Seems logical. New projects on the horizon. Unemployment rates rising in the community. Veterans returning from the battlefield. A major push for additional roles for women in the workforce. City Council, Mayor and City Manager trying to solve the problem of falling tax revenues and rising crime rates.
One of the council members in a scratch-your-head work session says, “I know, let’s start a local hire program that requires the contractors on our projects to hire local.” “Sounds catchy,” the mayor says. “It would find jobs for our constituents and help us get votes for re-election next year.”
The ordinance is drafted. The wording is interesting. It states that, “For every new publicly funded construction project with a budget of over $250,000, 25% of the construction workforce must be hired from our city.” Or SMSA or surrounding 5 counties or something to that effect. The council votes almost unanimously to adopt, but there is one council member who votes a resounding “No.”
“Not to worry,” says the Mayor, “He votes no on almost everything.” The City Manager is given the task of implementing the ordinance in addition to the other ordinances that require 25% of the work be awarded to HUBs or MWBEs. Seems logical. The local paper applauds the move by saying that it will provide jobs for “locals and the underserved” who need the jobs.
The problem emerges when the first project “hits the streets” for bids. In a pre-bid conference, the potential bidders are told about the new ordinance. A couple of the contractors ask questions, but, as in most cases, it is too late to make a difference. “The ordinance is in place and we will have to live with it,” echoes around the room. Contractors start calling their subs and specialty contractors to get budget numbers. What they probably find is what attorney Andrew Richards, Chair of the Construction Practice Group at Kaufman Dolowich & Voluck, says, “There are not enough workers. It's just that simple.”
Suddenly, an ordinance that, as Kim Slowey in her post How Contractors Can Navigate Local Hiring Requirements in the series The Dotted Line on Construction Dive says, is socially responsible, can make projects more difficult, stretches out the project schedule, increases construction costs, but might be either unlawful or unconstitutional.
The object of the article that Slowey writes is to point out ways that builders can deal with the “Hire Local” ordinances when they show up in the requirements on a new job.
These ordinances, well-meaning but not well-informed, are being pushed in cities across the country as well as at the national level. The Obama Administration instituted a pilot program under the Department of Transportation that would lead to the inclusion of the requirement in all DOT funded projects. The Trump Administration has since ended consideration of that requirement.
Additionally, according to the article, the Tennessee General Assembly passed a bill making it unlawful for such requirements to be added claiming that it stymied competitive bidding. Ohio also passed a similar law.
Our point here is that a law, intended to help the underserved and low-income residents of a particular geographic location, can have the opposite unintended effect of squeezing the contracting community, costing the taxpayer more money, and in the end, not serving the folks that the politicians had originally intended to help.
Slowey’s article recommends that if you run into these requirements on a job that you, at a minimum, build into your bid the contingency amounts to cover these “unintended consequences” of "Hire Local."