PDC Crafts Prevailing Wage Rules

From now until Jan. 10, staff members at the Portland Development Commission will be crafting a new prevailing wage policy – a policy that some African American construction company owners say could hurt their business.
The formation of the prevailing wage policy comes on the heels of nearly 20 hours of debate and four public work sessions from contractors, union and nonunion organizations, PDC commissioners and others affected by an issue that has been plaguing the commission for years. The policy will establish when Oregon's prevailing wage laws – the laws governing how much construction workers are paid on public projects — apply on projects receiving PDC assistance.
The commission is also addressing the concern over the amount of minority business participation in the South Waterfront Development, calling on Hoffman Construction Company to increase the number of minority-owned businesses in the construction project. Currently, only about 1 percent of the subcontracting businesses working on the South Waterfront are minority-owned.
And according to the PDC's own Annual Diversity in Contracting and Workforce Training report, which was recently released, the PDC is barely meeting its overall minority participation goals in commission-related projects.
Some in the minority construction business say more stringent prevailing wage rules on public/private projects could prevent them from participating in PDC-funded projects. Established in 1959, the prevailing wage law is designed to level the playing field for construction companies on public projects by setting pay rates for workers.
The issue is the focus of a legal dispute between the Bureau of Labor and Industries and the PDC over how current prevailing wage rules apply on private projects that receive PDC funding. Labor Commissioner Dan Gardner said the new policy being developed by PDC will have no effect on the lawsuit, which centers on a project receiving a low-interest loan from the PDC. The labor bureau is appealing the case; a lower court ruled in the PDC's favor.
John Jackley, operations division manager for PDC, said the commission – which has been receiving public testimony on wage issues since August – does not want a wage policy that would mean less minority participation. Jackley said most of those testifying urged the commission not to extend higher wage rules without ensuring that the barriers that prevent minority- and women-owned business from participating in those projects are removed. For example, some minority- and women-owned companies have a harder time getting low-cost insurance and bonds because their businesses are too small.
"(The PDC was told) not to trade hard money for soft promises," he said, referring to public testimony about minority business inclusion.
The diversity report indicated that the agency barely missed its goal to include minority-and women-owned and emerging small business in one fifth of total projects. However, numbers furnished by the PDC show an improvement in minority participation; about 24 percent of total workforce hours were worked by minority or female workers. Of the $13 million awarded to certified construction firms, African American-owned businesses received the most, at $3.6 million.
Wyman Winston, former PDC employee and consultant to the National Association of Minority Contractors, said he doesn't hold out much hope that the new rules will benefit minority contractors. He would like to see the issue of prevailing wages tied to a plan to hire and recruit minority and female employees and businesses similar to the original South Waterfront Agreement, where the PDC, South Waterfront investors and unions agreed to a diversity goal of 20 percent minority and 15 percent female participation by 2014.
To help provide access to these contractors, the commission has hired the minority-owned firm, FM Burch & Associates, to create a comprehensive list of eligible subcontractors that includes their specific trade, capacity and ownership. Currently, a list of minority- and women-owned and emerging small-business contractors exists, but it provides little information about the individual companies. The firm will also help subcontractors and newly formed businesses deal with the more technical aspects of working with the PDC, including paperwork and other requirements.
Faye Burch, owner of FM Burch & Associates, said if minority- and women-owned firms are not included in PDC construction contracts, many will have a difficult time building experience and contacts.
"That's how you build capacity in firms," she said.
One minority construction company owner is concerned that the new policies could turn out to be nothing more than racial window dressing. James Posey said he and the African American Alliance – a broad-based organization that addresses issues facing the Black community — presented the commission with a list of requirements that needs to be met before a prevailing wage policy can be put into place.
Posey said the commission should tie any prevailing wage policy to a requirement to include minority firms in projects. He worries that requirements to pay higher wages could deter many minority-owned, as well as other small construction companies, from ever bidding on PDC-financed projects.
"If someone told me to have a payroll of $5,000 a week, it would devastate me," he said.
Some of the alliance's requests included replicating parts of the South Waterfront Diversity Agreement; ending de facto segregation in the White unions and ensuring a transparent desegregation of those unions; and placing a delay on enacting prevailing wage rules for two years until the Columbia Pacific Building Trades Council achieves increased minority enrollment numbers.
Labor Commissioner Gardner said he believes prevailing wage rules should apply to all publicly funded projects, although he acknowledged that excluding some PDC-funded projects could help minority-owned businesses. The problem, said Gardner, is that not requiring the prevailing wage on public/private projects would hurt the individual workers employed by minority- and women-owned companies. And largely those workers are also minorities.
Although some people argue that prevailing wage rules discriminate against minority contractors, Gardner said he hasn't heard any arguments that hold water.
"If anybody shows me anything discriminatory about prevailing wage rules, I'd be the first one to (challenge the rules at the state Legislature)," he said.
The problem, he added, is that many minority- or women-owned businesses are small businesses and can have a hard time borrowing money and keeping workers' compensation rates low — all factors that can affect successful bids on public projects.
To help combat this, the labor commissioner has suggested that PDC provide economic assistance for firms with bond or insurance rates that could affect their ability to bid successfully for PDC-sponsored projects.
But Winston said one of the most important aspects of guaranteeing minority participation is union inclusion. He said setting up provisional membership into unions would be the fastest way of guaranteeing that minorities not only have a job for today, but would also help train tomorrow's minority work force.
Apprenticeship training for high school graduates would also help forge a future for students unable or unlikely to go on to college, he said.