This Joint City Council/Board meeting is being conducted in a hybrid in-person/virtual format. Members of the public may participate and provide public comment during the meeting, in person at the location identified above, by joining the Zoom meeting, and/or by submitting written public comments in advance of the meeting via email to [email protected]. The meeting will be streamed on www.slo-span.org.
1. CALL TO ORDER – Mayor/Chair Ed Waage
2. PLEDGE OF ALLEGIANCE
3. ROLL CALL BY AGENCY – City/Authority Clerks
Arroyo Grande: Council Members Lan George, Jim Guthrie, Kate Secrest, Mayor Pro Tem Kristen Barneich, and Mayor Caren Ray Russom
Grover Beach: Council Members Daniel Rushing, Clint Weirick, Zach Zimmerman, Mayor Pro Tem Robert Robert, and Mayor Karen Bright
ARROYO GRANDE CITY COUNCIL
GROVER BEACH CITY COUNCIL
PISMO BEACH CITY COUNCIL
CENTRAL COAST BLUE REGIONAL RECYCLED WATER AUTHORITY
BOARD OF DIRECTORS
Special Joint City Council/Board Meeting Agenda
MONDAY, JUNE 5, 6:00 PM
IN PERSON AT:
SOUTH COUNTY REGIONAL CENTER
800 WEST BRANCH STREET
ARROYO GRANDE, CALIFORNIA
AND VIA ZOOM AT:
Please click the link below to join the Zoom Meeting:
https://us02web.zoom.us/j/85151403161
Webinar ID: 851 5140 3161
Or by Telephone: 1-669-444-9171
Agenda: Arroyo Grande, Grover Beach, Pismo Beach, Central Coast Blue Regional Recycled Water Authority Joint City Council/Board Meeting
Monday, June 5, 2023
Pismo Beach: Council Members Marcia Guthrie, Stacy Inman, Scott Newton, Mayor Pro Tem Mary Ann Reiss, and Mayor Ed Waage
Central Coast Blue Regional Recycled Water Authority: Board Member Karen Bright, Vice-Chair Caren Ray Russom, and Chair Ed Waage
4. WELCOME AND MEETING ORIENTATION - Mayor/Chair Ed Waage
5. CENTRAL COAST BLUE REGIONAL RECYCLED WATER AUTHORITY STATUS REPORT AND PROJECT UPDATE - Geoff English, CCBRRWA General Manager and Justin Pickard, Water Systems Consulting
Council/Board Questions - Mayor/Chair Ed Waage
6. LOCAL HIRING ALTERNATIVES FOR CENTRAL COAST BLUE CONSTRUCTION CONTRACTS – Introduction by Geoff English, CCBRRWA General Manager; Presentation by Justin Pickard, Water Systems Consulting and Robert Lomeli, CCBRRWA Interim Attorney
Recommendation: Receive a report on alternatives and considerations to advance local hiring for construction of the Central Coast Blue Project. No formal action will be taken.
Council/Board Questions - Mayor/Chair Ed Waage
7. PUBLIC COMMENTS
At this time, any member of the public may comment on any item appearing on this Agenda. Please limit your comments to three (3) minutes or less.
8. CLOSING COUNCIL/BOARD COMMENTS - Mayor/Chair Ed Waage
9. ADJOURNMENT
This agenda was prepared pursuant to Government Code Section 54956 and posted at the following locations:
Arroyo Grande City Hall, 300 E. Branch Street, Arroyo Grande, CA; Grover Beach City Hall, 154 S. Eighth Street, Grover Beach, CA; Pismo Beach City Hall, 760 Mattie Road, Pismo Beach, CA; and Central Coast Blue Regional Recycled Water Authority (CCBRRWA), 177 S. Eighth Street, Grover Beach, CA. The Agenda and reports can be accessed and downloaded from the CCBRRWA website at www.centralcoastblue.com.
All materials submitted to the Council/Board relating to items on this agenda are open for public inspection unless otherwise exempt by law. Staff reports and attachments published as part of this agenda, as well as copies of correspondence received relating to these agenda items and materials distributed at the meeting, may be obtained by request from the Pismo Beach City Clerk at [email protected], or in person at the City Clerk's Office, City Hall, 760 Mattie Road, Pismo Beach, Monday-Friday 8:00 a.m. - 5:00 p.m. Please call (805) 773-7003 with any questions.
In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting or if you need agenda documents provided in an alternative format, please contact the City Clerk’s Office at 805-773-7003 as soon as possible prior to the meeting to ensure that reasonable arrangements can be made (28CFR 35.102-35.104 ADA Title II).
CENTRAL COAST BLUE REGIONAL RECYCLED
WATER AUTHORITY AGENDA REPORT
Agenda Item 6
SUBJECT/TITLE:
Local Hiring Alternatives for Central Coast Blue Construction Contracts RECOMMENDATION:
Receive a report on alternatives and considerations to advance local hiring for construction of the Central Coast Blue Project. No formal action will be taken.
BACKGROUND:
The cities of Arroyo Grande, Grover Beach, and Pismo Beach (“Partner Agencies”) entered into a Cost Share Agreement (“Agreement”) in March 2022, which included provisions to apportion the Central Coast Blue Project (“Project”) costs and benefits between the Partner Agencies and establish a framework for the delivery and governance of the Project. The project delivery and governance provisions of the Agreement designate Pismo Beach as the lead agency and project developer principally responsible for delivery of Phase 1 of the Project, including construction contract bidding and procurement. The Agreement also describes the formation of a Joint Powers Authority (“JPA”) that will own and operate the project improvements and finance the Phase 1 Project construction costs. In October 2022, the Central Coast Blue Regional Recycled Water Authority (“Authority”) was created pursuant to this provision of the Agreement.
Approximately $60 million in infrastructure will be constructed in the first phase of the Project, which presents a significant opportunity to reinvest in the local workforce and economy by prioritizing employment of local workers. To maximize local worker participation, the Partner Agencies included provisions in the Agreement requiring contractors who bid on the Project to make a good-faith effort to employ local workers. In addition to local hire good-faith effort programs, project labor agreements (PLAs), and local hiring mandates can be used to prioritize local worker participation on the Project.
The purpose of this report is to present potential alternatives to promote local hiring on the Project. The staff report and accompanying presentation are informational and intended to facilitate discussion between the Partner Agencies about local hiring, consistent with the Agreement which requires annual joint City Council meetings to discuss policy issues. While the discussion will inform strategies to promote local hiring, the City of Pismo Beach is ultimately responsible for determining how to incorporate local hire provisions in the construction contract bid documents in accordance with the Agreement in its capacity as lead agency.
DISCUSSION/ANALYSIS:
The following sections present three alternatives to promote local hiring on the Project along with considerations for each approach: local hire good-faith effort programs, PLAs, and local hiring mandates.
Joint Agenda 6-5-2023 Item 6 - Page 1
Local Hiring Alternatives
Local Hire Good-Faith Effort Programs
In general, local hire good-faith effort programs establish local worker participation goals and procedures contractors must follow to notify local workers of employment opportunities, identify prospective employees, and recruit and retain local workers.
Project contractors are required to document the good-faith efforts they utilize to employ local workers and provide documentation to the project owner on a regular basis.
Article III, section 1 of the Agreement discusses the lead agency’s duties during development and construction of Phase 1 of the Project. Subdivision b, entitled “Local Hire,” provides that every contractor submitting a bid to Pismo Beach for a public works contract for Phase 1 will agree to make a good faith effort to hire individuals who are local residents.
The Agreement defines a “good-faith effort” as taking the following or similar actions to recruit residents of San Luis Obispo and Santa Barbara Counties as part of the construction workforce: (1) contact local recruitment sources to identify individuals who are local residents; (2) advertise for individuals who are local residents in trade papers and newspapers of general circulation within San Luis Obispo and Santa Barbara Counties; and (3) with respect to any portion of a public works contract to be performed by a subcontractor, identify subcontractors whose workforce includes individuals who are local residents.
To ensure that the local hire requirements of the Agreement are met, the City of Pismo Beach will need to develop a process within its public works construction procedures to ensure that contractors submitting bids or working on the Project have satisfied the goodfaith effort requirements. The local hire good-faith effort program could include procedures contractors must follow to recruit and retain local workers, documentation requirements to demonstrate good-faith efforts, and actions to be taken by the City of Pismo Beach and contractors if good-faith efforts are not implemented.
In addition, a local worker participation goal can be included as part of the good-faith effort program, similar to PLA local worker participation goals as described in the following section of the report. The City of Pismo Beach has flexibility in establishing this goal as part of a good-faith effort program. To maximize local hiring, the goal should be ambitious yet achievable, and should take into consideration the specific nature of the work being performed. For example, the local hiring goal for the pipeline construction component of the Project could be higher than the goal for the well drilling portion of the project, as there are many local contractors and workers qualified to construct the pipelines, but few qualified local contractors and workers for the highly specialized well drilling work.
Project Labor Agreements
PLAs, also known as community workforce agreements or CWAs, are pre-hire collective bargaining agreements that establish standard terms and conditions of employment that apply to a specific construction project. Key PLA provisions include the establishment of Joint Agenda 6-5-2023 Item 6 - Page 2
uniform work conditions, hiring procedures, wages and benefits, management rights, dispute resolution procedures, and procedures to prevent work stoppages. A detailed discussion of PLAs and implementation considerations is included with the staff report as Attachment 1.
Specific to the issue of local hiring, PLAs can include provisions prioritizing referral of local workers to project contractors by union hiring halls and can establish local worker participation goals. Absent a PLA, unions cannot prioritize referral of local workers and must follow the worker referral procedures included in union Master Labor Agreements.
Union hiring halls maintain out-of-work lists, and workers are typically dispatched to projects based on the order in which they registered with the hiring hall (i.e., first come, first served), with no consideration given to their place of residence. PLAs are separate and distinct from local hiring preferences as their primary purpose is to establish conditions of employment. PLAs and local hiring preferences are not mutually exclusive, and a PLA is one method that can be used to prioritize employment of local workers.
While PLAs can promote local worker participation, provisions designating unions as the sole source of craft labor and requiring payment of fringe benefits to union trusts on behalf of workers can discourage bidding and participation in the Project by non-union contractors and consultants, reducing competition. Attachment 1 provides additional information regarding PLA provisions related to employment of workers and benefits.
Local Hiring Mandates
Local hiring mandates are programs that mandate the use of local workers or local contractors on projects rather than establishing local hiring goals. Programs that mandate local hiring are susceptible to legal challenges and must be justified by a substantial reason for the local hiring preference. The program must be narrowly tailored and supported with findings regarding the specific issues it is intended to address. A program that sets local hiring goals, as opposed to mandated requirements, is far less likely to be met with legal challenges and does not require a substantial justification with detailed findings. Implementation of a local hiring mandate would be difficult to justify based on local agency experience and a detailed economic study would be required. A local hiring mandate might also be incompatible with state and federal grant funding and financing programs. A League of California Cities white paper regarding local hiring preferences, including local hiring ordinances with mandates is included as Attachment 2.
Local Agency Experience
Several local agencies have utilized CWAs or local hire good-faith efforts to prioritize employment of local workers including the City of San Luis Obispo, South San Luis Obispo County Sanitation District (SSLOCSD), and the City of Morro Bay. A summary of information related to each of these agencies is presented in the following section. A more detailed discussion is included in Attachment 1.
Joint Agenda 6-5-2023 Item 6 - Page 3
City of San Luis Obispo
The City of San Luis Obispo entered into a CWA with the Tri Counties Building and Construction Trades Council for the Water Resource Recovery Facility (WRRF) Project in December 2018. The CWA included a local worker participation goal of 30%. “Local workers” were defined as residents of San Luis Obispo, Santa Barbara, Monterey, and Ventura Counties. As of March 2023, approximately 83% of all labor hours were performed by local workers.
In September 2021, San Luis Obispo initiated a work program to advance its Major City Goal of Economic Recovery, Resiliency, and Fiscal Sustainability in response to the COVID-19 pandemic. As part of the work program, the City performed extensive stakeholder outreach and analyzed historical local worker participation on City projects to inform policy on the application of CWAs for future public works projects. City staff analyzed 14 representative projects constructed without CWAs between January 2018 and September 2021, and found that 90% of all labor hours were performed by local workers (i.e., residents of San Luis Obispo, Santa Barbara, Monterey, or Ventura Counties). In consideration of the historically high local worker participation percentages on past City projects without a CWA in place, the City decided to limit application of a CWA to three large upcoming capital improvement projects. A City of San Luis Obispo Council agenda report detailing the City’s CWA analysis and stakeholder outreach process is included as Attachment 3.
South San Luis Obispo County Sanitation District
SSLOCSD entered into a CWA with the Tri Counties Building and Construction Trades Council in August 2019 for their Redundancy Project. The CWA included a local worker participation goal of 30%. “Local workers” were defined as residents in the SSLOCSD service area, or residents of Santa Barbara, Monterey, and Ventura Counties. As of December 2022, approximately 62% of all labor hours were performed by local workers.
City of Morro Bay
The City of Morro Bay included local hiring good-faith effort requirements in the construction documents for the conveyance pipeline and pump station portion of their Water Reclamation Facility Project, which was bid in June 2020. Bidders were required to provide evidence of good faith efforts made to engage local hires and local subcontractors when submitting bids and make continued efforts to promote the participation of local residents and businesses during construction. Data regarding the effectiveness of the local hire good-faith effort was not available as of the writing of this report.
City of Pismo Beach
City of Pismo Beach Public Works Department staff reviewed certified payroll reports from several recently completed capital improvement projects to compile local worker participation data. Residents of San Luis Obispo or Santa Barbara Counties were considered local workers for purposes of the analysis, similar to how local workers were defined in the CWAs described in the preceding sections of the report. The results of the City’s analysis are presented in Table 1 below.
Joint Agenda 6-5-2023 Item 6 - Page 4
Table 1. Local Worker Participation for Recent Pismo Beach CIP Projects Project Name Local Worker
Participation
Shell Beach Streetscape 100 %
Pier Plaza 95 %
Five Cities Lift Station 95 %
Shell Beach Reservoir No. 1 100 %
Heights Water System 0 %
Pismo Pier 100 %
Fiscal Impacts
Each local hire alternative will have costs associated with initial program development, implementation, and oversight. The local hire good-faith effort approach is estimated to be the lowest cost alternative, as development of the program is assumed to be led by the Pismo Beach City Attorney’s office with support from Public Works staff and the Program Manager, who currently has scope and budget to assist with this effort.
Implementation of a PLA is estimated to be a moderate cost alternative due to the costs associated with negotiating the agreement (assuming support from outside legal counsel) and the costs of retaining a Community Workforce Coordinator as required by the PLA to administer the agreement on behalf of the City of Pismo Beach.
A local hire mandate is estimated to be the highest cost alternative due to cost of the studies required to justify the approach, potential legal fees associated with defending the policy, and cost escalation associated with schedule delays resulting from the time required to develop and implement the policy.
Comparison of Local Hiring Alternatives
Potential benefits, risks, and costs associated with the local hire alternatives as described in the preceding sections and attachments to the report are summarized in Table 2 below.
Joint Agenda 6-5-2023 Item 6 - Page 5
Table 2. Potential Benefits, Risks, and Costs of Local Hiring Alternatives Local Hire Good-Faith
Effort Program PLA Local Hiring Mandate
Benefits
• Establishes local
worker participation
goal
• Consistent with
Agreement
• Does not impose
limitations on
employment of craft
workers
• Establishes local
worker participation
goal
• Work stoppages
prohibited
• Prescriptive dispute
resolution procedures
• Mandates local
worker participation
requirement
Risks
• Failure to meet local
worker goals
• Failure to meet local
worker goals
• Reduced competition
• Limits utilization of
non-union contractor
existing workforce
• Time required to
negotiate agreement
prior to bid phase
could impact
schedule
• Failure to meet local
worker requirement
• Legal challenges
• Potential lack of
significant justification
for implementation
• Time required to
implement prior to bid
phase could impact
schedule
Costs
• Lowest
implementation cost
• Development &
adoption of program
by Pismo Beach
• Incorporation of
program into
construction
contracts
• Contractor
implementation
• Ongoing monitoring &
oversight during
construction
• Moderate
implementation cost
• Legal counsel &
consultant costs to
negotiate agreement
• Potential doublepayment of fringe
benefits to offset
union trust fund
benefits requirements
• Contractor
implementation
• Ongoing monitoring &
oversight during
construction
• Fewer competitive
bids
• Highest
implementation cost
• Economic analysis to
justify implementation
of mandate
• Legal fees to craft
ordinance
• Contractor
implementation
• Ongoing monitoring &
oversight during
construction
Joint Agenda 6-5-2023 Item 6 - Page 6
SUMMARY:
Several methods can be employed to advance the Partner Agencies’ goal of promoting local worker participation on the Project, including a local hire good-faith effort program, a PLA, or a local hire mandate.
Local hire good-faith effort programs establish local worker participation goals and procedures contractors must follow to notify local workers of employment opportunities, identify prospective employees, and recruit and retain local workers. Implementation of a local hire good-faith effort program is consistent with the current provisions in the Agreement and is estimated to be the lowest cost alternative.
PLAs are pre-hire collective bargaining agreements between a project owner and construction trade unions. PLAs establish the terms and conditions of employment on covered projects and can include provisions intended to increase and prioritize participation in covered projects by local workers. While PLAs can promote local worker participation, PLA provisions designating unions as the sole source of craft labor and requiring payment of fringe benefits to union trusts on behalf of workers can discourage participation in the Project by non-union contractors. Implementation of a PLA is estimated to be a moderate cost alternative.
Unlike good-faith effort programs and PLAs, local hiring mandates are programs that require the use of local workers or local contractors on projects rather than establishing local hiring goals. Local hiring mandates can be difficult to justify and subject to legal challenges if not substantiated with valid reasons for the local preference and findings detailing the specific issues the program is intended to address. A local hiring mandate might also be incompatible with state and federal grant funding and financing programs.
A local hiring mandate is estimated to be the highest cost alternative.
CONCLUSIONS AND RECOMMENDATIONS:
The purpose of this report and accompanying presentation is to facilitate discussion between the partner agencies about alternatives to advance local hiring, consistent with the Agreement which requires annual joint City Council meetings to discuss policy issues.
No formal action is to be taken by the JPA Board. While the City of Pismo Beach may take feedback from the Partner Agencies under advisement during the procurement process for Phase 1 of the Project, Pismo Beach is ultimately responsible for determining how to incorporate local hire provisions in the construction contract bid documents as required by the Agreement in its capacity as lead agency.
FISCAL IMPACT:
Fiscal impacts described in the body of the report.
ALTERNATIVES:
None.
ATTACHMENTS:
1. Central Coast Blue Project Labor Agreement Analysis
Joint Agenda 6-5-2023 Item 6 - Page 7
2. League of California Cities: Constitutional Issues Relating to “Buy Local” and Local Hiring and Contractor Preferences
3. City of San Luis Obispo: Community Workforce Agreement: Phase 2 Data Analysis, Outreach and Draft Policy Development
Meeting Date: June 5, 2023
Joint Agenda 6-5-2023 Item 6 - Page 8
Date: May 23, 2023
To: Benjamin Fine
Public Works Director/City Engineer
760 Mattie Road
Pismo Beach, CA 93449
CC: Bill Robeson, Assistant City Manager/ Director of Public Works – City of Arroyo Grande Greg Ray, Public Works Director/City Engineer – City of Grover Beach Geoff English, General Manager – Central Coast Blue Regional Recycled Water Authority Prepared by: Water Systems Consulting, Inc.
