Legislative News

Offering testimony April 14 in opposition to prevailing provisions of the budget, some in a group and some by themselves,

were Terry Estes, project manager for J & B Steel, a family owned-construction company in Hamilton; Tim Galvin,

CEO of Brexton Construction LLC; Howard Krisher, chairman of the Mechanical Contractors Association of Ohio;

Douy Mayse, vice president of Rieck Services, a mechanical services firm in Dayton; Sam Halker, vice chairman of

the Mechanical Contractors Association of Ohio; and J.K. Williams of Kirk Williams Co. in Grove City.

They asked that the prohibition on prevailing wage for schools, county hospitals and universities be removed from

the budget, as well as the increase in the threshold for requiring prevailing wage from $78,000 to $5 million. They

acknowledged that the general prevailing wage laws need to be revisited and reformed but asked that any changes

be taken up in separate legislation that will allow more time and deliberation. They also said that estimations that

prevailing wage significantly drive up construction costs are bogus, that prevailing wage helps maintain high

education and training standards for workers, and that passing the prevailing wage changes now in the budget

could lead skilled workers to leave for other states.

Rep. Burke said the negotiations that set prevailing wage pay levels “sounds like price fixing.” Krisher said wage

negotiations are done in the interest of containing costs and maintaining competitiveness with merit-shop

contractors, and said that while it results in one regional wage, that allows a level playing field on which companies

compete on such things as capitalization, technology and pre-fabrication abilities.

Rep. Mecklenborg asked if there is a more amenable number for the prevailing wage threshold than the $5 million

proposed in the budget. Krisher said he’d served on a construction reform panel that had discussed increasing the

threshold to somewhere in the $150,000 range. He also said that some $100,000 projects might have more

complexity and need for sophisticated training than a $10 million “cookie cutter” school construction project.

Rep. Carney remarked that the witnesses’ statements about prevailing wage redirecting money back into training

and education “directly contradicts” testimony on prevailing wage from witnesses earlier in the week.

Rep. McGregor asked if those seeking to address the issue in separate legislation thought it could be done

“quickly,” saying “We need to take the time to do it right. I just don’t want it to take too much time.”

The Senate Ways and Means Committee approved SB90 April 14 that would repeal the Ohio Estate Tax SB90 for the estates of individuals dying on or after January 1, 2011.

Despite pleadings from witnesses and Democratic amendments reconsider repeal of the estate tax, the Republican

committee members made a small concession to extend repeal of the estate tax by two years. The bill was reported

out of committee, with the two-year extension amendment offered by Sen. Schaffer’s.

Sen. Turner said while she is appreciative of the extension to two years from enactment of the bill, this is not the

time to be considering such a cut and will still put a strain on local government budgets across Ohio. She offered an

amendment that was tabled along party lines that would have at least extended the phase-out date for 10 years, due

to the current budget issues.”I think we can do better,” she said.

Turner also was turned down on her amendment that she said was suggested by Gene Krebs of Greater Ohio,

essentially creating a revolving loan fund for local government infrastructure planning.

One other tabled amendment offered by Sen. Skindell would have created an earned income tax credit for low- to

moderate-income Ohioans.

City of Toledo Tax Commissioner Clarence Coleman explained to committee members the “full context” of the

proposed cut of the estate tax on local governments.  “The city of Toledo receives between $3 million and $4 million each year from the estate tax for our city’s General Fund,” he said. “With an operating General Fund budget of $228 million, the loss of $4 million may not first appear to

be a catastrophic loss … A reduction in $4 million at this point would almost surely mean the reduction of public

safety personnel.”

Coleman said this cut would also mean the difference between maintaining the skeletal recreation program and not

having recreation at all, and would further have a “domino effect” on other fiscal responsibilities.

As for Toledo, he said, the city’s largest source of General Fund revenues is income tax. In 2007, the city took in

almost $170 million from the income tax. By 2009, that figure fell to just over $140 million, a loss of almost $30

million in just two years.

“While income tax revenues are starting to slowly recover, other funding sources are still falling, including property

tax revenues,” Coleman said. “In the aggregate, we expect 2011 to have the lowest aggregate revenue figure for

Toledo since 1994. Of course you are aware of the cuts likely coming to Toledo’s third largest source of revenue, the

state’s Local Government Fund, and the state budget also targets reductions for the transition funds for the tangible

personal property tax.”

Coleman said that Toledo crafted its budget last month and it includes $15 million in one time funding, but also

includes savings from such initiatives as a merger of the Ottawa Hills Fire Department into the city of Toledo Fire

Department, and also a ceding of the city’s trash collection program to the Lucas County Solid Waste Management

District.  “In short, Toledo is already collaborating with other local governments and making the tough decisions that the times

demand,” Coleman said.

He urged the committee to reconsider the timeline for eliminating the estate tax and said this change is “simply too

much” for many cities to handle, especially when they are in times of early recovery.

