Oregon’s PLA Mandate: What It Means for the State’s Workforce

Lessons from Other States’ Use of PLAs and the Impact of Mandates

Summary

Project Labor Agreements (PLAs), mandated by Governor Tina Kotek's Executive Order 24-31, represent a significant shift in Oregon’s approach to public construction projects. Rooted in federal labor law, PLAs aim to establish uniform labor terms, enhance workforce development, and promote diversity. In Oregon, these agreements operate within the framework of robust prevailing wage laws, which set the standards for wages and benefits. These laws play a key role in shaping the cost implications of PLAs in the state.

While proponents highlight PLAs’ potential to streamline project execution, prevent labor disputes, and foster apprenticeship programs, critics argue they may disadvantage nonunion, minority-owned, and local businesses due to procedural and practice barriers. However, Oregon’s inclusivity measures under EO 24-31[i] allow open bidding and nonunion contractors to retain key workforce members, trying to strike a balance between equity goals and contractor accessibility. Monitoring and enforcement mechanisms embedded in the executive order will be essential to evaluating its success in fostering equity, stability, and labor market development.

 Key Findings

• Most states are either neutral or encourage open competition. 
  • 17 states are generally neutral on PLA policy. 
  • 9 states regulate/encourage or require the use of PLAs. 
  • 24 states limit PLAs in favor of open competition. 
• Requiring PLAs for state construction projects will likely increase the cost of projects. The impact may range between 0% and 20%. 
  • Using REMI, a 5% increase in the wage-related portion of construction costs reduces Oregon-wide employment by 17,262 by 2030 and by 14,503 by 2040. 
  •  Using REMI, a 10% increase in construction costs reduces Oregon-wide employment by 33,146 by 2030 and by 27,690 by 2040.  
•  Should PLAs lead to higher construction costs, Oregon may be forced to divert limited funds from education, transportation, and housing or take on more debt. With General Fund and Lottery Fund debt capacity nearing its limit in the 2023-2025 budget cycle, rising costs could reduce the number of projects completed and strain essential public services.
•  Oregon’s labor market is quite different for urban and non-urban areas. Since Oregon is already a state with prevailing wage statute, the increase in costs for PLA projects may be less pronounced in urban areas compared to non-urban areas. 
•  Impact on nonunion and local contractors is unclear. With fewer than 20% of Oregon’s construction workers unionized, hiring hall rules and duplicative benefit costs may limit participation, raising concerns about access for small businesses and locally owned businesses.

Introduction 

In a move that reshapes Oregon’s construction landscape, Governor Tina Kotek recently issued an executive order that mandated the use of Project Labor Agreements on state-funded projects. But what does this mean for the state’s economy, workforce, and contractors? 

What is a Project Labor Agreement? 

A Project Labor Agreement (PLA) is a unique type of pre-hire collective bargaining agreement designed specifically for the construction industry. It establishes terms and conditions of employment for a particular construction project before hiring begins. PLAs are legally grounded in federal labor law under 29 U.S.C. § 158 (f), which permits their use without violating unfair labor practice provisions.[ii]

Core Features of PLAs 

• Universal Terms for Contractors: PLAs bind all contractors and subcontractors on a project to a single agreement, simplifying administration. 
• No-Strikes, No-Lockouts: These clauses prevent labor disputes that could delay project timelines. 
•  Hiring Through Union Halls: PLAs typically require contractors to recruit workers from union hiring halls, providing access to a pool of trained labor.
• Local and Equitable Hiring Goals: Many PLAs incorporate provisions to hire local workers, support small businesses, and include equity plans for underserved communities. 

Oregon’s Executive Order 24-31: Setting the Framework 

Governor Tina Kotek’s Executive Order 24-31, signed in December 2024, mandates the use of PLAs for specific state-funded public improvement projects in Oregon. The order states that “broad adoption of PLAs by the state government will help ensure that our projects are adequately resourced and provide benefits to the communities where they are constructed.” This move follows a similar federal order under Biden administration in February 2022, which mandated the use of PLAs for federal projects over $35 million.[iii]

