Job Order Contracting Lays Foundation for Savings

At any level of government, public purchasers look for ways to streamline the procurement process. By simplifying and expediting purchasing procedures, government entities can save time and money, thereby spending taxpayer dollars wisely.

One such procurement method, Job Order Contracting (JOC), is quickly gaining momentum in the public and private sectors to handle tasks such as routine maintenance, facility upgrades and renovations, and minor construction projects that require minimal design requirements. Ideal for managing small to medium-sized projects valued at $5,000 to $1 million, JOC involves issuing one, fixed-price contract as an umbrella, under which many separate jobs are completed by an on-site contractor. The contrac-tor, in turn, often hires sub-contractors to perform certain portions of the work.

The JOC process was invented in 1981 by Harry H. Mellon, while serving as chief engi-neer for the Army Corps of Engineers, in charge of NATO (North Atlantic Treaty Organization) operations in Europe. Mellon developed JOC to help facility owners acquire contracted maintenance, repair, and construction services in a timely and cost-effective manner. He sought to reduce the lengthy procurement cycle required to award and accomplish multiple job orders, while ensuring quality work by contractors.

After JOC proved successful for NATO, Mellon developed and implemented JOC programs for the U.S. Department of Defense. Based on JOC principles, he developed a Delivery Order Contracting (DOC) system for the U.S. Army, a Simplified Acquisition of Base Engineering Requirements (SABER) system for the U.S. Air Force, and a Work Order Contracting (WOC) system for the U.S. Navy. Every defense facility in the United States and abroad that operates a JOC program does so under the original framework and procedures initiated by Mellon. After pioneering JOC for the public sector, Mellon founded and became chief executive officer of the Gordian Group, Inc., a JOC consulting firm based in Greenville, SC.

Today, JOC procurements are initiated by a variety of public- and private-sector facility owners, including government agencies at federal, state, and local levels, as well as school districts.

Terms and Conditions

Under JOC, a facility owner establishes a master contract, under which specific jobs are listed according to line items contained in a Unit Price Book (UPB). The UPBs, which can be purchased from various firms or customized by the facility, list costs for procuring the materials and labor hours required to perform each job order covered by the contract. A typical UPB contains more than 40,000 line items, covering almost every construction or maintenance task—from installing carpeting to replacing air filters in facilities. A city multiplier in each UPB then lets the facility owner adjust the line-item price according to the specific locality where work will be performed.

Next, the facility owner issues a Request for Qualifications (RFQ), and responding firms are evaluated using best-value criteria determined by the owner. These criteria usually consist of evaluating the firm’s qualifications, past performance with JOC contracts, technical staff, financial status, safety record, and other relevant factors. Each factor is weighted by the facility owner, according to its deemed importance in achieving a successful outcome of the overall job.

When considering the project’s price, however, the contracting firm submits a coefficient, applied to the UPB line items listed in the proposal. For example, a contractor might bid a coefficient of 0.75, by which that contractor would be paid 75 percent of the UPB prices. If the contractor bid 1.25, then that firm would be paid 25 percent above the UPB prices. This coefficient includes the contractor’s profit margin, as well as all tools, equipment, overhead expenses, insurance fees, and other costs involved with performing the specified jobs.
In addition, JOC contracts guarantee the contractor a minimum amount of work and may specify a maximum dollar amount of work governed by the contract. The duration of the contract is also specified, including any options for extension. In deciding whether to renew the contract with the same contractor, the facility owner will consider the contractor’s proven performance and commitment to high-quality work.

“What I typically recommend to owners is that they set up a one-year contract, with four, one-year renewals,” says Gary L. Aller, Director of the Alliance for Construction Excellence, which has established the Center for Job Order Contracting Excellence at Arizona State University. “That way, you’re forced every year into reviewing how you’re doing, how the contractor is doing, and whether the firm is accomplishing your goals and objectives. It also keeps contractors tuned up because they want that contract extension.”

By using the JOC process, facility owners can generally implement a project—from issuing a request for a job order to authorizing the work to begin—within 10 days to two weeks.

Although various contracting methods share similarities with JOC, their scope may differ significantly, according to Aller. He defines JOC as a request for proposals, followed by a contractor submitting the firm’s qualifications and a price coefficient for UPB line items listed in the proposal. “That definition is important,” Aller states, “because we’re establishing a competitive price in a process of selecting a contractor, without quantities, known delivery schedules, or times specified. That’s what makes JOC a delivery process.”

Based on JOC’s basic premise of providing a competitively bid procurement, “as far as I’m concerned, JOC is allowable in all 50 states,” Aller says. Nevertheless, some jurisdictions have enacted specific regulations for JOC procurements initiated by public entities.

One variable includes the threshold amount for each job order covered by the master contract. For instance, Arizona recently raised the maximum amount to $1 million for each job order. The State of Washington, however, allows each contract only two work orders in excess of $150,000, with up to $200,000 permitted in a one-year period.

Trends and Tactics

From cities and states to school districts and transit authorities, many government entities are increasingly using JOC for construction and maintenance services.

For instance, “in Arizona, except in the federal sector, we had no JOC projects going on at the state level in 2000,” Aller says. “Now, we issue about $200 million a year in JOC contracts. Every day, I see that figure growing.”