Subject: Central Coast Blue Project Labor Agreement Analysis Introduction
The purpose of this memorandum is to review typical provisions in project labor agreements (PLAs), present considerations for delivery of the Central Coast Blue Project (Project), and discuss the experiences of several local agencies who recently evaluated or employed PLAs for public works projects. The memorandum is not intended to be an exhaustive review of every provision included in PLAs or to provide an opinion on the merit of a PLA for the Project. As lead agency, the City of Pismo Beach is ultimately responsible for determining whether to utilize a PLA in conjunction with the local hire provisions in the Cost Share Agreement with Arroyo Grande and Grover Beach.
Background
PLAs, also known as community workforce agreements or CWAs, are pre-hire collective bargaining agreements that establish standard terms and conditions that apply to a specific construction project.
PLAs are usually negotiated between the project owner and the local building trades council or individual construction trades, although PLAs can be directly negotiated between contractors and construction trades. The general contractor and subcontractors of any tier must agree to be bound by the requirements of the agreement prior to performing any work on a PLA-covered project.
Key PLA provisions include the establishment of uniform work conditions, hiring procedures, wages and benefits, management rights, dispute resolution procedures, and procedures to prevent work stoppages.
In addition, PLAs often include provisions to promote participation in covered projects from targeted workers and demographics including local residents, apprentices, at-risk persons, and veterans.
PLAs are usually negotiated between the project owner and the local building trades council or individual construction trades. The general contractor and subcontractors of any tier must agree to be bound by the requirements of the agreement prior to performing any work on a PLA-covered project. PLAs are typically negotiated prior to issuing a project bid advertisement for a PLA-covered project, as PLA Attachment 1 Joint Agenda 6-5-2023 Item 6 - Page 9
requirements regarding work conditions, employment of craft workers, and payment of fringe benefits, among others, could impact bid pricing and constitute a material change if implemented after contract execution or submission of bid pricing.
It is important to note for public works projects, PLAs typically only apply to workers for whom prevailing wage rates have been determined by the California Department of Industrial Relations (DIR) and who are represented by construction trade unions. PLA requirements would not extend to the provision of professional services by consultants where work classifications and prevailing wage determinations have not been established by the DIR or to public agency employees.
Standard PLA Provisions
The following sections detail typical provisions included in PLAs and considerations for the Project.
Work Conditions
Uniform Work Conditions
PLAs commonly include provisions to establish uniform work conditions across each of the construction trades providing craft labor on the covered project. Conditions typically covered include work hours, holidays, meal periods, break periods, overtime and double-time pay, shifts, and shift differential pay. For contractors that are signatory to the unions, the Master Labor Agreement (MLA) with each individual trade sets forth standard work conditions. The MLA for each trade can include slightly different provisions related to work conditions, and a PLA can serve to standardize these conditions across all trades and simplify the management process. For example, a PLA could specify City holidays as the non-working days to be observed on covered projects by all construction trades, rather than each trade recognizing different holidays which could lead to inefficiencies in the delivery of the work.
Many of the work conditions typically covered in PLAs are also addressed in the California Labor Code including shift lengths, meal and break periods, and overtime/double-time pay. In addition, the construction contract sets forth allowable work hours and holidays observed by the project owner. In the absence of a PLA, California Labor Code and the construction contract will establish the work conditions for the Project.
Hiring Procedures
Union Recognition
PLAs designate trade unions and the local or regional building trades council as the exclusive source of craft labor on covered projects and the exclusive bargaining representatives for craft workers. In addition, employers must recognize the jurisdiction and scope of work specific to each trade as established in each MLA. Designation of trade unions as the sole source of labor on PLA-covered projects is one of the most contentious issues related to PLAs.
Referral Systems
PLAs require that established union referral systems be used exclusively to obtain craft labor on covered projects. If a union referral system is unable to refer workers within a defined period of time (typically 48 hours), contractors are allowed to hire employees from other sources. PLAs do not discriminate between Attachment 1 Joint Agenda 6-5-2023 Item 6 - Page 10
union and non-union workers; however, non-union workers must register with the union hiring hall to become eligible for assignment to a covered project and may be required to pay union dues.
Requirements for contribution of unions dues has recently changed based on the recent Janus decision by the U.S. Supreme Court (Janus v. AFSCME, 2018).
Core Workers
PLAs limit the number of existing workers that non-union contractors can employ on a project without utilizing the union hiring hall system. These existing employees are defined as “core” workers, and typically include key positions such as foremen. Employees must meet specific requirements to be considered a core worker including being recently active on the contractor’s payroll (i.e., for 60 of the 100 working days immediately prior to the award of the contract), possessing licenses required for the performance of the project work, and having the ability to safely perform the duties and functions of the trade for which they are providing craft labor.
Non-union contractors can hire core workers on a one-to-one ratio with employees referred by the union hiring hall up to a maximum number of core workers. For example, the non-union contractor can employ a member of its existing workforce first, followed by an employee referred from the union hiring hall second, then another member of its existing workforce. This process continues until the maximum number of core workers specified in the PLA is reached. Core worker provisions do not apply to union signatory contractors.
Union and Non-Union Contractor Comparison
For union contractors and on PLA-covered projects, MLAs clearly define the scope of work that can be performed by each individual trade, and workers are not allowed to work outside of their classification/jurisdiction. Non-union contractors on projects not covered by a PLA can allow their employees to perform a wider range of tasks. For example, a non-union employee can perform functions of multiple trades (e.g., laborer, operating engineer, cement mason), provided they are paid the appropriate prevailing wage rate for each classification while performing the work.
Hiring procedures included in PLAs limit the ability of non-union contractors to utilize their existing workforce on covered projects by limiting the number of existing workers they can employ. PLAs establish the maximum number of core workers that a non-union contractor can employ on a project and require non-union contractors to use union referral systems exclusively for obtaining craft labor. While non-union workers can register with the union and become eligible to work on the covered project, they are subject to the hiring hall rules of each specific trade. Union hiring halls maintain out-of-work lists, and members are typically dispatched to projects based on the order in which they registered with the hiring hall (i.e., first come, first served). It is important to note that the hiring procedures and hiring hall rules are specific to each local union.
Hiring procedures in PLAs do not significantly impact union signatory contractors. MLAs require signatory contractors to use union referral systems to obtain craft labor and union signatory contractors can request specific employees by name, rather than requesting workers from the out-of-work list for each trade. In addition, core worker provisions do not apply to union contractors and union contractors are able to utilize their existing workforce without limitation. Exceptions can include specific requirements in MLAs Attachment 1 Joint Agenda 6-5-2023 Item 6 - Page 11
that restrict or limit participation of “traveling” union members from their home union to the local union at the project location.
Central Coast Blue Project Considerations
The impact of PLA hiring procedure provisions on the Project depends largely on whether prospective contractors are signatory to the individual unions. Non-union contractors will be impacted by limits placed on their ability to utilize their existing workforce. Union contractors will not be significantly impacted by the hiring procedure provisions as the procedures reflect their standard work practices.
1. General Contractors
Three construction contracts will be bid and awarded as part of the Project – one for the Advanced Water Purification Facility (AWPF), one for injection and monitoring well drilling, and one for pipeline construction and well equipping. Construction of the AWPF must be performed by a general contractor experienced with advanced treatment technologies and complex commissioning requirements. There is a relatively small group of general contractors in California qualified to construct the AWPF, the majority of whom are union signatory contractors. It is anticipated that the AWPF general contractor will utilize local construction unions exclusively to obtain their craft labor, in accordance with applicable MLAs.
There are several local contractors with the requisite experience and qualifications to construct the pipeline and well equipping project. If these contractors are not union signatories, the PLA core worker provisions and limitations on their ability to utilize their existing workforce could impact their interest in bidding the Project and could increase their bid price.
The well drilling contract will require an experienced contractor capable of drilling up to 11 injection and monitoring wells with different drilling technologies. Well drilling contractors rely heavily on their existing core workforce, as experience with the specific drilling equipment and drilling technologies employed is critical to the success of the project. PLA provisions that limit how non-union well drilling contractors employ workers on the Project will likely reduce their interest in bidding and could increase their bid price.
2. Small and Specialty Subcontractors
PLA hiring procedures will have a significant impact on small and specialty subcontractors. Subcontractors with limited scopes of work on the Project (e.g., roofers, glaziers, tile installers, sheet metal workers) have a smaller role relative to the overall Project, provide fewer employees and fewer craft hours, and are more likely to be local contractors. Non-union subcontractors with a small workforce rely more heavily on their existing workers, and limitations on their ability to fully employ their existing workforce will affect their ability to effectively perform their subcontracted scope of work.
The Project includes several components requiring specialized expertise, including the trenchless crossing of the Union Pacific Railroad right-of-way and the calibration and commissioning of specialized instruments for the advanced treatment process. Limitations on non-union, specialized subcontractors to use their existing workforce presents a significant performance risk which may result in increased bid pricing or reluctance to bid on the Project.
Careful consideration should be given to the impacts of a PLA on small and specialty contractors if the Partner Agencies decide to move forward with an agreement. Negotiations with the building trades should include a discussion of potential exemptions from the typical PLA hiring provisions and core worker restrictions for small and specialty subcontractors performing limited scope on the Project.
Attachment 1 Joint Agenda 6-5-2023 Item 6 - Page 12
3. Construction Inspection
Construction inspectors and other personnel performing quality assurance and quality control functions will also be impacted by the hiring procedures set forth in a PLA, as construction inspection is a prevailing wage classification and construction inspectors are represented by the Operating Engineers Union.
Construction inspectors perform critical quality assurance on behalf of the project owner and help ensure the project is constructed in accordance with the plans and specifications. Construction inspectors are typically employed by a third-party construction manager through a professional services agreement.
While professional services are exempt from PLAs, construction inspection is a prevailing wage classification and personnel performing quality control and quality assurance functions would be subject to the provisions of the PLA, including employment of union referrals discussed in the preceding paragraphs. As providers of professional services, most construction management firms are not signatories to construction unions and non-union firms will be subject to standard PLA hiring procedures, including core worker provisions.
Construction inspectors must have experience commensurate with the complexity of the Project for which they are being retained to support. It is anticipated up to six inspectors will be employed on the Project during construction, and the construction manager could be required to obtain a portion of its inspection staff through the union referral system. Construction inspection is not a commodity service – inspector qualifications and specific experience with the improvements being constructed are critical to the successful oversight of the work. Employment of union referrals, with no prior work history with the employer, presents significant risk to the construction management firm, as the inspectors’ qualifications are unknown and the employer retains the liability for performance of the inspectors’ duties.
4. Specialty Inspection and Materials Testing
Construction management firms subcontract with specialty inspection and materials testing firms to inspect portions of the work (reinforced concrete, masonry, welding, high-strength bolting, soils, coatings, etc.) that often require special inspector certifications (e.g., International Code Council (ICC), American Concrete Institute (ACI), Certified Welding Inspector (CWI)), in accordance with the contract documents and code requirements. Specialty inspection firms also perform materials testing in off-site laboratories.
PLAs present unique challenges for specialty inspection and materials testing firms, as the hiring provisions require employment of inspectors from the union referral system, who might not have the requisite experience or certifications to perform the required inspections. Additional concerns regarding employer liability and worker’s compensation insurance coverage present risk and barriers to participation on PLA-covered projects for non-union specialty inspection and materials testing firms.
For the City of San Luis Obispo Water Resource Recovery Facility Project (WRRF Project) and the South San Luis Obispo County Sanitation District (SSLOCSD) Redundancy Project (Redundancy Project), the only local, full-service specialty inspection and materials testing firm expressed its unwillingness to provide services on the projects if the CWAs for these projects included construction inspection and quality assurance. If the City of San Luis Obispo and SSLOCSD had not successfully negotiated the exclusion of inspection and quality assurance from the CWAs, specialty inspection and materials testing services would likely have been required from as far away as Ventura County (the nearest union-signatory specialty inspection and materials testing firm), resulting in additional project cost for travel time as well as logistical challenges associated with timely performance of specialty inspections which are often requested by contractors on short notice.
Attachment 1 Joint Agenda 6-5-2023 Item 6 - Page 13
5. Professional Land Surveying
Like construction inspection, land surveying is a prevailing wage classification and providers of professional surveying services on the Project would be subject to the provisions of the PLA including, but not limited to, core worker limitations and payment of fringe benefits to union trust funds. Employer concerns regarding employer liability and insurance requirements for workers referred by the union as described in the sections above would likely also extend to professional surveying firms.
Should the Partner Agencies elect to move forward with a PLA, negotiations with the building trades should include a discussion of potential exemption from the typical PLA hiring provisions and core worker restrictions for project staff performing land surveying and quality assurance functions, including construction inspectors, specialty inspectors, and materials testers.
Wages and Benefits
Wages
Wages for craft workers on public works projects are paid in accordance with applicable state and federal prevailing wage rates. PLAs do not supersede applicable prevailing wage rates and wages paid to craft workers are the same for PLA and non-PLA projects.
Benefits
The DIR establishes basic hourly rates and fringe benefit amounts that must be provided to the employee by the employer. Fringe benefits include health and welfare, pension, vacation/holiday, training, and “other” benefits. “Other” benefits include contributions to management relations boards, industry advancement funds, and other miscellaneous initiatives specific to each trade. Non-union contractors must provide benefits of equivalent value as the fringe benefit amounts established by the DIR or pay fringe benefits directly to their employees as wages. Training benefits must be paid directly to a Stateapproved apprenticeship program and are not paid directly to the employee as wages.
Union contractors provide fringe benefit payments on behalf of their employees directly to union trusts, who in turn provide benefits to their members. As with non-union contractors, training benefits must be paid directly to a State-approved apprenticeship program and are not paid directly to the union trust fund.
In addition, some union MLAs require contractor contributions to industry advancement funds and various union trust funds. These contributions are made on a per hour basis for each employee.
Union and Non-Union Contractor Comparison
On PLA-covered projects, all contractors, regardless of union affiliation, must pay fringe benefit contributions directly to the union trust fund for each employee for the duration of the project. Union contractors are not affected by this requirement as it reflects their normal business practice and aligns with the MLAs between the construction trades and union employers.
The extent to which payment of fringe benefits to union trusts affects non-union contractors depends largely on the benefits employers offer to their employees and the number of hours employees of nonunion contractors work on the Project. If non-union contractors provide benefits such as a 401k contribution match, paid vacation, or health insurance, these benefits would no longer be provided through the employer and would be provided through the union trust. For non-union contractors that Attachment 1 Joint Agenda 6-5-2023 Item 6 - Page 14
pay fringe benefit contributions directly to employees as wages, the contractors would begin making these payments to the union trust on their employees’ behalf.
For non-union contractors that do not provide benefits to their employees, fringe benefits are paid in the form of wages. Employees have the freedom to purchase their own health insurance or invest in savings and retirement as they see fit.
Information published by the United States Department of Labor Bureau of Labor Statistics indicates that union workers have greater participation rates in medical benefit plans than non-union workers, 79% versus 46%, respectively. In addition, union workers have greater participation rates in retirement plans than non-union workers, 82% versus 47%, respectively (United States Department of Labor Bureau of Labor Statistics, 2017).
Craft workers must work a minimum number of hours to become vested in union pension programs (typically 10,000 hours or five years). Non-union craft workers might not work sufficient hours on the Project to become vested in a union pension plan, especially for shorter duration assignments or when working for contractors who perform limited scope on covered projects. This would result in a significant loss of income for the employee who doesn’t become vested, as the pension fringe benefit can be between 8% and 17% of the employee’s total hourly rate, depending on the worker classification (e.g., laborer, cement mason, carpenter). Exhibit A provides additional discussion on prevailing wages and fringe benefits.
Enrollment in union-provided healthcare programs can also present challenges for contractors with employees performing limited scope on the Project. Employees of non-union contractors are unlikely to transition from an employer-provided healthcare plan to a union-provided plan if working on the Project for only a limited period. Changing healthcare plans can result in coverage gaps, changes to in-network providers, and changes to covered prescriptions. For contractors with limited scope/short duration work on the Project, employees would potentially be required to exit their employer’s medical plan, join the union plan, then exit the union plan and re-join the employer’s plan at the conclusion of the CWA-covered work.
For non-union workers performing limited work on the Project, employers may elect to continue providing their standard retirement and health benefits while also providing fringe benefit payments directly to the union trust. Provision of benefit payments to both the union trust and directly to the employee would result in increased costs to the employer and, ultimately, the Project. In addition, employer contributions to industry advancement and various union trust funds as required by MLAs would result in additional cost to the employer.
If the Partner Agencies wish to pursue a PLA for the Project, negotiations with the building trades should include a discussion of potential exemptions from the required union trust fund benefit payments for small contractors performing limited scope on the City’s projects or for contractors whose employees work insufficient hours to become vested in union pension programs.
Management Rights
PLAs include provisions detailing the rights maintained by management under the agreement. PLAs typically give management exclusive rights to plan and direct the work; hire, layoff, and promote Attachment 1 Joint Agenda 6-5-2023 Item 6 - Page 15
employees; determine the number of employees required to prosecute the work; determine means and methods of construction; select craft foremen; and assign and schedule the work. The intent of these provisions is to preserve the ability of management to perform key duties that are critical to the successful performance of work under the covered project.
Management rights provisions are not anticipated to impact the Project. These provisions are simply intended to clearly express to signatories that contractors retain the right to manage the labor force on a covered project as they see fit.
Work Stoppages
PLAs include provisions expressly prohibiting strikes, picketing, work stoppages, slowdowns, and lockouts to ensure the continued performance of work and to prevent schedule delays on covered projects, with limited exceptions. When employers and employees are unable to agree on the terms and conditions of employment, employees may implement work stoppages such as strikes or slowdowns and employers can implement lockouts. Work stoppages are used to compel either the employer or the employees to agree to the terms and conditions of employment in dispute. Some PLAs allow unions to withhold craft labor in the event a contractor is delinquent in payment of its weekly payroll or payments to the union trust.
Work stoppages can significantly impact a construction project as they interrupt the availability of craft labor and delay performance of the work. Union employees are prevented from striking on the basis of economic conditions when bound by an active collective bargaining agreement and can only strike after a good faith effort has been made at collective bargaining. Union employees are not constrained in their ability to strike on the basis of unfair labor practices when certain conditions are met. It is beyond the scope of this report to detail the circumstances and laws surrounding employers’ and employees’ ability to implement work stoppages.
The construction trades in California have a long history of successful collective bargaining with the construction industry. A review of work stoppage data compiled by the United States Department of Labor Bureau of Labor Statistics did not identify any work stoppages by the construction trades in California involving 1,000 or more workers over the last 20 years (United States Department of Labor Bureau of Labor Statistics, 2023). Work stoppages resulting from a lapse in the collective bargaining agreements between the construction trades and the construction industry do not present a significant risk to delivery of the Project.
Dispute Resolution
Dispute resolution provisions are included in PLAs to establish a uniform and timely process to resolve project issues without slowing down or stopping the work. Disputes regarding the jurisdiction of individual trades are settled in accordance with the Plan for the Settlement of Jurisdictional Disputes in the Construction Industry (the Plan). The Plan is a broadly recognized dispute resolution procedure established by the AFL-CIO and construction employer associations that has been in place since 1984.