• Scope and Applicability: PLAs are required for all state-owned construction projects where onsite labor constitutes at least 15% of the total construction costs. This threshold ensures that the mandate focuses on significant projects with a substantial labor component. 
• Equity and Inclusivity: The EO emphasizes workforce equity by prioritizing local hiring and the participation of historically underserved communities. Importantly, it ensures that non-union contractors can bid on projects, provided they comply with PLA terms. 
• Labor Standards: The agreement enforces no-strike and no-lockout clauses and includes mechanisms for dispute resolution to minimize disruptions and maintain project timelines. 
• Skilled Workforce Development: Contractors must meet apprenticeship and training standards to ensure the development of a skilled workforce. This provision aligns with Oregon’s broader goals of supporting Registered Apprenticeship Programs and creating pathways for workers from underserved groups. 
• Project Oversight: The EO establishes accountability measures, requiring agencies to monitor compliance and provide periodic reports on the effectiveness of PLAs in achieving their intended outcomes. 

Potential Repercussions Based on Other States' Experiences: 

One state where Project Labor Agreements have seen increasing use is California. These agreements are implemented across various federal, state, and local public projects, including large-scale initiatives and smaller projects that collectively form larger undertakings. In the 1990s, only 19 PLAs were used for public works projects in California. By comparison, between 2010 and 2016, there were 122 PLAs, many of which governed multiple projects simultaneously.  

PLAs in California have been the subject of significant scrutiny. Key debates focus on their legality, their impact on project costs, and their ability to provide job opportunities for disadvantaged and local workers. Additionally, researchers have analyzed how PLAs influence the preservation and expansion of union presence in the construction industry, as well as their effect on project quality, timelines, and budget adherence.

1.   Cost Implications 

The relationship between Project Labor Agreements (PLAs) and construction costs is one of the most debated aspects of their implementation. Critics argue that PLAs increase costs due to union wage requirements, duplicative benefit contributions, and reduced competition. Under PLAs, nonunion contractors may be required to pay into union health and pension funds while continuing to provide benefits for their own employees, leading to higher overall costs. 

Reports such as Bachman et. al (2019)[iv] claim that PLAs can increase construction costs by 15–20%, though these findings have been challenged for methodological flaws, including failure to control for project size, complexity, and urban location. Similarly, Bachman and Haughton (2007)[v], in their study of 126 school construction projects in Massachusetts (1995–2003), found that PLAs increased costs by 9% to 15% ($12 to $20 per square foot). A case study of Fall River, Massachusetts, revealed that PLA-covered projects exceeded budget expectations, prompting the city to remove the PLA requirement. The resulting rebid projects were 6.4% lower, saving $5.8 million. 

Critics further contend that by discouraging nonunion contractors from bidding, PLAs reduce competition, which can result in higher bids. With fewer bidders, competitive pressures diminish, driving up project costs. Critics also highlight union work rules and labor restrictions in PLAs as potential sources of inefficiency, which could further contribute to cost escalation. 

However, peer-reviewed studies present a more nuanced perspective. Research by Philips and Waitzman (2021),[vi]which analyzed school construction projects in California and Massachusetts, found no statistically significant cost differences between PLA and non-PLA projects when controlling for project size and complexity. Similarly, Belman et al. (2010)[vii] concluded that prevailing wage laws—often tied to PLAs—do not significantly affect construction costs. 

A key factor influencing PLA cost effects is the presence of prevailing wage laws. In states such as Oregon, where prevailing wage laws already standardize wages on public projects, PLAs primarily build on existing wage frameworks rather than introducing substantial new labor costs. Research by Ormiston and Duncan (2019)[viii] found that prevailing wage laws do not significantly increase construction costs for municipal projects like schools and highways, though they may have a modest impact on affordable housing projects. This suggests that in states where prevailing wages set a high baseline, PLAs may not introduce substantial new costs. However, in states without prevailing wage laws, PLAs can increase labor costs more sharply by imposing union pay scales and benefits on nonunion contractors. 

Proponents of PLAs argue that these agreements can enhance cost efficiency by preventing costly delays caused by strikes or lockouts. The inclusion of no-strike clauses and streamlined dispute resolution mechanisms in PLAs helps mitigate risks that could escalate expenses. Additionally, by establishing clear labor management terms, PLAs can contribute to smoother project execution, particularly for large-scale infrastructure projects. 

Oregon’s Executive Order 24-31 emphasizes cost management by mandating PLAs for state-funded projects that meet specific criteria, such as prevailing wage compliance and workforce training initiatives. While these measures aim to balance cost concerns with workforce benefits, their effectiveness will depend on careful implementation and monitoring to prevent inefficiencies. 

