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PLA Costing Taxpayers $71 Million Struck Down by New Jersey Court

April 12, 2023

On April 4, the Appellate Division of the New Jersey Superior Court ruled that a commission authorized by New Jersey and Pennsylvania law to build and maintain Delaware River bridges lacked the authority to require controversial project labor agreements.

At issue were a contractor’s allegations that the Delaware Joint Toll Bridge Commission violated its fiduciary and legal duties when it required a PLA that excluded from consideration the lowest responsible bid for a bridge improvement project. The court found the PLA mandated by the commission was authorized neither explicitly in Pennsylvania statute nor implicitly in Pennsylvania competitive bidding law and public policy. While the court explicitly declined to “condemn the use of PLAs,” its ruling was partially informed by the commission’s failure to garner competitive bids. The PLA resulted in just one bid at $69 million, or roughly 20% more than the estimated project cost.

“This case is another illustration that government-mandated PLAs needlessly increase costs, reduce competition from qualified contractors and even exclude certain union-signatory contractors and union labor from competing for and building critical infrastructure projects,” said Ben Brubeck, ABC vice president of regulatory, labor and state affairs. “Because the project was built with an illegal PLA, delayed justice ultimately wasted $70 million of taxpayers’ money. This fiasco serves as an expensive reminder that the benefits of fair and open competition can help deliver the best infrastructure projects at the best price to American people.” 

In 2016, the Delaware Joint Toll Bridge Commission informed potential bidders for the estimated $260 million Scudder Falls Bridge improvement project of a PLA requiring contractors to hire 75% of all craft labor from specific unions signatory to the PLA. George Harms Construction, a New Jersey heavy construction contractor, threatened an injunction against the procurement unless the commission amended the PLA to include an additional union that was party to an existing collective bargaining agreement with the company. The commission refused and filed for a declaration that the unamended PLA was compatible with its fiduciary and legal duties.

Harms responded that the PLA prevented its submission of a bid $71 million less than the lone and successful bid, and therefore violated New Jersey and Pennsylvania laws requiring the commission to ensure competitive bidding and “prudent use of toll payer monies.” While New Jersey statute explicitly authorizes government-mandated PLAs, Pennsylvania statute does not, and Pennsylvania case law permits government-mandated  PLAs only in the event of “extraordinary circumstances.”

A district court found that the commission retained the authority to require a PLA in the absence of consistency in New Jersey and Pennsylvania’s legal treatment of PLAs and found the PLA not unrelated to the commission’s interests in timely completion.

The appellate court disagreed, ruling that the absence of consistency required the commission’s consent to exclusive jurisdiction under New Jersey law as a precedent to the PLA, and that the commission had not so consented. The appellate court clarified that, although the commission’s failure to garner competitive bids was not “basis for invalidating the PLA, … the commission must be mindful that its authorized purpose is to benefit the people of New Jersey and Pennsylvania.”

The ruling comes as the construction industry awaits a final rule implementing President Joe Biden’s Executive Order 14063, which requires PLAs on federal construction projects of $35 million or more. The Biden administration is also pushing state and local governments applying for more than $250 billion in federal infrastructure grants to require PLAs in order to enhance their ability to receive federal money. Research has found government-mandated PLAs increase infrastructure project costs by 12% to 20%. This will also exacerbate the construction industry’s skilled labor shortage of more than half a million people by excluding the 88% of the construction industry that chooses not to join a union­—in addition to some construction workers who are members of labor unions not favored in a PLA—and undermine taxpayer investments in America’s infrastructure and clean energy projects.

A total of 25 states have enacted laws that restrict the use of government-mandated PLAs, while less than a dozen states, including New Jersey, have enacted laws encouraging the use of  government-mandated PLAs on public works projects in certain circumstances.

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