IBEW contracts edge out local businesses

By Kirsten Adams
May 18, 2010

Nearly two years after the Anchorage Assembly approved more than $130 million in union contracts, local businesses claim provisions in the contracts are wasting city money and monopolizing business.

The contract between the Municipality of Anchorage and the International Brotherhood of Electrical Workers includes stipulations that work on municipal buildings be completed by union workers only. If a bid for work on city property is awarded to a non-union company, the company must become signatory to the union and pay union dues and fees during the duration of the project.

“It’s going to kill the people who are non-union,” said Lyle Aune, President of AAA Fence, Inc. “I’m an electrical contractor and I can’t bid on city work unless I go through the IBEW.”

Aune said his business had bid on a project to build a wooden fence around an electrical substation in Muldoon. When Aune refused to become a signatory to the IBEW, however, the city awarded the project to the next lowest bidder, another non-union company whose bid was $80,000 more but was willing to sign a letter of assent to the union.

The “letter of assent” is a contract that mandates a private company obtain temporary union membership. The company is required to pay dues, medical benefits and retirement contributions to the union for the length of the agreement.

“I had two lawyers look at it and they said not to sign it because I don’t want to be part of the union,” Aune said. “The reason we’re non-union is we don’t want to take money out of our employee’s paychecks to pay the unions; we have our own benefits and they’re better than what the union has.”

The situation is far from isolated, though. Aune said many businesses around town have faced the same situation, and many now simply refuse to bid on city projects.

One local contractor, who asked to remain anonymous for safety reasons, said his business completed more than $1.4 million worth of projects for the city annually before the new union contracts passed in late 2008.

When the contractor’s bid to complete electrical renovations at an emergency operations center came in more than 70 percent below the union bid, he refused to sign the letter of assent and the city put the project on hold rather than spend the extra money.

“I’ve been a thorn in the union’s side for ages; that job with the panel―it probably cost me $3,000 in broken windows in my company vans,” he said. “I refused to sign signatory; I refuse to sign any kind of agreement with IBEW.”

Fred Kaltenbach, Director of Purchasing for the municipality, said he has seen several instances where the lowest bidder has refused to become a signatory to the union and the city has assigned the project to a more expensive, union-friendly bidder.

“The reason there’s such a large difference is there is another contractor involved,” Kaltenbach said. “The letter of assent ties the contractor in for two years, and our contract with bidders says, in order to perform this contract, you have to get a letter of assent.”

When a company places a bid on a city project, Kaltenbach said it is legally obligated to perform the work if the bid is accepted, and he has only released contractors from that obligation in rare circumstances. In the case of AAA Fence Inc., Kaltenbach said he agreed to let them withdraw their bid because they had not realized they would need to sign a binding, two-year letter of assent.

“We place bid bonds for any projects over $100,000,” Kaltenbach said. “Our policy is, a contractor can declare a mistaken bid, we review it and we can force the contractor to do the work or allow him to withdraw.”

Because the bid process is so binding, many local contractors refrain from bidding on municipal projects rather then sign the two-year letter of assent. The local contractor whose windows were vandalized said he was approached in early May to bid on renovation work on Eagle River Fire Station #11, but again refused to place bids on city work.

“There was only one bidder and it was the union; and this was just last week,” he said.

Purchasing Department staff refused to comment on how many bids had been placed on the project, but said the bids will be opened May 20.

“Our tax dollars at work are not getting a fair shake at this unless we are allowed to compete against the unions,” the contractor said. “My tax dollars are going to fund these jobs; I’m fully licensed to do the work but now they say you can’t.”

Clarification: Julie Aune, Vice President of AAA Fence contacted us to clarify that they are a fencing contractor, not an electrical contractor.

Kirsten Adams is an investigative reporter with the Alaska Watchdog. She can be reached at kadams@alaskapolicyforum.org.