What Developers Need to Know About Project Labor Agreements for U.S.-based Offshore Wind Projects
The offshore wind market in the United States is exploding with unprecedented expansion, particularly in union-dominated areas on the East Coast. Many of these projects involve international developers who are new to the region. For developers who may not have insight into our country’s union labor force, here’s what you need to know about project labor agreements (PLA):
By definition, a PLA is a pre-hire collective bargaining agreement between a contractor (or a project’s managing entity) and one or more union labor organizations that determines economic and employment terms and conditions on a particular project. Before the project begins, the PLA establishes clear expectations on items including work schedules, overtime hours, holidays, paydays, safety rules, drug testing, dispute resolution, management rights and union rights. The PLA typically is established on a project-by-project basis and can be generated at the local level, regional level or even at a larger international level. International PLAs typically involve several of the 15 major labor union organizations that are part of North America’s Building Trades Unions and United Brotherhood of Carpenters (collectively known as the “building trades”). The PLA remains in effect for the duration of construction; once the project is complete, the PLA no longer is binding for future work in the project area.
Cost and schedule certainty. A PLA contains several components to keep the project on schedule and on budget. It establishes prevailing wage rates that have been negotiated in the area (based on the local or regional cost of living) and enables unions to provide a skilled local workforce through their hiring hall. This removes the risk of recruiting out-of-town workers at higher labor costs and allows developers to budget the project appropriately. PLAs also create predictability by setting schedule shifts, which helps deliver projects on time.
Quick issue resolution. While no contract is perfect and there’s always potential for issues to arise, an effective PLA will include dispute resolution forums covering grievances and work scope jurisdiction between the building trades. This provides greater labor harmony on the project and lessens the chance of work interruptions.
Ease of staffing. Training and recruitment processes are simplified with a PLA in place. Collaborating with the building trades labor unions ensures a strong, safe and highly skilled workforce—benefiting all parties involved.
Local community relationships. Aside from direct project benefits, the PLA also helps to build goodwill with the local labor force and community. With a PLA, the building trades unions may establish skills training programs that recruit from underserved residents in surrounding communities. In addition, local union representatives and members typically attend public permitting meetings to advocate for the project.
Legal requirements. For many offshore wind projects, a PLA may be mandatory. For example, President Joe Biden’s February 2022 Executive Order on Use of Project Labor Agreements For Federal Construction Projects stipulates that the U.S. government must require a PLA before awarding a directly financed federal construction contract when an estimated cost is $35 million or more (including offshore wind projects). This could affect an estimated $262 billion in federal contracts and improve job standards for nearly 200,000 construction workers.
Local content requirements. A PLA helps meet typical content requirements set by local governments and community organizations for hiring qualified local labor, guaranteeing residents will have the first chance to work on projects within certain zip codes and/or radius of their homes. The building trades unions also will commit to providing training programs for those individuals through pre-apprenticeship programs, apprenticeship training and other workforce development programs.
Public advocacy. Even if not required by law, the commitment to local communities demonstrated by a PLA goes a long way. This is especially true for the relatively new industry of offshore wind power, which brings both large opportunities and concerns to local communities. Emphasizing that these projects create desirable jobs helps avoid community backlash experienced by other large municipality projects. By offering locals a share of project success, they are more likely to advocate for these developments in public forums and help defuse problems before they arise.
Unique local workforce opportunities. Offshore wind projects with a PLA in place offer long-term workforce benefits to surrounding communities. As more project aspects are performed on land (such as building new ports or assembling turbines), more jobs also are being created in the community. Developers also will benefit by already having a consistent supply of a high-quality, well-trained U.S.-based workforce in place for future offshore wind projects and maintenance.
It’s essential for developers entering the United States’ growing offshore wind market to understand the needs of the local workforce and take proactive measures to address them—starting with a PLA. This upfront negotiation will save you time, money and headaches while improving the local community’s perception of your project. Learn more about how Black & Veatch’s experienced labor relations experts can navigate PLAs on your power, transmission, and infrastructure mega-projects by contacting us here.