Want a PLA? Show Me the Savings!

By Christopher A. Andreucci

A recent ruling by a State Supreme Court Justice has reinforced the fact that in order to mandate a Project Labor Agreement (PLA) in a public works contract, the burden falls to the public authority to establish that such a requirement advances the interests embodied in the competitive bidding statutes (e.g., best work at the lowest possible cost and preventing favoritism from becoming a factor in awarding public contracts).  A copy of the ruling is provided in the link here.

In the ruling, Judge Joseph C. Teresi sided with an unsuccessful low-bidder to a reconstruction and bridge replacement project in the Mid-Hudson Valley and held that the New York State Department of Transportation (DOT) violated New York’s competitive bidding requirements by requiring the inclusion of a PLA in its contract.  Reportedly, DOT rejected the bid submitted by Lancaster Development, notwithstanding that it was $4.5 million lower than the next bidder, due to the bid explicitly rejecting the idea of including a PLA in the project.

Given the fact that the law in regards to this issue has been well settled since a 1996 Court of Appeals decision on point, the fact that DOT did not follow the law, according to Judge Teresi, is more than a little surprising.  What is telling is the admonishment of DOT by Judge Teresi in his decision for what appears to be a flagrant attempt by DOT to circumvent well settled factors in establishing the need for a PLA in a public contract.

The 1996 Court of Appeals decision involved two PLAs: one of which was granted by the New York State Thruway Authority involving the Tappan Zee Bridge project and the second by the Dormitory Authority of the State of New York (DASNY) involving the New York State Department of Health’s Roswell Park Cancer Institute project.  The Court of Appeals upheld the PLA granted by the Thruway Authority, but rejected the one issued by DASNY.  Interestingly, and perhaps an important factor influencing the court’s decision, the facts established that the Thruway Authority based its authorization of the PLA on the recommendation of an independent consultant pursuant to an analysis conducted prior to bidding where DASNY’s decision was made after work on the project had commenced.  Indeed, the Court of Appeals found “[g]laringly absent from the record is DASNY’s contemporaneous projection of cost savings as a result of a PLA or any unique feature of the project which necessitated a PLA, an exceptional specification in all events.”

Thus, it is clear that PLAs are “neither absolutely prohibited nor absolutely permitted” by the courts, and the validity of PLAs are considered on a case-by-case basis with the following factors forming the basis for the review:

• The public authority’s burden is high and it must show more than a rational basis for its decision to require a PLA; and
• To enter into a PLA, the public authority must establish in the record that such a decision meets the goals of “protection of the public fisc by obtaining best possible work at the lowest possible price, and prevention of favoritism, improvidence, fraud and corruption in the awarding of public contracts”; and
• The public authority bears the burden of proof in showing that its decision to require a PLA “had as its purpose and likely effect the advancement of the interests embodied in the competitive bidding statutes”; and
• A public authority’s engagement of an independent third-party consultant to provide the analysis to support the required findings before bidding or work commences, is crucial in defending such public authority’s credibility on the issue.

So, what happened in the DOT case that made Judge Teresi issue such a strongly worded opinion?  For starters, according to Judge Teresi, DOT’s record supporting the decision to require a PLA was incomplete and despite repeated attempts to obtain the necessary information, DOT failed to provide a complete record.  This made Judge Teresi hold that “[d]ue to these blatant and unexcused record defects, rather than finding DOT in default or requiring yet another supplement, the missing documents are hereby considered non-existent and the proceeding is deemed fully submitted.”  Not a great start, strike one.

Secondly, Judge Teresi was particularly dismissive of DOT’s reliance on the independent consultant’s report because DOT caused its consultant to issue a revised report, without any apparent need other than to alter the conclusion of the initial report.  The first submittal of said report concluded that the PLA would provide some benefit, but to properly justify requiring one, DOT must first negotiate a PLA and quantify the required savings attributable to that requirement.  Instead, according to the court, DOT sought a revised report from its consultant “without specific explanation for the revision” and it received the revised report prior to concluding any negotiations on a PLA.  Thus the court found that any updated conclusion in the revised report lacked any basis upon which it could be properly relied upon.  Strike two.

Finally, the court pointed to internal DOT documents which found that requiring a PLA did not generate any significant cost savings, questioned other cost savings categories and ultimately concluded that it was “inclined to not recommend a PLA.”  Strike three.

We will never know why on these facts DOT pressed forward and required a PLA.  What we do know is that the courts will not simply look the other way when a public authority requires one as part of a public project and instead will continue to demand that the advancement of the interests embodied in the competitive bidding statutes remain at the forefront in awarding public contracts.

One Response to “Want a PLA? Show Me the Savings!”

1. Janet Penksa, Cty of Buffalo says:

   June 12, 2012 at 11:06 am

   Excellent information and particularly useful. PLA’s, in spite of this experience, can be very useful and beneficial to local governments particularly provisions pertaining to apprenticeship training, MWBE (and potentially goals for hiring city residents) in terms of meeting public policy goals. Thank you Chris.

   Reply