The committee chairman who recently steered a controversial collective bargaining bill through the House hopes to follow up soon with legislation that would restrict union labor contracts for state-funded construction projects.

Rep. Joe Uecker (R-Loveland), chairman of the House Commerce & Labor Committee, said Thursday that he would likely schedule a few more hearings before holding a vote on  Rep. Ron Young’s (R-Leroy) proposal to prohibit agencies from requiring project labor agreements (PLAs) for construction projects (HB102). 

The chairman said he believed there was enough support among Republicans on the panel to advance the bill and pointed to the vote Wednesday evening to accept a substitute version, which Democrats unanimously opposed. “That vote pretty much lays it out that we’re supporting it.”

Rep. Uecker said in an interview that he believed the testimony showed that preventing state agencies and local governments that get state assistance from requiring PLAs would save money on public construction projects.

“I think anytime that you have a contract that says you can only have a certain section of any industry is allowed to bid, I think you’ve got a discriminatory type of problem there,” he said. “You can’t discriminate against somebody just because they don’t belong to a union, which is what a PLA does. 

During the hearing, attorney N. Victor Goodman, who represents the Ohio State Building and Construction Trades Council said many major corporations willingly use PLAs to ensure a steady flow of skilled labor, simplify work rules, and prevent disputes 

“The council believes that government officials should be free, on a project-by-project basis, to enter into project labor agreements when those agreements would further the government’s interest in purchasing high-quality and cost-effective construction services,” he said 

“Such decisions are best made by the government officials purchasing the construction services, and this bill’s removal of that discretion unnecessarily hampers public officials,” he said.

Testifying in support of the bill, Fred Horner, owner of a non-union roofing business in Massillon, told members that he never bids on projects involving PLAs because he would have to accept any workers the union hall sends him while his own employees have to wait at the end of the line as temporary union members.

“Once I sign a PLA agreement, I’m going to lose control of my people. Once I lose control of my people, I’m going to bid higher,” he said. “They are a waste of taxpayer dollars and it is closing the door on 85% of employers in this state.”

Mr. Goodman described the bill as an attempt to make “cosmetic changes” to legislation Rep. Young sponsored in 1999 that the Ohio Supreme Court subsequently struck down as an unconstitutional violation of the National Labor Relations Act.

“Simply amending the language of an unconstitutional statute to say that the state can neither ‘require’ nor ‘prohibit’ a PLA does not change its effect,” he said. “Let there be no doubt that this bill prohibits public sector PLAs at the state level and is therefore unconstitutional.”

Chairman Uecker said he believed there was a substantive difference in that the new proposal would block public contracting entities from requiring or prohibiting PLAs on state-funded construction.

The substitute bill adopted Wednesday includes intent language designed to help underscore that point, he said. “You can’t say ‘no PLAs’ and you can’t say ‘only PLAs.’”

Rep. Uecker said possibility of a successful legal challenge is not sufficient to deter the legislature from pursuing what it believes is good public policy.

“One thing I’ve come to know in my years of working with the legislature and with state government is nothing’s unconstitutional until the Supreme Court says it is,” he said. “I will not purport to guess what any Supreme Court, state or U.S., would rule on any constitutional issue.”

Controversy over PLAs flared most recently at the Ohio School Facilities Commission. Earlier this year the agency under Gov. John Kasich reversed a Strickland-era policy that allowed local school districts to require PLAs.

Members of the House Commerce Committee also heard from New Boston Local Schools Superintendent Mike Staggs, who said OSFC stalled a school construction project after the board ignored the former director’s urging to adopt a PLA.

“In our county, if we sign a PLA, one contractor is going to get that job,” he said. “That person can basically name his price.”

During open hearings on the state’s two-year budget bill, HB  153), Tom Shreves, executive director of the North Central Ohio Chapter of the National Electrical Contractors Association, and Valerie Dahlberg, executive director of the Mechanical Contractors Association of Ohio (MCAO),

testified in opposition to provisions in the bill referred to as “construction reform” — changes that would eliminate

multiple prime contracting for public projects “and all but eviscerate the notion of competitive bidding,” as Shreves

noted.

He went on to say, “First, public entities can already conduct business through a single prime contractor under Ohio

law. Second, competitive bidding has benefitted Ohioans by being inclusionary, not exclusionary for over a century,

and these changes undo those benefits. Third, changes as substantial as these should be considered outside the

budget bill.”

Shreves went on to say that a similar discussion took place last year when the

Legislature created three pilot projects at universities to test alternative construction delivery methods. These

projects, he said, were to be evaluated after four years — not less than two years later. Shreves said “allow those

pilot projects to work before making any further decisions on the issue.”

Dahlberg said they understand changes are needed “but not in this manner and not in this bill.”

