Professional Development: Job Order Contracting
Published in the May 2008 issue of Today’s Facility Manager
Large facilities strive to be good stewards of the funds with which they are entrusted. This goes beyond sound accounting and financial practices; it reaches into areas of community support and development in the form of funds reinvested into local business communities. Nowhere is this more evident than procurement funds for services supporting facilities.
Does this statement seem familiar?
Recognizing an active program of research, technical assistance and procurement from small minority (MBE), woman (WBE), and disabled (DBE) business enterprises is essential to the realization of progressive social and economic development goals, the following is designed to express the County’s intent to foster participation by MBEs/WBEs/DBEs in its procurement process.
What about this one?
Goals for participation by certified MBE and WBE firms for this contract shall be not less than the following percentage of the total contract price: MBE participation goal: 25%; WBE participation goal: 7%.
Most states, localities, and facility managers (fms) seek and encourage Small Business Enterprises (SBEs). This may not only increase certain sources of funds for the facility, but it may also help the local economy by providing bidding opportunities for specific business classifications.
Procurement requirements often appear to be challenges rather than goals, particularly when contracts are awarded to the same few small or minority businesses time and again. But this doesn’t help the greater business community, because it perpetuates a dependence on a few players—it doesn’t build a broad range of potential resource partners.
Consequently, many small and minority business see a mountain to climb just to start the process of working for a publicly funded agency or large facility. Thoughts like: “I don’t want to deal with all the paperwork,” “I’m too small to compete,” or “It takes too long for me to get paid” are only a few obstacles to SBEs that wish to participate in the bidding process.
Actually,there is a better way for small MBEs/SBEs/DBEs to solicit work from facilities or publicly funded agencies. Through professionally developed and managed Job Order Contracting (JOC) programs, facilities can achieve these goals for their construction and renovation funds.
Exactly how does a JOC work? Here is a simple example.
Assume that it costs a facility $1,000 to prepare a bid package for a renovation project with an estimated value of $200,000. Assume the facility solicits between 35 to 50 renovation, repair, and minor construction projects per year. The total administrative procurement costs for a year would range from $35,000 to $50,000, assuming the organization doesn’t have to re-scope or re-solicit any projects.
JOCs are typically solicited through a Request for Proposal (RFP), so the cost to prepare a package is three times the cost of a typical single project solicitation ($3,000 instead of $1,000). However, being open ended and having an indefinite deliver and quantity contract, a JOC will allow the fm to place as many repair, renovation, and minor construction projects as needed through the term of the contract (or until they reach the dollar limit of the contract) and all at a single initial procurement cost.
Since most JOC contracts have a base year with up to four option years, the fm could theoretically outline projects for the next five years. This could translate into anywhere between 175 and 250 projects through the contract period at a cost of $3,000 (instead of $175,000 to $250,000 over the same time period and through a normal bid process).
As a steward for a facility, what could the fm do with an additional $172,000 to $247,000 saved over a five year period? On a large scale, could this be used to obtain additional products or services from other local business enterprises and reinvigorate a faltering local economy? On the smaller scale, could the money go towards the completion of an additional renovation project or chiller replacement?
Based on these examples, it’s easy to see that JOC is more than a procurement tool and construction delivery method for repair, renovation, and minor construction projects. It allows fms and contractors to work together to help build the economic well-being of a community through a process that includes mutual respect and communication.
An fm entering into a JOC program will be able to benefit from optimizing specific business segments to meet the facility’s requirements. And an experienced JOC provider should be able to develop a large database of appropriate SBE subcontractors to call on to obtain fair and reasonable prices. By using a unit price book available through the JOC process to define the scope of work, the fm will know the fixed price of the project upfront.
Through the normal project development process, the lowest bidding subcontractor is easily identified. This is not necessarily the most qualified, however.
On the other hand, the fm can commit to building and developing the local economy by having the JOC mentor SBEs/MBEs/WBEs in order to ensure they meet jurisdictional requirements and following safety procedures. (As an aside, if these criteria are not met, the fm will not be required to continue issuing delivery orders under the contract.)
Being able to monitor a subcontractor’s work load, experience, and capabilities, the JOC consultant can spread the delivery orders around so one subcontractor is not overly burdened. This not only ensures that all work is completed in a timely fashion, it also helps to guarantee SBEs/MBEs/WBEs are receiving a fair share of the delivery orders over the term of the contract. Under a JOC program, it is the consultant’s responsibility to hire the appropriate subcontractor—not necessarily the one with lowest price—and follow through to completion by delivering the project safely and on time.
A transaction that’s good for business and the community is a win-win situation. By applying the benefits of JOC, fms have the opportunity to improve a system that sets out to achieve a sustainable business environment for customers, service providers, and the community as a whole.
Duobinis is a senior market development manager for Centennial Contractors Enterprises, Inc., headquartered in Vienna, VA.