Overall, the impact of PLAs on construction costs is highly context-dependent, shaped by local labor policies, market competition, and project characteristics. As Oregon moves forward with its PLA framework, evaluating their cost implications within the state’s unique economic and labor environment will be critical to ensuring successful outcomes. 

2.   Impact on Competition 

PLAs have sparked significant debate regarding their influence on competition within the construction industry. Critics argue that PLAs can discourage nonunion contractors from bidding on projects, primarily due to the additional requirements imposed by these agreements. 

Key concerns include the requirement for nonunion contractors to pay into collectively bargained health and pension programs while maintaining their existing benefit systems, leading to duplicative costs. Furthermore, some nonunion contractors are reluctant to work alongside union labor dispatched through hiring halls[1], a system used to allocate unionized labor to projects. For contractors accustomed to managing their workforce independently, these conditions can be perceived as restrictive and burdensome. 

Despite provisions allowing nonunion contractors to bid, PLAs create structural barriers that disproportionately disadvantage open-shop firms. These firms often struggle with duplicative benefit payments and hiring hall requirements that disrupt their established workforce models. A nonunion worker may be forced to contribute to union benefit funds without receiving any of those benefits, effectively reducing their take-home pay and discouraging participation in PLA-covered projects. 

Some concerns over PLAs center on reduced local contractor participation. Projects may have fewer local bids, raising concerns about the inclusivity of local businesses in PLA-governed projects. While this does not mean PLAs inherently exclude local contractors, it does highlight the need to assess whether such agreements are structured in a way that maximizes opportunities for Oregon-based businesses and workers 

Research highlights these concerns. A survey conducted in Western Washington during the late 1990s found that 61 out of 69 nonunion contractors chose not to bid on PLA-governed projects, citing reliance on union labor and uncompetitive bid conditions as primary deterrents (Lang, 1997).[ix] Similarly, a more recent report analyzing 125 public construction projects in Washington state from 2003 onward found that PLA projects attracted 18.26% fewer bidders on average compared to non-PLA projects (Bachman et al., 2019). This reduction in competition was attributed to the exclusionary nature of PLAs, which critics argue favor union contractors at the expense of open-shop competitors. 

Contrasting these findings, other research suggests that PLAs do not universally suppress competition. An analysis of 263 public community college projects in California between 2007 and 2016 found no significant evidence that PLAs reduced the number of bidders or increased bid prices once project size, timing, and location were controlled (Philips and Waitzman, 2021). These mixed results highlight the complexity of evaluating PLAs' broader impact on competition, which may vary by region, market conditions, and the specific terms of the agreements. 

Oregon’s adoption of PLAs under Executive Order 24-31 will require careful attention to these contrasting findings. Monitoring how PLAs influence contractor participation and bid competitiveness in the state will be critical to understanding their long-term implications for the construction industry. 

3.   Workforce Development and Diversity 

PLAs aim to address workforce development challenges and promote diversity within the construction industry. By requiring provisions for local hiring, apprenticeship programs, and equity goals, PLAs seek to provide career pathways for underrepresented groups while meeting the demand for skilled labor. However, their actual impact remains debated, with studies highlighting both benefits and challenges. 

PLAs often include provisions for local hiring and the engagement of apprentices from registered programs, aiming to invest in the local workforce and support training opportunities for new entrants into the construction industry. Research indicates that joint labor-management apprenticeship programs, frequently associated with PLAs, train approximately 70% of construction apprentices in the United States and have a completion rate of 56%, compared to 46% for employer-only (nonunion) programs.[x]

At the same time, concerns remain about whether PLAs create unintended barriers for small and minority-owned contractors. Many of these businesses operate as nonunion firms, and PLA requirements—such as hiring through union halls—may limit their ability to use their established workforce. Additionally, nonunion contractors are often required to pay into union benefit programs while maintaining their own employee benefits, increasing costs and potentially discouraging participation in PLA-covered projects 

Oregon’s Executive Order 24-31 tries to address these concerns by emphasizing inclusivity. The order allows nonunion contractors to bid on PLA-governed projects as long as they comply with the agreement’s terms. While contractors may retain key workforce members, they must also adhere to apprenticeship and equity goals outlined in the PLA. These measures attempt to balance workforce development and diversity objectives with equitable access for small and minority-owned businesses, though their effectiveness in maintaining broad contractor participation remains to be seen.