Aller also notes that a cooperative purchasing program, offered by Mohave Educational Services Cooperative, Inc., has advanced JOC projects throughout Arizona. More than 750 organizations in the state, ranging from city and county governments to school districts, have joined the cooperative to tap into JOC agreements that Mohave has arranged with vendors. The cooperative processes job orders valued at up to $3.5 million each month. In addition, the City of Phoenix alone has currently initiated JOC procurements averaging close to $100 million a year, according to Aller.

Within other states, JOC’s scope is likewise growing. For instance, the State of Washington currently has two job order contracts that cover construction and renovation tasks for small public works projects. Total value of the contracts is approximately $4.2 million (not including tax).

“We heard about job order contracting through the Washington State Military Department,” says Cheryl L. Royal, Cost Engineer and Job Order Contracts Manager for the state’s Department of General Administration. “It was believed that the JOC process would be faster and more efficient than a more traditional design-bid-build public works process,” she adds, noting that overall results of the procurements have been very positive. Her office plans to initiate at least two more JOC contracts within the next two years.

At the Metropolitan Transit Authority of Harris County, TX (Houston METRO), benefits of using JOC also abound.

“METRO selected the JOC program based on the level of success and lessons learned by the Department of Defense,” says Jim Arenz, Director of Facilities Maintenance at Houston METRO. “Facility infrastructure support requirements within METRO are similar to base operations support of military posts and air bases.”

Since 1993, METRO has maintained a continuous JOC program to accomplish minor facility modifications and repairs.

“JOC reduced the normal procurement lead time for minor construction projects valued at $25,000 to $100,000 from 150 days to 21 days,” Arenz reports. “The program has grown from a $3 million per-year funding limit to $10 million per year, and the contract term has increased from 3 years to 5 years.”

Expert Advice

To help promote an understanding of JOC in the marketplace, various professional associations and consulting firms offer seminars, workshops, publications, discussion groups, and online tools. For instance, the International Facility Management Association, Center for JOC Excellence, the Gordian Group, and R. S. Means provide a wealth of information about JOC (see listings at the bottom of this page).

In addition, independent consultants can help public en-tities initiate JOC projects and select a contractor. Another source of information lies with JOC contractors themselves.

“In a lot of cases, you can learn an awful lot by having the contractors come in and tell you how they do things, what kinds of contracts they use, and how projects were procured,” Aller states.

“The selection process of a contractor is critical,” Aller emphasizes. “You want to hire the best firm, with the best price, although this might not necessarily be the lowest price.” He also notes that a thorough understanding of cost estimating is crucial when formulating job orders for the master contract.

When looking at the initial cost of a JOC contract, opponents of JOC may argue that the overall price of the project is too high. Aller responds, “The price is higher because the JOC also includes some of the owner’s costs for the management and for the procurement. I’m hiring someone to do part of my job, and to do the job of the contractor and manage the sub-trades. Therefore, the costs are going to be a little more than what you would get just bidding the work.”

Arenz likewise attests to the importance of selecting the right contractor. “Begin with a JOC contractor that is within your geographic area of support and who has the experience, the staff, and the time necessary to develop and implement a successful transition plan,” he says.

Royal adds, “My advice would be to set up a single point of contact for clients and contractors to manage the contract/job order process. Before doing this, we had many different project managers contacting the contractors and initiating work. That became a big problem.”

Aller equates JOC as a way of managing numerous nagging jobs that rest at the bottom of an employee’s IN box, where they never seem to get done. Instead, the employee’s time is consumed by big projects that take priority. “JOC is a way to get all of those little jobs done, to get them out of the bottom of your IN box, by hiring somebody to take care of them for you,” Aller says. In turn, accomplishing those “little” projects, such as repairing leaky faucets, can translate into additional savings for the facility, such as reduced water costs.
“JOC works best when you develop it as a partnership,” Arenz states, “and when you consider the JOC members as an extension of your in-house team.”

 

Resources

Centennial Contractors Enterprises, Inc., a national, general contractor, specializes in the management and performance of job order contracts. Services range from project development to design and engineering. Visit: www.govinfo.bz/5195-101.
Center for Job Order Contracting (JOC) Excellence, created by the Alliance for Construction Excellence, is part of the Del E. Webb School of Construction at Arizona State University. Members advance JOC knowledge and implementation through on-site seminars, publications, and other educational materials. Visit: www.govinfo.bz/5195-102.
Gordian Group offers consulting services, documents, and Internet-based Progen software to help facility owners develop and implement JOC programs. Firm also sells full line of Con-struction Task Catalogs (unit price books) for JOC projects. Visit: www.govinfo.bz/5195-103.
Kellogg Brown and Root Services, Inc. (KBRSI), a Halliburton Co., provides a wide range of design, engineering, construction, and project management services. Specialties include JOC solutions for repair, renovation, and construction projects. Visit: www.govinfo.bz/5195-104.
R. S. Means offers many JOC tools, including seminars, on-site training, and online cost estimators. Firm also sells a variety of unit price guides (books or CD-ROMs) for construction projects and specific building trades. Visit: www.govinfo.bz/5195-105.