When a jurisdictional dispute between trades arises on a project covered by a PLA (e.g., laborer versus pipefitter scope for the installation of underground pipelines), the issue is referred to the Plan for settlement. PLAs include provisions that prohibit work slowdowns and stoppages while jurisdictional disputes are being resolved.
Attachment 1 Joint Agenda 6-5-2023 Item 6 - Page 16
PLAs also include provisions related to resolution of grievances and disputes not specifically related to jurisdictional issues. PLAs establish a defined, step-wise process for dispute resolution that encourages resolution of project issues on the lowest possible level. The dispute resolution process typically culminates with arbitration if not settled at a lower level. As with jurisdictional disputes, parties to a PLA cannot stop or slow down the work as a result of a grievance or dispute.
It is difficult to evaluate the benefits of PLA dispute resolution provisions for the Project. Disputes on construction projects are typically resolved informally by the general contractor and subcontractor management teams or through the formal dispute resolution and claims process detailed in the contract documents on non-PLA projects. Labor disputes that impact performance of the work rarely occur on public works construction projects and are rarely elevated to the project owner.
Jurisdictional issues are more likely to arise between union contractors or on PLA-covered projects where workers are not allowed to work outside of their classification, and where the scope of work for multiple trades overlaps. For example, the scope of work for both laborers and pipefitters includes installation of piping in water and wastewater treatment facilities. This overlap in scope may result in a jurisdictional dispute depending on the amount of work in question and the willingness of the trades to pursue resolution through the Plan. If a contractor signatory to the laborers union on a project assumes laborers will install the mechanical piping and uses prevailing wage rates for laborers in its bid, but the piping work is later found to be within the jurisdiction of the pipefitters at pipefitter prevailing wage rates, the contractor would incur significant additional costs. The contractor would be required to pay the difference in the prevailing wage rate between laborers and pipefitters for all hours worked as restitution, and pipefitter hourly rates are approximately 30% higher than laborer hourly rates. Non-union contractors on projects not subject to PLA agreements would not be faced with a jurisdictional dispute and could elect to perform the work with laborers; however, the pipefitters could file a complaint with the DIR that the workers were not being paid the appropriate prevailing wage rate, which would be subject to an investigation by the Division of Labor Standards Enforcement.
Targeted Worker Participation
Many PLAs include provisions to increase participation in covered projects by targeted workers. Targeted workers can include local residents, apprentices, at-risk persons, and veterans, among others. PLAs establish goals for the percentage of total craft hours on the covered project to be performed by the targeted workers. Construction contractors can be required to retain the services of a jobs coordinator, who works with the contractor, unions, local workforce development agencies, and apprenticeship programs to help the contractor meet the participation goals for each demographic set forth in the agreement.
Targeted worker provisions can be effective in increasing participation in covered projects by the targeted demographics and in developing the local workforce. The success of targeted worker participation provisions depends on commitment to the process by all parties to the PLA through ongoing and active management. Absent a PLA, unions are not able to prioritize dispatch of targeted workers and must follow their normal referral procedures as defined in the MLA. Discussion regarding the experience of several local agencies with PLA local hiring goals is provided later in the report.
Attachment 1 Joint Agenda 6-5-2023 Item 6 - Page 17
Cost
Impacts of a PLA on construction costs are difficult to quantify and are beyond the scope of this memorandum to assess. Proponents of PLAs assert that these agreements save money while opponents argue that PLAs increase project costs. Information regarding the arguments on both sides of this issue is readily available through previously published articles and research. This section of the report focuses on the costs that are more readily quantifiable including costs to support contract negotiations, costs to incorporate the PLA into the construction documents, and costs to administer the PLA through construction.
The City of Pismo Beach will need adequate budget for PLA negotiation, contract document development, along with budget to retain the services of a PLA administrator to administer the PLA on behalf of the city.
PLA Negotiation and Contract Document Development
Negotiation of the PLA will require participation from the City of Pismo Beach’s Public Works Department and City Attorney’s office, outside legal counsel, and the Program Management Team. Costs to support PLA negotiations will depend on the extent and duration of the negotiations and can vary widely.
The construction contract documents will need to reflect the requirements of the PLA so prospective bidders and subcontractors will be aware of their responsibilities regarding the agreement. Language is typically included in the bid advertisement, bid form, agreement, and front-end documents to detail PLA requirements, and the complete PLA is included in the contract documents. It is recommended that a specification be developed to detail the targeted worker participation requirements, as the procedures for meeting participation goals and reporting requirements are typically not explained in detail in the PLA.
The targeted worker specification will increase the likelihood of meeting the participation goals set forth, increase transparency in the process, and facilitate accountability of all parties to the agreement.
Development of construction contract documents including PLA requirements will require participation from the City of Pismo Beach’s Public Works Department and City Attorney’s office, the design engineer, and the Program Management Team.
The cost for PLA negotiation and contract/specification language development is estimated to range between $45,000 and $90,000, depending on the makeup of the negotiating team and the duration of the negotiations.
PLA Administration
PLAs require that the project owner designate a Project Labor Coordinator to act as the owner’s agent and to facilitate implementation and compliance with the PLA. The Project Labor Coordinator can be a member of the owner’s staff, but an outside consultant with specific experience administering PLAs is typically used. In many cases, the Project Labor Coordinator can also function as the labor compliance program administrator to monitor compliance with state and federal labor standards. It is assumed that an outside consultant will be retained to serve as the Project Labor Coordinator in the event a PLA is negotiated.
PLAs include provisions for the establishment of a Joint Administrative Committee (JAC) comprised of representatives from the owner and representatives from the building trades. The JAC meets regularly to Attachment 1 Joint Agenda 6-5-2023 Item 6 - Page 18
discuss issues associated with the PLA including project issues, safety concerns, contractor relations, and disputes. The frequency of the JAC meetings is left to the discretion of the Committee, but meetings are typically held on a quarterly basis. It is anticipated that the Project’s representatives on the JAC will include Pismo Beach Public Works Department staff, the Project Labor Coordinator, and representatives from the Program Management Team.
The Partner Agencies can require the construction contractor to retain the services of a Jobs Coordinator to assist the contractor in meeting its obligations for targeted worker participation. The Jobs Coordinator coordinates with the construction trades, apprenticeship programs, and local workforce development agencies to identify potential workers that meet the targeted worker criteria for employment on the covered project. The Jobs Coordinator assists the contractor in the preparation of reports including targeted worker hiring status reports and manpower utilization plans. It is anticipated that the contractor will retain the services of an outside consultant to serve as its Jobs Coordinator if the negotiated PLA includes participation requirements for demographics other than local residents.
PLA administration costs can vary widely based on project duration, number of subcontractors, familiarity of contractors with PLA requirements, and number of covered projects. Estimated administrative costs for the Central Coast Blue Project are estimated to range from 0.25% to 0.5% of total construction cost, or approximately $170,000 to $340,000 based on the current opinion of probable construction cost.
Local Agency Experience
The following sections describe the application of PLAs and local hire good-faith effort programs by several local agencies on recent public works construction projects.
City of San Luis Obispo
1. Water Resource Recovery Facility Project
The City of San Luis Obispo entered into a CWA with the Tri Counties Building and Construction Trades Council for the WRRF Project in December 2018. A summary of key takeaways and lessons learned from the WRRF Project to date is as follows:
• The CWA includes a 30% local worker participation goal. • “Local Workers” as defined in the CWA include residents of San Luis Obispo, Santa Barbara, Monterey, and Ventura Counties. Unions refer workers to the WRRF Project based on a tiered system, with priority given to the lowest tier. The tiers are defined as follows: Tier 1 – city of San Luis Obispo; Tier 2 – county of San Luis Obispo; Tier 3 – Santa Barbara and Monterey Counties; and Tier 4 – Ventura County.
• The City successfully negotiated the exclusion of construction inspection and materials testing from the scope of the CWA as described in previous sections of this memorandum. Exclusion of construction inspection and materials testing prevented significant cost and logistical challenges for provision of inspection services by the City’s construction manager. • The pipefitters union claimed jurisdiction over pipe installation work assigned to the laborers by the contractor. While not elevated to a formal jurisdictional claim, resolution required significant coordination by the City and its Community Workforce Coordinator. • The contractor informally expressed challenges with securing subcontractor bids for portions of the work (e.g., elevators, architectural metal work, and finishes) related to the Water Resource Attachment 1 Joint Agenda 6-5-2023 Item 6 - Page 19
Center (WRC) due to the PLA. In the absence of subcontractor bids for this work, the contractor used conservative placeholder numbers in its bid, increasing the cost of the WRC additive alternate bid item, which ultimately exceeded the City’s available budget. • Local worker participation through the end of March 2023 is approximately 83% – over 2.5 times the 30% goal. The breakdown by tier is presented in the table below.
Tier Description Local Worker Hours
1 City of San Luis Obispo 3.7%
2 County of San Luis Obispo 50.8%
3 Monterey and Santa Barbara Counties 28.6%
4 Ventura County <0.1%
2. City-Wide Project Labor Agreement
The City of San Luis Obispo’s 2021-23 Financial Plan included a Major City Goal of Economic Recovery, Resiliency and Fiscal Sustainability. One of the work programs included in the Financial Plan to advance this goal included evaluation of alternatives to support the participation of local contractors, vendors and labor in public projects through workforce agreements, local purchasing requirements, and alternative project delivery methods.
The City performed extensive stakeholder outreach and analyzed historical local worker participation on City projects to inform policy on the application of CWAs for future public works projects. Key findings from this analysis include the following:
• Fifty-nine percent (59%) of surveyed contractors indicated they would be less likely to bid City projects if covered by a CWA.
• Sixty-seven percent (67%) of surveyed contractors indicated a CWA would increase their bid price.
• An analysis of 14 City projects of varying size (i.e., cost) and type (e.g., buildings, wet utilities, parks and recreation, street improvements) constructed between January 2018 and September 2021 indicated that 90% of all labor hours were performed by local workers (i.e., residents of San Luis Obispo, Santa Barbara, Monterey, or Ventura Counties). • The City limited application of the CWA to three large capital improvement projects: the Cultural Arts District Parking Structure (vertical component), the Prado Road Highway 101 Overpass Project, and the Public Safety Center Project.
South San Luis Obispo County Sanitary District
SSLOCSD entered into a CWA with the Tri Counties Building and Construction Trades Council in August 2019 for their Redundancy Project. A summary of key takeaways and lessons learned from the Redundancy Project to date is as follows:
• The CWA was modeled after the City of San Luis Obispo’s WRRF Project agreement, including exclusion of inspection and quality assurance from the scope of the CWA. Inspection and quality assurance were excluded after vocal opposition from consultants pursuing construction management services for the project.
Attachment 1 Joint Agenda 6-5-2023 Item 6 - Page 20
• SSLOCSD received outside funding from the USDA Rural Development Loan Program, and USDA was reluctant to affirm compatibility of the CWA with their loan program. SSLOCSD ultimately received approval from USDA, and construction started in January 2021. • Like the City of San Luis Obispo WRRF Project, pipefitters claimed jurisdiction over the project mechanical work although the work was assigned to the laborers by the general contractor. The dispute was settled informally by the SSLOCSD and its Community Workforce Coordinator. • Local worker participation through the end of December 2022 is approximately 62% – double the 30% goal. The breakdown by tier is presented in the table below.
Tier Description Local Worker Hours
1 SSLOCSD Service Area 18.3%
2 County of San Luis Obispo 13.7%
3 Northern Santa Barbara County 29.8%
4 Ventura County 0%
City of Morro Bay
The Morro Bay City Council considered implementation of a PLA for their Water Reclamation Facility Project in August 2019. A contract for design and construction of the treatment facility portion of the project was previously awarded in June 2018, and Morro Bay decided not to move forward with a PLA due in part to concerns with potential cost impacts associated with implementing a PLA after award of the design-build contract.
The City of Morro Bay included local hiring good-faith effort requirements in the construction documents for the conveyance pipeline and pump station portion of the project, which was awarded in November 2020. Bidders were required to provide evidence of good faith efforts made to engage local hires and local subcontractors when submitting bids and make continued efforts to promote the participation of local residents and businesses during construction. Data regarding the effectiveness of the local hire good-faith effort was not available as of the writing of this memorandum.
Summary
PLAs are one of several mechanisms that can be used to promote local worker participation on the Project.
If Pismo Beach decides to move forward with negotiating a PLA, careful consideration should be given to provisions in the agreement that could impact participation in the project by non-union contractors and consultants or impact the total Project cost.
Attachment 1 Joint Agenda 6-5-2023 Item 6 - Page 21
Works Cited
United States Department of Labor Bureau of Labor Statistics. (2017, July 21). Economic News Release.
Retrieved from United States Department of Labor Bureau of Labor Statistics:
www.bls.gov/news.release/ebs2.nr0.htm
United States Department of Labor Bureau of Labor Statistics. (2023, May 1). Work Stoppages. Retrieved from United States Department of Labor Bureau of Labor Statistics:
https://www.bls.gov/web/wkstp/monthly-listing.htm
Attachment 1 Joint Agenda 6-5-2023 Item 6 - Page 22
Central Coast Blue PLA Analysis
Exhibit A – Prevailing Wage and Fringe Benefit Summary
Construction craft workers on public projects in California are paid prevailing wage rates established by the California Department of Industrial Relations (DIR). Prevailing wage rates are comprised of a base hourly rate and fringe benefits for health and welfare, pension, vacation and holiday, training, and “other” benefits. Prevailing wages are based on worker classification (e.g., laborer, carpenter, cement mason) and the location where the work is being performed (e.g., Northern California, Southern California). The purpose of this exhibit is to provide a breakdown of prevailing wage rates and fringe benefits along with a description of the disposition of fringe benefits on PLA-covered projects.
Table A presents a breakdown of base hourly rates and fringe benefits for select worker classifications.
Table A. Prevailing Wages for Select Construction Craft Worker Classifications (Southern California Index 2023-1) Employers on public projects must pay their workers wages and benefits with a value equivalent to the prevailing wage rate published by the DIR. On PLA-covered projects or for union-signatory contractors, all fringe benefits (except training) must be paid to a union trust fund on behalf of the employee. Training fund contributions are made directly to a State-approved apprenticeship program. Absent a PLA, employers can pay fringe benefits directly to their employees as wages, or they can provide medical, retirement, and vacation benefits with a value equivalent to the prevailing wage rate.
As described in the memorandum, some craft workers might not work enough hours on a PLA-covered project to become vested in a union pension program, and the pension contributions made on behalf of the employee would effectively be lost. Vesting in union pension Classification
Basic
Hourly
Rate
Amount
% of
Total
Hourly
Rate
Amount
% of
Total
Hourly
Rate
Amount
% of
Total
Hourly
Rate
Amount
% of
Total
Hourly
Rate
Amount
% of
Total
Hourly
Rate
Total
Fringes
Total
Hourly
Rate
Carpenter $ 47.24 $ 8.00 11% 5.66 $ 8% 7.31 $ 10% 2.44 $ 3% 0.67 $ 1% 24.08 $ $ 71.32 Laborer - Group 1 $ 39.23 $ 8.75 13% 10.82 $ 17% 5.02 $ 8% 0.67 $ 1% 0.70 $ 1% 25.96 $ $ 65.19 Operating Engineer - Group 1 $ 53.90 $ 12.35 15% 13.15 $ 16% 3.85 $ 5% 0.39 $ 0.5% 1.05 $ 1% 30.79 $ $ 84.69 Construction Inspector - Group 1 $ 54.68 $ 12.35 14% 13.15 $ 15% 3.85 $ 5% 0.39 $ 0.5% 1.05 $ 1% 30.79 $ $ 85.47 Land Surveyor - Instrumentman* $ 54.80 $ 12.35 14% 13.15 $ 15% 4.90 $ 6% 0.15 $ 0.2% 1.15 $ 1% 31.70 $ $ 86.50 *San Luis Obispo County specific prevailing wage
FRINGE BENEFITS
Health and Welfare Pension Vacation and
Holiday Other Training
Attachment 1 Joint Agenda 6-5-2023 Item 6 - Page 23
funds typically requires five years, or 10,000 hours. Employers may continue providing a retirement benefit to their employees (either as wages or a retirement account contribution) to mitigate this loss of income.
To help quantify the potential cost impact of this issue, Table B presents the pension fringe benefit contributions for select worker classifications in a typical month (20 working days, 8 hours per day).
Table B. Example Pension Fringe Benefit Contribution Calculation The pension fringe benefit represents a significant portion of the total compensation for construction craft workers, and the potential loss of the pension contribution because of the union vesting requirement on PLA-covered projects would negatively impact craft workers. In addition, potential double-payment of the pension fringe benefit to mitigate the loss of income would be a significant additional expense for employers, and by extension, the Project.
Classification
Total
Hourly
Rate
Pension
Fringe
Benefit
($/hr)
Hours
Worked Total Pay
Total
Pension
Contribution
Carpenter $ 71.32 $ 5.66 160 11,411.20 $ $ 905.60
Laborer - Group 1 $ 65.19 $ 10.82 160 10,430.40 $ $ 1,731.20 Operating Engineer - Group 1 $ 84.69 $ 13.15 160 13,550.40 $ $ 2,104.00 Construction Inspector - Group 1 $ 85.47 $ 13.15 160 13,675.20 $ $ 2,104.00 Land Surveyor - Instrumentman $ 86.50 $ 13.15 160 13,840.00 $ $ 2,104.00 Attachment 1 Joint Agenda 6-5-2023 Item 6 - Page 24
League of California Cities 2012 Spring Conference
Renaissance Hollywood Hotel, Hollywood
Constitutional Issues Relating to “Buy
Local” and Local Hiring and Contractor
Preferences
Thursday, May 3, 2012 General Session; 2:00 – 4:15 p.m.
Barbara R. Gadbois, Gibbs, Giden, Locher, Turner & Senet Theodore L. Senet, Gibbs, Giden, Locher, Turner & Senet Kristi J. Smith, Supervising Deputy City Attorney, Riverside Attachment 2 Joint Agenda 6-5-2023 Item 6 - Page 25
League of California Cities 2012 Spring Conference
Renaissance Hollywood Hotel, Hollywood
Attachment 2 Joint Agenda 6-5-2023 Item 6 - Page 26
Constitutional Issues Relating to Buy Local
and Local Hiring and Contractor Preferences
By
Barbara R. Gadbois, Esq., LEED AP, Partner, Gibbs, Giden, Locher, Turner & Senet, LLP and Kristi J. Smith, Esq., Supervising Deputy City Attorney, Office of the City Attorney, City of Riverside I. INTRODUCTION
In recent years, city council members and local taxpayers look to legal counsel for analysis of methods for increasing participation of local businesses and local workers on city public works projects. This paper sets forth analysis of the basic legal requirements and constraints relating to potential options to fulfill this stated goal.
II. CONSTITUTIONAL ISSUES RELATING TO BUY LOCAL CONTRACTOR PURCHASING PREFERENCES.
A. Introduction
To determine the constitutionality of a local purchasing preference law (See attached Exhibit A for an example ordinance), three clauses of the U.S. Constitution must be considered:
the Commerce Clause, the Privileges and Immunities Clause, and the Equal Protection Clause.
As discussed herein, when a local government acts as “market participant” expending its own funds to purchase goods and services, a local purchasing preference will be valid under the Commerce Clause. Likewise, when a local purchasing preference does (1) not burden a fundamental privilege protected by the Privileges and Immunities Clause; or (2) if it does burden a fundamental privilege, but there is a “substantial reason” for discrimination against citizens of another state, then the preference will not violate the Privileges and Immunities Clause. Finally, since non-local vendors are not a suspect classification, to survive an Equal Protection Clause challenge, a preference law need only demonstrate that the classification (e.g., local vs. non-local businesses) is rationally related to a legitimate governmental purpose, such as encouraging local industry.