“MCAO also is concerned that the process involved in passing a budget bill will not permit the careful consideration

of all relevant facts and arguments that a separate bill on construction reform would afford. Today’s construction

industry involves a great deal of fragmentation due to increasing technical specialization. The highly competitive nature of the business is based largely on price. A decision of this magnitude should not be made without a separate, thorough discussion and analysis of all the facts.”

The Ohio House Commerce and Labor Committee took testimony April 13 on HB 102 which would prohibit state agencies from requiring or prohibiting certain labor requirements as a condition of performing public works and prohibit appropriations of state funds for public works when political subdivisions require labor requirements.  

Rep. Young introduced a substitute bill, which was accepted 7-5 along party lines.

Fred Horner testified as a proponent of HB102 because he believed that project labor agreements (PLAs) drive up

costs and limit competition. He shared his experiences of dealing with a “significant amount” of state and federally

funded projects, as well as private entities. “In these economic times when many are facing financial crisis, why would we force PLAs and limit the bidding

process for state or federally funded projects,” Horner asked. “PLAs add 20 percent to the project which is a direct

cost to the taxpayers of the state, and exclude bidders because of how his or her shop is organized.”

Rep. Szollosi asked if the 20 percent Horner spoke of applied to both private and public projects. Horner replied

that the 20 percent was a modest number, and said it varied depending on paying benefits like health and pension.

Szollosi remained skeptical, and asked why major corporations still used PLAs to reduce costs, if it increases costs

by 20 percent. Horner said that he was just there to testify about PLAs and his experience.

Young said that people have told him that this bill is the end for unions in Ohio, and asked Horner if he agreed that

there is a place for unions in Ohio. “I absolutely agree that unions compete very well, and I lose jobs to them every

day.”

Rep. Ramos asked if Horner had any concerns about smaller companies undercutting him, or his having to

undercut himself, when bidding on a job if this legislation was passed. Horner replied that he was not, because

smaller companies, and less-reputable companies have to pay liability insurance and bond the job, which they can’t

afford.

N. Victor Goodman, representing the Ohio State Building and Construction Trades Council, spoke in opposition to

the bill saying that it was “unwise public policy” and because it certainly “runs afoul” of the supremacy clause in the

U.S. Constitution. Goodman cited a multitude of Supreme Court cases, as well as construction law sections, that

helped emphasize the point that HB102 was unconstitutional.

“HB102 would rob state and many local officials of a tool used frequently and successfully by non-public purchasers

of construction services on their most complex construction projects,” Goodman remarked.

“The very introduction of this bill demonstrates the sponsor’s intent to set state policy, i.e. regulate it. The bill, therefore, crosses the market participation line and imposes an unconstitutional regulatory ban of PLAs.”

Goodman attached a letter with his testimony from the president of Toyota, Tetsuo Agata, praising the work done

by America’s Building Trades Unions, and stating that due to the PLAs they used on their major construction

projects, they could not be more pleased with the results. “Why prevent public entities from having a PLA on a major project if they think it will work better for them,” Goodman asked. “Why abolish that choice?”

Szollosi asked Goodman if he agreed with the 20 percent cost increase that private companies incurred as a result

of PLAs, to which Goodman responded that since 22 percent of any project is labor, the workers are either working

for free or paying to work. “With all due respect to the previous witness, we have numbers from Uncle Sam.”

Mike Staggs, superintendent of New Boston Schools, gave proponent testimony and told the story of his dealing

with PLAs and how his district was involved in the 2010 Ohio School Facilities Commission (OSFC) scandal and the

inspector general’s report. Ground broke on their project, but it was put on hold by OSFC for no reason, other than the fact that they had not

agreed to a PLA.

Szollosi asked about letters from the superintendents of Ironton and South Point local schools, which thanked local

trade organizations for partnering with their schools and commending the quality of work done after entering into

PLAs. Staggs responded, “I know that Dean Nance and Ken Cook would not write those letters now. I know Dean Cook

very well.”

After Staggs’ testimony, Young took an opportunity to say that this legislation did not prohibit or require PLAs.

Finishing the evening’s testimony was Nick Nykulak of the Cleveland law firm Ross, Brittain and Schonberg who

came forward as a proponent of the bill, but started by saying that he had just gotten an email on his phone

regarding Nevada SB1403 which “effectively does the exact thing that Ohio’s HB102 is doing.”

He continued, “We, along with the organizations and employers we represent strongly support the passage of

HB102 and believe that this bill will uphold the purpose of Ohio’s competitive bidding laws, will expand employment

opportunities and job creation in the state, and will prevent favoritism, collusion and discrimination in government

contracting.”

He also added that the firm believes the bill to be constitutional and that it will survive any pre-emption challenge.

“Although the Ohio Supreme Court decision preempted a previous version of this bill, here it is absolutely clear that

this bill does not attempt in any way to regulate the labor relations of any private party. If anything, this bill clearly

expresses a view of labor neutrality on behalf of the state and its political subdivisions when acting as a market

participant and engaged in contracting.”

