Professional Development: Navigating Job Order Contracting
By Rory Woolsey
Published in the August 2012 issue of Today’s Facility Manager
Today, getting a construction job started takes more than the simple act of just putting hammer to nail. For maintenance and repair projects, there is an abundance of red tape and paperwork to wade through even before a contractor is hired. And all the while, conditions could be changing or even getting a bit worse.
Job Order Contracting (JOC) is an alternative procurement method that puts this process on the fast track so work can begin in just days and weeks instead of months—compared to traditional bidding. JOC is an indefinite delivery, indefinite quantity procurement method that enables facility managers (fms) to complete a large number of routine, straightforward repair and renovation projects with a single, competitively bid contract.
Contractors bid an adjustment factor to be applied to a unit price book containing preset unit prices for a variety of construction tasks, such as a square foot of painting, a square foot of ceiling tile, chalkboard, door, or hardware installation and so on. While JOC is not the answer for procuring every construction project, it is another resource in the fm’s toolbox. JOC works best on small- to medium-sized, straightforward repair and renovation projects.
Fms may choose the JOC delivery system to save time and money on projects such as bathroom renovations, Americans With Disabilities Act (ADA) upgrades, landscaping and exterior repairs, mechanical work, and more. JOC can help to eliminate the time, expense, and administrative burden of completing the normal design-bid-build cycle for each project, delivering high quality construction faster and more cost-effectively.
Once the JOC contract has been bid, there is no need to prepare copy, advertise, and distribute bid packages for each project. Those individual administrative costs are no longer necessary.
And because contractors are bidding on a series of projects instead of each small one, they provide volume discounts that are passed along to the fm. Future job orders are tied to the contractor’s performance, so the contractor has an ongoing financial incentive to provide responsive service and high quality work.
Once the JOC contract is awarded, the contractor is paid for each project at the preset unit prices multiplied by the quantity of the task and then multiplied by the competitively bid adjustment factor. Change orders are reduced, because the contractor actively participates in developing the Detailed Scope of Work before the contractor prices the project, thereby eliminating much of the confusion and mistakes that account for many change orders. If there are changes, they are priced directly from the unit price book.
Choosing the correct unit price book will impact the entire process. Unit price books come in two forms: national estimating guides available from various publishers; and locally priced, customized unit price books. JOC works well when it is set up well. National estimating guides tend to feature more generic task descriptions, limited demolition costs, and national pricing, resulting in more negotiations and higher construction costs.
The other option is a highly detailed, comprehensive unit price book built using local labor, materials, and equipment costs. This type of unit price book can be customized to include only owner approved products and materials. It can incorporate the fm’s standards for hardware, windows, roofs, ceiling tiles, etc.
The more specific the unit price book, the less room for negotiation. The more certainty about the exact tasks in the unit price book also means more efficiency in administering the contract. This will ensure that the fm always pays the competitively bid price for the work—not some newly negotiated price.
Negotiating prices may work in some business situations, but it is not appropriate for competitively bid construction contracts. While national estimating guides are the perfect resource for developing budgetary estimates, they are not the right tool for attempting to price construction work under a JOC contract.
One of the benefits of the JOC process is the partnership that occurs between the fm and the contractor. Collaboration and cooperation often result in more cost-effective solutions. When an fm and the contractor spend their time debating about exactly what is meant by a generic task description or whether a “classroom lockset” is Grade 1 or Grade 2, F05 or F42, and are forced to negotiate everything about the price, it can harm the partnering relationship. When the partnership disintegrates, and frustration mounts, the benefits of JOC can be quickly lost.
In addition, when reviewing and approving price proposals, fms must look ahead to make sure the documents can withstand an audit or post construction review—especially when dealing with public funds or taxpayer money. The tasks in the price proposals must be accurate and certain. Gray areas, questionable actions, unjustified tasks, and negotiated items will create doubt in the auditor’s mind about whether the competitive price was paid. Choosing the correct unit price book will make it easier to withstand such a review.
Harry Mellon founded The Gordian Group, Inc. in 1990 “for the sole purpose of providing the services, software, data, and documents that would make facility and infrastructure owners successful at JOC,” [Source: Wikipedia]. As the acknowledged inventor of the JOC process, Mellon wrote, “In optimum practice, true Job Order Contracting does not include any negotiation of price; hence the agency maintains control of the entire process.”
This control is easier to maintain by using a detailed, locally priced, location specific unit price book, featuring known and approved products and materials, instead of a national estimating guide. When a JOC program is set up well on the front end, the better system facilitates a better outcome.
Woolsey is a project manager for The Gordian Group, the leaders in expediting construction procurement through Job Order Contracting. A former employee of RSMeans, Woolsey was the editor who compiled the
first volume of Facilities Construction Cost Data Book in 1986. He is known for his expertise in construction budgetary estimating and has facilitated over 8,000 classroom hours on the topic. Woolsey has worked in management and engineering for the construction industry for 35 years in the positions of laborer, field engineer, project manager, MIS manager, estimator, designer, structural engineer, general contractor, and more.