If you are a public sector owner looking to put an end to underperforming facilities projects and excessive administration costs, rethinking job order contracts might be a good idea.
What is Job Order Contracting (JOC)?
Job order contracting is a project delivery method that was developed to expedite the numerous repair, renovation, maintenance, and “minor” new construction projects facing real property portfolios owners.
The concept was initially developed by the United States Army, however, currently available deployments, tools, and support services provide far more powerful capabilities and significantly enhanced benefits to all participants and stakeholders.
Current JOC solutions integrate construction planning, procurement, and project delivery, associated participants and stakeholders, and more! Individual projects range in size from approximately $50,000 to over $20,000,000, depending upon the specifics of the contract and location. Both the maximum individual project size and type, as well as the maximum overall annual size of the JOC Program are typically stated in the contract documents. Financial transparency is provided through the use of an associated detailed unit price book (UPB).
As an Owner, how can I participate in a Job Order Contract?
Depending upon applicable regulations, an owner may be able to issue an RFP for a JOC Program and engage in self-management, or an owner might be able “piggyback” an existing Job Order Contract via an inter-local agreement. An owner may also be able to participate using via a JOC Cooperative.
Is setting up a JOC Program difficult?
No. Information, tools, and services are readily available to stand up an owner-managed JOC program. JOC consultants may also be of value in establishing a JOC Program for the first time. A JOC Program can be set up in as little as 90 days.
Are all JOC Programs the same?
No. JOC can vary in a myriad of ways. It is critical to assure that the JOC Program is based upon fundamental LEAN planning, procurement, and project delivery methods that mutually benefit all participants.
Furthermore, attention should be paid to the costs of JOC Program development and ongoing support, as well as assuring that owners are directly involved in management. (Note: Having a “JOC Consultant” manage a JOC Program puts a layer between the Owner and the Contractors and my negatively impact relationships and overall JOC Program performance. Base upon the JOC consultant selects, there may be excessive “program management: costs, and may create conditions for a potential conflict of interest. These costs can exceed 8% of total construction value.) JOC Programs may involve general repair, renovation, and new construction, or be limited in some way. “Single trade JOCs” such as fencing, electrical, communications, roofing, etc., also may be structured.
Are there special skills or additional resource required to manage a successful JOC Program?
Owners must have leadership skills and a degree of competency with respect to LEAN collaboration construction planning, procurement, and project delivery.
Unlike traditional construction procurement and project delivery, JOC operates optimally within an environment of mutual trust and respect, shared risk and reward, and a focus upon best value outcomes for all participants and stakeholders. The ability to build and understand detailed line item cost proposals and estimates is also required for owners and contractors. Remember, people and process come first!
How many JOC Contracts do Owners bid and execute?
Owners may bid a single contract or bid several contracts base upon geographic area and/or type of work required (roofing, paving, electrical, etc.).
Are JOCs awarded via lowers bidder or best value?
Owners may elect to award JOCs responsible and eligible bidders bidding the lowest coefficients per solicitation. We, however, suggest that a best value approach be used. Owners should considers the bidders previous work history as well as the coefficient.
How is are JOC projects priced?
Pricing for individual projects is based upon contractor/s proposals prepared from the approved locally researched unit price book, and the applied contractor JOC coefficient. The coefficient (or multiple coefficients), serve as an adjustment factor, to the applicable unit price book(s) approved for the JOC. For instance, a coefficient of 1.20 would represent a 20% markup. The coefficient generally must include all project general conditions as described in the contract, including but not limited to supervision, overhead and profit. The proposal represents the total cost for an installed unit. Projects and work orders under a a JOC contract are generally scoped and priced as part of a defined process described in the contract. Once a project is approved, the price becomes a lump sum price.
How often should a unit price book, UPB, be updated, and how?
A unit price book must be updated as stipulated in contract documents. That said, best management practice is to update the UPB at least annually for labor, material, and equipment updates, as well as, the addition of any new line items that may be required. Updating labor on a more frequent basis and adjusting materials based upon major shifts should also be considered.
How do I, as a contractor, develop a coefficient? What is a typical coefficient?
Contractors may develop the coefficients that they choose to bid by any means they desire based on their own experience.
Some contractors develop coefficients by analyzing the unit prices in the Unit Price Books and comparing them to historic and anticipated actual costs, plus overhead and profit. They can not analyze all unit price line items (generally 30,000-40,000+) but focus on key commonly used tasks. They select corresponding line items out of the Unit Price Books and compare actual costs including general conditions, overhead and profit.
Historical project analysis, where you take a past project where costs are known, and then generate a line item estimate based on the applicable Unit Price Book is also a good technique. The differential between the estimates (including overhead and profit) may provide a reasonable basis for the coefficient is an appropriate cross section of tasks is selected and other aspects are properly considered. Projects selected should be similar in size, general condition requirements, and possible distribution of work items.
If a locally researched unit price book is properly prepared, the contractors co-efficient should be 1.x, where “x” represents the contractors overhead and profit and other factors as allowed in the associated JOC RFP. JOC co-efficients typically range in the 1.2-1.4 area, however, can deviate based upon other environmental and economic factors.
Is the 4BT OpenJOC Unit Price Book similar to a national average price book and the associated used of location factors?
No. The 4BT OpenJOC Unit Price Book has been locally researched for the specified JOC area(s). We do not recommend the use of commercial and/or national average price books. National average cost books can introduce gross cost errors.
What items should be included in a JOC estimate?
All JOC estimates should include within the cost estimate all allowable costs, which a prudent and experienced contractor would expect to incur. Any design costs (if applicable) are the responsibility of the JOC contractor as well as all construction efforts needed for project completion. Cost must include consideration of performance specifications, deliveries, site preparation, access, cleanup, and other such items not included in the plans and specifications but would be part of the costs a prudent contractor would expect to incur.
What are prevailing wage requirements?
Labor rates required for the JOC Program are typically specified in a JOC RFP and associated contract. Prevailing wage rates represent an average wage rate in a particular geographic region. How prevailing wage rates are calculated, and which prevailing wage rate source to be used, should be detailed. Davis-Bacon Wage Rates are required for federal government projects and/or those using federal funds. They also generally provide a reasonable approximation of local prevailing wage rates. It is critical that labor is locally researched and that national average data not be used. States may may also publish prevailing wages rates that much be used for all related public sector JOC programs.
How may the Job Order Contracts support Minority and Women-owned businesses?
Studies of JOC in the federal government have shown that JOC increases opportunity for small and disadvantaged businesses. The type of work performed under a JOC should provide provide opportunities for emerging businesses, whether they serve as prime contractors or a trade subcontractors. Note that not all JOCs allow for subcontractors.
What JOC support services are available ?
A partial listing of JOC Program support services would include:
JOC Program Development
JOC Program Oversight, Including Formal and Informal Compliance Audits
JOC SaaS Technology Customization
Multi-level and Multi-format training
24/7 JOC Technology User Support Services – Online, Phone, email.