The Ohio House Commerce and Labor Committee took testimony March 13 on HB176 which would limit the magnitude of change orders on public

improvements required to be competitively bid.  Rep. Beck offered sponsor testimony.

This bill would limit ‘change-in-scope’ change orders that are not essential to the purpose of the project. It

would limit these change orders to less than $50,000 or two and one-half percent of the total contract price for the

improvement.”

Governor Kasich’s Budget Bill returns to play major construction reforms which Ohio House Democrats sidetracked last Session in favor of authorizing three pilot trial projects.  

.    State institutions and agencies (as well as counties, municipalities and townships) would no longer be required to bid to multiple-prime (MEP) contractors. 

.    They could utilize CM at-risk, design-build and single prime contracting. 

.    Both CM at-risk and design-build could be used without a full competitive bid process, but instead utilizing a new proposal selection process.

.    The threshold for the competitive bid process would be raised from $50,000.00 to $200,000.00 on all public construction projects.

.    All state institutions of higher education would be exempted from prevailing wage requirements (as K-12 presently). 

.    Primary and secondary education institutions could no longer require prevailing wages (they can no longer “opt in”).

.    An improvement by private entity with the benefit of public financing, grants or in-kind support from a public authority would be exempt from prevailing wage.

.    Interested parties (i.e. unions) would no longer have a right to sue regarding a violation of prevailing wage law when the Governor’s Director of Commerce fails to rule upon a prevailing wage complaint within sixty days after the complaint is filed.

It appears that, under these alternative contract delivery systems, performance bond protections are preserved for owners and payment bond protections are preserved for subcontractors and suppliers. 

Mechanical Contractors Association of Ohio

Executive Director Valerie Dahlberg said her organization opposes the elimination of multiple prime contracting

under the aegis of construction reform.

“Requiring multiple prime bids reduces costs by eliminating a layer of mark-up for profit and overhead, which is

why the single prime bid is generally higher than the combination of the separate prime bids and why projects are

rarely awarded to the single prime contractor when the separate prime option is available,” he said.

Dahlberg noted the markup often reaches 10-15 percent of actual constructions costs under single prime

contractors. He said multiple prime contracting opens the door to small business and hedges against “favoritism

and corruption” in the award of construction contracts. He added that proposed construction reform will not reduce

litigation and cannot be proven by hard data to deliver purported cost savings.

Associated General Contractors of Ohio

Executive Director Richard Hobbs submitted written testimony that contradicted the claims of Dahlberg. He noted

that HB153 includes many recommendations from the Construction Reform Panel of the 128th General Assembly,

“the most significant of which is allowing the public authority to select the project delivery system that best suits

the type of project: multiple prime, multiple prime agency, single prime (general contract), CM at risk, design build,

and design assist and design build…. The opportunity for public owners, including universities, to select the delivery

that best suits their project provides them the opportunity to save 10 to 30 percent of the construction costs, and

complete their building projects more quickly and efficiently with less risk and litigation.”

Hobbs took a rather different view of proposed changes to prevailing wage, which would eliminate the requirement

on universities and raise the minimum project cost to $5 million for all other public construction.

“Such a significant change to Ohio’s prevailing wage law would have a considerable impact on the entire vertical

building industry,” he said. “The quality of the workforce constructing public buildings would erode, and potentially

this would put many of the thousands of small and medium-sized contractors out of business – both union and

open shop.”

The Ohio House Judiciary and Ethics Committee took sponsor testimony March 5 on HB 170 which would shorten the time during which a suit could be brought relative to a written contract.

The sponsor, Rep. Mecklenborg, said the change from a 15- to a six-year statute of limitations on written contracts would bring Ohio in line with most other states. He said only Ohio and Kentucky continue to have the 15-year bar with 22 states having six-year limits and another 18 having three- to six-year limitations after a cause of action for a lawsuit can be filed.

The sponsor said Ohio’s 15-year statute was established in 1803 when Ohio achieved statehood www.berealinfo.com/. He said the two-century old law should be shortened in line with other states. Chairman Bubp, with tongue in cheek, asked if the sponsor had checked with Speaker Batchelder as to his feeling regarding the change as he might have been around when initially enacted.

Mr. Mecklenborg said the long statute of limitation period increases the cost of doing business in the state as business owners and operators must pay for document and data retention in order to defend a contract claim that could occur some 15 years out. And, he said employees who drafted or performed the contract could have retired or died making the claim difficult to defend.

He ticked off support for the change comes from the Ohio Alliance for Civil Justice that includes the Ohio Manufacturers’ Association, Ohio Chamber of Commerce, Ohio Society of CPAs, Ohio State Medical Society, NFIB/Ohio, Ohio Council of Retail Merchants and Ohio Hospital Association.

