Wednesday, July 30, 2014

Court Strikes Down Apprenticeship Utilization Requirements on Public Construction Projects

Many public agencies throughout the country require that contractors on public construction projects use a certain percentage of apprentices on the projects.

Federal court rules against city program:  On July 16, 2014, a federal court in Boston struck down an apprenticeship utilization ordinance for the City of Quincy, Massachusetts, arguing that it violated federal law (ERISA).  The decision by the U.S. Court of Appeals for First Circuit will have impacts on similar apprenticeship programs in the states covered by the First Circuit court, including Massachusetts, Rhode Island, Maine, New Hampshire, and Puerto Rico. It may also, in time, have impacts on similar programs across the country.  Click here for a news article on the court decision.  Click here to read the full court decision.

Shortage of construction workers:  It's no secret that many older construction workers are reaching retirement age, and that young people are not flocking to fill the vacancies and anticipated vacancies in the years ahead.  Many argue that apprenticeship utilization requirements are necessary in order to attract young workers to enter the field.  It seems to me, however, that the solutions to the shortage of workers goes much deeper than simply requiring apprenticeship jobs on public construction projects.  That, in and of itself, will not be compelling to convince a young person to enter the field.  There are much deeper reasons why construction is not attractive to young people today.

Lawsuit brought by open shop contractors:  The City of Quincy's ordinance was challenged by a coalition of merit shop (non-union) contractors who argued that the requirement for utilization of apprentices enrolled in a state-approved apprenticeship training program effectively limited competition to union contractors.  Unions generally sponsor and have state approval for most construction training programs.  

Limited competition:  Ronald N. Cogliano, the president of the Merit Construction Alliance that brought the lawsuit stated that "When you artificially limit competition in any market, prices go up.  Fewer bidders means higher prices."

Importance of trained workforce:  There's no question that it is in everyone's best interest that the construction workforce be appropriately trained.  Apprenticeship training programs are often seen as a means to accomplish this.  

Conflicting policy objectives:  With a shrinking construction workforce and the need for a trained workforce, unions have been strong proponents of apprenticeship utilization requirements.  Such requirements, however, often restrict competition to union contractors who have access to union sponsored apprenticeship training programs.  Thus, there are conflicts between policy objectives of ensuring competition and having a trained workforce.  From my perspective, the public is best served when the procurement process is open, fair, and transparent.

Keep competition open:  Any solution to ensuring a trained and sufficient construction workforce must ensure that competition does not exclude non-union contractors from bidding.  Any time competition is restricted, whether it is for an apprenticeship program or a local preference program, it will ultimately result in higher prices to the public.  In promoting apprenticeship utilization requirements, union proponents should develop programs that ensure a trained workforce and do not restrict competition to union contractors only.  The union argument that non-union contractors may participate in the union apprenticeship programs is fraught with major challenges, and is not an acceptable option for many non-union contractors.  

Educate young people:  Perhaps the real solution is not to mandate utilization of apprentices on public projects, but to let the market dictate what workers are used, while at the same time endeavor to educate young people on the advantages of a pursuing a career in construction.  

Washington state:  In Washington state, RCW 39.04.320 requires that 15% of the workforce on public works projects estimated to cost $1 million or more be performed by apprentices enrolled in a state approved apprenticeship training program.  The state law only applies to the state Department of Transportation (WSDOT), institutions of higher eduction, the state Department of Enterprise Services (DES), and school districts.  Some cities and counties have voluntarily adopted apprenticeship utilization requirements on their public works projects.
Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC

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