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Commonwealth Court Invalidates PennDOT Project Labor Agreement

The Commonwealth Court recently held that a Project Labor Agreement (PLA) required by PennDOT violated competitive bidding laws codified in the Commonwealth Procurement Code, 62 Pa.C.S.A. §512(g). Allen Myers, L.P. v. Department of Transportation, No. 314 C.D. 2018 (Pa.Cmwlth. January 11, 2019)(en banc). Although the facts which gave rise to the dispute are unusual, the decision is significant because it demonstrates the Court’s willingness to question the justifications relied on by PennDOT (and presumably other agencies) in support of mandating PLAs.

Allen Myers, L.P., an open shop contractor, had recently completed (early and under budget) the first phase of a PennDOT project for improvements on Markley Street, State Route 202 in Montgomery County. For phase 2, PennDOT mandated that the successful contractor enter into a PLA with the Building and Construction Trades Council of Philadelphia and Vicinity, which represented 11 local construction unions. The PLA would have required the successful contractor to hire its entire workforce of tradesmen pursuant to the hiring practices set forth in the labor agreements of each union, but did not require the unions to accept as members the employees of any contractor that bid on the project. Further, there was an exception to the hiring requirement for contractors whose employees were represented by the United Steel Workers (USW): those contractors did not have to hire from the local unions and could employ their own, USW-represented employees.

Allen Myers filed a bid protest under the Procurement Code, challenging the PLA requirement on three grounds: 1) that the PLA was discriminatory because it effectively precluded non-union contractors from bidding and unduly favored contractors affiliated with the USW; 2) the Keystone Report, which PennDOT had relied on as its rationale for including the PLA requirement in the project, was invalid because it did not use objective data and was inherently biased; and 3) that the use of the PLA violated 404.1 of the State Highway Law, 36 P.S. 670-404.1, because a bidder’s union affiliation is not among the statutory criteria for determining a responsible bidder on a highway project. The Secretary of Transportation dismissed Allen Myers’ protest, which then appealed to Commonwealth Court.

The Court began its analysis by reiterating the principles behind competitive bidding statutes: to eliminate fraud and favoritism and to provide common standards to foster fair competition that places all bidders on an equal footing. When the procedures followed by an agency interfere with these principles the courts will intercede to restore them.

The Court then reviewed its jurisprudence addressing PLAs, concluding that it had found them to be appropriate where “time was of the essence” for project completion and where they permitted non-union contractors an equal opportunity to bid by allowing them to employ at least some of their own employees on the project. E.g., A. Pickett Construction, Inc. v. Luzerne County Convention Center Authority, 738 A.2d 20 (Pa.Cmwlth. 1999); Sossong v. Shaler Area School District, 945 A.2d 788 (Pa.Cmwlth. 2008); Glenn O. Hawbaker, Inc. v. Dep’t of General Services, No. 405 M.D. 2009 (Pa.Cmwlth. December 1, 2009).

In light of these factors, the Court determined that the PLA requirement on the Markley Street project violated competitive bidding requirements. It noted that the “exemption for United Steelworkers contractors tilts the playing field” because USW contractors can use their own employees while others must hire their workforce through the local unions. The Court rejected PennDOT’s argument that the PLA was available to all contractors as “lip service to the principle of competitive bidding” because “unlike contractors affiliated with the Local Unions or the United Steelworkers, the nonunion contractor that bids the Markley Street Project cannot use its own experienced workforce.” And because the PLA did not require the Local Unions to accept Allen Myers’ employees as members it “effectively precluded a nonunion contractor, such as Allan Myers, from participating in the bid solicitation.”

The Court next critically examined and rejected PennDOT’s reliance on an “expert’s report” as justification for the PLA. The Court stated that its PLA precedent “did not establish the broad principle that a PLA is appropriate so long as it contains the boilerplate language ‘time is of the essence’ and ‘nonunion contractors may bid’”:

The use of a PLA is permitted where the contracting agency can establish extraordinary circumstances, and PennDOT did not make that demonstration in this case. The Markely Street Project is a long term road improvement, the first phase of which was completed a year ahead of schedule. Nor is there any evidence that there is a labor shortage in the greater Philadelphia area. The Keystone Report’s recommendations did not justify the PLA because it did not identify any extraordinary circumstances surrounding the Markley Street Project that warranted its use.

(Emphasis supplied). Because of the PLA’s inherent unfairness to nonunion contractors and PennDOT’s failure to establish the “extraordinary circumstances” to justify its use, the Court held that the “PLA requirement in the bid solicitation for the Markley Street Project violates competitive bidding” and canceled the bid solicitation.

The most signifcant aspect of the Allen Myers case is the Court’s willingness to examine the justifications for the use of PLAs by contracting agencies. If Commonwealth Court really means that PLAs are warranted only in “extraordinary circumstances,” then the routine use of PLAs for government contracts in the Commonwealth is of dubious validity.