B. The Commerce Clause
Attachment 2 Joint Agenda 6-5-2023 Item 6 - Page 27
Constitutional challenges against local purchasing preferences arise primarily from the Commerce Clause (Article I, Section 8 of the U.S. Constitution). The “dormant” or “negative” Commerce Clause affects local purchasing preferences in that it prohibits state and local governments from taking actions that burden interstate commerce. See, e.g., Healy v. Beer Institute, Inc. (1989) 491 U.S. 324, fn. 1. There is, however, a well-recognized exception to the dormant Commerce Clause for “market participants,” that was established by the Supreme Court in Hughes v. Alexandria Scrap Corp. (1976) 426 U.S. 794. In Hughes, a Maryland program offered money to scrap processors who removed abandoned cars or “hulks” from state roads.
Stricter documentation requirements were imposed on out-of-state processors than on in-state processors. Id. at 797-801. Finding that Maryland entered the hulk market as a purchaser, not a regulator, the Court held that the state needed no independent justification for its action. Id. at 809. “Nothing in the purposes animating the Commerce Clause prohibits a State, in the absence of congressional action, from participating in the market and exercising the right to favor its own citizens over others.” Id. at 810. This “market participant exception” means that when a state or local government acts in the market like a business or customer, rather than a regulator, the government may favor certain customers or suppliers. The government must be expending its own funds in order to be considered a market participant rather than a regulator. White v.
Massachusetts Council of Construction Employers, Inc. (1983) 460 U.S. 204, 214.
The State of California’s Buy American Act (Cal. Govt Code §§ 4300-4305) (the “Act”) was found to be unconstitutional by the California Court of Appeal in Bethlehem Steel Corp. v.
Board of Commissioners of the Dept of Water & Power of the City of Los Angeles (1969) 276 Cal.App.2d 221. The Act requires that contracts for construction or for the purchase of materials for public use be awarded only to those who agree to use or supply materials manufactured in the United States. Id. at 223-224. The Court found that the Act unconstitutionally encroached on exclusive power of the federal government. The next year, the California Attorney General concluded that the California Preference Law (Cal. Govt Code §§ 4330-4334) was similarly unconstitutional because it “affects foreign commerce as much as did the…Act.” 53 Ops.Cal.Atty.Gen. 72, 73 (1970).
Attachment 2 Joint Agenda 6-5-2023 Item 6 - Page 28
In Reeves, Inc. v. Stake (1980) 447 U.S. 429, the Supreme Court held that a policy of the South Dakota Cement Commission was constitutional. Due to a cement shortage, the State Cement Commission enacted a policy that required a state cement plant that had previously produced cement for in-state residents and out-of-state buyers to now confine its sales only to instate residents. Id. at 429. This policy caused an out-of-state buyer to drastically cut its distribution. Id. at 432-433. The Court found that South Dakota “unquestionably” fit the definition of a market participant and that the resident preference program was valid. Id. at 440.
In Big Country Foods, Inc. v. Board of Education of the Anchorage School District, Anchorage, Alaska (1992) 952 F.2d 1173, the Ninth Circuit held that a policy that gave a 7% bidding preference to in-state milk harvesters was valid under the market participant exception to the dormant Commerce Clause.
C. The Privileges and Immunities Clause
The Privileges and Immunities Clause, in the 14th Amendment to the U.S. Constitution, comes into play with respect to local purchasing preferences, although it is somewhat more applicable to local hiring preferences. The Privileges and Immunities Clause prevents states and local governments from discriminating against citizens of other states. This Clause only protects individuals, however, not corporations. Western and Southern Life Ins. Co. v. State Bd. of Equalization of California (1981) 451 U.S. 648, 656. Therefore, since local purchasing preferences affect corporations that sell goods, not individuals that sell goods, this Clause is less likely to provide a substantial basis for a challenge to a local purchasing preference law.
Notwithstanding this applicability issue, in order to overcome a Privileges and Immunities Clause challenge, a local purchasing preference must (1) not burden a fundamental privilege protected by the Clause; or (2) if it does burden a fundamental privilege, there must be “substantial reason” for discrimination against citizens of another state. United Bldg. & Construction Trades Council of Camden County & Vicinity v. Mayor and Council of the City of Camden (1984) 465 U.S. 208, 222. Moreover, “[a]s part of any justification offered for the discriminatory law, nonresidents must somehow be shown to ‘constitute a peculiar source of the evil at which the statute is aimed.’” Id. (quoting Toomer v. Witsell (1948) 334 Attachment 2 Joint Agenda 6-5-2023 Item 6 - Page 29
U.S. 385, 396). The Court noted, however, that “[e]very inquiry under the Privileges and Immunities Clause ‘must ... be conducted with due regard for the principle that the states should have considerable leeway in analyzing local evils and in prescribing appropriate cures.’ [citation] This caution is particularly appropriate when a government body is merely setting conditions on the expenditure of funds it controls.” United Bldg., supra, 465 U.S. at 222-223.
In 1989, the California Attorney General determined that a county policy that gave a 5% preference to local vendors did not violate the Privileges and Immunities Clause under certain circumstances. The contract had to be for supplies that were either (1) not subject to the requirement that preference be given to the lowest responsible bidder (Cal. Govt Code § 25482), or (2) in a general law county that employs a purchasing agent. In making this finding of constitutionality, the Attorney General noted several important factors. First, the county was expending its own funds. Second, neither “the opportunity to be employed by or to contract with the government is…a fundamental interest explicitly or implicitly guaranteed by the Constitution.” 72 Ops.Cal.Atty.Gen. 86 (1989). Therefore, the Equal Protection Clause of the 14th Amendment required only that there be a rational relationship between the classification and a legitimate government purpose. Id. The Attorney General found that the classification of vendors inside and outside the county was “rationally related to the legitimate governmental purpose of economic development.” Id.
D. The Equal Protection Clause
The Equal Protection Clause of the 14th Amendment has also been used to attack local purchasing preferences. Under the Equal Protection Clause, no state may “deny to any person within its jurisdiction the equal protection of the laws.” U.S. Const. amend. XIV, Sec. 1. An equal protection analysis only requires strict scrutiny of a legislative classification when the classification impinges on certain fundamental rights or operates to the peculiar disadvantage of a suspect class; otherwise, a rational relationship test is used. 13 Cal.Jur.3d Constitutional Law § 366. This test asks “whether the classification is rationally related to a legitimate governmental purpose.” Id. Regarding government contracts, the Supreme Court has stated that “like private individuals and businesses, the government enjoys the unrestricted power to produce its own supplies, to determine with whom it will deal, and to fix the terms and Attachment 2 Joint Agenda 6-5-2023 Item 6 - Page 30
conditions upon which it will make needed purchases.” Perkins v. Lukens Steel Co. (1940) 310 U.S. 113, 127. This principle appears to leave little room for an equal protection challenge where no suspect class is involved. Since non-local vendors are not a suspect class, the Equal Protection Clause does not present a likely obstacle to local purchasing preference laws. If the preference reflects a legitimate interest of the local governments, such as encouraging local industry or enhancing the local tax base, the preference should be valid.
E. Local Preference Case Study – City of Riverside
In 1976, the City of Riverside amended their then existing Purchasing Resolution to add a provision to award a contract to a local bidder who was not the lowest bidder if the local bidder’s quote does not exceed one percent of the sales taxable portion of the lowest bid or when it can be demonstrated that the cost of dealing with the lower out-of-town bidder would exceed the local bid. (Resolution No. 12867)
In 1991, when the City of Riverside revised and revamped its Purchasing Resolution, they carried over the one percent sales tax provision but clarified it was for the purchase of goods. Eleven years later, desiring to award more contracts to local bidders, the City retained the services of John Husing, Ph.D., of Economics & Politics, Inc. (“Husing”) to analyze the economics and viability of establishing a five percent (5%) local preference.
Husing’s study found, among other things, that: a) purchasing products from local vendors allows for the money paid to circulate through the local economy longer, thereby stimulating the local economy as opposed to purchases made outside the City which money would only serve to stimulate other economies; b) every new dollar entering into the City creates from 1.97 to 2.61 times more total economic activity and household income before it “leaks” away to other geographic areas; c) local vendors would tend to use other local vendors, thus multiplying and continuing to expand the local economy; d) the Inland Empire is not as mature a region as Los Angeles and Orange Counties, and by increasing the local preference it would help increase that maturity in the area, draw and return more businesses including professional services, and expand the local economy; and e) giving local vendors a five percent (5%) Attachment 2 Joint Agenda 6-5-2023 Item 6 - Page 31
preference would be a modest way in which to stimulate and expand the City’s economy.
Based on that study, the City amended its Purchasing Resolution (Resolution No. 20363) to establish a preference for the procurement of goods from a local vendor, define a qualified local vendor and to award a contract to a local vendor provided the difference between the local responsible bidder and the lowest responsible bidder does not exceed five percent (5%) of the lowest responsible bidder. To qualify as a local vendor, the bidder must certify at the time of bid the following:
a) it has fixed facilities with employees located within the City limits; b) it has a business street address (Post Office box or residential address shall not suffice to establish a local presence);
c) all sales tax returns for the goods purchased must be reported to the State through a business within the geographic boundaries of the City and the City will receive one percent (1%) of the sales tax of the goods purchased; and d) it has a City business license.
The current Purchasing Resolution No. 21182, adopted in June 2006, carried over the provisions of Resolution No. 20363 and the City currently has a five percent (5%) preference.
III. CONSTITUTIONAL ISSUES RELATING TO LOCAL HIRE PROGRAMS.
A. Mandatory Local Participation.
1. Legal Requirements for Mandatory Local Participation a. Requirements for Use on Private Development
With the goal of increasing employment opportunities for residents, cities and counties nationwide have established programs to encourage and, in some cases, to require private developers of construction projects to hire locally for skilled and unskilled labor. For example, the City of Pasadena recently adopted an ordinance (See attached Exhibit B) Attachment 2 Joint Agenda 6-5-2023 Item 6 - Page 32
mandating that private developers who receive city financial assistance, in the form of grants financing, revenue sharing, provision for the sale of city property at less than market rate, fee waivers or other forms of financial assistance, to enter into a local hire agreement establishing a minimum percentage of construction-related payroll or equivalent that must be accomplished with resident employee hours either during construction or as part of on-going, non-temporary employment following completion of the project. Pasadena’s local hire program is voluntary for private development not receiving city financial assistance; however, participating developers receive a partial rebate of the city’s construction tax. Unlike private developers, who are free to negotiate the terms and price of construction contracts, the requirement for the city to award construction contracts to the lowest responsive bidder, makes use of local programs difficult.
City council members and taxpayers may not appreciate that competitive bidding rules make it difficult to require a mandatory number of local firms or workers and make it difficult to predict the results of such well-intentioned programs.
b. Requirements for Use on Public Works
Local hiring ordinances mandating use of local contractors and workers on public works projects have historically been faced with constitutional scrutiny at the federal and state level. (1) Commerce Clause – Not an Issue if Only City Funds Used The Commerce Clause, Article I, § 8, cl. 3 of the United States Constitution prevents state and local governments from interfering with Congress’s power to regulate commerce among the states. In White v. Massachusetts Council of Const. Employers, Inc., 460 U.S. 204 (1983), the mayor of Boston issued an executive order requiring all projects funded in whole or in part by city funds to be performed by a work force at least half of which were city residents.
The Supreme Court held that when a state or local government expends only its own funds for a public project, the city acted as a market participant and was not subject to the restraints of the Commerce Clause. Thus, local participation programs can rarely be used when federal or state funds are involved in project funding.
(2) Privileges and Immunities Clause – Must Have a
“Substantial Reason” for the Program and
Attachment 2 Joint Agenda 6-5-2023 Item 6 - Page 33
the Program Must be Narrowly Tailored to Address
Underlying Reason
The Privileges and Immunities Clause, Article IV, § 2, of the United States Constitution prevents a state from discriminating against out-of-state citizens. In United Building and Constructions Trades Council of Camden County and Vicinity v. Mayor and Council of the City of Camden, 465 U.S. 208 (1984), the Supreme Court extended the privileges and immunity protection to municipal residency classifications. Thus, there must be a "substantial reason" for discrimination against citizens of another state when awarding local public contracts.
Nonresidents must be the cause of a “particular evil” and the local hire law must bear a close relationship/be narrowly tailored to address the particular evil. The Supreme Court held that Camden’s ordinance requiring 40% of employees of contractor and subcontractors to be city residents, was subject to the strictures of the Privileges and Immunity clause and the ordinance discriminated against nonresidents but it was impossible to evaluate the city’s justification for the local hire program to determine if there was a “substantial reason” for the program.
In Hicklin v. Orbeck, 437 U.S. 518 (1978), the Supreme Court analyzed a constitutional challenge to the “Alaska Hire” law, which was an extremely broad local hire law. The Supreme Court held that the Alaska Hire law violated the Privileges and Immunities Clause because it found that Alaska’s unemployment was not caused by non-resident jobseekers, but rather by lack of education, lack of training, or geographic remoteness. Moreover, even if non-residents could be shown to be “a peculiar source of the evil” at which the Alaska Hire law was aimed, the statute would still be invalid because the hiring preference was given to all Alaskans, not just unemployed Alaskans. The Supreme Court noted that the means by which Alaska discriminates against non-residents “must be more closely tailored to aid the unemployed the [Alaska Hire law] is intended to benefit.” Id. at 528. The Alaska Hire law was also overly broad in terms of what businesses fell within its scope, and effectively attempted to mandate that all businesses that benefit in any manner from Alaska’s development of oil and gas bias their employment practices in favor of Alaska residents.
Thus, in order withstand strict scrutiny analysis any local hire or local business contracting program that mandates a specified percentage of local participation, must be Attachment 2 Joint Agenda 6-5-2023 Item 6 - Page 34
supported by a study supporting the substantial reason for the program and a nexus showing the program is narrowly tailored to correct the underlying reason for the program. See the San Francisco program (attached as Exhibit C) discussed below for the information that must be included in a disparity study to support a local participation program and note that the San Francisco program has not been tested by the courts.
(3) Privileges and Immunities Clause – Must Have a
“Substantial Reason” for the Program and the Program
Must be Narrowly Tailored to Address Underlying Reason
The California Constitution, Article XI, § 10 (b) provides that, a city or county, including any chartered city or chartered county, or public district, may not require that its employees be residents of such city, county, or district; except that [after employment] such employees may be required to reside within a reasonable and specific distance of their place of employment or other designated location. In Cooperrider v. San Francisco Civil Service Commission, 97 Cal.App.3d 495 (1979), the Court of Appeal held the city’s one-year residency requirement for city job applicants was unconstitutional because it violated Article XI, § 10 (b), which protects the right to migrate, resettle, find a new job and start a new life and violated the right to seek public employment without discrimination under the equal protection clause Article IV, § 16. Since two fundamental rights were at issue, the court applied a strict scrutiny test, requiring that the city demonstrate a compelling state interest was advanced by the policy and that no less intrusive means could achieve the same result. The city offered evidence only as to its attempts to use city funds to prevent unemployment among the impoverished residents of the city and its affirmative action policy, but was not able to establish that there was a rational relationship, let alone a compelling interest, between those objectives and the one-year residency requirement. In light of this case, durational residency requirements are typically minimal, 2 weeks to 3 months when part of a local participation program, if duration of residency is addressed at all. (4) Local Hire Requirement Cannot Restrain Freedom of
Association or Require Unfair Labor Practices
In O’Hare Truck Service, Inc. v. City of Northlake, 518 U.S. 712 (1996) a towing firm sued after it was dropped from the city’s list of available contractors when it Attachment 2 Joint Agenda 6-5-2023 Item 6 - Page 35
refused to contribute to the city mayor’s reelection campaign. The Supreme Court held that First Amendment protections afforded to public employees against being discharged for refusing to support a political party or candidates also extended to independent contractors.
Based on the ruling in the O’Hare case, many attorneys recommend that a local hire program include exceptions for union contractors who are already bound by collective bargaining agreements or project labor agreements or date of last employment arises from the terms of the collective bargaining agreement to which contractor and subcontractors are signatories.
29 USC 158(b) provides that it shall be an unfair labor practice for a labor organization or its agents: (1) to restrain or coerce (A) employees in the exercise of the rights guaranteed in section 157 of this title [Section 157 grants employees the right to organize, engage in concerted activities, etc.] . . . (2) to cause or attempt to cause an employer to discriminate against an employee in violation of subsection (a)(3) of this section [Section 158(a)(3) makes it an unfair labor practice for an employer to discriminate . . . in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage membership in any labor organization . . . ]
Generally, it is a violation of Section 8(b) of the National Labor Relations Act (28 U.S.C. 158(b)) for a union to engage in a systematic and continuous pattern of making referrals in violation of the terms of a collective bargaining agreement without a legitimate purpose. See, National Labor Relations Board v. International Association of Bridge, Structural and Ornamental Iron Workers, Local 433, 600 F.2d 770, 777 (9th Cir. 1979), see also, Laborers and Hod Carriers Local No. 341, 564 F.2d 834, 839-40 (9th Cir. 1977).
Although we have not found a case directly on point, the requirement to abide by a local hiring ordinance may provide a legitimate purpose and thus no unfair labor practice. Although criminal liability may arise from an unfair labor practice, generally, criminal liability attaches only when there is an unfair labor practice that results in physical injury. (5) Mandatory Local Business Participation
Requirement May Violate Charter
Attachment 2 Joint Agenda 6-5-2023 Item 6 - Page 36
Requirement to Award to Lowest Bidder Unless
Exceptions Apply
In Associated General Contractors v. City and County of San Francisco, 813 F.2d 922 (1987), the Ninth Circuit evaluated the city ordinance, as it existed at the time, giving local firms a 5% bidding preference for contracts put out to bid and found that the ordinance was invalid because it conflicted with the city charter requirement that the contract be let to the lowest reliable and responsible bidder and did not fall within any of the charter exceptions to competitive bidding. The Ninth Circuit rejected the argument that determination of a bidder’s responsibility includes the determination that a bidder is “socially responsible” and able to comply with a local hire requirement.
Thus, it is unlikely that a public entity can mandate use of local businesses or local workers at specified levels without modifying a charter that requires award to the lowest responsibility bidder, or unless there is an existing charter exception for award to other than the low bidder (such as a reciprocal preference similar to Public Contract Code Section 6107). (6) Local Participation Program May Not Violate Equal
Protection Clause If Supported by a Substantial Reason and the Program is Narrowly Tailored
In Associated General Contractors v. City and County of San Francisco, 813 F.2d 922 (1987), the Ninth Circuit also held that the 5% preference to local firms did not violate the equal protection clause by promoting local businesses at the expense of nonresident competitors because “the city may rationally allocate its own funds to ameliorate disadvantages suffered by local businesses, particularly where the city itself creates some of the disadvantages”. The Ninth Circuit noted that two of the ordinance’s findings are relevant to this issue: 1) local businesses are at a competitive disadvantage with businesses from other areas because of the higher administrative costs of doing business in the city (e.g. higher taxes, higher rents, higher wages and benefits for labor, higher insurance rates, etc.; and 2) the public interest would best be served by encouraging businesses to locate and remain in San Francisco through the provision of a minimal preference. The court found that the preferences given local businesses were “relatively slight” as the local businesses got only a 5% preference, there were no goals, Attachment 2 Joint Agenda 6-5-2023 Item 6 - Page 37
quotas or set-asides. The preference applied only to those transactions where the city itself was a party. Moreover, the definition of a local business was rather broad; foreign businesses can become local businesses by acquiring fixed offices or distribution points within the city and paying their permit and license fees from a city address. Thus, any business willing to share some of the burdens of a San Francisco location (higher rents, wages, insurance etc.) can enjoy the benefits of the preference.
