On Call Renovation, Repair Construction – Job Order Contracting

By peter.cholakis@verizon.netUncategorized

On Call Renovation, Repair Construction – Job Order Contracting

The Good, The Bad, and the Ugly

 

On-call renovation, repair, sustainability and maintenance contracts, especially JOB ORDER CONTRACTS can significantly improve construction project efficiency and financial transparency… IF they are developed managed, and monitored properly.
Unfortunately, a high percentage of JOB ORDER CONTRACTS, JOC percentage administered at the County, State, and Local Government levels man NOT be following following basic best management practices, and therefore not providing anticipated results.

Defining a Job Order Contract – On-Call Construction Contract 

Job Order Contracts are bid and awarded without a specific public works project or scope of work.  The do specify general types of work, such as general facilities renovation and repair, or even more specifically, fencing, roofing, etc.  Most JOCs have a one year term with additional two to four year options, totaling anywhere between one and five years.   The annual and total (approximate) construction volume and minimum guaranteed dollar levels are specified as well as the maximum project (work order) size.  Pricing is based upon a detailed UNIT PRICE BOOK (UPB), generally organized via MASTERFORMAT with associated descriptions and labor, material, equipment, and labor costs.   The latter a localized for the areas in which the work is to be performed.  A “co-efficient” or multiple coefficients are also bid by the Contractor and accepted by the Owner as part of the Job Order Contract.  A coefficient is a value, typically  in the range of 0.80 to 1.20, that is multiplied times the total of the construction costs estimate as developed using the UPB.
Technical construction specifications are also sometimes associated with the UPB, however, JOC-specific specifications, are generally neither required nor recommended.  Most Owners already have a set of Technical Specifications that have been developed over time.  Theses will generally best reflect Owner needs/requirements.   The can, and should be noted, and associated with the awarded Job Order Contract. The number of line items for a UPB generally averages approximately 60,000, however, most Owners only use 10,000 or fewer in there JOC program.  Lastly a JOB ORDER CONTRACT OPERATIONS MANUAL and/or JOC ORDER CONTRACT EXECUTION PLAN should also be part of the awarded JOB ORDER CONTRACT.  This document should contain all roles, responsibility, deliverables, reporting requriements, training levels,  timelines, etc., associated with the Job Order Contract.

THE GOOD – Procedures Associated with Job Order Contract – On-Call Construction Contracts 

Job Order Contracts can be deployed  and managed directly by an Owner, (Owner-managed JOC) deployed and managed in association with a JOC Consultant (outsourced-JOC), or JOC service may be procured through a Cooperative.   Of these three options, an Owner-developed and Owner-managed JOC ultimately delivers the highest levels of competency, value, performance, and transparency.   If there are not enough construction dollars associated with the JOC (typically a minimum of $2M), to justify and Owner-managed JOC, then using a Cooperative is an alternative.   If the Owner doesn’t have the in-house competency to manage a JOC, a JOC Consultant and/or Outsourced-JOC is also an option. The latter,however, should be viewed as at temporary solution, due to associated lower levels of value in terms of collaboration, etc.,  and higher associated costs.
job order contract on call construction
Once a Job Order Contract is in place, a specific need is identified by the Owner, the Owner generates a scope of work, and the Owner requests a proposal from the awarded JOC Contractor.
job order contracting best management practices
Each individual project/work order is authorized based upon a lump sum cost that is not to be exceeded, using the estimate based upon the UPB.  Note, that projects/task orders over a specified dollar threshold should trigger a Owner internal estimate to assure fiscal stewardship, however, Owners should perform a detailed review of ALL contractor estimates.  This is to assure financial accountability, proper scope of work, and compliance with associated regulations/statues.
Regular progress meeting are held, and a final inspection the results in payment to the contractor, or a punch list of items to be completed/corrected.

THE BAD – Using JOC to Improperly Approve Construction Projects

Over the past several years, many public agencies have begun to use Job Order Contracts as a way to either approve construction projects that otherwise would NOT have been approved if due diligence and traditional procurement practices were followed… or simply as a means to speed project delivery by bypassing procurement and/or purchasing.

While properly implement JOC does speed total project delivery time, this can ONLY be diligently accomplished if established Job Order Contract best management practices, processes, and procedures are followed.

THE UGLY – Implementing JOC without Proper Oversight, Competency, and Ethics

JOC is an excellent tool for productively executing the numerous common and repetitive public works projects encountered across facility and physical infrastructure portfolios.  It provides a means to have a local contractor, one that is experienced with an Owner’s portfolio and associated nuances,  perform work at reasonable prices as work needs develop, without the months or even years of delay and poor quality resulting from traditional design-bid-build and lowest bidder processes.

 

However, JOB ORDER CONTRACT AUDITS over the past several years have noted what can happen if JOCs are not implemented per best management and best value practices.

Here are examples of the “UGLY” that have recently be noted…

“detailed the systemic pressures and lack of control that led to city job contracts for the Department of Public Works were being overinflated, inappropriately priced and were vulnerable to fraud. The nearly two-year review of the city’s Job Order Contracting program (JOC) showed that the city has paid over $1.9 million more than it was contractually obligated.”

“(The audit report) shows that the JOC program within the Department of Public Works had created an environment “highly vulnerable to fraud,” partially because it placed an emphasis on getting jobs done quickly instead of ensuring that they were competitively priced and properly defined.”

“The “Triangle of Fraud” as defined in Doud’s report, was created by contractor’s pressure to inflate costs because the city was accepting bids that were unrealistically low. The three points of the triangle were listed as the pressure to inflate costs, opportunity without detection and justification for quick completion.”

“…adjustments were able to fly under the radar because of a lack of structure and oversight in the JOC program, the report said. This ranged from the initial scope of work (SOW) that made it difficult to assess whether the submitted price was appropriate. The lack of clarity led to order changes and cost overruns to occur in 91 percent of the projects surveyed in the report that spanned 17 months.”

“Adding non-catalog charges requires three independent quotes that are reviewed by the city prior to approval. The audit found that 67 percent of the the non-catalog items documented had no independent quotes, but also had no documentation of justification explaining why the quotes were forgone.”

“Furthermore, Long Beach’s program, unlike other JOC’s, does not have a cap on how many “non-catalog” items can be added once an bid is awarded. This resulted in over 40 percent of contractor jobs having these items added, resulting in an overall expenditure increase of almost $2 million.”

“Doud’s report noted that despite a former city project manager issuing a letter to a JOC contractor addressing the overinflation of a proposal, one that was circulated to JOC management staff, the city continued to grant over $3.8 million of work to that contractor who had allegedly “padded proposals” to inflate pricing.”

“The report acknowledge the obvious advantages of using the JOC program—speed—but…During the audit period seven projects amounting to $3.3 million took more than 90 days to initiate. The industry standard is 25 days (for JOC) with an existing design and 55 days without.”

-Long Beach Post, 2016

The above highlights the need for assuring that robust LEAN best management practices be applied to JOC and any construction delivery method, as well as the need for  independent, objective, and best value job order contracting industry resources.

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