4.   Legal and Policy Considerations 

Legal Framework of PLAs 

Federal Labor Law Authorization: PLAs are legal under Section 8(f) of the National Labor Relations Act (NLRA), which allows pre-hire agreements in the construction industry. This legal foundation enables employers and unions to establish project-specific labor agreements without violating unfair labor practice rules. (Ormiston and Duncan, 2019) 

Compatibility with Prevailing Wage Laws: PLAs often work in tandem with prevailing wage laws, as in Oregon. Prevailing wage laws ensure that public project workers are compensated at fair, standardized rates, which aligns with the wage protections typically embedded in PLAs. In states like Oregon, where prevailing wage laws are already robust, PLAs enhance workforce protections rather than adding substantial new regulatory burdens (Belman & Philips, 2010). 

Policy Implications 

Federal and State Level Support: Recent federal initiatives, such as tⁱⁱhe Biden Administration’s 2022 Executive Order mandating PLAs for federal projects over $35 million, underscore the growing policy emphasis on using PLAs to ensure labor stability and workforce equity (Ormiston, and Duncan, 2019). Oregon’s Executive Order 24-31 mirrors this approach by mandating PLAs for state-funded construction projects.

Legal Challenges and Litigation Risks: While PLAs are federally authorized, their implementation has faced legal scrutiny in various states. In right-to-work states, where laws prohibit mandatory union membership, critics argue that PLAs may indirectly pressure non-union contractors to adopt union practices, limiting fair competition. Although Oregon is not a right-to-work state, similar concerns have fuelled legal challenges against its PLA mandate. 

In January 2024, the Associated General Contractors of Oregon-Columbia Chapter sued the Oregon Department of Transportation (ODOT) over its use of PLAs on eight pilot projects. The lawsuit claimed that PLAs restricted competition and could exclude a significant portion of Oregon’s road contractors from bidding. 

In response, Marion County Circuit Court Judge Jennifer Gardiner issued a preliminary injunction, ruling that prioritizing union labor over open-shop contractors was "prejudicial" and could exclude up to 70% of contractors from state projects. The case escalated to the Oregon Supreme Court, and while awaiting a final ruling, Governor Tina Kotek issued Executive Order 24-31 in December 2024, reinforcing the state’s commitment to using PLAs despite ongoing legal disputes. 

Monitoring and Compliance 

The effectiveness of PLAs depends on strong oversight and enforcement mechanisms. Oregon’s EO 24-31 includes provisions for reporting and compliance tracking, which aim to ensure that the agreements achieve their intended workforce and equity goals while balancing contractor participation. 

6.   Summing Up the Evidence on Project Labor Agreements 

Meta-analysis 

Given the conflicting evidence on the impact of PLAs, we looked to synthetize the quantitative data from the multiple independent studies. Four research questions are synthesized: 

First, what type of an effect do PLAs have on project costs generally? 

The impact of PLAS on construction costs remains a contested issue, with mixed findings across multiple studies. Some research suggests that PLAs increase costs, largely due to reduced bid competition and union labor mandates, while others find no statistically significant cost difference when controlling for factors like prevailing wage laws and project complexity.

One of the primary concerns raised in studies that identify cost increases is the impact of restricted bid competition. Research analyzing PLA-mandated public projects in Massachusetts and Washington State finds that PLAs can reduce the number of bidders by as much as 18%, potentially driving up costs due to a less competitive bidding environment. In some cases, such as Fall River, Massachusetts, project costs declined after PLAs were removed from bid requirements, supporting the argument that open competition lowers costs. Additionally, critics point to union benefit mandates under PLAs as another potential cost driver, as non-union contractors must contribute to union pension and healthcare funds while maintaining their own employee benefits. 

However, other research suggests that PLAs do not inherently raise construction costs. Studies focusing on California and Massachusetts school projects have found that PLAs do not result in statistically significant cost differences when controlling for project complexity and location. This aligns with findings that prevailing wage laws—often associated with PLA-covered projects—do not significantly impact overall costs. In states where prevailing wage laws already standardize labor costs, the incremental cost effect of PLAs appears to be minimal. This is particularly relevant to Oregon, where prevailing wage laws are already in place for public projects, ensuring that labor costs remain consistent regardless of a PLA requirement. 

