Setting up a Job Order Contract Using Best Management Practices involves a mix of strategic and operational steps including a gap analysis of current and planned outcomes.
Job Order Contracting is an alternative LEAN construction delivery method that targets repair, sustainment, restoration, modernization (SRM), and minor new construction projects (unless prohibited by local statue). In general, maximum and minimum projects dollar sizes are assigned for each contract and may range from $10,000 to $20M+, with an industry average of approximately $150,000. From a JOC Program perspective, an annual total JOC construction value of approximately $2M is required before considering JOC due to associated administrative costs.
Definitions.
“Coefficient” – a numerical factor that represents costs (generally indirect costs) not considered to be included in the “Unit Price Book” (UPB) unit prices (e.g., general and administrative and other overhead costs, insurance costs, bonding and alternative payment protection costs, protective clothing, equipment rental, sales tax and compliance with tax laws, and also contractor’s profit). Contingencies such as changes in wage rates and the effect of inflation in option years are also covered in the coefficient when the UPB is not updated annually. (Note: Annual updating of the UPB is recommended) Coefficients proposed by offerors are multiplied times the total of the project estimate developed using the unit prices in the Unit Price Book. The coefficient(s) proposed by the offeror and accepted by the Owner are incorporated in the JOC.
“Job order contract” – an indefinite-delivery, indefinite-quantity contract based upon LEAN collaborative processes which is awarded on the basis of full and open competition and effective competition and is used to execute repair, sustainment, restoration, modernization and minor new construction projects.
“Unit price book” – (UPB) a comprehensive collection of detailed repair, maintenance and minor construction task descriptions, units of measure and pre-established unit prices for each of these discrete tasks. JOC unit prices include direct material, labor and equipment costs, but not indirect costs or profits which are addressed in the coefficient(s). Depending upon the source of the data base used, the Unit Price Base (UPB) generally contains from 25,000-90,000 line items, including line item modifiers and demolition line items. Excessively large UPBs, i.e. hundreds of thousands of line items are not generally recommend at they can negatively impact productivity, create confusion, and add to JOC Program overhead costs.
“Non-prepriced task or item” – a necessary, but incidental, part of a job or project ordered or to be ordered under a JOC that is not susceptible to unit pricing using the pre-priced tasks in the Unit Price Book or database incorporated in the JOC. The coefficient developed for a prepriced task or item must not be applied to a non-pre-priced task or item. The total value of nonprepriced tasks limited to 10% of less of any individual project.
Applicability.
JOC is used to execute repair, sustainment, restoration, modernization, and minor new construction projects. Engineering or architectural support services generally can not be acquired using JOC. Informal (shop) drawings, incidental to the job, reflecting the plan of action and the completed project, are anticipated under JOC.
JOC Characteristics.
(a) Use of a “Unit Price Book” to pre-price the direct material, labor, and equipment costs associated with tasks listed in the book coupled with one or more “coefficient(s)” to cover contractor profit and indirect costs.
(b) A solicitation, construction delivery methods, and contract which contain a large volume of pre-priced, elementary, facilities/infrastructure detailed construction tasks that are normally available on an automated database (preferably cloud-based);
(c) Competitive source selection based on an integrated assessment of capability and past performance, technical and management proposals, sample task proposal, and the coefficient(s) proposed for the first and option years, as appropriate best value.
(d) An indefinite-delivery, indefinite-quantity (task order) contract which provides for the use of negotiated, definitive, bilateral orders (i.e., the JOC contractor formally accepts the order, as mutually agreed, with real property owner.
(e) Each signed task order becomes, in effect, a fixed price, lump sum contract and is managed accordingly.
Planning and coordination.
(a) JOC should be considered when an owner’s projected repair, sustainment, restoration, modernization, and minor new construction workload is anticipated to be of such a yearly volume that benefits to be derived from JOC use are greater than the costs of the owner’s resources and contractor overhead associated with establishing and using a JOC. These costs include the total owner resources required to award, use, monitor and administer the JOC and JOC orders as well as management oversight and functional support of the total JOC process. The calculated workload for a potential JOC should exclude –
(1) Work normally reserved for 8(a) or set aside for small disadvantaged businesses;
(2) Repetitive tasks that are not complex (such as interior and exterior painting, sanding and finishing/sealing of floors, roofing, etc.) and are traditionally covered by requirements contracts;
(3) Work that can be effectively and economically accomplished by in-house resources.
(b) A market survey must establish that more than one capable firm is willing to compete for a JOC at the owner location(s).
Procedures.
Presolicitation.
