A new report from the Illinois Economic Policy Institute (ILEPI) finds that project labor agreements (PLAs) used in Illinois construction projects do not significantly increase construction costs — and in fact, may increase competition among bidders.

Researchers analyzed more than 2,500 bids across 773 Illinois Capital Development Board building projects, valued at over $1.2 billion, between 2017 and 2023. The study revealed that projects covered by PLAs saw 14% more bid activity on average. Each additional bid also increased the likelihood of coming in under budget by 6%.

Frank Manzo, an economist at ILEPI and one of the study’s principal authors, said the report breaks new ground.

“We accounted for important factors such as the size and complexity of each project, location — which is very important in Illinois — and we also accounted for whether it was new construction or a rehabilitation of an existing project,” he said.

Cost Stability, Not Inflation

Despite longstanding debate over the financial impact of PLAs, the ILEPI report found no statistically significant cost difference between PLA-covered projects and those without. Manzo said the data shows that PLAs help contain costs while fostering a competitive and inclusive bidding environment.

“These findings challenge the conventional narrative that PLAs unnecessarily inflate costs and reduce market competition, demonstrating instead that they can foster cost-effective, competitive and equitable construction practices within Illinois,” the study stated.

Pushback from Critics

However, the report drew criticism from Ben Brubeck, vice president of regulatory, labor and state affairs for the Associated Builders and Contractors. He pointed to numerous studies suggesting PLAs tend to raise costs, particularly in school and affordable housing construction.

“The claim that PLAs can promote increased competition and lower costs flies in the face of more than two decades of survey results of ABC contractor members and anecdotes from union and nonunion contractors as well as federal, state and local procurement officers, who have generally shared real-world experiences suggesting the opposite is true,” he said.

Brubeck also argued that Illinois’ unique market conditions may not reflect national trends, suggesting that bid patterns observed in the state may not apply elsewhere.

Bidding Trends Reflect Policy Shifts

The ILEPI study tracked fluctuations in bidding patterns over time. In 2017, Illinois projects received an average of 3.3 bids. That dropped slightly to 3.1 in 2018. But following President Joe Biden’s 2019 executive order mandating PLAs on many federally funded projects, competition surged. The average number of bids rose to 3.8 in 2019, 3.9 in 2020, and 3.6 in 2021, before dipping below 3.0 in 2022 and 2023.

“Projects with PLAs averaged more bids than projects without PLAs,” Manzo said. “More competition drives down cost with each additional bid improving [the chances] that a project comes under budget by 6%. PLAs create conditions for responsible contractors to enter the market based on their ability to compete on quality, workforce productivity and their materials usage, and that’s why we are seeing more bids on projects with PLAs.”

PLAs and Inclusive Contracting

Beyond cost and competition, the study also highlighted the role of PLAs in increasing contract awards to minority-, women-, and veteran-owned businesses. According to the report, these groups saw market share gains of 1 to 2 percentage points in PLA-covered projects.

“This increased opportunity facilitates broader access to public contracts for historically underrepresented groups — an important factor in promoting equity and diversity in the construction industry,” said Robert Anthony Bruno, co-principal author of the study and director of the labor education program at the University of Illinois, Urbana-Champaign.

Brubeck, however, contended that diversity outcomes can be achieved independently of PLAs.

“The coupling of diversity hire goals with a PLA is like putting lipstick on the PLA pig,” he said. “It is a statistical fact that there are more minorities and women in the construction industry on the nonunion side of the ledger simply because almost 90% of the U.S. construction industry is nonunion.”

Conclusion: PLAs as Strategic Tools

The report concludes that PLAs can be effective tools for maintaining budget discipline and encouraging fair competition.

“Use them,” Bruno said. “It’s a skillful, rational way … to attract responsible bidders to ensure you will get high-quality work and a mix of craftworkers around different price points that will allow you to be competitive.”

Originally reported by Keith Loria in Construction Dive.