SEPTEMBER 28, 2009
** NOT APPROVED **
Members Present: D. Pullen, G. Benson, D. Fanton, W. Hall, T. Hopkins, T. O’Grady,
Others Present: D. Burdick, W. Dibble, A. Finnemore, M. Healy, J. Margeson, T. Miner,
B. Reynolds, B. Riehle, T. Seeler (Seeler Engineering), F. Sinclair, N. Ungermann
Call to Order: 12 noon by Committee Chairman David Pullen.
Project Labor Agreement Benefits Analysis (Feasibility Study):
Tim Seeler, from Seeler Engineering, forwarded his report on the Project Labor Agreement Benefits Analysis for the Courthouse Project late last week (copy attached to original minutes). Committee Chairman David Pullen noted that he spoke with several legislators to make sure everyone was aware the information was available on the Internet. Mr. Seeler was present at the meeting to discuss the report and answer questions.
Committee Chairman Pullen noted that the benefits analysis was broken down to show labor savings directly attributable to provisions in the PLA, and that totaled $192,600. He asked Mr. Seeler to explain how he arrived at that estimate and what was included in the analysis.
Mr. Seeler summarized the analysis process. When determining if a PLA is applicable, (1) you must demonstrate an economic benefit directly due to terms and conditions negotiated in the agreement, and (2) you must make sure there is no favoritism. Seeler Engineering looked at the information provided by LaBella Associates (design team) and Bovis Lend Lease (cost estimator), met with LaBella to fully understand the features of the project, and then evaluated the individual cost breakdowns. They put that together and projected the amount of labor that goes into the project, using previous models for similar projects. On that, they imposed the special circumstances, i.e. weekend work to avoid certain conditions, night work to allow building operations to continue, etc. Those things trigger most of the premiums associated with a project. A projection of labor was made, totaling about 125,000 hours, which was then broken down by trade, and each trade was evaluated for those special conditions to ascertain what can be saved for this project by applying the PLA that's been negotiated (Section 5, Table 2 of the report). That led to the projections included in the summary table.
There are a couple of things that entered into that from a project execution standpoint. There are really two components: the new addition and the renovations to the existing structure. The key to getting to these renovations and maintaining the project on schedule is being able to move the Court system into the new structure during the short period of time when the Courts are not in operation, so some things will have to be done by a certain time. Otherwise you would have the potential of disturbing the Court calendar and adding to the cost of the project. The second piece is the renovations. Some areas will be renovated in the absence of personnel, but others will have to be renovated while staff is working there at the same time. Those kinds of things add the premiums, primarily in second shifts and weekends. Seeler Engineering has identified the savings to be realized in those work activities. The PLA was negotiated with no shift differential, where typically it's five to ten percent, and this provides significant flexibility for how the work is executed without worrying about extra pay.
The other thing that shows up in the estimates that's available because of the PLA, but wouldn't be otherwise, is the ability to use a four ten-hour work day program. There is a significant increase in productivity just in the normal work day cycle, especially for the general trades, in the existing building areas where there would be a lot of prep time, special clean up, and protection of equipment. They have found that a significant benefit can be derived by going to a four ten-hour day program.
In addition to the reduction in the shift differential to zero, there are other things that are favorable to the County, like the negotiation of industry funds and flexibility in start and finish times. All of that packages into one of the last things Seeler made a projection on, and that was management rights. In a union situation, most agreements don't say anything about management rights; it's inherent in the way they operate. They will dictate to the contractor for staffing requirements, delivery of the labor, and levels of skill base - all adding to the costs or slowing the project down. The PLA negotiated for the County completely removes those rights from the unions; they have no right to participate in those decisions. That adds value to the project as well.
In the end, the labor hours and all those different scenarios are looked at to arrive at detailed calculations that support the numbers for each individual thing (Appendix G). This shows how Seeler arrived at the $192,600 estimate. These are dollars directly related to the County's project: the labor and how they work on the job.
Two key things that allow the application of a PLA are economic savings, which this demonstrates, and the absence of favoritism, which the agreement in total demonstrates. If those two conditions are met, then you look at the additional benefits, which are things you can account for later on, but can't be used in the decision-making process (Section 6 of the report). This has all been established through the past ten to twelve years of implementing these types of projects. Included are all of the other intangible benefits that don’t directly drive cost savings shown in Section 5, but are still valuable.
About two years ago, the state changed the Labor Law to say that for certain projects in certain dollar ranges, you are allowed to step outside the Wicks Law and implement your project in a way that's more favorable to you. The Wicks Law requires at least four very specific contracts for any public labor bid job: general, electrical, mechanical, and plumbing. The implementation of a PLA allows stepping outside that to package the project in a way that is much more favorable to the project owner. That was not taken into direct account in the report, because it's really more an indirect benefit, but studies done by the state and cited in the report indicate you can reduce the project cost by anywhere from 10 to 30 percent as a result of repackaging outside of that standard Wicks Law requirement. In Mr. Seeler's opinion, the County would not see a 30 percent reduction; however, there is the potential for up to 10 percent.
An additional benefit, the management rights clause mentioned earlier, or the right to manage the project the way the management team sees fit, may be an intangible, but the County has control of the project.
Another aspect typically evaluated in the report is the
potential for project disruption. They look
at the labor market and the potential for disruption due to strikes, walk-outs,
and job actions, and then try to make an assessment of risk. The economy has made people more anxious
about their employment, and the change in national politics has allowed more of
a voice for those organizing labor, so things are changing a little. Mr. Seeler characterized the mood in
Seeler assessed the marketplace, the type of project, and
also what they expect as the bidding environment, to make some projections, and
those are reflected in the estimates.