(a) The facilities management and/or technical staff must document the decision and plan to use a JOC.
(b) To solicit for a JOC, the owner have an existing set of construction task technical specifications (i.e. UFGS, MasterSpec, SpecLINK, etc.) specifications select a Unit Price Book tailored their needs. Any special range pricing (to get quantity discounts) of units associated with the requirements of known JOC projects to be ordered, or specialized components/processes must be specified.
Solicitation.
(a) Purchasing/Procurement, in coordination with the facilities management and/or technical staff, must assure that the specifications and Unit Price Book have undergone technical review and validation and are tailored to meet the projected requirements and local economic conditions. This is a critical step in implementing JOC and is required to minimize the need for non-pre-priced items during the processing of task orders. The projects proposed to be ordered under JOC must be identified in internal documentation, and a representative description must be included in the solicitation. A locally researched unit price book is the best means to support this goal.
(b) To encourage competition and lower coefficients, the JOC solicitation must include realistic and reasonable annual minimum and maximum dollar amounts for projected requirements. Generally, the higher the minimum is, the lower the coefficient proposed will be. The annual maximum is connected with the bonding requirement as appropriate.
(c) The guaranteed minimum for the basic contract and each option period is required. A new minimum guarantee must be obligated upon exercise of an option. The minimum guarantee need not be the same amount that was used to secure the work of the basic contract. However, it must be more than a token amount so that adequate consideration exists.
(d) Because of the complexity of small and small disadvantaged business utilization issues in relation to JOC, additional processes and training may be required.
(e) The Owner’s unilateral right to withdraw a proposed job or order before or after receipt of contractor’s proposal must be included in the solicitation.
(f) The solicitation must explain the make-up of the unit prices and specify what types of costs, as a minimum, must be covered by the coefficient. Offerors must specify in their proposal what additional types of costs are included in their coefficients. These additional costs may be incorporated in the contract, if appropriate, and may preclude later disagreements over non-pre-priced tasks. The methods of “Pricing” of option periods must be covered by the contract. Separate coefficients may be used for normal working hours and other than normal working hours.
(g) JOC solicitations and contracts must clearly notify offerors of initial and continuing bonding requirements. Bonding must be sufficient to cover the stated estimated annual maximum contract value. No JOC contract shall cite the total estimated maximum value of the contract (including option periods) as the estimated annual maximum value, although there may be language in the contract allowing ordering beyond that “maximum” but less than the estimated value of the total contract with option periods. The estimated annual maximum value will be a reasonable figure based on historical experience and known workload for the coming year. This approach should avoid the prior difficulties associated with adjusting bonding coverage every time a new task order is awarded. Because contractors can now plan their liability for premiums, and because they get unliquidated/unneeded premiums reimbursed by the bonding agent, payment incrementally through the use of the coefficient becomes both logical and reasonable. Contractors must be clearly notified, in the solicitation and contract, of their responsibility for ensuring sufficient bond coverage during the course of the contract. All costs associated with bonding (specifically including bond premiums) shall be included in the coefficient.
(h) JOC solicitations and contracts must contain provisions for making annual adjustments to the option year(s) prices. This must be done by updating the base year UPB or the coefficient. The latter, though not recommended, using criteria and predetermined formulas in an economic price adjustment clause. Adjustments to the base year coefficient are generally based on the Engineering News Record (ENR) Building Cost Index (BCI) or similar.
(i) Job order solicitations must be accorded the same type of planning and management review as commercial activities procurement actions.
Ordering.
(a) Summary of ordering process. After the requirement is validated in accordance with owner procedures and an estimate is prepared to determine suitability of the project for the JOC, a statement of work (SOW) is presented to the contractor with a request for a proposal (JOC Project/Task Order RFP). The contractor then prepares a proposal that identifies the tasks and quantities necessary to accomplish the job. This proposal is subsequently evaluated, and agreement is reached on quantities, time, performance period, etc., through discussions and negotiations. After agreement, a fixed-price bilateral order is prepared. Some integral non-pre-priced work may be included in the order.
Statement of work.
(1) The SOW for the proposed order must contain sufficient detail to enable the owner to develop an independent estimate and/or internal government estimate (IGE), for all orders or for orders of a predetermined value of more (i.e. $100,000 or more), and to assure that the contractor can properly prepare a responsive and cost effective proposal with a minimum of non-pre-priced tasks.
(2) The SOW must be updated prior to issuing the order to reflect the details of the negotiated agreement and to include significant quantities, methods of construction, quality levels, and number of days to complete the work. This updated SOW may also include a statement that the work must be performed in accordance with the method and quality of construction specified in the contractor’s proposal. Other pertinent aspects of the contractor’s proposal may also be specifically cited as deemed appropriate. The updated SOW must contain sufficient detail to allow the owner to effectively monitor the contractor’s performance.
