Few construction industry leaders believe they’ll see a turnaround in the first half of 2011 in the New York region. But they may see one an important milestone by midyear when 30 New York City labor-contractor collective bargaining agreements are set to expire on July 1.
The current crop includes some of the biggest unions, including the steamfitters, operating engineers, carpenters, and laborers. And a standoff looms over costs, says Louis Coletti, president and CEO of the Building Trades Employers’ Association.
Coletti says contractors are getting pressure from owners’ groups, such as the Real Estate Board of New York and hospital associations, all of which want to build with union labor because of its advantages in skill, project coordination, quality, and safety. But he says they are telling his contractors that the cost differential between labor and nonunion construction is too wide. “They all want the same thing,” Coletti says. “There was a 30% cost differential between union and nonunion at the height of the market in 2007, and we have been able to reduce it to about 20% through the project labor agreements and cuts the contractors have made in their own profit margins and overhead.”
And while he says unionized construction has “not done a good enough job” at marketing its value, he says the “differential” owners are willing to pay for union expertise is lower than the current level, requiring fundamental work rule changes – and not just temporary pay adjustments – to make project sites more efficient.
“I believe we have reached a potentially transformational moment in the New York City unionized construction industry,” Coletti says. “What the industry will look like moving forward will be determined on the success or failure of changes to reduce the costs of construction that are agreed to in those collective bargaining agreements.”
But Coletti acknowledges labor has a different view. “The contracting community believes that the financial crisis has created a permanent change in the structure of real estate financing,” he says. “We’re not so sure that labor agrees with that.”
And indeed, labor unions don’t agree the market has structurally changed, says Gary LaBarbera, president of the Building and Construction Trades Council of New York City. “There’s no doubt the economy has created very difficult scenarios, and the project labor agreements were designed to mitigate those problems,” he says. “We’ve been in a very bad recession, the worst since the Great Depression. But I think where the views tend to split is that we don’t necessarily share the same long-term view the contractors do. We think the work opportunities are going to pick up at the end of next year going into 2012.”
LaBarbera says those divergent views are going to color the negotiation process. “We’re all ultimately negotiating with the market, but we think when negotiations start next spring, we’ll have a more clear view of the economic outlook for next year,” he adds. “Everyone intends to go to the bargaining table in good faith and reach agreements that work for everybody.”
Coletti says the contractors are making efforts to show this round is different, such as pushing up the negotiating timetable, possibly into January. Another is to cancel the annual Florida winter retreat that both sides have used as an informal negotiations starting point. And the last is to not plan a replacement for the “Economic Recovery” PLA that expires in March, a deal that had lowered rates for private developers during the recession. “We haven’t talked about it because what we’re really looking for is permanent change in the contracts,” Coletti says.