million government projects have now all these requirements, and that follows on the heels of a federal PLA signed by President Joe Biden. The federal PLA applies to some federal projects costing $35 million or more.

But so, what’s the difference? What’s the difference between setting it at $35 million and $1.5 million?

Alameida: I think the biggest difference is moving it down to $1.5 million is catering to a select group. It’s restricting small businesses from participating in building Hawaii. And it’s a significant detriment.

And not only does it hurt smaller businesses, we have contractors who are operating, they’re working on projects just under the original $25 million threshold. And they like these projects because it keeps their employees working for extended periods of time, right?

A $20 million project might keep somebody busy for four years. So I don’t have to worry as an employer about finding work.

Kent: Finding work and looking around. 

Alameida: But what can you do for $1.5 million? Can we even renovate a park bathroom for $1.5 million? I mean, what can you do?

Kent: Almost every government project is over $1.5 million. 

Alameida: Yeah. And the duration of that project is probably more like months, right?

Kent: So this is the most restrictive PLA in the nation, is what you’re saying.

Alameida: Yes, the next nearest is New Jersey at $5 million. If we look at California, I believe California is looking at codifying it at $35 million. Washington, D.C., I believe it’s at $75 million. So it’s incredibly restrictive.

Kent: The Honolulu rail, was that a PLA?

Alameida: That’s a PLA. And you know, what was it? PLAs are supposed to put projects out on time, on budget. 

Kent: Oh, right. 

Alameida: So on and so forth. And I guess the Honolulu rail, is that an example of it?

Kent: [laughter] It’s over budget, over schedule. 

Alameida: That’s right. 

Kent: And the argument there, it’s interesting because many arguments for the PLA are, seems like the opposite. If you read the governor’s order, they’re trying to put the PLA in place so that they can find more workers and prevent strikes and so on. But there’s like a flip side to that coin though, right?

Alameida: Absolutely. Because you can’t — employers will tell you, contractors will tell you, if we already have a shortage, by introducing more projects subject to PLA, it’s going to mean that we’re going to need to import workers and export their pay. 

Bottom line, that’s what we’re going to need to do. Because we don’t have enough workers here.

Kent: Well, but maybe importing workers is a good idea. We don’t have enough workers here. And so, what, how else can we solve our worker shortage?

Alameida: Well, you know, there’s some real roadblocks in the entire training process, if you will. I don’t want to, we won’t go into licensing, but let’s look at the apprenticeship programs, for instance. 

One, it’s incredibly restrictive to introduce new apprenticeship programs to the state to get them approved.

Kent: Apprenticeship, like, if you’re starting out, you’re learning the trade, you need to …

Alameida: That’s right. 

Kent: There’s rules regarding you have to work underneath an experienced and licensed person. 

Alameida: That’s one part of it. Those are, that’s one part of it. The other is, for instance, at ABC, we run five apprenticeship programs. Carpentry, plumbing, painting, roofing, and electrical. And it’s wonderful because you earn while you learn. 

Yet, we have had numerous occasions where we have wanted to introduce new apprenticeship programs to the community. It has to go through a review process, and unfortunately, the committee that is dedicated to sort of — I’m going to say rubber stamping — but giving permission or allowing these programs to move forward, we’re the only non-union participant on the committee. So in most cases the proposal never makes it to the table, which is really difficult. 

And what’s interesting, you know how we talked about the majority of companies and the majority of workers are non-union? It seems to me in an advisory group supporting that industry, might it make sense that the ratio of representation better reflect that?

Kent: But going back to this unionization, though, don’t unions protect people? I mean, from employers, let’s say, who have unsafe work conditions or treat their employees badly. This is the classic thought of why we need unions, right?

So aren’t unions a good thing in that sense? Or is there another side to the story?

Alameida: No, unions provide — obviously there are many of their members who understand the value of, or they feel, or they like the idea of — someone lobbying on their behalf for their benefits, for their abilities to work. That’s what collective bargaining is all about, right?

Yet, if we look at the issue of safety, it’s not the unions that are driving or helping improve safety. It’s the companies, whether they’re union companies or non-union companies. My bottom line is hit directly if I have a safety issue on site. 

Kent: So there’s already an incentive by the companies … 

Alameida: Significant. 

Kent: … to make sure that there’s safety there. Otherwise you might get a lawsuit, your company could lose millions of dollars and so on. 

Alameida: Thats right. Exactly. 

Kent: And so, even with non-union workers, there’s sort of a market force, in a sense, to protect them.

Alameida: That’s right. There’s never been, it’s really hard. I mean, that’s a discussion that we often, or an argument that’s often presented to us when we’re trying to introduce new programs is that, “Oh, we don’t know if it’s going to be safe.”

