Labor relation issues are varied among PPP types. In a brown-field concession, labor issues are related to displacement of existing employees, ranging from engineers to administrative staff to road maintenance workers and others, including toll operators. Displaced (or potentially displaced) workers will have broad employment concerns including the continuation of employment, wages, health insurance, pensions and other benefits, working conditions, and, where applicable, union representation. In a greenfield project these issues are related more to the private sector meeting prevailing wage requirements. PPPs have created significant labor issues in Canada, the United Kingdom, and other European countries, even though it could be argued that the PPP enabled more projects to be built, thereby increasing employment, especially in the construction industry. In the United States, construction unions in Indiana demanded that the Indiana Toll Road's new operator, ITR Concession Company (ITRCC), provide them 95% of the construction work on the facility. However, ITRCC's concession agreement does not require it to follow public notification and bidding rules.
On the other hand, the concession agreement for the Chicago Skyway, also owned by Cintra and Macquarie (owners of ITRCC), requires all contracts to contain prevailing wage language. All contractors are required to submit certified pay vouchers corresponding to a particular job. Thus, the concessionaire can ensure its contractors are following predetermined wages as set by the Illinois Department of Labor ("Unions Want Indiana Toll Road Jobs" 2007). Nonetheless, even with these protections, local and smaller engineering and design firms may be excluded from benefiting from the work generated by a large PPP project, because large engineering firms can have the design work done in other offices throughout the country, without tapping local resources (KCI Technologies 2005).
Also at issue are the potential for less favorable terms of employment in the private sector and the immediate reduction in headcount for those employees who operate the facilities. To resolve these issues, labor protections have been incorporated into some PPP agreements. Several countries have legislation that specifically addresses the transfer of public sector workers to the private sector with some or all of their benefits (Subcommittee on Highways and Transit, House Transportation and Infrastructure Committee 2007b).
On greenfield projects with federal funding, federal labor and contracting requirements (Davis-Bacon act) can address this concern; many states also have "little Davis-Bacon" laws that ensure the prevailing wage for projects. The New Jersey privatization legislation provides compensation for toll road workers (Samuel 2007), guaranteeing employment to union employees for up to six years. However, omitting such specifications from the PPP contract can permit private contractors to reduce staff levels or hire non-union employees, reducing costs, increasing private profits, and increasing the value of the project for the public sector. These benefits, however, may conflict with state labor policies, lead to public disapproval, and could result in potential litigation (Regional Plan Association 2007).
In the United States, recent PPP agreements have included contract provisions that address some of the concerns related to workforce protection in both long-term leases of new or existing toll roads. In the Chicago Skyway, the contract required the concessionaire to employ all unionized employees, and employees were given the option to move onto other city jobs. Most of the employees (100 of 105) took other city jobs, whereas the reminder chose to keep their jobs with the Skyway (GAO 2000b). The legislation that will allow the lease of the Midway Airport in Chicago has a range of labor provisions that include requiring the concessionaire to pay employees in line with the city of Chicago wages and benefits (Illinois Public Act 094-0750). In Indiana, employees were guaranteed that pay and benefits would not be reduced if they took a job with the concessionaire. About 85% of the employees took jobs with private operator at the same or higher pay, whereas others stayed with the state (GAO 2000b). A newspaper report from November 2007 indicates, however, that promised salary increases have not materialized for toll road collectors, prompting workers to become unionized (Potter 2007). The Texas' SH-130 lease agreement requires payment of prevailing wages to construction workers in accordance with governing law and the concessionaire should meet goals for hiring minorities, women, and disadvantaged business groups. The United Kingdom ensures workforce protection by requiring that new and transferred employees of concessionaires are offered "fair and reasonable" employment conditions (GAO 2000b).
Samuel (2007) suggests that workers who are paid reasonable labor-market wages and benefits are likely to be offered work by a private toll company because they have valuable skills and local knowledge. He also noted that government toll authorities are cutting back on staff themselves as electronic toll collection reduces or eliminates toll booths. Private sector groups agree that using local firms saves money and has the added benefit of existing relationships with the public sector (KCI Technologies 2005).
Another labor issue relates to the increase in contracting out of services that have been conducted in-house in the past, such as design and oversight of public works. The GAO (2008a) found that the most important factor in a state DOT's decision to contract out some of these services "is the need to access the manpower and expertise to ensure the timely delivery of their highway program"; cost savings is a secondary consideration. It reported that states protect the public interest through prequalification of contractors and consultants, regular monitoring procedures, assessment of work performed, and standards and requirements for certain types of work. Nevertheless, it appears that state DOTs are still facing some challenges in providing oversight, as they struggle to maintain the required in-house expertise to address demand. This concern was also mentioned in our interested parties' survey, indicating that as more projects are contracted out, it becomes more difficult for state DOTs to attract and retain talent.
In testimony to Congress in April 2007, the Professional Engineers in California Government (PECG), which represents public employees, presented its position on PPPs. The PECG recommends that all construction inspection be conducted by public employees, and that if the public agency is liable for a facility, then the public sector could design, construct, and inspect the facility. Furthermore, PECG indicated in the interested parties' survey that PPPs should require public oversight, design, and inspection to ensure public safety and cost control. The group claims that design-build has been unsuccessful in California, resulting in higher project costs. Other respondents in the interested parties' survey brought similar concerns, drawing specifically from the "Big Dig" experience in Boston. The Big Dig had cost overruns, delays, and several issues, including a fatal accident, owing to flawed construction. According to a labor union representative, oversight and enforcement for this project was not properly conducted and there was no demarcation between the public and private sector responsibilities, given that the relationship between both parties was "too cozy." From the state DOT perspective, most states reported that labor relations are a "somewhat important" concern; six states considered this a "not important" concern.