Local-Hire Rules Tied to Project Incentives Push Contractors
Tax-incentive packages being awarded by municipalities and states to manufacturers to locate big projects are including local-hire requirements for construction labor that contractors say can be tough to meet.
"Most owners receive state incentives and support to attract these projects, and that puts the challenge on us to find local subcontractors who are qualified and have capacity," says Chris Morgan, project manager at Michigan-based Walbridge Construction. "The difficulty varies by the state or region."
Before starting work in 2012 on the first $975-million phase of the Benteler Steel plant near Shreveport, La., Walbridge knew it had to meet local hiring mandates for the 1,000 construction jobs to be created. The firm conducted multiple outreach events to vet local subcontractors through its prequalification process, according to Morgan.
The project, set for completion in the second half of 2015, attracted a lot of interest but added review and analysis of prospects was needed to find the right mix of local, regional and national subcontractors to meet project requirements, he says.
"Sometimes, the owner wants the biggest and best contractor to do a $20-million concrete job, but we might have to break it into five parts to get local contractors involved," says Morgan. "Some owners understand and are totally on board, while others—maybe companies new to the U.S.—don't realize what comes along with the local-hire requirements they agree to."
He adds, “When a project receives local dollars, there’s a hope, and often an expectation, it will use local labor, but the contractor doesn’t get those tax breaks,”
West Virginia's manufacturing investment tax credit calls for 75% of project construction labor to come from local sources. "If a contractor cannot find the workers they need locally, they can hire from outside the area," says David Efaw, treasurer of the West Virginia Building Trades Council, but only after filing a request with the state jobs agency and waiting three days to see if local workers are available.
At a chemicals industry conference last month, Shell executives said an ethane cracker project is moving forward in Pennsylvania, for which the state created a $1.65-billion tax incentive package in 2012. It calls for Shell to invest $1 billion and create 2,500 construction jobs in the state althought the final investment decision could still be years away.
“We are looking forward to working with Shell,” says Frank Sirianni, president of the Pennsylvania Building and Trades Council. “We have one of the highest skilled workforces in the country with 8,500 apprentices and 136,000 union members, so there will not be problems for contractors to use local labor. We haven’t seen that issue here.”
Sirianni says AFL-CIO policy is to support local hiring on all jobs.