Yet there’s no data to show — well, let me rephrase this — all the data that we’ve seen out there has shown that whether it’s apprentice to journeyman ratios or apprenticeship programs in general, safety has not been impacted.

Kent: OK. So going back though, this new PLA, what does it mean for taxpayers? What does it mean for Hawaii’s economy? And what does it mean for government projects in general?

Alameida: Taxpayers, we as taxpayers, are going to be paying more for our projects, number one. The projects will, the length of time for projects to be completed will increase.
Kent: Why is that? 

Alameida: Because we don’t have enough of a workforce.

Kent: Oh, I see. There’s fewer workers to do the job to pick from.

Alameida: That’s right. Unless we are willing to bring workers in, non-residents in, to work on these projects, and they will in turn take what they earn and send it back to their homes.

So we have increased costs, we have projects taking longer, which means fewer projects, and we have a whole lot of projects — right? — that really need some work. Our infrastructure really needs some work, right?

And we have the rebuilding of Lahaina, for example. All of those things will be delayed. We’ll have more businesses, non-union businesses, who choose not to compete or they can’t compete because they don’t have the scale. They’re going to go out of business.

Kent: So what do you think should be done then with this new PLA policy?

Alameida: I think we should, one, it should be torn up. Let’s at the very least take it to $25 million. Or why not replicate the $35 million at the federal level. That’s number one.

Kent: I see. So you could tear it up and it would just revert back to the old way, which was the cap of $25 million.

Alameida: With a threshold at $25 million. That’s number one.

Number two, we really need to look at improving the paths to entry into the trades. It needs to not be something that’s siloed where a particular special interest group has the ability to say, “No, we’re not gonna add this program” or “Yes, we’re gonna add this program.”

We need to open it up. We need to be able to match our training opportunities with what the incoming workforce can manage. I think that’s really important.

Kent: I see. You’re saying that there’s some barriers that are preventing more workers from joining the trades.

Alameida: Yeah. Just like I had mentioned earlier, if we want to bring a new apprenticeship program, it has to be subject to review and we never even have that opportunity.

Kent: And that would bring down the cost of government projects.

Alameida: Absolutely. 

Kent: Actually, not just government though. If we brought more in, then maybe it would be easier for my wife and I to find an electrician for our home project or something.
Alameida: And you know, that speaks to something else that’s really important that we really should visit. And again, safety was always brought up as this is the reason why we don’t do it, but there’s no data to prove otherwise, is we have what’s called an apprentice-to-journeyman ration. 

Bottom line what it says, if we look, for example at the electrical field, electricians. For every eight apprentices working on a project there’s a need for — it’s called a progressive ratio, so the numbers vary — but you would need to have 16 journeymen working on the project. 

Kent: Wow, so in certain cases you need two to one workers. 

Alameida: Two to one. One to two.

Kent: One to two, right. So if you wanted more apprentices on your project that means you need more electricians. Many more journeymen. 

Alameida: More journeymen. But if we have a shortage of journeymen, how are we gonna be able to get more apprentices on the project?

So, we really should visit or revisit the ratio. At least getting it down to one to one. Revisiting it at the very least. 

Kent: Right. 

Alameida: The other thing, and at ABC we’re involved with it, we think it’s really, really important, we need to get involved stakeholders who are actually not in the industry. 

So we, for example, we have what we call a cross-program. And it’s a pre-apprenticeship program. Students completing the program — and it’s provided at no charge — they actually, if they decide to move into one of our apprenticeship programs, they actually have accelerated through the first semester. 

And we have, you know, local organizations — for example like the Castle Foundation — that really believes in expanding the career workforce. So they are partnered with ABC. We’re going to go out to the Hawaii Youth Challenge. You know, we’re going to go out to a couple of local schools. 

Palama Settlement, as an example, as we’d like to put together a cohort that we can train and introduce into the trades. 

We need to get community, we need to get stakeholders that are beneficiaries of the construction industry, if you will, involved in the process.  

Kent: Is there anything else you’d like to say today?

Alameida: You know, one, first of all, Joe, we really appreciate the opportunity to be able to share our thoughts about this really important issue.

I think in closing, what I’d like to suggest is we really think about choices. You know, we want, we should be able to, as a client, as a taxpayer, we should be able to pick the best company for the job.

Kent: I see. And consumers should have more choices.

Alameida: That’s right. 

Kent: Individuals should have more choices, and the government should have more choices too.

Alameida: Absolutely. That’s what I think we really need to revisit that and see how we can do that. 

Kent: I see. Well thanks so much for joining us today, that was really educational.

Alameida: Thank you. I appreciate it.