Ultimately, the cost impact of PLAs appears to be highly context-dependent, influenced by: 

•  The presence of prevailing wage laws. In states like Oregon, where prevailing wage laws already regulate public project wages, PLAs may not create significant additional labor costs. In states without such laws, PLAs can introduce union wage structures that contractors would not otherwise follow, increasing total project expenses. 
• The level of bid competition. When fewer contractors are willing to bid on PLA-covered projects, a less competitive environment can drive up construction costs. 
•  Project type and location. Certain types of projects or high-cost urban areas may see different PLA cost effects, a topic explored in later sections. 

 Second, what type of an effect do PLAs have on timely project completion?  

The relationship between PLAs and timely project completion is another widely debated issue in the literature. While some research suggests that PLAs reduce delays and increase efficiency, others argue that restrictive labor conditions may lead to inefficiencies. The evidence remains mixed, with some studies showing shorter completion times under PLAs and others indicating no significant difference compared to non-PLA projects. 

Several studies highlight the role of PLAs in preventing work stoppages by prohibiting strikes and lockouts, which can lead to more predictable project timelines. Ivanoff and Diekmann (1989)[xi] emphasize that PLAs were historically implemented to ensure uninterrupted labor supply on large, complex projects such as dams, power plants, and major infrastructure developments. Similarly, Philips and Waitzman (2021) found that PLA-covered projects did not experience greater delays than non-PLA projects, largely due to better workforce coordination and reduced labor disputes. 

Conversely, Bachman et al. (2019)[xii] found that Washington State’s PLA projects did not consistently outperform non-PLA projects in terms of completion time, suggesting that factors such as project complexity, contractor experience, and management practices may play a larger role. 

A study of California’s community college projects (2007–2016) found that PLA projects and non-PLA projects had similar completion rates, though PLA-covered projects trained more apprentices and engaged more local workers, which may influence long-term workforce sustainability.  

Ultimately, the impact of PLAs on timely completion appears to depend on: 

•  The complexity of the project. Larger, more complex projects benefit more from PLA’s structured labor-management coordination.  
•  The strength of the preexisting labor agreement. In states with strong union presence and prevailing wage laws, PLAs may not significantly alter project timelines. 

Third, are there certain types of projects where PLAs have a material impact on completion/costs? 

The impact of PLAs on construction costs and completion times depends on the type of project. While school construction has been the most studied sector, large-scale infrastructure projects and affordable housing developments have also been examined. The literature suggests that the complexity, scale and labor requirements of a project can influence how PLAs affect costs and completion. 

School Construction Projects 

School construction has been the most analyzed category in PLA research, likely because of the large number of comparable public-school projects available for study. 

•  Studies examining PLA use in school construction generally find mixed results. Some studies report higher costs due to restricted competition and labor mandates, while others show no statistically significant impact after controlling for factors such as project location and complexity 
• A New Jersey Department of Labor and Workforce Development (2010)[xiii] report found that school construction projects completed under a PLA were 30.5% more expensive than non-PLA projects. 
•  On the other hand, Philips and Waitzman (2021) analysed California’s community college projects and found that PLAs did not significantly impact construction costs when prevailing wage laws were already in place. 

Large Scale Infrastructure Projects 

The impact of PLAs on major infrastructure projects like highways, bridges, and power plants is less studied but has been debated in policy discussions. 

•  Some analysts argue that PLAs are more beneficial in large-scale infrastructure projects where maintaining a stable workforce and avoiding work stoppages is crucial. 
•  Ormiston, and Duncan (2019) found that state prevailing wage laws—which often reflect union wage structures required in PLAs—had no significant impact on the cost of highway construction projects. 
•  However, a case study of Washington State’s public projects found that PLAs reduced the number of bidders, which can contribute to higher infrastructure costs. (Bachman et al., 2019). 

Affordable Housing Projects 

There is limited research on the effects of PLAs in affordable housing, but a few studies suggest that PLAs may increase costs in this sector. A study by RAND Corporation (2021) on Los Angeles affordable housing projects under Proposition HHH found that PLAs increased construction costs by 14.5%. The study attributed this increase to higher labor costs and union work rules, which reduced the flexibility of some developers.  

Although research findings vary, the type of project plays a key role in how PLAs affect costs and completion. 

