How Open Shops Motivate Competition and Drive Value in the Construction Industry

How Open Shops Motivate Competition and Drive Value in the Construction Industry

Estimation, NEWS /

During the past century, unions have been associated with maintaining industry standards and protecting employee rights. Trends in recent years, however, suggest open shop policies may be better at fostering an inclusive and competitive environment where contractors can implement multiskilling and other streamlining tactics.

An open shop construction policy, also known as a merit shop, is a workplace that allows incoming recruits and existing employees to elect whether to join a union, rather than making it a requirement for employment, as with a closed shop.

According to the Federal Bureau of Labor Statistics, in 2015 about 14 percent of employees in the construction industry nationwide were either members of a union or workers with no union affiliation but whose jobs were covered by a union or employee association contract.

The Pros and Cons of Open Shop Construction

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The open shop concept protects an employee’s right to choose between participating in a union, or withholding from a union. The purpose of unions, on the other hand, seeks to protect the rights and interests of workers. By organizing and advocating for workers, unions are quick to claim that open shops fail to protect the rights of those working in construction.

However, the Merit Construction Alliance, an organization dedicated to open shop construction, claims open shop companies not only offer employees year-round employment, but also health insurance and other fringe benefits.

With close shop firms, unions control the supply of labor, which bolsters their ability to maintain the best industry standards and establish collective bargaining relationships with employers. When companies have the option to hire non-affiliated labor in addition to union members, they no longer have the same incentive to negotiate with unions on working conditions, wages and other issues.

How Open-Shop Policies Affect Prices

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Several sources suggest open-shop policies affect the cost estimation of a project in a manner that benefits clients. For instance, the Merit Construction Alliance claims open-shop companies can “deploy manpower more efficiently,” because they are not restrained by “the burdensome staffing requirements of union construction.” Certain terms and conditions found in contracts with unionized construction firms, such as “show up pay,” increase the cost of construction projects, according to the alliance. Public entities may pay about 14 to 20 percent more, and private entities 30 to 35 percent more when working with union contractors.

The Association of Builders and Contractors state:

Studies commissioned by union contractor groups and independent research firms confirm that the cost advantages gained by merit shop contractors over union firms are achieved through the efficient management of operational costs and an innovative labor-management technique employed regularly by merit shop contractors called multiskilling.

In contrast, unionized firms may be burdened with inflexible job classifications that restrict how employees handle specific job tasks, hurting overall productivity.

Contrary to popular belief, not all open-shop companies are small or incapable of handling large projects. Open-shop companies can vary in size and handle a host of projects, according to the Merit Construction Alliance.

At South Bay Construction, we have extensive design-build experience, and have completed more than 9,200 projects to date. According to our business philosophy, the choice to work with unions is made when it is right for the job, not when it is right for the unions. Because South Bay Construction withdrew from the Carpenter’s Union about nine years ago, we have the flexibility to work with open-shop subcontractors or unions, which helps us remain competitive on price.

Estimating Cost

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No matter which type of contractor a person or group prefers, market information is important to make the right decision in any construction build. That is why we at South Bay Construction have developed the Cost Reference Guide, to provide construction professionals and prospective clients with market data and up-to-date construction pricing that reflects the current market conditions in the Bay Area.

In addition to a print edition, the guides are available through downloadable iPhone and Android applications. These applications provide useful, real-time data industry professionals need to make informed decisions.

 

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Estimation, NEWS