Offering testimony April 14 in opposition to prevailing provisions of the budget, some in a group and some by themselves,

were Terry Estes, project manager for J & B Steel, a family owned-construction company in Hamilton; Tim Galvin,

CEO of Brexton Construction LLC; Howard Krisher, chairman of the Mechanical Contractors Association of Ohio;

Douy Mayse, vice president of Rieck Services, a mechanical services firm in Dayton; Sam Halker, vice chairman of

the Mechanical Contractors Association of Ohio; and J.K. Williams of Kirk Williams Co. in Grove City.

They asked that the prohibition on prevailing wage for schools, county hospitals and universities be removed from

the budget, as well as the increase in the threshold for requiring prevailing wage from $78,000 to $5 million. They

acknowledged that the general prevailing wage laws need to be revisited and reformed but asked that any changes

be taken up in separate legislation that will allow more time and deliberation. They also said that estimations that

prevailing wage significantly drive up construction costs are bogus, that prevailing wage helps maintain high

education and training standards for workers, and that passing the prevailing wage changes now in the budget

could lead skilled workers to leave for other states.

Rep. Burke said the negotiations that set prevailing wage pay levels “sounds like price fixing.” Krisher said wage

negotiations are done in the interest of containing costs and maintaining competitiveness with merit-shop

contractors, and said that while it results in one regional wage, that allows a level playing field on which companies

compete on such things as capitalization, technology and pre-fabrication abilities.

Rep. Mecklenborg asked if there is a more amenable number for the prevailing wage threshold than the $5 million

proposed in the budget. Krisher said he’d served on a construction reform panel that had discussed increasing the

threshold to somewhere in the $150,000 range. He also said that some $100,000 projects might have more

complexity and need for sophisticated training than a $10 million “cookie cutter” school construction project.

Rep. Carney remarked that the witnesses’ statements about prevailing wage redirecting money back into training

and education “directly contradicts” testimony on prevailing wage from witnesses earlier in the week.

Rep. McGregor asked if those seeking to address the issue in separate legislation thought it could be done

“quickly,” saying “We need to take the time to do it right. I just don’t want it to take too much time.”

The Senate Ways and Means Committee approved SB90 April 14 that would repeal the Ohio Estate Tax SB90 for the estates of individuals dying on or after January 1, 2011.

Despite pleadings from witnesses and Democratic amendments reconsider repeal of the estate tax, the Republican

committee members made a small concession to extend repeal of the estate tax by two years. The bill was reported

out of committee, with the two-year extension amendment offered by Sen. Schaffer’s.

Sen. Turner said while she is appreciative of the extension to two years from enactment of the bill, this is not the

time to be considering such a cut and will still put a strain on local government budgets across Ohio. She offered an

amendment that was tabled along party lines that would have at least extended the phase-out date for 10 years, due

to the current budget issues.”I think we can do better,” she said.

Turner also was turned down on her amendment that she said was suggested by Gene Krebs of Greater Ohio,

essentially creating a revolving loan fund for local government infrastructure planning.

One other tabled amendment offered by Sen. Skindell would have created an earned income tax credit for low- to

moderate-income Ohioans.

City of Toledo Tax Commissioner Clarence Coleman explained to committee members the “full context” of the

proposed cut of the estate tax on local governments.  “The city of Toledo receives between $3 million and $4 million each year from the estate tax for our city’s General Fund,” he said. “With an operating General Fund budget of $228 million, the loss of $4 million may not first appear to

be a catastrophic loss … A reduction in $4 million at this point would almost surely mean the reduction of public

safety personnel.”

Coleman said this cut would also mean the difference between maintaining the skeletal recreation program and not

having recreation at all, and would further have a “domino effect” on other fiscal responsibilities.

As for Toledo, he said, the city’s largest source of General Fund revenues is income tax. In 2007, the city took in

almost $170 million from the income tax. By 2009, that figure fell to just over $140 million, a loss of almost $30

million in just two years.

“While income tax revenues are starting to slowly recover, other funding sources are still falling, including property

tax revenues,” Coleman said. “In the aggregate, we expect 2011 to have the lowest aggregate revenue figure for

Toledo since 1994. Of course you are aware of the cuts likely coming to Toledo’s third largest source of revenue, the

state’s Local Government Fund, and the state budget also targets reductions for the transition funds for the tangible

personal property tax.”

Coleman said that Toledo crafted its budget last month and it includes $15 million in one time funding, but also

includes savings from such initiatives as a merger of the Ottawa Hills Fire Department into the city of Toledo Fire

Department, and also a ceding of the city’s trash collection program to the Lucas County Solid Waste Management

District.  “In short, Toledo is already collaborating with other local governments and making the tough decisions that the times

demand,” Coleman said.

He urged the committee to reconsider the timeline for eliminating the estate tax and said this change is “simply too

much” for many cities to handle, especially when they are in times of early recovery.

