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Sans REO, more opportunity.

Byline: John Lauring; Francis Madigan III; Frederic Mulligan


Last week, Worcester City Manager Michael V. O'Brien notified the City Council of his intention to suspend enforcement of certain provisions of the city's Responsible Employer Ordinance. Specifically, contractors who wish to bid on city work will no longer be required to maintain and participate in an apprenticeship training program and will no longer be required to provide health insurance to workers.

The city manager took this action because of a U.S. District Court judge's recent decision to strike down Fall River's REO. If Worcester had persisted in enforcing its REO, it faced the potential of a costly and losing legal battle.

But besides being legally required, the city manager's action is encouraging news for Worcester and its taxpayers. As The Research Bureau argued in its 2008 report, "Where Have All the Bidders Gone?: The Impact of `Responsibility' on Public Construction," the effectual elimination of Worcester's REO will open the bidding process on public construction projects to all qualified bidders, making the system fairer and the costs lower to the city.

Because Worcester's REO has been in the news only sporadically, there seems to be some confusion over what is at issue here. Two general misunderstandings should be addressed.

The first is that somehow, without the REO, the city will be forced to do business with unscrupulous contractors. Not true. State law already provides extensive regulation of all public construction projects carried out by private contractors (with a value over $100,000) in the commonwealth. The state defines the structure of the bidding process, it certifies what contractors may bid on public work, it mandates what wages and benefits they must pay their workers, and it requires that they all be covered by workers' compensation and industrial accident insurance.

The REO then imposed an additional requirement, that bidders "maintain and participate in a bona fide apprentice training program."

This clearly favored unionized contractors, because a unionized contractor can fulfill this requirement simply by being signatory to a union contract. The unions themselves, not the contractors, then take responsibility for administering the apprenticeship training program. A nonunion contractor, by contrast, bears the burden of maintaining an apprenticeship training program all on its own.

The second big misunderstanding about the REO is that, without it, local firms and employees will have less of an opportunity to work on city projects. Also not true. Residency requirements predated the REO and were long ago ruled illegal.

In 1984, the Worcester City Council adopted an ordinance that required that at least 50 percent of the total worker hours on city-funded projects go to city residents. The REO, adopted in 1997, merely reaffirmed this requirement. Then, in 2002, a U.S. District Court judge struck down this provision as a violation of the U.S. Constitution's privileges and immunities clause, which prohibits interstate protectionism.

When Worcester gives preferential treatment to city residents, it illegally discriminates against workers from other states. Since then, residency requirements in Worcester have been only goals, not true requirements. Eliminating the REO might actually help the cause of local jobs. Many of the most vocal opponents of Worcester's REO were local firms who hire local workers and yet were barred from city work simply because they were nonunion. But now the playing field will be more level.

Furthermore, project costs will now likely be lower. The reason is that about 85 percent of the construction industry in Massachusetts is nonunion. Thus, bidding on publicly-funded projects will now be open to a large new supply of contractors. Increasing the supply of any commodity increases competition and generally results in lower costs.

To sum up, the REO did nothing to improve the quality of public construction projects or the treatment of construction workers, nor did it preserve jobs for local workers. Suspending enforcement of the REO will produce a fairer bidding process by opening it up to all qualified contractors, union and nonunion, and it will reduce costs, to the benefit of the city and its taxpayers.

John Lauring is president of Lauring Construction Co. Inc., Francis Madigan III is president of F.W. Madigan Co.Inc., and Frederic Mulligan is chairman of Cutler Associates Inc.
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Title Annotation:COMMENTARY
Publication:Telegram & Gazette (Worcester, MA)
Date:Mar 9, 2012
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