REUTERS/Sean Gardner

Federally funded infrastructure projects come with strict policies that don’t allow locals-first hiring. Here’s why cities should lead.

The ordinance New Orleans recently passed requiring city contractors to commit at least half of the total hours needed to complete a project to locally based workers still needs some fine-tuning before it takes effect. There are concerns about how effective the new policy will be at helping bring down the city’s sky-high black unemployment rate.

One of those concerns, as reported by Nola.com:

Although the ordinance's primary sponsor, James Gray, made reference to "billions" of dollars in construction projects in the pipeline for New Orleans, many of those are funded through FEMA and other federal agencies. Federal law prohibits states and cities from imposing local-hiring laws such projects.

So, what’s up with that? If a federally funded project is based in New Orleans, why shouldn’t New Orleanians get first dibs on those jobs? And why wouldn’t locals be prioritized for jobs on federal projects in any city?

In searching for answers, I found that the federal government is actually a little more flexible on this than it is given credit for, especially in a disaster context. When it comes to FEMA, most of its disaster funding falls under the Stafford Act, which was passed in 1998 as the statutory authority over federal disaster-relief activities. Much of the language in that act sounds like it’s actually more partial to its contractors hiring locally than not. Section 307 of the act reads (page 13):

IN GENERAL — In the expenditure of Federal funds for debris clearance, distribution of supplies, reconstruction, and other major disaster or emergency assistance activities which may be carried out by contract or agreement with private organizations, firms, or individuals, preference shall be given, to the extent feasible and practicable, to those organizations, firms, and individuals residing or doing business primarily in the area affected by such major disaster or emergency. ...

In carrying out this section, a contract or agreement may be set aside for award based on a specific geographic area.  

That’s for FEMA contracts. But as a FEMA spokesperson explained to Citylab, the agency also provides funding through grants, which are governed by a different section of the federal code, one that:

prohibits the use of statutorily or administratively imposed preferences in the evaluation of bids and proposals, except in those cases where applicable Federal statutes expressly mandate or encourage geographic preferences.

However, from that same section of the federal code:

When contracting for architectural and engineering (A/E) services, geographic location may be a selection criterion provided its application leaves an appropriate number of qualified firms, given the nature and size of the project, to compete for the contract.

The FEMA spokesperson explained to CityLab that the agency does not interpret that to mean it encourages adopting local hiring preferences for its disaster grants. In New Orleans, grants have constituted the majority of FEMA funds issued for Katrina recovery projects over the past decade.

But for cities that receive FEMA contracts for disaster-recovery work, local hiring is a go. Of course, FEMA is not the only federal agency at play for recovery work, not even in New Orleans. And even though FEMA provided most of New Orleans’ Katrina recovery funding, the local hiring ordinance it just passed applies to all city contracts beyond those awarded for Katrina projects.

Other federal departments and agencies do prohibit local hiring preferences for their projects, though. Why?

Kitty Kelly Epstein, an urban studies professor at Holy Names University, explains to CityLab that the federal government’s position is that, since its projects are funded from taxpayers across local jurisdiction boundaries, local hiring preferences are seen as as “creating conflict interests between people who are all residents of the U.S.”

Epstein provides the example of a person living in Hayward, California who wants to work on a federally funded construction project in Oakland.  

“The person in Hayward figures, ‘The federal government is supposed to protect my rights also—why should they fund Oakland projects that don't allow me, as a Hayward resident to benefit?’" says Epstein.

The U.S. Department of Transportation has been exploring ways to relax these guidelines. In a pilot program launched earlier this year, DOT allowed Atlanta; Birmingham, Alabama; and Los Angeles to set local-hiring preferences for department-funded projects. The point of this experiment is to determine whether the federal rules “unduly limit competition” among workers and contractors by allowing for this.

The federal transportation department has already opened the idea up to the public to weigh on whether it should expand the program. One comment, from the L.A. County Metro Transportation Authority, in favor of expanding the program, breaks down how the federal hiring policies were set up:

The historical rationale for this prohibition is that the federal gas tax is collected nationally and therefore all individuals and companies in the U.S. should have access to any given project. This regulation, however, does not take into account the new reality of how transportation projects are financed, which today, is often through the majority of funds being derived from local dollars.

Another comment from a group of construction trade councils around the Bay area also supports the federal government on this, and points to success with the San Francisco local hiring model as a reason to expand it:

Our experience with local hire requirements in the context of project labor agreements has been positive. The City of San Francisco has a strong local hire ordinance that has been implemented across all public works jobs. Overall, the City reports that mandates at the 20%, 25% and 30% local hire levels have all been consistently exceeded. The result of these requirements has been more than 929,000 hours of work for local residents.

The City’s 2013-2014 report on local hiring demonstrates that under Project Labor Agreements at San Francisco International Airport, local workers did 38% of the work (exceeding all of the mandatory requirements), amounting to a total of 235,561 hours. 61% of the apprentices working at the airport were hired from San Mateo and San Francisco Counties, ensuring that workers are not only getting good jobs, but are also building skills for lifelong careers.

But a group of construction-worker associations have submitted public comments discouraging the federal government from pursuing broader polices that allow for local hiring preferences. The General Contractors Association of New York claims that it would be unconstitutional. The Constructors Association of Western Pennsylvania said in its comments that such preferences constituted discrimination against non-local workers. The Wisconsin Transportation Builders Association even argued that local residents might not be smart enough or skilled enough for federal contract work:

A residency restriction forces contractors to employ workers who may not be trained or have little understanding of what a career in construction entails. This causes greater inefficiencies in projects and the likelihood of being penalized for not completing the project on time. The result will be higher project costs, less work and, therefore, less employment opportunities. In addition, having workers who are not adequately trained or qualified adds significantly to the safety risks on projects and puts their lives, their co-workers lives and the lives of the traveling public at risk.

For the New Orleans local-hiring ordinance, the Louisiana Association of General Contractors has come out in opposition. However, city council member Jason Williams said that such an ordinance was “several decades past due,” noting how cities like Atlanta have made strides with similar policies since the 1970s.

Plenty other cities are considering similar “locals first” hiring prioritization or have recently adopted them, and companies are buying in to the trend. But city jobs have long been the almost-exclusive province of certain unions and trade associations, and these groups will make their objections heard about these changes. It will come down what cities believe are their best interests in terms of solving unemployment problems—and whether the federal government will have their backs.

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