Union-only deal sent Wynn casino costs soaring

FEW WOULD DOUBT that developer Steve Wynn is a very savvy guy.  It turns out, though, he’s getting a lesson in competition and how his own decisions have helped lead to his Everett casino being $300 million over budget.

You see, Wynn agreed to a project labor agreement (PLA) for the project, which requires that unions be the “sole and exclusive” source of jobsite labor for all construction.  Given that more than 80 percent of the construction workforce in Massachusetts chooses not to join a union, it only stands to reason that fewer bidders mean higher prices.

News of the Wynn casino overruns comes on the heels of UMass Boston’s financial mess.  There, a 10-year master plan for $750 million in construction that was adopted in 2010 also included a PLA.

Fast forward to the present and a science center that was projected to cost $155 million came in $28 million over budget and two years behind schedule.  A new classroom building was a year late and $17 million over budget.  Before a recent round of cuts, the campus was on track to face a deficit of $30 million – almost the same amount as the science center cost overrun.

But UMass Boston wasn’t the only reason Wynn shouldn’t be surprised by high construction costs.  Studies documenting the cost of PLAs could fill an Amazon warehouse. A 2010 study from New Jersey’s Department of Labor and Workforce Development placed the PLA premium at more than 30 percent and also found that the projects took 28 percent longer than those built using open competition.  And while supporters point to a few studies that refute cost savings, it’s hard to argue with the basic economic principle that increased competition generally leads to lower costs.

Backers also argue that these union-exclusive deals ensure “labor peace,” but that claim doesn’t hold up.  Between 2001 and 2008, when PLAs where banned on federally funded construction, there is no record of a single project that was plagued by labor unrest.  It’s no wonder that nearly half the states have banned the use of PLAs on public construction projects.

Construction buyers, whether they be developers or taxpayers, receive the most bang for their buck when all qualified contractors can bid on a project.  Wynn got bids from some excellent local union contractors.  But if he didn’t require all contractors to use only union labor, he could have increased competition by adding scores of outstanding local open shops to the bidding pool.

Steve Wynn builds destination casinos that offer something for everyone.  Going forward, taking the same all-inclusive approach to bidding will increase his odds of staying on time and on budget.

Greg Beeman is president of Associated Builders and Contractors of Massachusetts.