(7) City and County of San Francisco Ordinance
Prior to the enactment of the San Francisco Local Hiring Policy for Construction (Policy), San Francisco required contractors "to make a good faith effort” to hire qualified individuals who are residents of the City and County of San Francisco to comprise not less than 50% of each contractor's total construction workforce, measured in labor work hours, and to give special preference to minorities, women, and economically disadvantaged individuals. A 2010 study by Chinese for Affirmative Action and Brightline Defense Project found that, since 2003, the average local hire figures on city-funded construction was less than 25% and actually dipped below 20% for 2009.
On December 14, 2010, the San Francisco Board of Supervisors passed an ordinance establishing the San Francisco Local Hiring Policy for Construction, in order "to advance the city's workforce and community development goals, removing obstacles that may have historically limited the full employment of local residents on the wide array of opportunities created by public works projects, curbing spiraling unemployment, population decline, and reduction in the number of local businesses located in the city, eroding property values, and depleting San Francisco's tax base.” The San Francisco Policy requires contractors and their subcontractors performing public works projects for the City and County of San Francisco worth $400,000 or more to hire local San Francisco residents and extends to projects at sites located up to 70 miles beyond the jurisdictional limits of San Francisco. The San Francisco program requires an initial local hiring requirement with a mandatory participation level of 20% of all project work hours within each trade performed by local residents, with no less that 10% to be performed by disadvantaged workers. Subject to periodic review, the mandatory Attachment 2 Joint Agenda 6-5-2023 Item 6 - Page 38
participation level increases annually over 7 years at increments of 5%, up to a mandatory participation level of 50%, with no less than one-half to be performed by disadvantaged workers.
The San Francisco program authorizes the negotiation of reciprocity agreements with other local jurisdictions that maintain local hiring programs. The San Francisco Program exempts: 1) Projects using federal or state funds if application of the Policy would violate federal or state law, or would be inconsistent with the terms or conditions of a grant or contract with an agency of the United States or the State of California; 2) Project work hours performed by residents of states other than California (to prevent a challenge based on the Privileges and Immunity Clause of the U.S. Constitution); and 3) Projects where the local hire program conflicts with an existing Project Labor Agreement or collective bargaining agreement (to prevent a challenge based on the O’Hare decision).
While it is understandable for San Francisco to want to increase local jobs, favoring local workers can negatively impact neighboring cities that are also experiencing high unemployment levels. According to the December 2010 figures by the California Employment Development Department, six of the nine Bay Area Counties have higher unemployment rates than, San Francisco which was at 9.2%. While local hiring goals are laudable, such goals should not be accomplished by introducing new obstacles for the regional workforce; the Bay Area is a mobile and economically interdependent region and it does not benefit from pitting neighboring communities against each other. A similar analysis applies to the Los Angeles basin.
B. Local Participation Goals with Good Faith Efforts.
Because of the legal limitations and practical difficulty of implementing mandatory programs set forth above most local subcontractor and hiring ordinances relating to public works projects require bidders to document a "good faith" effort to meet the local participation goal, but do not require that bidders meet the goal in order to receive award of the contract.
1. California Supreme Court Review of a Targeted Outreach Program In the 1980’s, the City of Los Angeles City Council adopted a policy to ensure that minority (MBE) and women-owned (WBE) businesses have the maximum Attachment 2 Joint Agenda 6-5-2023 Item 6 - Page 39
opportunity to participate in the performance of contracts and subcontracts. The Los Angeles program examined the adequacy of bidders’ good faith in conducting subcontractor outreach efforts to obtain MBE, WBE and other business enterprises (OBE) utilizing 10 factors including selecting specific work items for subcontracting, advertising, good faith negotiations, etc.
Although the city established a percentage “goal” for MBE and WBE participation, the program made clear that failure to meet the stated goal would not disqualify a bidder. Only bidders who failed to document good faith efforts to obtain MBE/WBE/OBE subcontractor participation would be disqualified.
The California Supreme Court case of Domar Electric, Inc. v. City of Los Angeles, 9 Cal.4th 161 (1995) expressly held that a Los Angeles City charter provision requiring award of contracts to the “lowest and best regular responsible bidder” did not bar the city from requiring bidders to comply with a subcontractor outreach program that involved no bid preferences, setasides or quotas. The Court reviewed provisions of the LA City Charter that expressly stated that “bidders may be required to submit with their proposals detailed specifications of any item to be furnished, together with guarantees as to efficiency, performance … and other appropriate factors” and that a local bidder preference may be allowed if provided for by ordinance. Since these charter provisions neither expressly authorize or forbid the city from adopting a subcontractor outreach requirement, the Court indicated that the validity of the program must be ascertained with reference to the purposes of competitive bidding, which are “to guard against favoritism, improvidence, extravagance, fraud and corruption to prevent waste of public funds; and to obtain the best economic result for the public”. The Court found no conflict between the city’s outreach program and the purposes of competitive bidding, which necessarily imply equal opportunities to all. The Court discussed that despite the lack of empirical evidence it was not unreasonable for the city to conclude that in the absence of mandated outreach, prime contractors will tend to seek out familiar subcontractors and therefore their bids may or may not reflect as low a price had reasonable outreach efforts been made.
2. Discussion
Attachment 2 Joint Agenda 6-5-2023 Item 6 - Page 40
A local contractor/worker outreach program with non-mandatory goals and mandatory good faith efforts would likely be subject to the same level of review as the MBE/WBE program examined by the Domar court and should be structured in a similar manner in order to withstand a potential legal challenge. In fact, the majority of local participation programs implemented by California local agencies use a good faith effort model. These programs are often initially well received because they establish a public policy for use of local firms and workers. The results of the programs, however, are often criticized because it is difficult to structure a good faith effort program and achieve significant levels of local participation. Some critics view good faith efforts as meaningless and push for mandatory programs.
Programs which require review of bidders’ documentation of good faith efforts can also complicate the bidding and contract award process and may provide new grounds for disappointed bidders to protest proposed contracts.
C. Bonus/Incentive Payments for Local Participation.
In light of the shortcomings of good faith effort outreach programs, charter cities may wish to explore the use of incentives, such as a line item allowance in the bid and contract, which can be used to fund bonus/incentive payments based on documented levels of actual local participation achieved throughout the duration of the project discussed in the next section.
1. California Constitutional Prohibition on Gift of Public Funds Article XVI, Section 6 of the California Constitution prohibits the legislature from making or authorizing the making of any gift of public money or thing to an individual or corporation. California Government Code Section 82028(a) defines “gift” as “any payment that confers a personal benefit on the recipient, to the extent that consideration of equal or greater value is not received….” The gift prohibited by the Constitution includes voluntary transfers of personal property without consideration, as well as “all appropriations of public money for which there is no authority or enforceable claim, even if there is a moral or equitable obligation.” 58 Cal. Jur. 3d State of California § 91.
Attachment 2 Joint Agenda 6-5-2023 Item 6 - Page 41
To determine whether an appropriation of public funds is a “gift,” the primary question is whether the funds are to be used for a public purpose or a private purpose; if the funds will be used for a public purpose, the appropriation is not a gift. 45 Cal. Jur. 3d Municipalities § 172. “The benefits to the state from an expenditure for a public purpose is in the nature of a consideration; therefore, the funds expended are not a gift, even though private persons are benefitted from them.” Id. What constitutes a public purpose is generally left to the discretion of the legislature, and courts will not disturb such a determination if it has a reasonable basis.
Sturgeon v. County of Los Angeles (2008) 167 Cal.App.4th 630, 638-639 (review denied).
2. Charter City Exemption
The California Constitutional prohibition on gifts of public funds, however, does not apply to charter cities. Mullins v. Henderson (1946) 75 Cal.App.2d 117, 129; Sturgeon, 167 Cal.App.4th at 637; 45 Cal. Jur. 3d Municipalities § 172.
3. Payments for a Public Purpose are Not Gifts
A local contractor/local hire program that gave a bonus to the contractor or its key personnel at project closeout based on local participation levels on the project would likely not be viewed as a gift of public funds because the bonus payment would be for a public purpose, even though the contractor/individual would also benefit. “A mere incidental benefit to an individual does not convert a public purpose into a private purpose, within the meaning of the rule.” 45 Cal. Jur. 3d Municipalities § 172. The rationale for a local hiring program is to use taxpayer dollars that are invested into public projects in the city while also increasing the economic strength of the city by providing city residents with an opportunity to be employed on those projects. This rationale would likely be determined to be a public purpose. Rewarding a contractor at the end of such a project with a bonus for actually using local hires on the project serves that public purpose by encouraging the contractor to look locally for new hires whenever possible. The fact that the contractor also benefits is a consequential advantage to the program, but not its purpose. The city’s concern is the public—the local residents, and in turn, the entire city economy—that stands to gain from a local hiring program.
Attachment 2 Joint Agenda 6-5-2023 Item 6 - Page 42
Examples of expenditures that have been deemed public purposes by the courts include:
providing inhabitants of a municipality with utility services; public housing projects for lowincome families; and a joint study by two municipalities of common sewage problems. County of Riverside v. Whitlock (1972) 22 Cal.App.2d 863; Housing Authority of City of Los Angeles v.
Shoecraft (1953) 116 Cal.App.2d 813; City of Oakland v. Williams (1940) 15 Cal.2d 542.
One case that is particularly analogous to paying bonuses for using local contractors/hires is Sturgeon v. County of Los Angeles (2008) 167 Cal.App.4th 630. In Sturgeon, the plaintiff challenged the validity of benefits provided by the County to superior court judges. The challenge was based in part on the argument that the benefits were an unconstitutional gift of public funds. The court of appeal held that the benefits given to the judges were not gifts of public funds. The court noted that most earlier California cases had found that a public employer’s provision of benefits to its employees, “including bonuses for work already performed,” serve public, not private purposes. Id. at 638. In Sturgeon, the court found that the benefits to judges helped with recruitment and retention of judges, and therefore the benefits were not gifts under the meaning of Article XVI, Section 6 of the Constitution.
A bonus paid to a contractor for using local contractors/hires helps a city’s economy by incentivizing that contractor to look to city residents first when subcontracting and job openings arise on a project, which benefits a city and its residents. Therefore an incentive bonus for local hires should not be viewed as a gift of public funds, because it is an expenditure for a public purpose—the contractor is giving consideration (utilizing city residents) for the payment of public funds (the bonus).
IV. SUMMARY
A. Mandatory Local Participation.
In order to survive a challenge under the U.S. Constitution Commerce, Privileges and Immunity and Equal Protection clauses, a mandated “preference” (as opposed to a “goal”) for local participation on a city public works project:
Attachment 2 Joint Agenda 6-5-2023 Item 6 - Page 43
1) Requires project funding from city funds only (no federal, state or grant funding);
2) Requires a “substantial reason” for the local preference, e.g., nonresidents must be the cause or a particular “evil” (such as similar preferences legislated by other states or municipalities, or a disparity study that shows local contractors or workers are not getting their expected share of city public work contracts); 3) Must be narrowly tailored to address the particular evil or address the local disadvantage;
4) Must indicate that the program does not apply if it violates federal or state law or a grant so as to jeopardize funding for the project; 5) Local residence requirement cannot impair California Constitutional right to resettle and find a job (Article XI §10(b)) 6) Must not conflict with charter provisions requiring award to low bidders; and
7) With respect to local hiring, cannot restrain freedom of association or require unfair trade practices, (i.e., should either provide exceptions for union hall hiring practices, however disparate treatment could raise equal protection challenges by non-union contractors) or the city should attempt to obtain union cooperation before bidding a project with a local participation program or use only with negotiated contracts.
B. Local Participation Goals with Good Faith Efforts.
Legal requirements for a program that requires bidders to undertake good faith efforts to meet a goal for local firm/resident participation on a city project include (See Exhibit D for Attachment 2 Joint Agenda 6-5-2023 Item 6 - Page 44
sample):
1) Establishes a goal for local participation, but does not require bidders to meet the goal,
2) Requires all bidders, including local firms, to undertake subcontractor/supplier and worker outreach,
3) Requires bidders to undertake outreach to all qualified subcontractors, suppliers and workers including, but not limited to, local firms and individuals, and
4) Compliance with any charter or ordinance requirements for approval by the city council.
C. Bonus/Incentive Payments for Local Participation.
The California constitutional prohibition against gifts of public funds does not apply to charter cities unless there is specific language in their charters prohibiting such use of funds.
The test for whether payments of public funds are a gift is whether the funds are used for a public purpose, regardless of whether a private person also benefits from the expenditure.
Incentive payments tied to the level of participation local firms and workers on a city project reasonably appear to advance a public purpose of improving the lives of city residents, improving the revenue of local businesses and improving the overall local economy; therefore a bonus paid to a firm or individual to serve that public purpose would likely not be considered a gift waste of public funds.
V. FURTHER CONSIDERATIONS
A. Determine the scope and nature of the local participation program B. Gather statistics from federal, state and local entities regarding labor statistics, sales tax revenues, etc. to support need for program even if a mandatory Attachment 2 Joint Agenda 6-5-2023 Item 6 - Page 45
participation level program is not used to support the program as consistent with the basic policies of competitive bidding
C. Adopt a resolution, ordinance or similar legislative action on the public benefit, specifically addressing the fact that there will be no gift of public funds if an incentive/bonus payment is part of the program.
D. Consider methods of measuring results
E. Consider incorporating a sunset date and reporting requirements for projects where no incentive provided as well as projects with local business/hire program, and review to determine whether program/bonus increased use of locals Attachment 2 Joint Agenda 6-5-2023 Item 6 - Page 46
Department: Public Works
Cost Center: 5001
For Agenda of: 4/19/2022
Placement: Business
Estimated Time: 60 Minutes
FROM: Matt Horn, Public Works Director
Prepared By: Brian Nelson, Deputy Director of Public Works and City Engineer SUBJECT: COMMUNITY WORKFORCE AGREEMENT: PHASE 2 DATA ANALYSIS,
OUTREACH, AND DRAFT POLICY DEVELOPMENT
RECOMMENDATION
Authorize staff to negotiate a Community Workforce Agreement with the Tri-Counties Building and Construction Trades Council to include the Cultural Arts District Parking Structure (vertical construction component only), Prado Road Interchange, and Public Safety Center projects, including a 60% local worker participation goal and excluding prevailing wage services provided through professional services agreements.
REPORT-IN-BRIEF
The 2021-23 Financial Plan includes the Major City Goal (MCG) of Economic Recovery, Resiliency & Fiscal Sustainability. The MCG intends to implement a strategic approach focused on economic resiliency by supporting a thriving local economy in addition to practicing fiscal responsibility, paying down unfunded pension liabilities, and investing in critical infrastructure.
One of the work programs included in the Financial Plan to advance this MCG (Item 1.1f)1 is establishment of an internal working group to research and develop various methods to support the participation of local contractors, local vendors, and local labor in public projects through workforce agreements, local purchasing requirements, and alternative project delivery methods. This report focuses on the evaluation and potential policy framework for a community workforce agreement (CWA).
1 MCG Item 1.1f: "Hire a consultant, support legal review, and establish an internal working group and hire a consultant to research methods to support local contractors, local vendors, and labor through workforce agreements, local purchasing requirements, alternative project delivery methods, and other options to support local businesses and employees. The Community Services Group will be leading this effort".
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 47
CWAs are “pre-hire” collective bargaining agreements between a project owner (City), contractors that perform the project work and building and construction trade unions. A CWA establishes standard terms and conditions of employment for workers on a qualified construction project, including work conditions, hiring procedures, wages and benefits, management rights, dispute resolution procedures, and procedures to prevent work stoppages. In addition, CWAs often include provisions to promote participation in covered projects by targeted workers and demographics, including local residents, apprentices, historically underutilized or underrepresented residents or groups, and veterans. In the context of furthering the MCG, Council has provided input to staff that a top priority objective of any City CWA should be local worker participation requirements and enhancement of employment of local residents on City public projects, without compromising quality and expertise on City projects.
Following a Council Study Session held in September 2021, staff performed extensive stakeholder outreach and analyzed actual local hiring totals for the City’s Capital Improvement Program (CIP) projects to determine historical local worker participation.
The stakeholder outreach process, historical CIP project review, and the resulting staff recommendation are informed by these efforts and are detailed in the body of this report.
DISCUSSION
1. Background
1.1. Workforce Agreement Task in Major City Goal
With the adoption of the 2021-23 Financial Plan, Council established a Major City Goal (MCG) of Economic Recovery, Resiliency, and Fiscal Sustainability. To help achieve this goal, Council outlined a specific task to research methods to support the participation of local contractors, local vendors, and local labor in public projects through workforce agreements, local purchasing requirements, and alternative project delivery methods.
This work effort has been broken into three general phases:
Phase 1 (complete). Council Study Session to provide input and guidance on the work effort and develop a project plan based on Council feedback. The Study Session was held in September 2021.
Phase 2 (current phase). As framed by input and guidance from the phase one Study Session, develop a policy framework for Community Workforce Agreements (CWAs), alternative project delivery, and local purchasing. Within this policy framework, identify CWA negotiating objectives for Council consideration.
Phase 3. Council consideration of programs and policies, and direction for implementation of the same.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 48
Based on direction received from Council in the phase one Study Session, this report focuses on the evaluation and potential policy framework for CWAs; local purchasing is part of an item being brought forward by the Finance Department and scheduled for the May 17th Council meeting. Alternative project delivery methods are currently under evaluation as part of the implementation of the Management Partners CIP Process Improvement study.
1.2. Definition and Purpose of a CWA
CWAs, sometimes referred to as Project Labor Agreements, or Project Stabilization Agreements, are "pre-hire" collective bargaining agreements between a project owner, contractors and building and construction trade unions. A CWA establishes standard terms and conditions of employment for a qualified construction project, including work conditions, hiring procedures, wages and benefits, management rights, dispute resolution procedures, and procedures to prevent work stoppages. In addition, CWAs often include provisions to promote participation in covered projects by targeted workers and demographics, including local residents, apprentices, historically underutilized or underrepresented residents or groups, and veterans. CWAs can apply to a single project, projects with budgets over a specified threshold, different types of projects, or all projects undertaken by a project owner. CWAs must be included in the bid documents for covered projects, and the provisions apply to the prime contractor and subcontractors of every tier.
1.3. City Experience with a CWA
The City previously negotiated and entered into a CWA with the Tri-Counties Building and Construction Trades Council (Trades Council) for the SLO Water Plus Project (i.e., WRRF Upgrade) in December 2018, completed in advance of project bidding, with the primary objective defined by the Council of maximizing the employment of local residents. This was the first such agreement the City has approved. The agreement included a local worker participation goal of 30%.
By February 2022, approximately 79% of all labor hours (141,200 hours) on the SLO Water Plus Project (WRRF) have been performed by workers residing in San Luis Obispo, Santa Barbara, Monterey, and Ventura Counties (defined in the CWA as "local workers"), representing a significant reinvestment of construction funds into the local economy.
