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WEST MICHIGAN — The comprehensive reforms to Michigan’s tax structure have opened up public contracts to increased competition.

Governor Rick Snyder signed legislation July 19 that prohibits public entities from using union-only project labor agreements (PLAs). The agreements bundle contracts with unionized shops, offering owners discounts if they use all-union labor on a project. The Republican leadership of the Michigan Legislature struck down the ability for public bodies to use the agreements, but left them in place for the private sector. The effect of the legislation is blunted somewhat, legal experts say, as the bill carves out provisions for prevailing wage projects — as most publicly funded projects are still subject to federal and state prevailing wage requirements.

John Doherty, president of Associated Builders and Contractors of West Michigan, said that the non-union construction firms took notice of the issue when the board of trustees at Michigan State University and Kellogg Community College stipulated that contracts for new construction would have to include union-only PLAs.

“We felt that the overriding situation with public PLAs is that they are using taxpayer money for the construction of those projects,” Doherty said. “By virtue of lessening the amount of competition, odds are you will have to pay more. When a merit shop and union shop are in the same bidding process, everyone will start sharpening their pencils.”

Tim Schowalter, president of Pioneer Construction, said that more than 85 percent of construction workers are non-unionized and PLAs gave union shops unfair advantages.

“(Union-only project labor agreements) have prevented us from bidding on many public projects in the past. Typically PLAs were being used by public entities … and were more prevalent in the Lansing and Detroit metropolitan areas,” Schowalter told MiBiz. “This will allow any non-union contractor to pursue work in the public arena regardless of whether or not their employees belong to a union. It is a basic issue of fairness when taxpayer dollars are being used.”

Mike Jackson, executive secretary and treasurer of the Michigan Regional Council of Carpenters & Millwrights, the state’s largest construction union, said that while he appreciated being at the table during negotiations with the leadership of the State House and Senate, as well as with the governor, the legislation missed the mark.

“Our position is simple. We don’t believe that was a very good piece of legislation for a number of reasons,” Jackson told MiBiz. “The bottom line is that it doesn’t address PLAs — it addresses construction contracts.”

Jackson said the costs of PLAs are being overstated. By pooling services such as safety and drug testing, union-only PLAs can keep costs low. Jackson points to the fact that some of the largest corporations in the state, GM and Marathon Oil Company among them, work with union-only PLAs due to the cost certainty and risk management that the agreements bring to construction projects.

“We believe we win the free market argument here. If we can do the better job, be more productive and create value, why would you stop this? This wasn’t about saving money for the state or local municipalities. For some, it was a direct shot at the unions,” Jackson said. “We believe that we win the economic argument, the free market argument. The more competitive argument is on our side.”

Doherty admits that the direct economic impact of PLAs is minor — adding 2-5 percent to contracts. The real impact, he said, are requirements in state and federal contracts to pay prevailing wages, which can add 12-15 percent to the cost of contracts. The law now enables a more equitable playing field for unionized and non-union contractors, he said.

“We didn’t see many of these locally, but then you saw MSU, then KCC go with them. It did impact our guys’ ability to increase their market area, where they were able to do work,” Doherty said. “We looked at it as a cancer in the industry. If you didn’t do something about those that pop up here and there, more and more clients would be convinced to go with them.”