(c) Independent Owner Estimate, Independent Government Estimate (IGE).
(1) For JOC projects at, or above, an established dollar thresholds, an independent owner estimate must be obtained prior to evaluation of the contractor’s proposal. This is in addition to the earlier budgetary/gross estimate, which helped determine whether the proposed work was appropriate for JOC. The estimate shall be prepared using the same method required of the contractor (e.g., the Unit Price Book). A detailed analysis of all task orders is required for ALL orders, regardless of project dollar value, in order to aid in the determination of a fair and reasonable price.
(2) Total or lump sum owner estimates are not acceptable for proposed JOC task orders. The owner estimate must be sufficiently detailed to be useful in evaluating, not only the reasonableness of the contractor’s proposed price, but also any costs associated with non-pre-priced tasks.
(3) Purchasing or, if applicable, the ordering authority, must insure that significant differences among the SOW, the owner estimate, and the contractor’s proposal are reconciled and documented prior to placing the order.
(4) To the extent practicable, identify non-pre-priced tasks in advance and treat them as discrete items in the owner estimate to help determine if the price of the non-pre-priced work is reasonable and to help calculate the relative value of the non-pre-priced work.
(d) Negotiations.
(1) Negotiations on orders of specified value or greater not begin without an owner estimate.
(2) Negotiations will further reconcile differences among the owner estimate, SOW, and the contractor’s proposal.
(3) At the conclusion of negotiations, purchasing or ordering officer must prepare a memorandum of negotiation and place it in the contract file.
(e) Limitations.
(1) The value of non-pre-priced work under an order must not exceed 10 percent of the value of the pre-priced work.
(i) The value of the pre-priced work must be computed by multiplying the coefficient(s) times the total project estimate as derived using the appropriate unit price(s) in the Unit Price Book.
(ii) When the contract allows, indirect costs and profit for non-pre-priced work may be attributed by application of a solicited and pre-agreed rate to be applied to the bare labor, equipment, and material costs of the non-pre-priced work.
(iii) Description of non-pre-priced work must not be manipulated or forced to fit under a pre-priced line item, either to avoid including non-pre-priced line items in the order or to reduce the value of non-pre-priced line items in an attempt to circumvent the intent of the JOC.
(2) The value of non-prepriced work under an order shall not exceed 10 percent of the value of the prepriced work.
(3) Normally, if the value of the non-prepriced work exceeds 10 percent, then the non-prepriced work should be reduced, eliminated or performed in-house or the job must be acquired using other contracting methods. However, purchasing may exceed the 10 percent if the non-prepriced portion of the order involves urgent or emergency situations or if the purchasing determines it is a good business decision. Purchasing shall negotiate the modification and make a determination that the price is fair and reasonable.
(f) Funding. Funds for the guaranteed minimum amount must be obligated on the awarded JOC. Contract performance and cumulative orders under the guaranteed minimum amount are not limited to the fiscal year in which the contract becomes effective. Funds beyond the guaranteed minimum required to complete a proposed project must be obligated by each task order. Orders beyond the guaranteed minimum must also comply with the bona fide need principles, statutory and other restrictions on year-end spending.
(g) Forms, numbering and reports.
(1) Appropriate, owner specific forms should be used and electronically completed, exected and stored.
(2) Standard forms are used for all JOC project phases including modifications to a task order.
(3) Purchasing is responsible for the actions involving specific ordering and must retain control over assignment of all orders and/or revisions.
(4) Purhasing must be responsible for ensuring timely preparation and submission of all forms and reports.
(5) Automated versions of forms should be used for JOC,
(h) Distribution. A copy of all JOC orders must be sent to the purchasing, finance and accounting office, the office or individual assigned responsibility for inspection and technical administration of the contract, and any others per the JOC. Purchasing must maintain the permanent record of each transaction.
Contract administration.
Contractor performance evaluations must be prepared for all orders of $100,000 or more, and for the JOC program in general on a regular basis. JOC administration should not be outsourced in its entirety to JOC consultant.
Purchasing / JOC ordering authority
(a) Appointment. The appointment of a special “JOC ordering authority” is required for executing the JOC task orders. A appropriate facilities management/techical JOC manager shall be appointed to work with the JOC ordering authority. a
(b) Training. All JOC owner and contractor participants must receive specific training and orientation specific to the JOC Program. This training must cover policy and procedures for operation of JOC,, and shall specifically address all particiipants limitations and responsibilities, to include ethics, conflict of interest, and potential pecuniary liabilities.