Table 1 presents the labor hours worked by residents of each tier on the SLO Water Plus Project.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 49
Table 1. SLO Water Plus Project Labor Hours by Tier
No. Tier Description Labor Hours % of Total Labor
Hours
1 1 City of San Luis Obispo 7,551 6%
2 2 San Luis Obispo County 65,042 46%
3 3 Monterey and Santa Barbara Counties 39,341 28%
4 4 Ventura County 46 <1%
5 N/A Non-Local 29,263 21%
6 TOTAL 141,243 100%
1.4. CWA Alignment with Major City Goal
The City's ongoing Capital Improvement Program (CIP) includes numerous construction projects that will provide the infrastructure required for economic vitality, neighborhood wellness, housing, transportation, sustainability, active and passive recreation, public safety, cleanliness, and other basic amenities. In November 2020, voters approved a
1.5% local sales tax (Measure G-20) that replaced the previous 0.5% local sales tax. The increased revenue from passage of Measure G-20 added about $15 million to the annual General Fund capital budget, allowing for a more expansive Capital Improvement Plan.
The public projects included in the City's CIP present an opportunity to continue enhancing the employment of local residents by negotiating a CWA with the Trades Council that includes a local worker participation goal. Key considerations regarding potential CWA implementation for the City’s CIP projects are described in Attachment A.
1.5. Council Study Session Feedback
A Study Session was held in September 2021 to present strategies identified by staff to support the local economy and to receive feedback from Council on the work program.
The Study Session included a guided discussion with a series of questions intended to determine Council’s preferred strategies and implementation priorities, and to inform the subsequent phases of the work program. The following feedback/direction was provided to staff during the Study Session:
1. Council supported analysis and implementation of the draft strategies as separate work efforts.
2. Council confirmed that its primary objective in considering implementation of a more broadly applicable CWA is to prioritize employment of local workers.
3. Council recommended using the SLO Water Plus CWA as a model for a future CWA.
4. Council recommended the CWA evaluation include consideration of appropriate cost thresholds and types of projects for inclusion in the CWA.
5. Council identified additional stakeholders to be included in the stakeholder outreach effort.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 50
Additional feedback from individual Councilmembers regarding the potential inclusion of participation goals for women, veterans, underserved populations, and Cuesta graduates was also provided. This CWA evaluation is focused on the employment of local workers and analysis of additional targeted worker demographics can be evaluated as a separate work effort upon direction from Council.
At the conclusion of the Study Session, staff outlined the plan for Phase 2 of the work program including stakeholder outreach and a review of the City’s past and current CIP to inform policy recommendations for consideration by Council.
2. Stakeholder Outreach
Following the phase one Study Session, staff began the stakeholder outreach process.
A Stakeholder Outreach Plan was prepared consistent with the City’s Public Engagement and Noticing (PEN) Manual. The Stakeholder Summary presented in Table 2 below was prepared as a part of the Stakeholder Outreach Plan and was used to guide the stakeholder outreach effort.
Table 2. Stakeholder Summary
No. Stakeholder Communication Objective
1 SLO Chamber of Commerce Inform and Consult
2 Downtown SLO Inform
3 Public Works Contractors Inform and Consult
4 Local Consultants Inform and Consult
5 SLO County Builders Exchange Inform and Consult
6 Tri-Counties Building and Construction Trades
Council
Inform, Consult,
Collaborate
7 Central Coast Labor Council Inform
8 Cuesta College Inform
9 Hancock College Inform
10 Cal Poly Inform
An informational document with responses to frequently asked questions (FAQ) was developed by staff and shared with each stakeholder to provide background on CWAs and the relationship between CWAs and the MCG. This FAQ document in included with the report as Attachment B. The following sections provide additional detail on the outreach efforts for each stakeholder group.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 51
2.1. Local Business Associations
Downtown SLO and SLO Chamber of Commerce
Downtown SLO and the SLO Chamber of Commerce were identified as potential stakeholders because they represent the interests of many local businesses. Downtown SLO and the SLO Chamber of Commerce were briefed by staff and provided with a copy of the FAQ document for additional information.
SLO County Builders Exchange
The SLO County Builders Exchange (Builders Exchange) is a non-profit contractors association whose membership includes over 500 contractors, subcontractors, and suppliers in the local construction industry. The Builders Exchange provides numerous services to its membership, including distribution of public and private bid opportunities and training for construction-related topics such as prevailing wage requirements, public works bidding requirements, and safety certifications.
Staff met with the Builders Exchange Executive Director and several Officers to inform the organization of the City’s CWA evaluation effort and to solicit the group’s feedback.
The Builders Exchange expressed opposition to implementation of a CWA citing the following concerns: 1) limitations on ability to utilize core workforce, 2) qualifications of union referrals, 3) implementation costs, 4) reduced efficiency, 5) loss of worker contributions to union pension programs, 6) reduced competition, 7) lack of local union workers required to meet local worker participation goals, 8) increased risk of work stoppages and strikes, and 9) reduced opportunities for local contractors to participate.
2.2. Public Works Contractors
Public works contractors were identified as a key stakeholder group as implementation of a CWA will significantly change the requirements for bid award and employment of craft labor on City projects, which directly impacts the employers (i.e., construction contractors) who provide craft labor to the City. Staff prepared a list of questions that were posed to contractors via video conference and phone survey. The survey included a series of simple questions intended to facilitate aggregation and reporting of responses along with open-ended questions that provided respondents an opportunity to provide additional feedback. The questions were crafted to determine how implementation of a CWA would affect respondents’ future pursuit of City public projects.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 52
To identify a representative group of contractors to engage, staff tabulated information for all public projects with bid closing dates between January 2018 and September 2021.
The low bidders were identified and a group of contractors who were awarded different project types (e.g., street improvements, buildings and structures, bridges, wet utilities, etc.) and sizes (e.g., $1-$250K, $250K-$1M, and $1M-$5M) were selected. Sixteen contractors were contacted and twelve participated in the survey. One respondent (Cal Portland) was not initially identified as a potential survey participant, but contacted Public Works staff after learning of the City’s CWA evaluation efforts from colleagues. Survey respondents represent 51% of low bidders for all public projects awarded between January 2018 and September 2021 (78 total projects). Table 3 presents the contractors who participated in the survey and the number of City projects constructed by each from January 2018 to September 2021.
Table 3. Public Works Contractors Surveyed by Staff
No. Name Number of City Projects
1 Souza Corporation 11
2 R. Burke Corporation 9
3 Specialty Construction 4
4 Toste Construction, Inc. 3
5 Lee Wilson Electric 3
6 VSS International 3
7 Papich Construction 2
8 Smith MEP 2
9 Taylor Jane 1
10 Cushman Contracting Corporation 1
11 MGE Underground 1
12 Cal Portland 0
13 TOTAL 40
Questions posed to the public works contractor stakeholder group are presented below along with a summary of the feedback received. The first several questions were included to determine each respondent’s familiarity with CWAs along with their labor contract signatory status. As described in Attachment A, CWAs affect non-union contractors more than union contractors. Establishing whether the respondents were current signatories to a union agreement helped staff gauge responses to subsequent questions in the survey.
Questions 1-3 are presented in Table 4 below along with the responses received.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 53
Table 4. Public Works Contractor Survey Responses
No. Question Yes No
1 Are you familiar with CWAs and the associated requirements? 83% 17% 2 Have you ever worked under a CWA? 42% 58%
3 Are you a union signatory contractor? 58% 42%
The remaining survey questions and responses are described in greater detail in the following sections.
Question 4: Would you be more likely, less likely, or as likely to bid City projects if subject to a CWA?
This question was included in the survey to determine if contractors who have historically bid on City projects would be more, less or equally likely to bid on future City projects if subject to the requirements of a CWA. The responses to this question are presented in Figure 1 below.
Figure 1. Likelihood of Surveyed Contractors to Bid CWA-Covered Projects The respondent who indicated its company would be more likely to bid noted that a CWA would deter inexperienced contractors from bidding. The respondent noted that in general, contractors who aren’t experienced with public works construction can underbid projects because they don’t understand the complexity of prevailing wage and public contract code requirements, which decreases experienced contractors’ chances of being the lowest responsive bidder.
As Likely
33%
More Likely
8%
Less Likely
59%
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 54
Respondents who indicated they would be less likely to bid CWA-covered projects expressed concern with 1) limitations to employing their core workforce, 2) lack of certifications for union-referred workers required for performance of the work (e.g., hazardous materials transportation), 3) impacts to employer provided healthcare and pension benefits for employees, 4) jurisdictional issues, and 5) reduced efficiency.
Concerns raised by multiple respondents are discussed at the end of this section of the report.
Respondents who indicated they would be as likely to bid CWA-covered projects noted CWAs are consistent with their current business practices. These respondents were all union-signatory contractors.
Question 5: Would a CWA increase, decrease, or not affect your bid price? This question was included in the survey to determine how a CWA would affect bid pricing for future City projects. While qualitative, responses to this question provide some indication of how bid prices would be affected if a CWA were implemented. The responses to this question are presented in Figure 2 below.
Figure 2. Potential Impact of CWA on Contractor Bid Price Respondents who indicated a CWA would increase their bid price noted the following: 1) presumed decrease in competitive bids, 2) increased administrative requirements, 3) penalties for non-compliance with targeted worker participation goals, 4) double payment of benefits, 5) increased risk, 6) union dues, 7) reduced efficiency, 8) decreased quality, 9) impacts to safety program, and 10) unfunded union pension liability. Concerns raised by multiple respondents are discussed at the end of this section of the report.
No Change
25%
Increase
67%
Decrease
8%
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 55
The respondent who indicated a CWA would reduce their bid price noted that they would be more competitive on a CWA-covered project. Respondents who indicated a CWA would not impact their bid price noted the following: 1) prevailing wage rates are the same on all public projects, regardless of union affiliation; 2) CWAs are consistent with current bidding and employment practices for union signatory contractors.
Question 6: What percentage of your craft workers are 1) City of San Luis Obispo residents, 2) San Luis Obispo County residents, 3) Santa Barbara or Monterey County residents, 4) Ventura County residents, and 5) residents of other areas? As previously noted, the SLO Water Plus CWA defines “local workers” as residents of the City of San Luis Obispo or San Luis Obispo, Monterey, Santa Barbara, and Ventura Counties. The intent of this question was to determine where craft worker employees of contractors who have historically constructed City projects reside. Of the surveyed contractors, an average of 89% of their craft workers are local workers as defined in the SLO Water Plus CWA. Responses to this question have been averaged and are presented in Figure 3 below.
Figure 3. Location of Contractor Craft Workforce
Question 7: In your opinion, does a CWA benefit the covered project? The intent of this question was to determine if respondents were generally supportive of CWA implementation and to provide an opportunity to share additional feedback. Four of the 12 respondents, or 33%, believed CWAs benefit covered projects. Respondents who believe CWAs are beneficial noted the following: 1) increased participation by local workers, 2) skilled workforce from union trades, 3) increased employment opportunities for union workers who have dedicated their careers to the construction trades, 4) union benefits, and 5) increased quality of work.
City of SLO
4%
SLO County
60%
SB/Monterey
County
23%
Ventura
County
2% Non-Local
11%
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 56
Respondents who believed CWAs do not benefit covered projects expressed the following concerns: 1) lack of provisions to consider participation by local vendors and materials suppliers; 2) reduced efficiency, productivity, quality, and safety from core workforce limitations; 3) reduced competition; 4) increased project cost; 5) fewer bidding opportunities for non-union contractors; 6) local workers are already being employed without a CWA; 7) absence of local contractors for specialty work; 8) unfair advantage to union contractors; 9) increased administrative burden; 10) reduced employment of local workers; 11) fewer union workers available for union contractors if workers dispatched to non-union contractors on covered projects; 12) lack of local subcontractors who would be willing to sign CWA; and 13) concern with ability to end union affiliation after single project agreement. Key concerns shared by multiple respondents are discussed in the following section.
Public Works Contractor Outreach Summary
Contract or opinions regarding CWA implementation were mixed, and not clearly divided based on union affiliation. While 58% of respondents were union signatories, only 33% believed CWAs benefit covered projects, 58% would be less likely to bid CWA-covered projects, and 67% indicated CWAs would increase their bid price. Issues raised by contractors during the outreach process are discussed in greater detail below.
Core Workers
Attachment A includes detailed information on CWA hiring procedures, core worker limitations, and a comparison of impacts to union and non-union contractors. In short, construction unions are designated as the exclusive source of craft labor on CWAcovered projects. This requirement does not impact union contractors, because they only employ union members and rely on union hiring halls to refer workers to their projects when needed. Non-union contractors are limited in their ability to employ their regular workforce on CWA-covered projects. CWAs limit the number of existing employees who meet the negotiated qualification requirements, or “core workers”, non-union contractors can employ on a project (typically three to six) and require all other workers be referred from union hiring hall out of work lists.
Several contractors who participated in the survey noted that limitations on core worker employment would reduce efficiency, increase risk, and reduce quality. These concerns are related to the integration of union-referred workers, with whom the contractor has no previous work history, into the contractor’s long-standing workforce. According to several respondents, efficiency is impacted when workers don’t have prior experience with the specific work being performed by the contractor or with the unique ways in which the contractor typically performs its work. Replacing a contractor’s long-standing, experienced employees with workers who have never worked for the contractor increases risk and can potentially impact quality and safety.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 57
One respondent who performs pavement rehabilitation work throughout the Western United States noted that six of the nine workers it typically employs in its paving crew are required to hold a commercial driver license with a hazardous materials endorsement, which requires a federal background check. They expressed concerns that truck drivers with these classifications are difficult to find and might not be available through the union referral system. CWAs typically allow unions 48 hours to dispatch workers to employers when requested, after which the employer can hire workers from another source if the union is unable to refer workers. The paving contractor noted that this waiting period can impact project schedules and create logistical challenges when trying to fill open positions if the union referral system is unable to dispatch certified workers.
Benefits
CWAs require that all contractors, regardless of their union affiliation, pay fringe benefit contributions to union trust funds on behalf of their employees working on the CWA project. Attachment A includes additional information regarding benefits on CWAcovered projects. Several non-union contractors expressed concern with the union trust fund contribution requirement for pension benefits. Union pension plans require a minimum vesting period (typically 10,000 hours or five years) before participants can redeem retirement benefits. Non-union craft workers might not work sufficient hours on a CWA-covered project to become vested in a union pension fund, especially for shorter duration projects or for contractors who perform limited scope on covered projects. This would result in a significant loss of income for the employee who doesn’t become vested, as the pension fringe benefit can be between 8% and 20% of the employee’s total hourly rate, depending on the worker classification (e.g., laborer, cement mason, carpenter, etc.). Attachment C provides additional information on prevailing wages and fringe benefits for a select group of construction craft worker classifications. Several surveyed contractors stated they would continue providing a retirement benefit to their employees in addition to making union trust fund contributions to mitigate the pension vesting issue, resulting in additional cost to the employer and likely to be passed on to the City.
Respondents also voiced concern with the union trust fund contribution requirement for medical benefits. These contractors currently provide medical benefits to their employees and requiring their workers to change healthcare plans can result in coverage gaps, changes to in-network providers, and changes to covered prescriptions. For contractors with limited scope/short duration work on CWA-covered projects, employees would potentially be required to exit their employer’s medical plan, join the union plan, then exit the union plan and re-join the employer’s plan at the conclusion of the CWA-covered work. Respondents noted that this transition is difficult for employees and their families, and several contractors stated they would continue providing a medical benefit to their employees in addition to making union trust fund contributions to address this issue, resulting in additional cost to the employer and likely to be passed on to the City.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 58
2.3. Local Consultants
CWA provisions apply to all employers providing prevailing wage labor on covered projects, including consulting firms. The City has traditionally employed consultants through professional services agreements to provide construction inspection, surveying, and materials testing services. Construction inspection, surveying, and field materials testing are work classifications covered by the state prevailing wage determinations and would be subject to the requirements of a CWA.
Like the public works contractor outreach described in the preceding section, staff prepared a list of questions that were posed to consultants via video conference and phone survey. The survey included a series of simple questions intended to facilitate aggregation and reporting of responses along with open-ended questions that provided respondents an opportunity to provide additional feedback. The questions were crafted to determine how implementation of a CWA would affect respondents’ future pursuit of City projects.
Seven of the ten consultants who provide on-call soils and materials testing, construction management, and land surveying services to the Public Works Department were contacted. All seven firms who were contacted by staff participated in the survey. Table 5 lists the firms who participated in the survey with staff.
Table 5. Local Consultants Surveyed by Staff
No. Firm Name Services Provided
1 Cannon Construction Management/Surveying
2 Earth Systems Pacific Soils and Materials Testing
3 Filippin Engineering Construction Management
4 GeoSolutions Soils and Materials Testing
5 Kitchell CEM, Inc. Construction Management
6 MNS Engineers, Inc. Construction Management
7 Wallace Group Construction Management/Surveying
Questions posed to the local consultant stakeholder group are presented below along with a summary of the feedback received. The first several questions were included to determine each respondent’s familiarity with CWAs along with their union signatory status. Questions 1-3 are presented in Table 6 below along with the responses received.
Table 6. Local Consultant Survey Responses
No. Question Yes No
1 Are you familiar with CWAs and the associated requirements? 71% 29% 2 Have you ever worked under a CWA? 43% 57%
3 Are you a union signatory contractor? 0% 100%
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 59
The remaining survey questions and responses are described in greater detail in the following sections.
Question 4: Would you be more likely, less likely, or as likely to provide professional services on City projects if subject to a CWA? This question was included to determine if consultants who have historically provided prevailing wage services on City projects under professional services agreements would be more, less, or equally likely to participate in future City projects if subject to the terms and conditions of a CWA. The responses to this question are presented in Figure 4 below.
Figure 4. Likelihood of Surveyed Consultants to Participate in CWA-Covered Projects The respondent who indicated its company would be as likely to participate in CWAcovered projects noted their standard practice of subcontracting all prevailing wage services. The respondent noted that if it was unable to find a subcontractor willing to sign on to the CWA or if they were required to self-perform prevailing wage services, they would be less likely to participate.
As Likely
14%
More Likely
0%
Less Likely
86%
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 60
Respondents who indicated they would be less likely to participate in CWA-covered projects noted the following concerns: 1) increased risk and professional liability exposure by employing union referrals with no existing relationship to employer and unfamiliarity with employer-specific work practices; 2) increased costs associated with reduced efficiency, increased oversight, CWA administrative requirements, and potential for duplication of employer paid benefits costs resulting from payment of employee fringe benefits to union trust; 3) staff attrition by employees who do not want to be affiliated with unions; 4) significant learning curve associated with compliance with union requirements; and 5) limitations on employees who can be dispatched to covered projects (i.e., only employees who have registered with union can be dispatched). Several respondents who indicated they would be less likely to participate on CWA-covered projects further clarified they would not participate in City projects if subject to the requirements of a CWA.
Question 5: Would a CWA increase, decrease, or not affect the cost of your services?
This question was included in the survey to determine how a CWA would affect the cost of soils and material testing, construction inspection, and surveying on future City projects. It is noted that the response to this question is qualitative and does not reflect the extent to which pricing for professional services would be affected. The responses to this question are presented in Figure 5 below.