•  School construction is the most studied sector, with mixed findings—some studies report higher costs due to PLAs, while others find no significant difference when controlling for prevailing wage laws. 
• Large-scale infrastructure projects may benefit more from PLAs’ workforce stability provisions, though some studies indicate potential cost increases due to reduced bid competition. 
• Affordable housing projects show some evidence of cost increases under PLAs, but further research is needed to confirm these effects. 

Fourth, does the potential impact of PLAs differ by geographic region? 

The effectiveness and cost implications of PLAs vary significantly across geographic regions, influenced by local labor markets, state policies, and the urban-rural divide. Research suggests that PLA impacts tend to be more pronounced in urban areas, where construction projects are larger, and labor conditions differ from rural settings. 

Urban vs. Rural Difference 

•  Studies indicate that PLA projects are disproportionately located in urban areas, where construction tends to be larger, more complex, and already subject to unionized labor conditions. 
• Belman et al. (2010) found that when controlling for project location, complexity, and size, the cost effect of PLAs was not statistically significant, suggesting that geographic factors play a major role in cost estimates. 

State Level Differences in PLA Effectiveness 

•  Washington State’s PLA projects were found to reduce bidder competition by 18.26%, which led to higher costs. (Bachman et al., 2019) 
•  In contrast, California’s community college projects under PLAs showed no significant cost differences when prevailing wage laws were already in place. (Ormiston and Duncan, 2019) 

The Role of State Policies 

• States that encourage PLAs, such as California, New York, and Illinois, tend to have stronger union representation and prevailing wage laws, which can mitigate potential cost increases above the already higher construction costs. 
• States that restrict or prohibit PLAs, such as Texas, Florida, and Tennessee, tend to have weaker union presence and lower prevailing wage requirements, which may result in PLAs leading to greater cost differences. 

Although PLA effects are shaped by multiple factors, geographic location plays a key role, with urban projects showing different cost dynamics than rural ones and state labor policies influencing the overall economic impact of PLAs. 

7.   Prominent Projects That Used PLAs 

Project Labor Agreements have been used across some well-known projects. Some of these include:  

• Walt Disney World: The Walt Disney World Resort PLA, effective from 2010 to 2013, facilitated construction projects across the resort in Orange, Osceola, and Polk Counties, Florida, ensuring workforce stability, standardized wages, and streamlined dispute resolution to maintain efficient and uninterrupted operations.[xiv]
• Hoover Dam: One of the largest infrastructure projects of its time, the Hoover Dam’s construction relied on a PLA to coordinate labor, ensuring workforce stability and meeting its demanding timeline. The project was successfully completed in 1936, ahead of schedule.[xv]
• Shasta Dam: Located in California, Shasta Dam's construction utilized a PLA to manage labor relations effectively, contributing to its successful completion in 1945.[xvi]
• Cape Canaveral: Cape Canaveral has been the site of several significant construction projects that utilized PLAs, including the most recent P103 project—a 132,000-square-foot Engineering Test Facility at the Naval Ordnance Test Unit, designed to support prototyping, development, testing, and evaluation of advanced missile systems.[xvii]

8.   Where are PLAs Prevalent? 

The use of PLAsis most concentrated in states with strong union presence, prevailing wage laws, and legislative or executive support. PLAs are particularly prevalent in public sector infrastructure projects, where labor agreements are seen as a mechanism for ensuring wage stability and workforce reliability (Belman et al., 2010). 

PLAs are most prevalent in states such as California, New York, Washington, and Illinois, where legislative measures actively encourage their use (Bachman et al. 2019). Research indicates that PLAs are frequently used in major public infrastructure, transportation, and school construction projects, with examples from California’s community college system and Massachusetts’ public school construction programs (Philips and Waitzman, 2021). In states with ambitious renewable energy targets, such as New York and Illinois, PLAs have also been applied to offshore wind, solar, and clean energy projects (Ormiston and Duncan, 2019).  

By contrast, PLAs are far less common in Southern and Midwestern states, where right-to-work laws and state-level restrictions on government-mandated PLAs encourage open competition. Texas, Florida, Georgia, and Tennessee are among the states that prohibit PLAs on public construction projects (Bachman et al., 2019). In these regions, private-sector PLAs remain rare, though some large-scale industrial and energy projects still utilize voluntary PLAs where labor stability is a priority (Ormiston and Duncan, 2019). 

