Meanwhile, the fruits of the first round of PLAs reached earlier this year were evident in the topping-out of Forest City Ratner Cos.' 76-story Beekman Tower. One of a dozen stalled development projects that got back on track after the May 29 Economic Recovery Project Labor Agreement between the Building and Construction Trades Council and the Building Trades Employers' Association, the 867-foot Downtown tower became Manhattan's tallest residential building at a Nov. 19 topping-out ceremony.
Bruce Ratner, chairman and CEO of FCRC, who reportedly threatened to cap the tower at 40 stories when costs became an issue, said in May that "after a thorough review, Forest City's decision to complete the Beekman project as it was designed by Frank Gehry is the result of achieving our economic goals." Lou Coletti, president and CEO of the BTEA, said in a statement earlier this month that he was "extremely happy that the PLA was able to play a role in the decision to complete this project."
Coletti was also on hand for the Bloomberg administration's Nov. 24 announcement of the PLAs covering four public projects, saying the agreements will provide "a major boost to New York City's economy, providing new business opportunities for contractors, generating badly needed jobs and tax revenue, and resulting in new and rehabilitated public buildings and infrastructure throughout the city." The PLAs are designed to save the city a total of $299 million in construction costs.
One of the PLAs covers roughly $942 million in projects for the general renovation and rehabilitation of existing city-owned buildings and structures; the city expects to save 10.5% of total project costs, or $99 million. Two additional PLAs covering $1.9 billion for 11 large-scale new construction projects, including a new police academy to replace the existing, undersized facility that dates from the 1960s, are expected to save the city another $99 million, or 5% of the total costs on these projects. The fourth agreement, between the School Construction Authority and the BCTC, covers up to $2.5 billion of work for renovating and rehabilitating schools and is expected to save 4% of total project costs, or $100 million.
According to a release from the Bloomberg administration, the PLAs generate cost savings via an exemption from Wicks Law procurement requirements and a package of negotiated work rule changes that allow individual trades to work more efficiently together on job sites. The Wicks Law normally mandates that in addition to the bidding out the construction contract, separate bidding must take place on wiring, plumbing and HVAC for any public projects worth more than $3 million. That means the city must often award as many as four contracts on a project, thereby increasing costs.
The PLAs contain many of the same work rule changes that figured in the private-sector agreements hammered out last May. They include: no strikes or work stoppages; a standard eight-hour workday and 40-hour work week; overtime at time-and-a-half; eight common holidays; flexible starting times and lunch breaks; and maximum utilization of apprentices at training wages. Additionally, the PLAs with the city spell out contractor rights with respect to directing work at job sites, including determining the number and qualifications of employees and selection of materials, techniques and methods.
Job sites worth $3.9 billion popped up around the city during the third quarter, according to an analysis by the Building Congress. That's comparable to the $4.1 billion in new construction starts seen during the second quarter, although well below the $5.3 billion in new starts recorded for Q3 2008.
Richard T. Anderson, president of the Building Congress, comments in the report that starts remain "significantly below" the standard set last year, which registered an all-time high of $33.8 billion in construction spending. "Judging from these numbers, as well as the overall trends in New York City employment, one must assume that it will be a while before construction activity returns to the levels experienced at the height of the building boom."
However, Anderson notes that "it is encouraging to see further evidence that construction activity in general has stabilized considerably after an abysmal start to the year. The key moving forward will be the ability of government to continue spending on public infrastructure and the continued easing of credit markets to allow for the resumption of private sector development."
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