Figure 5. Potential Impact of CWA on Cost of Professional Services No Change
29%
Increase
71%
Decrease
0%
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 61
Respondents who indicated a CWA would not affect their cost of service noted that prevailing wage requirements are the same on all public projects, regardless of whether a CWA is in place. Respondents who indicated a CWA would increase the cost of their services noted the following concerns: 1) increased administrative costs, 2) increased insurance costs, 3) increased exposure to professional liability claims, 4) double payment of benefits, 5) time associated with verifying work performed by union referrals, 6) overhead costs of union enrollment and union dues, and 7) four-hour minimum shift required by union master labor agreements regardless of time spent on site.
Question 6: What percentage of your prevailing wage employees are 1) City of San Luis Obispo residents, 2) San Luis Obispo County residents, 3) Santa Barbara or Monterey County residents, 4) Ventura County residents, and 5) residents of other areas?
The intent of this question was to determine where prevailing wage employees of consultants who have historically participated in City projects reside. Of the surveyed consultants, an average of 93% of prevailing wage employees met the criteria of local workers as defined in the SLO Water Plus CWA. Responses to this question have been averaged and are presented in Figure 6 below.
Figure 6. Location of Consultant Prevailing Wage Workforce Question 7: In your opinion, does a CWA benefit the covered project? The intent of this question was to determine if respondents were generally supportive of CWA implementation and to provide an opportunity to share additional feedback. Two of the seven respondents, or 29%, believed CWAs provided benefits to the construction craft workers on covered projects, but not to professional service providers.
City of SLO
21%
SLO County
65%
SB/Monterey
County
6%
Ventura
County
1%
Non-Local
7%
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 62
Five of the seven respondents, or 71%, believed CWAs did not benefit covered projects.
Feedback supporting this position included the following: 1) construction unions are the only beneficiaries, 2) increased cost, 3) increased risk, 4) not appropriate for the local market, 5) adversely impacts ability for local businesses to participate in covered projects, 6) counter to the City’s goal of helping local businesses, 7) inherent conflict of interest with unions representing both quality assurance/quality control staff (e.g., inspection, materials testing, soil testing, surveying) and craft workers performing the work, 8) risk of decreased quality, 9) reduced opportunities for non-union companies to participate, 10) majority of local contractors and consultants are non-union, and 11) risk of preferring employment of workers from out of the immediate area (i.e., City and County of San Luis Obispo) even though technically considered “local” by CWA. Key concerns from this stakeholder group are discussed in the next section.
Local Consultant Outreach Summary
Most of the surveyed consultants (86%) stated they would be less likely, or unwilling, to provide services on City projects if CWA requirements apply to their prevailing wage staff.
Issues raised by consulting firms during the outreach process are discussed in greater detail below.
Core Workers
Surveyed consultants voiced concern with limitations on their ability to utilize their core workforce on CWA-covered projects, similar to the concerns raised by contractors.
Construction management firms noted their prevailing wage inspection staff have specific experience and skillsets that allow them to successfully perform their field duties.
Respondents believe inspectors referred by the union hiring hall are unlikely to have the same qualifications and experience, which they believe increases the employer’s risk.
Respondents conveyed that this increased risk would require additional oversight by professional/salaried staff and might require redundant inspection positions, according to respondents.
Consulting firms who provide prevailing wage surveying services to the City emphasized the importance of team dynamics in the efficient and accurate performance of their work.
Typical survey crews are small (two to four employees), and respondents believe introducing new workers (i.e., union referrals) into a survey crew would potentially reduce efficiency and require additional oversight to verify the accuracy of the work products.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 63
Benefits
Surveyed consultants voiced similar concerns as contractors regarding the requirement to pay fringe benefits to union trusts for their employees on CWA-covered projects.
Consultants noted 1) possible lapses in health insurance coverage when moving between employer and union-provided plans, 2) inability to work sufficient hours to vest in union pension programs resulting in certain payments made to the union, with no benefit realized by employees and 3) the likelihood that employers would need to effectively double-pay benefits to reduce impacts to their staff, adding employer paid benefit costs to the costs of service. Attachment C includes a summary of prevailing wages for construction inspectors and land surveyors, including the fringe benefits that would be paid to the union trust on behalf of the employee on CWA-covered projects.
Respondents also highlighted the intermittent nature of the prevailing wage services they provide on public projects, and the resulting complications for the provision of benefits to employees. For example, the City routinely requests special inspection or soils testing at discrete hold points as detailed in the construction specifications (e.g., structural welding, soil compaction testing, etc.). The on-call service provider dispatches an inspector to perform the required inspection, which typically only requires four to eight hours out of a 40-hour work week. Several respondents noted that the limited time spent on a CWAcovered project in a typical work week would necessitate the double-payment of benefits, as employees would not qualify for union benefits when not working full time on the CWAcovered project.
2.4. Higher Education
Cal Poly, Cuesta College, and Allan Hancock College were identified by City Council as potential stakeholders to be included in the outreach effort. Each organization was contacted and invited to participate in a discussion with staff to explore the potential alignment between CWAs and university programs/initiatives. Feedback was not provided as part of the initial outreach effort, but additional outreach can be performed if Council decides to move forward with CWA implementation.
2.5. Construction Trades Organizations
The Tri-Counties Building and Construction Trades Council (Trades Council) is a principal stakeholder for this project as the primary negotiating party with the City for the CWA.
Staff met with Trades Council representatives following the September 2021 Study Session to discuss the Trades Council’s objectives, review direction provided by Council during the Study Session, and to discuss next steps. A draft CWA was transmitted by the Trades Council in February 2022, with suggested modifications, for review by City staff.
Consistent with Council’s feedback, the draft CWA is based on the SLO Water Plus CWA, with several changes based on outreach and data analysis and to be discussed with the Trades Council if Council directs staff to proceed with negotiations on final terms.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 64
The Central Coast Labor Council (Labor Council) was identified as a potential stakeholder by City Council during the phase one Study Session. Staff met with the Executive Director of the Labor Council and discussed the City’s CWA evaluation effort. The Executive Director indicated that the Labor Council would likely be more engaged with elected officials to generate support for a CWA if negotiations proceed.
2.6. Outreach Summary
A broad range of stakeholders were engaged during the outreach process, including those who will be most directly impacted by the implementation of a CWA (i.e., contractors and consultants). The outreach process helped identify many important considerations that have informed the recommendations presented later in this report.
3. Historical CIP Analysis
An analysis of past CIP projects was performed to identify the location of bidders who have historically bid on City projects and to determine the types of projects for which a CWA would be most effective in increasing employment of local workers. Fourteen public projects of varying types and costs completed between January 2018 and September 2021 were selected for review. Table 7 lists the projects included in this analysis along with project cost, project asset type, the prime contractor, and location of the prime contractor.
Table 7. CIP Projects Selected for Review
No. Project Name Project
Cost
Project
Asset Type
Project
Type
Prime
Contractor
Location
of Prime
Contractor
1 City Facility
HVAC
≤ $250K Asset
Maintenance
or
Replacement
Buildings
and
Structures
Smith MEP Santa
Maria
2 Meadow Park
Pathway
Maintenance
≤ $250K Asset
Maintenance
or
Replacement
Bicycle
Paths
Souza
Construction
San Luis
Obispo
3 Mission Plaza
Railing 2021
≤ $250K Asset
Maintenance
or
Replacement
Parks and
Recreation
Taylor Jane
Construction
LP
Nipomo
4 Swim Center
Bath House
Roof Repair
≤ $250K Asset
Maintenance
or
Replacement
Buildings
and
Structures
American
Foam Experts
Herald
5 Wash Water
Supply Tank
No. 2
≤ $250K Asset
Maintenance
or
Replacement
Wet Utilities Paso Robles
Tank, Inc
Hemet
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 65
No. Project Name Project
Cost
Project
Asset Type
Project
Type
Prime
Contractor
Location
of Prime
Contractor
6 Bullock CMP $250K -
$1M
Asset
Maintenance
or
Replacement
Wet Utilities Souza
Construction
San Luis
Obispo
7 Islay Park
Playground
$250K -
$1M
Asset
Maintenance
or
Replacement
Parks and
Recreation
RE Schultz Orange
8 Sinsheimer
Irrigation and
Stadium
Drainage
$250K -
$1M
Asset
Maintenance
or
Replacement
Parks and
Recreation
Empire
Landscaping
Inc
Davis
9 Concrete
Streets
$250K -
$1M
Asset
Maintenance
or
Replacement
Street
Improvemen
ts
R. Burke
Corporation
San Luis
Obispo
10 Anholm Phase
1A
$250K -
$1M
New Asset Street
Improvemen
ts
Lee Wilson
Electric
Arroyo
Grande
11 South Hills
Radio Site
Upgrades
$250K -
$1M
New Asset Buildings
and
Structures
Specialty
Construction
San Luis
Obispo
12 Casa Stenner
Murray
Waterline
Project
$1M -
$5M
Asset
Maintenance
or
Replacement
Wet Utilities S Chavez
Construction
San Luis
Obispo
13 RRST Taft to
Pepper
$1M -
$5M
New Asset Bicycle
Paths
Souza
Construction
San Luis
Obispo
14 South Broad
Street
Pavement
Improvements
$1M -
$5M
Asset
Maintenance
or
Replacement
Street
Improvemen
ts
Papich
Construction
Company
Arroyo
Grande
The location of craft workers who worked on the selected projects was determined by reviewing certified payroll reports (CPRs). CPRs list the hours worked by each employee during the reporting period (typically one week), along with the zip code of the worker’s residence. Once the CPR data was compiled, local worker participation was analyzed based on project type, project size, and the location of the prime contractor. Local workers were defined as residents of the city of San Luis Obispo or San Luis Obispo, Santa Barbara, Monterey, and Ventura Counties, consistent with the SLO Water Plus CWA.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 66
3.1. Local Worker Participation by Project Asset Type
CIP projects in the City budget are categorized by project asset type and are identified as either 1) New Assets or 2) Asset Maintenance and Replacements. New Assets are the construction and/or installation of new capital facilities or assets such as roads, water treatment equipment, new water or sewer pipelines, or new buildings and facilities. Asset Maintenance and Replacements are the repair, replacement, or rehabilitation of existing capital assets. Examples of Asset Maintenance and Replacement projects include street resurfacing, playground equipment replacement, and pipeline rehabilitation. Of the 14 projects listed in Table 7, 11 are Asset Maintenance or Replacement and three are New Asset project asset types.
The projects in Table 7 were grouped by project asset type to compare local worker participation percentages. The results of this analysis are presented in Table 8.
Table 8. Local Worker Participation by Project Asset Type No. Project Asset Type
Local
Worker
Hours
Total Labor
Hours
Local Worker
Participation
1 New Assets 12,134 12,762 88%
2 Asset Maintenance or
Replacement 21,310 24,343 95%
3 TOTAL 33,444 37,105 90%
The data shows that 88% of all labor hours on New Asset projects were performed by local workers and 95% of all labor hours on Asset Maintenance or Replacement projects were performed by local workers.
Further analysis was performed on Asset Maintenance or Replacement projects as this project asset type comprises a significant portion of the CIP budget. Bidder location data was compiled for all 68 Asset Maintenance and Replacement projects with bid closing dates between January 2018 and September 2021. Figure 7 presents the location of the low bidders for these projects.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 67
Figure 7. Bidder Location for Asset Maintenance and Replacement Project Asset Type As the figure illustrates, 79% of the low bidders for the City’s Asset Maintenance and Replacement projects are located in the City of San Luis Obispo or San Luis Obispo, Santa Barbara, and Ventura Counties. Contractors based in the City were awarded 50% of the Asset Maintenance and Replacement projects for which bidder information was compiled. This finding is noteworthy, as it shows that contractors based in the City are constructing most of the City’s Asset Maintenance and Replacement projects.
In summary, local contractors constructed most of the Asset Maintenance and Replacement projects in the January 2018 to September 2021 review period, with 50% of all projects constructed by contractors based in the City. Of the 11 Asset Maintenance and Replacement projects reviewed in detail by staff, 95% of all labor hours were performed by local workers. This analysis indicates local contractors are primarily employing local workers, a finding that is supported by additional data presented later in the report.
City of San
Luis Obispo
50%
County of San
Luis Obispo
19%
Santa Barbara
County
9%
Ventura
County
1%
Other
21%
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 68
3.2. Local Worker Participation by Project Type
The selected projects were grouped by type to determine average local worker participation percentages. The results of this analysis are presented in Table 9.
Table 9. Local Worker Participation by Project Type
No. Project Type
Local
Worker
Hours
Total Labor
Hours
Local Worker
Participation
1 Buildings & Structures 1,024 1,337 84%
2 Bicycle Paths 9,802 10,183 96%
3 Parks and Recreation 1,166 3,619 32%
4 Wet Utilities 12,890 13,156 98%
5 Street Improvements 6,755 6,765 99%
6 TOTAL 33,444 37,105 90%
In general, the local worker participation percentages were high for all project types with the exception of Parks and Recreation projects. Local worker participation percentages were lower for this group because two of the three projects included were awarded to non-local contractors (i.e., contractors not based in San Luis Obispo, Monterey, Santa Barbara, or Ventura Counties).
Of the Parks and Recreation projects analyzed (See Table 7), 78% (7 out of 9) of bidding contractors were local, with a non-local contractor being the low bid on only the Sinsheimer Irrigation and Stadium Drainage Project. The low bid contractor on Islay Hill Park Playground was local, however, was found to have submitted a non-responsive bid2 ,
resulting in the project being awarded to the second-low bidder, who was non-local. If the awarded contractors were local, it is likely the local worker participation percentage would have been largely consistent with the other project types in Table 9.
In total, the local worker participation for all projects reviewed was 90%. 2 To be considered responsive, a bid must comply in material respects with the invitation for bids. On Islay Park Playground, the low bid contractor was deemed non-responsive because they failed meet the minimum qualifications, including recent park construction experience with a city, county, state, or federal agency.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 69
3.3. Local Worker Participation by Project Cost
The selected projects were grouped by size to determine average local worker participation percentages. The results of this analysis are presented in Table 10.
Table 10. Local Worker Participation by Project Cost
No. Project Cost Local Worker
Hours
Total Labor
Hours
Local Worker
Participation
1 ≤ $250K 2,909 3,448 84%
2 $250K - $1M 7,216 9,917 73%
3 $1M - $5M 23,319 23,741 98%
4 TOTAL 33,444 37,105 90%
Local worker participation percentages were high for each project cost category, with an average of 90% for all projects analyzed. Local worker participation percentages were lower for the $250K - $1M cost category because this category included the two Parks and Recreation projects constructed by non-local contractors described in the preceding section.
3.4. Large Project Comparison
Staff reviewed and compiled CPR data for the Los Osos Valley Road Overpass Project (LOVR Project) for comparison with the SLO Water Plus Project. Like the SLO Water Plus Project, the LOVR Project is a large project (i.e., cost >$15M) constructed by a nonlocal contractor, however, the LOVR Project was constructed without a CWA in place.
Table 11 presents local worker participation data for the LOVR and SLO Water Plus Projects.
Table 11. LOVR Project and SLO Water Plus Local Worker Participation No. Project Local Worker
Hours
Total Labor
Hours
Local Worker
Participation
1 LOVR Project 41,190 59,985 69%
2 SLO Water Plus* 111,980 141,243 79%
*SLO Water Plus labor hours reported through February 2022.
The data shows that most of the labor hours on the LOVR Project were performed by local workers, and local worker participation was significantly higher than the 30% goal typically set forth in a CWA.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 70
3.5. Local Worker Participation by Prime Contractor Location A list of all contractors who were awarded public projects between January 2018 and September 2021 was tabulated to determine the contractor’s location. Of the 78 projects awarded during this period, approximately 70% were awarded to local contractors (i.e., contractors based in San Luis Obispo, Monterey, Santa Barbara, or Ventura Counties).
The results of this analysis are presented in Figure 8.
Figure 8. Location of Prime Contractor for Past City Projects To determine if local contractors typically utilize local workers, the selected CIP projects listed in Table 7 were grouped by prime contractor location and the local worker hours were tabulated. The results of this analysis are presented in Table 12.
Table 12. Local Worker Participation by Prime Contractor Location No. Prime Contractor
Location
Local Worker
Hours
Total Labor
Hours
Local Worker
Participation
1 Local 33,021 33,690 98%
2 Non-Local 423 3,415 12%
3 TOTAL/AVERAGE 33,444 37,105 76%
The data confirms that most of the labor hours on projects constructed by local prime contractors were performed by local workers. In addition, the local hours presented in Table 12 are inclusive of subcontractor labor hours which indicates local contractors are also utilizing the services of local subcontractors.
City of San
Luis Obispo
49%
County of San
Luis Obispo
22%
Santa Barbara
County
8%
Ventura
County
1%
Other
20%
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 71
3.6. Summary and Discussion
The historical CIP analysis indicates local workers are performing most of the work on City public projects, regardless of project type or size. The one exception to this finding is for Parks and Recreation projects, where local workers performed 32% of the total labor hours for the selected projects. As previously noted, reduced local worker participation for this project type is attributed to the location of the prime contractors for the selected projects, two of which were non-local. Although local worker participation was lower for the selected Parks and Recreation projects, it was higher than the local worker participation goal typically set forth in CWAs (30%).
The analysis also indicates local contractors primarily employ local workers. Of the 14 past CIP projects reviewed, ten were constructed by local contractors and 98% of all labor hours were performed by local workers. Local workers only performed 12% of all work hours on the four CIP projects constructed by non-local contractors. Analysis of the LOVR Project – the second largest CIP project in City history – indicates 69% of all labor hours were performed by local workers. This finding is noteworthy as the LOVR Project was a large, multi-year project constructed by a non-local contractor without a CWA in place.
4. Fiscal Analysis
The impact of CWA implementation on construction bids is difficult to quantify and beyond the scope of this report to evaluate comprehensively. Proponents of CWAs believe that these agreements reduce costs by improving labor reliability, increasing quality, and preventing schedule delays. Opponents argue that CWAs increase costs by reducing competition, increasing administration requirements, and requiring payment of fringe benefits to union trust funds. The only way to conclusively determine the impact of CWAs on construction bids is through a parallel bid process, whereby a pilot project would be advertised for bids both with and without a CWA requirement. This approach has been suggested by other agencies currently evaluating CWA implementation including Ventura and Santa Barbara Counties, however it is unclear if such a bidding arrangement would ultimately be acceptable to the agencies and the Trades Council.
This section of the report focuses on the costs that are more readily quantifiable including costs to support CWA negotiation, costs to incorporate CWA requirements into the City’s standard construction contract and standard specifications, costs to develop procedures for CWA implementation, and costs to administer the CWA during construction. Budget for outside legal counsel and consultant staff to support these efforts, except for CWA administration, is included in the FY 21-23 Financial Plan.
4.1. CWA Negotiation
CWA negotiation will require participation from the Community Services Group, the City Attorney’s office, outside legal counsel, and consultant staff. While both Council and the Trades Council have expressed support of using the SLO Water Plus CWA as a template for negotiations, certain provisions of the agreement will likely require additional negotiation based on direction provided by Council.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 72
4.2. Development of Contract and Standard Specification Language If implemented, CWA provisions must be developed and incorporated into the City’s standard construction contract documents so prospective bidders and subcontractors will be aware of their obligations regarding the agreement. Language is typically included in the bid advertisement, bid form, agreement, and the front-end documents to detail CWA requirements. In addition, the complete CWA is included in the contract documents as part of the front-end documents or as an appendix. It is recommended that a specification be developed to detail the targeted worker participation requirements, as the procedures for meeting participation goals and reporting requirements are typically not explained in detail in the CWA. The targeted worker specification will increase the likelihood of meeting the participation goals set forth, increase transparency in the process, and facilitate accountability of all parties to the agreement.