The committee chairman who recently steered a controversial collective bargaining bill through the House hopes to follow up soon with legislation that would restrict union labor contracts for state-funded construction projects.

Rep. Joe Uecker (R-Loveland), chairman of the House Commerce & Labor Committee, said Thursday that he would likely schedule a few more hearings before holding a vote on  Rep. Ron Young’s (R-Leroy) proposal to prohibit agencies from requiring project labor agreements (PLAs) for construction projects (HB102). 

The chairman said he believed there was enough support among Republicans on the panel to advance the bill and pointed to the vote Wednesday evening to accept a substitute version, which Democrats unanimously opposed. “That vote pretty much lays it out that we’re supporting it.”

Rep. Uecker said in an interview that he believed the testimony showed that preventing state agencies and local governments that get state assistance from requiring PLAs would save money on public construction projects.

“I think anytime that you have a contract that says you can only have a certain section of any industry is allowed to bid, I think you’ve got a discriminatory type of problem there,” he said. “You can’t discriminate against somebody just because they don’t belong to a union, which is what a PLA does. 

During the hearing, attorney N. Victor Goodman, who represents the Ohio State Building and Construction Trades Council said many major corporations willingly use PLAs to ensure a steady flow of skilled labor, simplify work rules, and prevent disputes 

“The council believes that government officials should be free, on a project-by-project basis, to enter into project labor agreements when those agreements would further the government’s interest in purchasing high-quality and cost-effective construction services,” he said 

“Such decisions are best made by the government officials purchasing the construction services, and this bill’s removal of that discretion unnecessarily hampers public officials,” he said.

Testifying in support of the bill, Fred Horner, owner of a non-union roofing business in Massillon, told members that he never bids on projects involving PLAs because he would have to accept any workers the union hall sends him while his own employees have to wait at the end of the line as temporary union members.

“Once I sign a PLA agreement, I’m going to lose control of my people. Once I lose control of my people, I’m going to bid higher,” he said. “They are a waste of taxpayer dollars and it is closing the door on 85% of employers in this state.”

Mr. Goodman described the bill as an attempt to make “cosmetic changes” to legislation Rep. Young sponsored in 1999 that the Ohio Supreme Court subsequently struck down as an unconstitutional violation of the National Labor Relations Act.

“Simply amending the language of an unconstitutional statute to say that the state can neither ‘require’ nor ‘prohibit’ a PLA does not change its effect,” he said. “Let there be no doubt that this bill prohibits public sector PLAs at the state level and is therefore unconstitutional.”

Chairman Uecker said he believed there was a substantive difference in that the new proposal would block public contracting entities from requiring or prohibiting PLAs on state-funded construction.

The substitute bill adopted Wednesday includes intent language designed to help underscore that point, he said. “You can’t say ‘no PLAs’ and you can’t say ‘only PLAs.’”

Rep. Uecker said possibility of a successful legal challenge is not sufficient to deter the legislature from pursuing what it believes is good public policy.

“One thing I’ve come to know in my years of working with the legislature and with state government is nothing’s unconstitutional until the Supreme Court says it is,” he said. “I will not purport to guess what any Supreme Court, state or U.S., would rule on any constitutional issue.”

Controversy over PLAs flared most recently at the Ohio School Facilities Commission. Earlier this year the agency under Gov. John Kasich reversed a Strickland-era policy that allowed local school districts to require PLAs.

Members of the House Commerce Committee also heard from New Boston Local Schools Superintendent Mike Staggs, who said OSFC stalled a school construction project after the board ignored the former director’s urging to adopt a PLA.

“In our county, if we sign a PLA, one contractor is going to get that job,” he said. “That person can basically name his price.”

During open hearings on the state’s two-year budget bill, HB  153), Tom Shreves, executive director of the North Central Ohio Chapter of the National Electrical Contractors Association, and Valerie Dahlberg, executive director of the Mechanical Contractors Association of Ohio (MCAO),

testified in opposition to provisions in the bill referred to as “construction reform” — changes that would eliminate

multiple prime contracting for public projects “and all but eviscerate the notion of competitive bidding,” as Shreves

noted.

He went on to say, “First, public entities can already conduct business through a single prime contractor under Ohio

law. Second, competitive bidding has benefitted Ohioans by being inclusionary, not exclusionary for over a century,

and these changes undo those benefits. Third, changes as substantial as these should be considered outside the

budget bill.”

Shreves went on to say that a similar discussion took place last year when the

Legislature created three pilot projects at universities to test alternative construction delivery methods. These

projects, he said, were to be evaluated after four years — not less than two years later. Shreves said “allow those

pilot projects to work before making any further decisions on the issue.”

Dahlberg said they understand changes are needed “but not in this manner and not in this bill.”