Overall, nine states encourage or require the use of PLAs, 24 states encourage open competition, and 17 states are generally neutral. [2]

Figure 1 

9.   Summarizing the Impact of PLAs Based on Studies to Date 

Given the disparate research on PLAs[3], we conducted a limited in scope summary on the limited publicly disclosed information. We reviewed the results of seven studies looking at the impact of PLAs on total cost, log of total cost, or cost per square feet and attempted to perform a formal meta-analysis. We found that the studies generally confirm that PLAs are correlated with higher project costs. Please note that the studies reported different types of information and made consistent meta-analysis unreliable. Given the general findings of most papers, further research may change the magnitude of the result, but it is unlikely to change the conclusion that PLAs are generally associated with higher costs.

PLA Impact (Difference = Cost with PLA - Cost w/o PLA)
Comparison Measure	Minimum Difference	Average Difference	Maximum of Difference
log of Total Cost	-0.015	0.069	0.206
Per Square Foot	6	59	121
Total Cost	-42,840	2,232,476	9,638,659

Table 1

10. The Economic Impact Should Construction Costs Rise 5% and 10%, Respectively 

On net, imposing the use of PLAs for state construction projects will likely increase project costs. To estimate the impact on the Oregon economy, we applied a 5% and 10% wage increase for the construction sector using Regional Economic Models Incorporated’s economic multiplier system. 

•  For the 5% increase in construction-related wages, the economic impact results in 9,930 fewer jobs in the state by 2030 and 7,888 fewer jobs by 2040 (Figure 2). 

Figure 2

•  For the 10% increase in construction-related wages, the economic impact results in 19,434 fewer jobs in the state by 2030 and 15,381 fewer jobs by 2040 (Figure 3). 

Figure 3

11.  Requiring Projects to be Aligned with Project Labor Agreements May Decrease Funding Available for Schools and Healthcare in the Coming Years 

When construction wages rise by around 5-10%, state funded projects costs increase, often forcing budget adjustments. In some cases, governors have explicitly acknowledged these impacts. For example, California’s Governor Gavin Newsom vetoed[xviii] a 2023 bill mandating PLAs on certain projects, warning that new PLA requirements could impose unbudgeted cost pressures and divert funds from essential services. This indicates that a moderate rise in labor costs can prompt state leaders to either allocate additional funds or risk cutting other programs. A historical case is the Boston “Big Dig”, where massive cost overruns – partly due to higher labor and materials costs – left “a gaping financial hole in the state’s transportation budget” for years.[xix]Massachusetts had to absorb those overruns through heavy borrowing and by shifting future transportation funds to debt repayment, illustrating how higher construction costs directly led to long-term budget allocations. In other scenarios, instead of increasing overall budgets, states simply get less infrastructure for the same money. Los Angeles’s Proposition HHH affordable housing program provides a cautionary example: a PLA requirement raised construction costs by about 14.5%, costing an extra $141 million and resulting in 800 fewer housing units built with the given budget. In summary, documented cases show that when construction wages (and thus project costs) jump, states have either injected more funding (to keep projects on track) or implicitly “shifted” the budget by delivering fewer projects for the same expenditure.[xx]

Changes in Infrastructure Spending Share Amid Rising Labor Costs

Historically, infrastructure spending as a share of state budgets has tended to decline when construction costs rise and other priorities demand funds. Over the past several decades, the portion of state and local expenditures devoted to infrastructure (capital projects like highways, bridges, public buildings) has dropped significantly – from about 9% of spending in the late 1970s to roughly 6% by 2021.[xxi] A major factor was the high inflation of the 1970s and early 1980s, when soaring labor and material costs squeezed capital budgets. Indeed, state and local capital investment fell sharply as a share of budgets during that period,[xxii] as governments struggled to keep up with rising costs while maintaining other services. The pattern has often been that when construction prices climb faster than revenues, states don’t proportionally increase infrastructure funding, causing infrastructure’s share of the budget to stagnate or shrink. Instead, resources shift to pressing operating needs (like education, healthcare, pensions) that are politically harder to cut. This meant many states simply deferred or scaled back projects, effectively reducing infrastructure investment relative to the total budget. Only recently, with large federal infusions (e.g. the 2021 Bipartisan Infrastructure Law), has the trend reversed slightly – state/local capital spending share jumped by about 1.6 percentage points in 2021–2022, the biggest rise since 1979.[xxiii] Overall, higher construction labor costs in past decades often corresponded with slower growth (or decline) in infrastructure spending share, as states either could not afford the same volume of projects or chose to prioritize other budget areas.