Development of CWA provisions for the City’s standard construction contract documents will require participation from the Community Services Group, the City Attorney’s office, outside legal counsel, and consultant staff.
4.3. CWA Procedure Development
If a CWA is implemented, procedures must be developed to facilitate uniform application of the agreement for all covered projects so the City meets its obligations as set forth in the CWA. Development of CWA implementation procedures will require participation from the Community Services Group and consultant staff.
Table 13 presents the estimated costs for CWA negotiation, contract/specification language development, and CWA procedure development.
Table 13. Estimated Cost of CWA Implementation
The total cost for CWA implementation is estimated to be between $64,000 and $115,000.
RESOURCE Low High Low High Low High
Community Services Group 6,000$ 10,000$ 5,000$ 10,000$ 8,000$ 15,000$ City Attorney 4,000$ 5,000$ 2,000$ 4,000$ -$ -$
Outside Counsel 14,000$ 28,000$ -$ -$ -$ -$
Outside Consultant 8,000$ 14,000$ 9,000$ 13,000$ 8,000$ 16,000$ SUBTOTAL 32,000$ 57,000$ 16,000$ 27,000$ 16,000$ 31,000$ TOTAL $64,000 - $115,000
Contract/Specification
Development CWA Negotiation CWA Procedure Development
TASK
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 73
4.4. CWA Administration
CWAs require that the project owner designate a Community Workforce Coordinator to act as the owner’s agent and to facilitate implementation and compliance with the CWA.
The Community Workforce Coordinator can be a member of the owner’s staff, but an outside contractor with specific experience administering CWAs is typically used. In many cases, the Community Workforce Coordinator can also provide labor compliance oversight, a function typically performed by City staff. It is assumed the City will hire an outside consultant to serve as the Community Workforce Coordinator if a CWA is implemented.
CWAs include provisions for the establishment of a Joint Administrative Committee (JAC, Committee) comprised of representatives from the owner and representatives from the building trades. The JAC meets regularly to discuss issues associated with the CWA including project issues, safety concerns, contractor relations, and disputes. The frequency of the JAC meetings is left to the discretion of the Committee, but meetings are typically held on a quarterly basis. It is anticipated that the City’s representatives on the JAC will include Community Services Group staff and the City’s Community Workforce Coordinator.
The City can require the construction contractor to retain the services of a Jobs Coordinator to assist the contractor in meeting its obligations for targeted worker participation. The Jobs Coordinator coordinates with the construction trades, apprenticeship programs, and local workforce development agencies to identify potential workers that meet the criteria necessary to qualify as a targeted worker for employment on the covered project. The Jobs Coordinator assists the contractor in the preparation of reports including targeted worker hiring status reports and manpower utilization plans. It is anticipated that the contractor will retain the services of an outside consultant to serve as its Jobs Coordinator if the negotiated CWA includes participation requirements for demographics other than local residents.
Staff contacted several consulting firms who specialize in CWA administration and labor compliance to determine the estimated cost for CWA administration. Several factors impact CWA administration costs including project duration, number of subcontractors, familiarity of contractors with CWA requirements, and number of covered projects.
Estimated administrative costs range from 0.25% to 5% of total construction cost, with lower percentages for large, multi-year projects and higher percentages for small, short duration projects.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 74
For example, CWA administration costs for the $110 million SLO Water Plus Project are approximately $312,000, or 0.3% of the total construction cost. CWA administration costs for a 6-month, $250,000 project are estimated to be approximately $12,500, or 5% of the total construction cost. The total cost of CWA administration will ultimately depend on the number, size, and duration of projects covered by the agreement. Notably, much of the administrative work is based on time; the time that the CWA coordinator will need to spend each month reviewing CPRs, compiling local worker numbers, verifying core worker requirements, and coordinating with the construction contractors and construction trades.
5. Recommendations and Alternatives
The extensive stakeholder outreach process provided valuable insight into the practical considerations of CWA implementation, including potential impacts to the local contracting and consulting community. Review of the City’s past CIP projects helped quantify historical local worker participation and helped identify opportunities to support local worker participation on future City projects. The stakeholder outreach process and historical CIP review informed staff’s recommendation and the alternatives presented in the following sections. Section 5 includes staff’s recommendation for CWA-covered projects as well as alternatives for implementation based upon project budget thresholds.
Section 6 includes recommended exclusions based upon type of work.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 75
5.1. Recommendation – CWA for Legacy Projects
As funded and approved for construction, authorize staff to negotiate a Community Workforce Agreement with the Tri-Counties Building and Construction Trades Council to include the Cultural Arts District Parking Structure (vertical construction component only), Prado Road Interchange, and Public Safety Center projects, including a 60% local worker participation goal and excluding3 prevailing wage
services provided through professional services agreements.
Staff recommends Council consider implementing a CWA for the Cultural Arts District Parking Structure (vertical construction and off-site improvements contract only4 ), Prado
Road Interchange, and Public Safety Center projects. The total construction cost of these “legacy projects” is estimated to be approximately $153 million, or 46% of the City’s total CIP budget over the next five years. These projects are large, complex, multi-year efforts involving multiple construction trades that would realize the greatest benefit from the uniform work conditions, dispute resolution procedures, and work stoppage protections afforded by a CWA. The Cultural Arts District Parking Structure is scheduled to begin vertical construction in Fall 2023 with a two-year construction timeframe, and both the Prado Interchange and Public Safety Center are in preliminary design stages and scheduled to begin construction in FY25/26 with multi-year construction timeframes.
These projects are also likely to be awarded to non-local contractors, as few local contractors have the requisite experience and bonding capacity to undertake the work.
As noted in previous sections of the report, non-local contractors are more likely to employ non-local workers, and a CWA could promote local worker participation on these large City projects.
Limiting the CWA to legacy projects would reduce CWA implementation costs as compared to a CWA that applied more broadly to City public projects. CWA administration as a percentage of construction cost for these large budget, multi-year projects is estimated to be less than CWA administration costs as a percentage of construction cost for numerous, smaller budget projects. In addition, City staff time to implement CWA requirements on covered projects would be reduced. 3 See Section 6 for discussion of recommended exclusions. These may be considered as negotiating parameters within each project budget threshold.
4 The Cultural Arts District Parking Structure Project is separated into three contracts: 1) Phase 1A PG&E Utility Relocation 2) Phase 1B On-Site Demolition, Clearing, and Grading and 3) Phase 2 Vertical Structure and Offsite Improvements. Phase 1A and 1B include work similar to asset maintenance and replacement projects (utility relocations, demolition, grading, etc.) and are anticipated to be competitive projects for bidding amongst local contractors utilizing local workers.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 76
5.2. Alternative 1 – CWA with $15 Million Threshold
Authorize Staff to negotiate a Community Workforce Agreement with the TriCounties Building and Construction Trades Council to include projects with an estimated construction cost of $15 million or greater, including a 60% local worker participation goal and excluding5
emergency projects and prevailing wage services
provided through professional services agreements.
As an alternative, Council could consider implementing a CWA for all City projects with an estimated construction cost of $15 million or greater. A $15 million cost threshold would include the three legacy projects described in the preceding section and the Prado Road Bridge and Road Widening Project (Prado Road Bridge Project). Table 14 presents the public projects in the City’s 5-year CIP grouped by cost category.
Table 14. Public Projects in City 5-Year CIP Grouped by Cost No. Project Cost Number of
Projects Total Budget Percent of 5-Year CIP
1 ≤ $250K 139 $20,413,161 6%
2 $250K - $1M 54 $37,096,965 12%
3 $1M - $5M 26 $66,404,147 21%
4 $5M - $15M 2 $12,450,000 4%
5 >$15M 4 $184,061,231 57%
6 TOTAL 226 $320,425,504 100%
Staff does not recommend this alternative as including the Prado Road Bridge Project in the CWA would likely result in reduced project participation by local contractors who have successfully constructed similar City projects in the past, and by extension, reduce local worker participation. Similar projects constructed by local contractors include Marsh Street Bridge Replacement and the Orcutt Tank Farm Roundabout. 5 See Section 6 for discussion of recommended exclusions. These may be considered as negotiating parameters within each project budget threshold.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 77
5.3. Alternative 2 – CWA with $5 Million Threshold
Authorize Staff to negotiate a Community Workforce Agreement with the TriCounties Building and Construction Trades Council to include projects with an estimated construction cost of $5 million or greater, including a 60% local worker participation goal and excluding6
maintenance and rehabilitation projects,
emergency projects, and prevailing wage services provided through professional services agreements.
Council could also consider implementing a CWA for all City projects with an estimated construction cost of $5 million or greater. A $5 million cost threshold would include the four projects described in the preceding sections along with the Mission Plaza Primary Plaza Area Improvements and the WRRF and Wastewater Collections Shop Project.
Staff does not recommend this alternative due to the lack of historical local worker participation data for projects with construction costs between $5 million and $15 million.
It is unclear if local worker participation for projects in this cost range will be low and whether local worker participation would increase with a CWA. Average local worker participation for projects reviewed by staff in the $1 million to $5 million cost range was 98%, and 69% of all labor hours on the $16 million LOVR Project were performed by local workers. Staff anticipates that projects in the $5 million to $15 million cost range, including the Prado Road Bridge Project, are likely to be bid by local contractors who have historically used high percentages of local workers. Local contractors are expected to be less likely to pursue City projects if covered by a CWA.
If Council moves forward with an alternative to the staff recommendation, a $15 million threshold (i.e., Alternative 1) would be more appropriate to help ensure local contractor participation on City projects valued between $5 million and $15 million. At Council’s direction, staff can track labor hours on projects with construction costs of $5 million or more and return to Council with an analysis of local work hours and recommendations for the possible expansion of CWA coverage. Such an approach would give staff the opportunity to establish baseline local worker participation statistics and identify opportunities to enhance local worker participation where appropriate. 6 See Section 6 for discussion of recommended exclusions. These may be considered as negotiating parameters within each project budget threshold.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 78
5.4. Alternative 3 – No CWA
Direct staff not to negotiate a Community Workforce Agreement with the TriCounties Building and Construction Trades Council.
Council could consider not implementing a CWA on future public projects. Staff does not recommend this alternative as the three legacy projects recommended for inclusion in a CWA and these projects are likely to be constructed by non-local contractors, which have historically used more non-local workers based on staff’s review of past public projects.
A CWA could promote local worker participation on these legacy projects which comprise 46%, or $153 million, of the City’s CIP budget over the next five years.
If Council does choose this alternative, staff recommend ongoing tracking of local contractor participation on capital projects as well as ongoing analysis of local labor usage on awarded contracts, which would result in data collection equivalent to Section 3 of this report. This accumulated date could be shared with Council in conjunction with Budget Supplement as a Key Performance Indicator.
6. Negotiating Parameters
Staff recommends Council consider the following negotiating parameters if staff is directed to proceed with CWA implementation, regardless of the recommendation or alternative selected.
6.1. Professional Services
Staff recommends that all prevailing wage services procured through professional services agreements, including inspection, land surveying, and materials testing be excluded from coverage by a CWA. As is the case with most agreements, the City must maintain its authority over quality, budget and schedule (QA/QC) and professional services are often the mechanism by which the City ensures that these essential key elements are satisfied.
As such, Staff recommends that all prevailing wage services procured through professional services agreements, including inspection, land surveying, and materials testing be excluded from coverage by a CWA, regardless of the recommendation or alternative selected by Council. The City has built trusted relationships with local consulting firms who provide these services, and these partnerships are critical to the successful delivery of the City’s CIP. Including professional services in the CWA would impact the City’s ability to retain the most qualified firms to perform essential quality assurance and quality control (QA/QC) functions on the City’s behalf, jeopardizing the City’s ability to ensure projects have been constructed in accordance with the approved plans and specifications.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 79
Local consultants contacted by staff during the stakeholder outreach process raised valid concerns regarding CWA core worker and benefits provisions, which increase consultant cost, risk, and professional liability exposure. If a CWA is implemented, local consultants will be less likely to continue providing prevailing wage services to the City, which would reduce local worker participation rather than increase it.
Exclusion of inspection and materials testing services is consistent with the previously negotiated CWA for the SLO Water Plus Project. Staff is recommending that land surveying also be excluded from coverage by the CWA. Like inspection and materials testing, land surveying is a key QA/QC function that is best performed by a firm with experienced staff procured by the City through a competitive process.
6.2. Emergency Projects
Staff recommends emergency repair projects be excluded from the scope of the agreement if a cost threshold is established for CWA coverage. The City must preserve its ability to procure construction services as quickly as possible in the event of an emergency without additional administrative requirements, in accordance with the existing emergency purchasing policy in the Financial Management Manual. The additional time required to administer and enforce CWA requirements on emergency projects would compromise the City’s ability to respond to emergencies as efficiently and cost effectively as possible. Staff recommends emergency repair projects be excluded from the scope of the agreement regardless of the construction cost threshold.
6.3. Maintenance and Repair Projects (Projects <$15 million) Staff recommends Maintenance and Repair projects be excluded from the scope of the agreement if a cost threshold less than $15 million is established for CWA coverage (i.e., Alternative 2). Contractors located in the City constructed 50% of the Maintenance and Repair projects advertised by the City during the January 2018 to September 2021 period reviewed by staff. Of the 11 past CIP projects reviewed in detail by staff, 95% of all labor hours were performed by local workers. Maintenance and rehabilitation projects are routinely constructed by local contractors using local workers and a CWA is unlikely to increase local worker participation for these types of projects.
In addition, rehabilitation projects such as street resurfacing and wastewater collection system lining are often performed by specialty contractors who rely heavily on their core workforce to perform their work efficiently and effectively.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 80
6.4. Local Worker Participation Goal
If Council decides to implement a CWA, staff recommends a minimum local worker participation goal of 60% be established. Review of local worker participation on a representative sample of recent City projects indicates 90% of all labor hours were performed by local workers. Of the cost categories reviewed, the lowest local worker participation percentage was for projects with a cost between $250,000 and $1 million, where 73% of all labor hours were performed by local workers. Historical local worker participation percentages for projects of all types and sizes is well above the 30% local worker participation goal typically set forth in CWAs and included in the SLO Water Plus CWA. The local worker participation goal should be established such that implementation of a CWA supports the continued employment of local workers, consistent with historical employment of local workers on City projects. This goal should be achievable based on the local work hours measured for the SLO Water Plus Project and historical local worker participation on City projects.
Previous Council or Advisory Body Action
Council adopted the FY21/23 Financial Plan at the June 1, 2021, meeting. Included within the programs and projects identified within Major City Goal (MCG) of Economic Recovery, Resiliency, and Fiscal Sustainability was a task/action with Strategic Approach #1.1f, which stated:
"Hire a consultant, support legal review, and establish an internal working group and hire a consultant to research methods to support local contractors, local vendors, and labor through workforce agreements, local purchasing requirements, alternative project delivery methods, and other options to support local businesses and employees. The Community Services Group will be leading this effort".
A Study Session was held in September 2021 to present strategies identified by staff to support the local economy and to receive feedback from Council on the work program.
The Study Session included a guided discussion with a series of questions intended to determine Council’s preferred strategies and implementation priorities, and to inform the subsequent phases of the work program. Reference the Background section of the report for additional information.
Policy Context
There are no existing policies in place for Community Workforce Agreements. The recommendations and alternatives of this report provide a policy framework for Council consideration.
Public Engagement
Public engagement/stakeholder outreach discussed in body of report.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 81
CONCURRENCE
The Administration Department, City Attorney, and Community Services Group concur with the recommendations of this report.
ENVIRONMENTAL REVIEW
The California Environmental Quality Act (CEQA) does not apply to the recommended action in this report, because the action does not constitute a “Project” under CEQA Guidelines Section 15378.
NEXT STEPS
If directed by Council, staff will initiate CWA negotiations with the Trades Council in accordance with the negotiating parameters established by Council. The City Attorney has retained the services of outside legal counsel to assist with negotiations. If staff and the Trades Council are able to reach an agreement, the negotiated CWA will be provided to Council for review and approval. If an agreement with the Trades Council cannot be reached, staff will return to Council for further direction.
Once the CWA has been adopted, staff will procure the services of a Community Workforce Coordinator to facilitate implementation and administration of the agreement.
Public Works staff will coordinate with the City Attorney’s office to develop construction contract provisions and specifications describing CWA requirements. Public Works staff will develop internal procedures to be used by City staff to help ensure uniform application of CWA requirements on all covered projects.
As noted previously, use of alternative project delivery methods and local purchasing policies can also provide the opportunity for the City to make progress on the MCG of Economic Recovery, Resiliency & Fiscal Sustainability. Updates on both strategies are as follows:
1. Staff is currently considering alternative project delivery methods as a part of the broader Capital Improvement Process effort. With the exception of certain energy saving projects, use of anything other than the design-bid-build methods requires amendment to both the municipal code and City Charter. During the Study Session in September 2021, the Council indicated general support for the use of alternative project delivery methods but expressed a desire for more analysis of the pros and cons of the alternatives. Due to the need for additional Council followup and the time that it takes to prepare a successful ballot measure for Charter amendment, staff is tentatively planning to work towards a ballot measure during the November 2024 statewide general election to allow for the use of alternative delivery methods, pending additional analysis and direction from Council.
2. On May 17th, the Finance Department will bring forward an item to seek Council’s consideration of policy updates that would broaden local vendor preferences for City purchases.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 82
FISCAL IMPACT
Budgeted: Yes Budget Year: 2021-22
Funding Identified: Yes
Fiscal Analysis:
Funding
Sources
Total Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost
General Fund $ 105,000 $ $70,000 $
Water Fund $ 26,250 22,500
Sewer Fund $ 26,250 22,500
Parking Fund $ 17,500 15,000
Total $ 175,000 $ $130,000 $
The appropriated budget for FY2021-22 allocated $175,000 in operating budget to hire necessary consultant support for this ongoing effort, with costs proportionally shared between the General Fund and three enterprise funds – Water, Sewer, and Parking.
Currently, $45,000 has been obligated for consultant support of this work effort including legal services consisting of CWA contract negotiation support, with a remaining budget of $130,000. In the near term, remaining budget may be utilized for implementation of the Council preferred action, including work to develop procedures for implementation of CWAs on covered projects. The costs of implementation in the long term, which include consultant support for CWA contract oversight during project construction, would be applied to the covered Capital Projects and be incorporated into the project construction budget.
ALTERNATIVES
These alternatives are discussed extensively above in the body of the report.
1. Authorize Staff to negotiate a Community Workforce Agreement with the Tri-Counties Building and Construction Trades Council to include projects with an estimated construction cost of $15 million or greater, including a 60% local worker participation goal and excluding emergency projects and prevailing wage services provided through professional services agreements.
2. Authorize Staff to negotiate a Community Workforce Agreement with the Tri-Counties Building and Construction Trades Council to include projects with an estimated construction cost of $5 million or greater, including a 60% local worker participation goal and excluding rehabilitation projects, emergency projects, and prevailing wage services provided through professional services agreements.
3. Direct staff not to negotiate a Community Workforce Agreement with the Tri-Counties Building and Construction Trades Council.
Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 83
ATTACHMENTS
A – City Capital Improvement Program CWA Evaluation
B – CWA Frequently Asked Questions Document
C – Public Works Prevailing Wage and Fringe Benefit Summary Attachment 3 Joint Agenda 6-5-2023 Item 6 - Page 84