One of the most difficult decisions in standing up a Job Order Contract is the owner’s decision about what type of Unit Price Book (UPB) is best for your JOC program.  UPB’s have traditionally come in two flavors:

Commercial off-the-shelf estimating guides like those produced by RSMeans (Facility Construction Cost Data is the one most often specified for JOC).

Customized books, which can have varying levels of custom cost data line items and varying approaches to localization.  For example, RSMeans also produces custom cost data sets  such as an international custom data set  for the US Army Corps of Engineers.  That said,  most owner’s needs are better met with standard price guides.

A number of factors should inform this choice, including:

1. Geographic footprint of your program.
2. Whether your organization or group of users has a single well-defined set of building standards and specifications.
3. Program volume.
4. Volatility of the construction market, especially commodity-based materials, and your desire to track these price variances.

Localization Localization and customization are different things.  There is a bit of a “localization fallacy” in the JOC market.  Unit Price Books (UPBs) are described as being either “national” or “local,” but the lines are blurred when you look at how the books are actually produced.  RSMeans’ national pricing guides are produced to serve a broad market, so the published unit prices are a national average.  But in reality, RSMeans researches local material, labor and equipment inputs on a vast scale—935 distinct locations in the US and Canada—and through its proprietary algorithms produce City Cost Indexes (CCIs) to fine-tune each and every unit price for all 935 markets.  If you dig into the data produced by RSMeans’ methodology, it is impressive.  RSMeans produces not just one CCI for each location, but 18 of them, segmented by CSI division/subdivision and by material and installation.

The importance of leveraging this granular level of CCI will be addressed in another post, but the point here is that the application of this highly detailed and precise CCI adjustment factors is in no way inferior to a “localized” UPB.  In both cases there are proprietary algorithms and raw cost research at work; it’s just a matter of how the outputs are presented.  The line blurs further when the data is loaded into a powerful software programs like e4Clicks Project Estimator and JOCWorks  which allow automatic application of the CCIs.  In addition, RSMeans has worked with a large northeastern state to produce a set of 14 pre-localized UPBs—one for each county—to support a JOC program.  This allows for the direct insertion of current prevailing wage rates and a direct print reference for contractors new to JOC and RSMeans, which this state valued.  But many owners find that the application of the appropriate CCI more cost-effectively meets their needs.

Geographic Flexibility There are actually some distinct advantages in tapping into a national pricing guide like RSMeans. First and foremost, it is an objective third party, market leading source of information.  Also you can use a single data source to cover a large geographic area, which is particularly valuable for purchasing organizations, statewide, or other multi-site contracts.  RSMeans can cover multiple locations with a single data source through the application of our CCI data.  For instance, RSMeans covers 36 locations in the State of California, with wide swings in price deltas from the national average as evidenced in the CCI’s—from a low of 65.5 (65.5% of national average prices) for concrete products in San Bernadino, due to proximity to aggregate sources and batch plants, to 171.6 (71.6% more than the national average) for Division 21/22/23, driven by the nearly $100/hr. wage + fringe rate for plumbers in the city.

In addition to simplifying administration of a Job Order Contract, use of a single flexible, location-adjusted data set allows for some powerful benchmarking of projects across a program, even when construction costs are variable by location.  A job order proposal or portfolio of projects can be easily repriced with a different CCI to compare typical costs from place to place, and aggregated projects can be analyzed for ongoing construction program insight.  The use of a single data set, and especially an industry standard one like RSMeans, also simplifies the UPB evaluation and coefficient bidding process for contractors.

Customization Localization is the simple adjustment of an existing database for a particular geographic location.  True customization is the addition of distinct owner-specific line items that may be needed for a JOC program but are not included in the standard data set.  Common sense tells us that no UPB is entirely custom—they would be cost-prohibitive to produce if they were.  Rather, books can be customized by selecting the applicable line items from a vast database and then providing selective additional custom data.

What is the value of customization?  It depends.  For an owner that has clear proprietary building materials or systems that need to be covered in a JOC, it can be valuable.  RSMeans worked with Los Angeles World Airports (LAWA), a very sophisticated owner with extensive standard specifications used in a particular geographic location, to accomplish a selective customization (in tandem with localization).  RSMeans integrated and mapped LAWA’s specs to our data, and also did custom cost data research on some unusual and proprietary items that are part of their building standards.  Another approach to flexibly dealing with proprietary or unusual items is to build in a contractual provision to allow for a material price over-ride, based on documented costs of proprietary material.  This allows for holding the labor and equipment costs constant, when owner-preferred material may not be covered by the UPB line items.  This is another functionality of  e4Clicks Project Estimator and JOCWorks.

Updates Another advantage of tapping into a commercial cost data research effort like RSMeans’ is that the data is updated on a continuous basis, including annual publications and quarterly updates.  Only a national-local research effort with 40,000+ customers can provide this level of dynamic pricing for the  volatile construction market, where commodity prices, wage adjustments and market forces can push specific unit prices up or down in sometime unpredictable ways.  RSMeans updates 80,000 line items annually by researching material prices, current wage rates, and equipment rental rates for all 935 locations we cover.  That said, 4Clicks exclusively enhances this data to delivery well over 400,000 line items, complete with line item modifiers and full descriptions in plain english.

 

Customized and localized books can be expensive to produce on this continuous basis, and while the financial investment might be warranted in a very large program, it can be cost-prohibitive in small- to moderate-sized ones.  As a result JOC pricing for customized/localized books is often updated by applying a single inflationary index (most typically the ENR CCI) annually to the contract coefficients.  The problem with this approach is that material and labor prices don’t rise and fall equally—they are subject to highly variable commodity price inputs and labor negotiations.  The failure of a UPB to accurately track these changes on a continuous basis is a risk factor for contractors, and can lead to higher coefficients to cover their risk margin.  No construction cost data source is updated as frequently as RSMeans, and that reduces risk and costs to owners and contractors alike.

 

So when choosing the right UPB for your JOC program, cut through the black-and-white rhetoric of national vs. local, gain an understanding of how the data is developed and presented, evaluate your need for customization and updates, and then consider your options.  RSMeans provides both standard and custom cost data solutions, always with cost-effective program administration in mind.

(Source: adapted from RSMeans/Lisa Cooley Blog 7/10/2014)

http://www.4Clicks.com – e4Clicks Project Estimator is the premier cost estimating and project management software available featuring an exclusively enhanced 400,000+ RSMeans line item cost database and integrated contract/project/document management, visual estimating/QTO, and more.,