Which Budget Sectors Absorb Higher Construction Costs?

When state-sponsored construction projects grow more expensive (due to wage increases or other factors), the impact is usually felt within the capital project sector itself, though indirect effects can ripple through other areas. In practice, the specific agency or sector running the project typically absorbs the cost increase by adjusting its own plans. For instance, a transportation department like Oregon Department of Transportation (ODOT) facing higher highway construction bids might delay or cancel lower-priority road projects, trim project scopes, or dip into its reserve funds rather than immediately pulling money from unrelated programs. ODOT’s recent experience highlights this: Oregon’s DOT warned that its highway program was financially strained even before new PLA wage mandates, and that requiring PLAs would make already unaffordable projects “10% to 20% more expensive”.[xxiv] With limited revenues, ODOT indicated it would have to consider severe measures (even layoffs and service reductions) to balance costs[xxv] – essentially, the transportation sector absorbing the pain through internal cuts and fewer projects. 

That said, if the cost surge is large and a project is a high priority, states may inject general funds or emergency appropriations to cover the gap. In those cases, other sectors indirectly bear the burden because money is finite. High-cost infrastructure can crowd out funding that might have gone to schools, healthcare, or housing programs. Governor Newsom’s veto message underscored this trade-off: he noted that enacting a costly mandate not planned in the budget could force “deep program cuts” to vital services like education, health care, and public safety in order to keep the budget balanced.[xxvi] Similarly, in the context of affordable housing, higher construction wages mean housing agencies can build fewer units with given funds – effectively the housing sector absorbs the hit in the form of reduced output. Portland, Oregon provides a concrete example: the city exemptssome affordable housing projects from state prevailing wage rules specifically because paying the higher wages would shrink the number of units that limited budgets can produce.[xxvii]In 2018, one nonprofit developer nearly had to abandon 189 affordable apartments until an exemption was found, illustrating that without relief the housing sector would have absorbed the cost by sacrificing those units.[xxviii]

In summary, cost increases are usually managed within the sector of the project (transportation, housing, education construction, etc.) – by scaling back projects or seeking more funding – rather than, say, directly cutting a healthcare program. However, if a state chooses to cover a construction overrun with general revenues, then effectively some other budget priority (education, healthcare, etc.) loses out on those funds. Oregon’s General Fund and Lottery Funds supported debt capacity is already nearing its limit. As of the 2024 session, the state had $65.8 million in General Fund debt capacity left and $27.4 million in Lottery Funds debt capacity for the remainder of the 2023-25 biennium. If PLA requirements increase construction costs, it could further strain the state's ability to fund necessary projects.[xxix] This dynamic is why policymakers weigh construction wage mandates carefully, since the ultimate cost may be fewer public works delivered or reduced resources for other services.

Conclusion 

The implementation of Project Labor Agreements under Executive Order 24-31 introduces a structured framework for labor agreements on state-funded projects. While these agreements establish uniform employment terms and include workforce development goals, their broader implications depend on factors such as industry dynamics, contractor participation, and cost management.

Research suggest that PLAs may influence both project costs and contractor competition. While some studies highlight potential benefits, such as clearer labor terms and workforce development opportunities, others raise concerns about cost increases and the impact on nonunion and small contractors. The mixed evidence underscores the complexity of assessing PLAs’ effects, as outcomes vary based on existing labor laws, market conditions, and project characteristics.

Oregon’s fiscal constraints add another layer to the discussion. With General Fund and Lottery Fund debt capacity already limited, the potential for increased project costs may contribute to difficult funding decisions. If construction costs rise, Oregon may have to prioritize projects, adjust spending allocations, or reconsider how resources are distributed across sectors.

Ultimately, the impact of PLAs in Oregon will depend on their implementation and the state’s ability to navigate workforce needs, cost pressures, and long-term infrastructure planning. Continuous evaluation, transparent reporting, and adaptability will be crucial in assessing whether PLAs meet their intended objectives without introducing unintended constraints on the state’s budget and construction industry.

 

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