(c) Authorization and limitations.
(1) Purchasing exclusively may sign task orders under JOC on behalf of the owner when…
(i) adequate management controls are in place (e.g., contracting oversight);
(ii) adequate training is provided;
(iii) purchasing approves; and
(iv) the value of any non-pre-priced item(s) does not exceed a set value, or the total of nonprepriced items exceed 10% of the total JOC project.
(3) May execute modifications to existing task orders provided that —
(i) pricing is accomplished by using the unit price book; and
(ii) the total value of non-prepriced items under the order as modified does not exceed established limit
(4) \Detailed of all modifications shall be immediately be recorded and available. Modifications effecting changes to termination actions, or work suspensions, shall be executed by purchasing because of legal consideration issues and the potential fiscal issues involved.
(d) Responsibilities. JOC purchasing authorties —
(1) Are responsible for ensuring that all proposed JOC project descriptions and task orders express the Owner’s actual requirements, validated in accordance established procedures, in a professional and understandable manner;
(2) Must ensure that an owner estimate for orders $100,000 or more, is prepared prior to evaluating the contractor’s proposal;
(3) Must ensure that adequate and proper funds are available for the project prior to issuing an order;
(4) Must provide notification of any additional bonding requirements associated with new orders or changes in the value of existing orders;
(5) As the principal point of contact for technical and engineering issues, must respond to requests for technical clarification from the JOC contractor, documenting both the request and the response, and conduct the joint pre-proposal site survey, assuring that the contractor is provided access to all required facilities, plans, and other documents required for full knowledge of the scope and conditions of the required job;
(6) May evaluate contractor proposals; compare them with the owner estimate negotiate scope of work, quantities, and performance period for pre-priced and non-pre-priced tasks; and may negotiate price on non-pre-priced tasks;
(7) For orders estimated to exceed the JOC ordering limits, be responsible for evaluation of contractor proposals for proposed orders and may be authorized to solicit such proposals and clarify and negotiate units and quantities of pre-priced tasks; and must assist the contracting officer, as requested, in negotiations and resolution of variances between the owner estimate and the contractor’s proposal;
(8) Must be responsible for maintaining complete contract file documentation for each order and modification executed, including a record of all related correspondence and actions taken prior to award of the order and in the order administration phase;
(9) Must be responsible, with the facilities management/techincal team, for assisting the in technical monitoring of the contractor’s performance of orders issued under JOC to include —
(i) Monitoring compliance with the SOW and schedule;
(ii) Contractor or supplier compliance,
(iii) Wage Rate Requirements (Construction) statute compliance;
(iv) Assessment and validation of percentage of completion for progress payment purposes;
(v) Recommendations for changes to existing orders,
(vi) Documenting and quickly reporting systemic or recurring problems in contractor performance;
(vii) Prioritization of orders, provided no increase in cost is involved; and
(viii) Preparation of any JOC status reports required;
(ix) The above includes preparation of, or input for, performance evaluation reports;
(10) Must update record files upon completion, (e.g., as-built drawings and warranties); and
(11) Must identify and report any recurring or significant inaccuracies or omissions in the Unit Price Book contained in the job order solicitation or JOC and propose needed changes.
(12) Be the official ultimately responsible for management of all aspects of the JOC, including the actions of any JOC Managers, and member of the facilities mangement/technical staff who is carrying out functional oversight responsibilities related to JOC administration.
(13) issue orders under JOC, and modifications to such orders.
(14) Exercise an option to extend, or issue any modification to, a job order contract (as opposed to an order under same).
(15) Ensure that all orders and modifications to orders, together with significant supporting documentation are duly received, recorded, and reported and that such orders are regularly reviewed for completeness and compliance and sound business practices. At least twice a year, tensure that files and procedures are reviewed and that a representative sampling of orders is selected for tracking from initiation of the requirement to final payment and close-out of the order.
Internal controls.
(a) An internal control program must be present and include the following:
(1) Separation of duties and responsibilities to establish internal checks and balances.
(i) Project scoping and project quality assurance/acceptance activities will be kept separate. Individuals involved with project scoping and development as well as proposal negotiations with the contractor will not be the same individual responsible for monitoring quality assurance. The responsibility for recommending acceptance of completed work will remain with separate quality assurance personnel.
(2) Clear assignment of responsibilities and authority throughout the JOC process.
(b) An internal control JOC action and documentation checklist, tailored to the needs of the owners shall be developed to assist personnel responsible for management of JOC.