The County can expect up to 60 percent of the project being conducted by
union contractors due to the high percentage of the skilled trades (electrical,
mechanical, and plumbing) that are union.
Also, the general contract is large enough to make it a real stretch for
some of the local generals, but it would draw attention from
Mr. Seeler concluded by stating that the economic savings are clearly demonstrated, the agreement is fair and equitable to both union and non-union contractors, and the County will also see additional benefits.
Legislator Fanton asked how much time operating engineers would be involved in the project, and expressed concern about the high rate of pay with the project beginning in the winter. Mr. Seeler replied that about 6,000 labor hours are projected. A chart included in the report lists typical guaranteed hours for unusual conditions under existing agreements in the absence of a PLA, but "guaranteed" pay was eliminated in the County's PLA. The agreement only guarantees one hour of work across the board. The PLA acts like a master labor agreement that overrides all local agreements, but if nothing is said in the PLA on a particular issue, the local agreement applies. The key features of the local agreements are summarized in the PLA.
Legislator Reynolds questioned if the PLA eliminates the need for a construction manager, allowing the retention of a clerk of the works with a potential savings. Mr. Seeler responded that the County could consider eliminating the full construction manager scope of services and reduce it to a clerk of the works. There are some advantages to having a more comprehensive set of services. Some of the studies that address the reduced cost by going to a single contractor and eliminating the Wicks Law found that the claims related to a contract will go up, even in a single contractor environment. Managing risk and the potential for claims may add a higher cost for litigation or resolution. A construction manager's presence helps to resolve issues on the site, such as between the sub-contractor and the prime, and just enforcing the prime contractor. You really want someone with more involvement in the project. There is a very substantial difference in the quotes the County received for construction management and clerk of the works services, but that depends on the scope of services. Mr. Reynolds questioned if any of the responses received for clerk of the works qualified. Mr. Pullen answered that the committee interviewed three firms that quoted on both approaches, two for clerk of the works and three for construction management. The committee hasn't made a decision, but is still gathering information and checking references. Mr. Pullen's opinion was that even with the savings (there was $190,000 difference between the low quotes), there were additional advantages to be gained by retaining the construction management services: additional inspection services, supervision, value engineering, etc. We would not be choosing the cheapest approach, but would be gaining other advantages. Mr. Pullen has gathered viewpoints from several people outside of the County, including some from uninvolved engineering firms, and the conclusion was that the retention and involvement of a construction manager as soon as possible will save money and improve the quality of the project. He personally would choose construction management services, and there were similar sentiments expressed by committee members.
Chairman Crandall referred to the break-down of categories included in Mr. Seeler's cover letter, and some of the issues, such as the four ten-hour work days, need to be actually implemented by the construction manager in order to experience the savings. Mr. Seeler acknowledged that was true. Six of the seven savings areas identified become automatic with the implementation of the PLA. The only one that’s optional is the four ten-hour work day program, which would have to be implemented, so that message would have to go back to the design and management teams.
Committee Chairman Pullen reviewed the next steps, and noted that LaBella is anxiously awaiting the decision on the PLA, as it affects how the specs are drawn up for the bidding process. They plan to advertise in mid-October, with bids to be received sometime in November. If this committee approves of the benefits analysis, the PLA is already scheduled to be considered by the full Board this afternoon. If the committee is unhappy with the study or feels that the PLA would be detrimental to the project, the resolution can be withdrawn. The law requires that this analysis be done, and it has to show an economic benefit. It is clear that there is an advantage, and Mr. Seeler has recommended moving forward with the PLA. Chairman Crandall voiced his opinion that the $192,600 estimated savings is very positive, and he would support the PLA. He noted that there is no further action needed from this committee, unless it desires to withdraw the PLA resolution. Mr. Fanton asked if the PLA has to be approved by any other entity. Mr. Seeler noted that no one else needs to approve it, and the unions have their own approval process. Mr. Pullen reported that Peter Godfrey, from Hodgson Russ Attorneys, indicated that all unions have voted to approve the PLA, but they’d like to hold off on signing until the County approves it. Steve Thorp, from the Construction Trades Council, will circulate the agreement for signatures. LaBella Associates wants to send out signed copies with bids.
Legislator Ungermann questioned how the no-strike protection provision in Section 5.2 of the report affects the savings estimate. Mr. Seeler responded that it was not projected into the estimate. He is assuming the project will proceed without disruption as a conservative way of estimating savings. Mr. Pullen added that there could be disruption without a PLA, and if so, that would add cost to the project.
Legislator Reynolds expressed concern about the apparent lack of negotiations with the unions. Mr. Pullen dismissed that concern and explained that over three months were spent in negotiations with the unions, which were conducted by Attorney Peter Godfrey, acting on behalf of the County. All of the issues that have been mentioned – the “tag-along” provision (one-to-one union-to-non-union labor ratio), payment of union benefits by non-union employers, use of apprentices, and premium pay – were on the table and negotiated. Five major points were identified by Mr. Godrey, and he was able to get all five, possibly due to the lack of work.
Next Meeting: Wednesday, October 7, 2009, 3:00 p.m.
Adjournment: The meeting was adjourned at 12:45 p.m. following a motion made by Legislator Hall, seconded by Legislator Fanton and carried.
Respectfully submitted by
Adele Finnemore, Journal Clerk