“MCAO also is concerned that the process involved in passing a budget bill will not permit the careful consideration

of all relevant facts and arguments that a separate bill on construction reform would afford. Today’s construction

industry involves a great deal of fragmentation due to increasing technical specialization. The highly competitive nature of the business is based largely on price. A decision of this magnitude should not be made without a separate, thorough discussion and analysis of all the facts.”

The Ohio House Commerce and Labor Committee took testimony April 13 on HB 102 which would prohibit state agencies from requiring or prohibiting certain labor requirements as a condition of performing public works and prohibit appropriations of state funds for public works when political subdivisions require labor requirements.  

Rep. Young introduced a substitute bill, which was accepted 7-5 along party lines.

Fred Horner testified as a proponent of HB102 because he believed that project labor agreements (PLAs) drive up

costs and limit competition. He shared his experiences of dealing with a “significant amount” of state and federally

funded projects, as well as private entities. “In these economic times when many are facing financial crisis, why would we force PLAs and limit the bidding

process for state or federally funded projects,” Horner asked. “PLAs add 20 percent to the project which is a direct

cost to the taxpayers of the state, and exclude bidders because of how his or her shop is organized.”

Rep. Szollosi asked if the 20 percent Horner spoke of applied to both private and public projects. Horner replied

that the 20 percent was a modest number, and said it varied depending on paying benefits like health and pension.

Szollosi remained skeptical, and asked why major corporations still used PLAs to reduce costs, if it increases costs

by 20 percent. Horner said that he was just there to testify about PLAs and his experience.

Young said that people have told him that this bill is the end for unions in Ohio, and asked Horner if he agreed that

there is a place for unions in Ohio. “I absolutely agree that unions compete very well, and I lose jobs to them every

day.”

Rep. Ramos asked if Horner had any concerns about smaller companies undercutting him, or his having to

undercut himself, when bidding on a job if this legislation was passed. Horner replied that he was not, because

smaller companies, and less-reputable companies have to pay liability insurance and bond the job, which they can’t

afford.

N. Victor Goodman, representing the Ohio State Building and Construction Trades Council, spoke in opposition to

the bill saying that it was “unwise public policy” and because it certainly “runs afoul” of the supremacy clause in the

U.S. Constitution. Goodman cited a multitude of Supreme Court cases, as well as construction law sections, that

helped emphasize the point that HB102 was unconstitutional.

“HB102 would rob state and many local officials of a tool used frequently and successfully by non-public purchasers

of construction services on their most complex construction projects,” Goodman remarked.

“The very introduction of this bill demonstrates the sponsor’s intent to set state policy, i.e. regulate it. The bill, therefore, crosses the market participation line and imposes an unconstitutional regulatory ban of PLAs.”

Goodman attached a letter with his testimony from the president of Toyota, Tetsuo Agata, praising the work done

by America’s Building Trades Unions, and stating that due to the PLAs they used on their major construction

projects, they could not be more pleased with the results. “Why prevent public entities from having a PLA on a major project if they think it will work better for them,” Goodman asked. “Why abolish that choice?”

Szollosi asked Goodman if he agreed with the 20 percent cost increase that private companies incurred as a result

of PLAs, to which Goodman responded that since 22 percent of any project is labor, the workers are either working

for free or paying to work. “With all due respect to the previous witness, we have numbers from Uncle Sam.”

Mike Staggs, superintendent of New Boston Schools, gave proponent testimony and told the story of his dealing

with PLAs and how his district was involved in the 2010 Ohio School Facilities Commission (OSFC) scandal and the

inspector general’s report. Ground broke on their project, but it was put on hold by OSFC for no reason, other than the fact that they had not

agreed to a PLA.

Szollosi asked about letters from the superintendents of Ironton and South Point local schools, which thanked local

trade organizations for partnering with their schools and commending the quality of work done after entering into

PLAs. Staggs responded, “I know that Dean Nance and Ken Cook would not write those letters now. I know Dean Cook

very well.”

After Staggs’ testimony, Young took an opportunity to say that this legislation did not prohibit or require PLAs.

Finishing the evening’s testimony was Nick Nykulak of the Cleveland law firm Ross, Brittain and Schonberg who

came forward as a proponent of the bill, but started by saying that he had just gotten an email on his phone

regarding Nevada SB1403 which “effectively does the exact thing that Ohio’s HB102 is doing.”

He continued, “We, along with the organizations and employers we represent strongly support the passage of

HB102 and believe that this bill will uphold the purpose of Ohio’s competitive bidding laws, will expand employment

opportunities and job creation in the state, and will prevent favoritism, collusion and discrimination in government

contracting.”

He also added that the firm believes the bill to be constitutional and that it will survive any pre-emption challenge.

“Although the Ohio Supreme Court decision preempted a previous version of this bill, here it is absolutely clear that

this bill does not attempt in any way to regulate the labor relations of any private party. If anything, this bill clearly

expresses a view of labor neutrality on behalf of the state and its political subdivisions when acting as a market

participant and engaged in contracting.”

The Ohio House Commerce and Labor Committee took testimony March 13 on HB176 which would limit the magnitude of change orders on public

improvements required to be competitively bid.  Rep. Beck offered sponsor testimony.

This bill would limit ‘change-in-scope’ change orders that are not essential to the purpose of the project. It

would limit these change orders to less than $50,000 or two and one-half percent of the total contract price for the

improvement.”

Governor Kasich’s Budget Bill returns to play major construction reforms which Ohio House Democrats sidetracked last Session in favor of authorizing three pilot trial projects.  

.    State institutions and agencies (as well as counties, municipalities and townships) would no longer be required to bid to multiple-prime (MEP) contractors. 

.    They could utilize CM at-risk, design-build and single prime contracting. 

.    Both CM at-risk and design-build could be used without a full competitive bid process, but instead utilizing a new proposal selection process.

.    The threshold for the competitive bid process would be raised from $50,000.00 to $200,000.00 on all public construction projects.

.    All state institutions of higher education would be exempted from prevailing wage requirements (as K-12 presently). 

.    Primary and secondary education institutions could no longer require prevailing wages (they can no longer “opt in”).

.    An improvement by private entity with the benefit of public financing, grants or in-kind support from a public authority would be exempt from prevailing wage.

.    Interested parties (i.e. unions) would no longer have a right to sue regarding a violation of prevailing wage law when the Governor’s Director of Commerce fails to rule upon a prevailing wage complaint within sixty days after the complaint is filed.

It appears that, under these alternative contract delivery systems, performance bond protections are preserved for owners and payment bond protections are preserved for subcontractors and suppliers. 

Mechanical Contractors Association of Ohio

Executive Director Valerie Dahlberg said her organization opposes the elimination of multiple prime contracting

under the aegis of construction reform.

“Requiring multiple prime bids reduces costs by eliminating a layer of mark-up for profit and overhead, which is

why the single prime bid is generally higher than the combination of the separate prime bids and why projects are

rarely awarded to the single prime contractor when the separate prime option is available,” he said.

Dahlberg noted the markup often reaches 10-15 percent of actual constructions costs under single prime

contractors. He said multiple prime contracting opens the door to small business and hedges against “favoritism

and corruption” in the award of construction contracts. He added that proposed construction reform will not reduce

litigation and cannot be proven by hard data to deliver purported cost savings.

Associated General Contractors of Ohio

Executive Director Richard Hobbs submitted written testimony that contradicted the claims of Dahlberg. He noted

that HB153 includes many recommendations from the Construction Reform Panel of the 128th General Assembly,

“the most significant of which is allowing the public authority to select the project delivery system that best suits

the type of project: multiple prime, multiple prime agency, single prime (general contract), CM at risk, design build,

and design assist and design build…. The opportunity for public owners, including universities, to select the delivery

that best suits their project provides them the opportunity to save 10 to 30 percent of the construction costs, and

complete their building projects more quickly and efficiently with less risk and litigation.”

Hobbs took a rather different view of proposed changes to prevailing wage, which would eliminate the requirement

on universities and raise the minimum project cost to $5 million for all other public construction.

“Such a significant change to Ohio’s prevailing wage law would have a considerable impact on the entire vertical

building industry,” he said. “The quality of the workforce constructing public buildings would erode, and potentially

this would put many of the thousands of small and medium-sized contractors out of business – both union and

open shop.”

The Ohio House Judiciary and Ethics Committee took sponsor testimony March 5 on HB 170 which would shorten the time during which a suit could be brought relative to a written contract.

The sponsor, Rep. Mecklenborg, said the change from a 15- to a six-year statute of limitations on written contracts would bring Ohio in line with most other states. He said only Ohio and Kentucky continue to have the 15-year bar with 22 states having six-year limits and another 18 having three- to six-year limitations after a cause of action for a lawsuit can be filed.

The sponsor said Ohio’s 15-year statute was established in 1803 when Ohio achieved statehood www.berealinfo.com/. He said the two-century old law should be shortened in line with other states. Chairman Bubp, with tongue in cheek, asked if the sponsor had checked with Speaker Batchelder as to his feeling regarding the change as he might have been around when initially enacted.

Mr. Mecklenborg said the long statute of limitation period increases the cost of doing business in the state as business owners and operators must pay for document and data retention in order to defend a contract claim that could occur some 15 years out. And, he said employees who drafted or performed the contract could have retired or died making the claim difficult to defend.

He ticked off support for the change comes from the Ohio Alliance for Civil Justice that includes the Ohio Manufacturers’ Association, Ohio Chamber of Commerce, Ohio Society of CPAs, Ohio State Medical Society, NFIB/Ohio, Ohio Council of Retail Merchants and Ohio Hospital Association.