By Vince Duobinis and Kelvin King
Published in the February 2009 issue of Today's Facility Manager
By now, facility managers (fms) who are involved in project management for their organizations have probably heard about Job Order Contracting (JOC). For those who have not, this excerpt from the May 2008 installment of TFM’s Professional Development column, titled “Job Order Contracting: Putting Business Goals Within Reach” should serve as a primer:
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.
In addition to reducing overall procurement costs as well as the procurement time for multiple construction projects, a successful JOC program can increase the overall safety standards for the manager. It can also help the organization reach its goals of building a database of small, minority owned and women owned subcontractors to serve through the prime JOC contractor. Implementing JOC may also improve the overall satisfaction of the facility management (FM) department over traditional design-bid-build construction.
So, while all these benefits may be waiting for managers who use JOC, what are the basic elements necessary to create a JOC program just by modifying current construction documents?
Essentially, a Job Order Contract is: a competitively procured, open ended, indefinite-delivery indefinite-quantity contract (IDIQ), providing for firm fixed pricing based on a detailed joint scope of work, a unit price book, and a pre-determined coefficient for the purpose of managing and completing complex multi-trade renovation, repair, rehabilitation, and minor construction projects.
There are three fundamental elements to creating a Job Order Contract solicitation from traditional documents. Construction documents differ from state to state and agency to agency; therefore, the following information will drill down on three elements that differentiate JOC from the ubiquitous design-bid-build construction solicitation documents.
First, unlike a typical construction contract for an individual project, a JOC is for multiple projects that are yet to be defined. Because of this fact, a JOC must be for a period of time or term. The most common approach is to set a base year, plus additional option years to be awarded based on the contractor’s performance. Managers can modify their current solicitation documents to include a paragraph explaining the term of performance expected by the contractor.
Second, unlike a typical construction contract for an individual project, a JOC must include a unit line item price book (or software) for construction tasks. For example, the RSMeans Facilities Construction Cost Data book contains tens of thousands of construction task line items. These line items include quantities, units of measure, material costs, labor costs, etc. that the contractor must use when pricing/estimating individual projects. There are other companies providing unit price books and software (e.g., The Gordian Group, U.S. COST), so managers must specify in their solicitation which book and software apply to the JOC.
Third, unlike the receipt of bid prices for a typical construction contract, managers request and receive a coefficient(s) (multiplier) under a JOC solicitation. This coefficient is applied to the referenced unit price book, because individual construction projects are not yet assigned. In application, once the required line items are selected for an individual job under a JOC, the contractor must always apply the coefficient(s) to the summary of those selected line items. This calculation determines the fixed price for the job.
There are a myriad of other clauses, evaluation procedures, and modifying elements that managers can include in JOC solicitations to create an individualized program. When customizing a solicitation, they should consider the following suggestions:
Best value evaluation and award. The single most important and reliable indicator of success in JOC is successful and relevant past performance of the contractor. JOCs are not typically awarded based solely on a low coefficient. Weighting the coefficient along with other factors such as past performance on similar contracts, safety program, technical capabilities, and financial capability are common evaluation criteria for JOC solicitations and oftentimes weighted more than price.
Anticipated annual volume. A solicitation should include a general idea of the amount (in dollars) expected to be funneled through the JOC program (e.g., $6 million to $8 million annual volume). Even though there is little to no guarantee of work to be assigned to the contractor, it is wise to have an idea of historical volumes. This figure or range of figures gives the competing contractors a common baseline from which to begin developing their coefficient (price). Typically, coefficients are lower when there is greater volume in a concentrated geographic area and higher if the JOC program covers a larger geographic area.
Performance timelines. The RFP can define timelines for the contractor’s response to a site visit request, scope of work deadline, and project start deadlines.
Technical capabilities. A manager may want to consider including a technical capabilities section within the RFP. Technical capabilities can include contractor staff résumés and experience, the Job Order Management System proposed by the contractor, as well as detailed safety and quality control procedures. The manager could also require evaluation of the financial capability of the contractor. This would include proof of the ability to bond up to the project maximum. Lastly, a manager may consider including a requirement for a bid bond or bid guarantee to protect the investment in the procurement effort.
Safety. Managers can also include a requirement for a safety plan that covers the entire term of the contract. This requirement can include processes, procedures, specific staffing, metrics, and culture of safety of the contractor.
An agency’s legal department may have specific requirements or mandates. Some states even have specific guidelines regarding JOC. (One source for additional information, examples, and research is the Center for Job Order Contracting Excellence.)
Often, managers choose JOC for increased budget control to reduce project cost creep and change orders. These managers may want to assign more dollars to the construction project versus procurement, design, or contingency. Or they may be focused on simply reducing the inherent risk in construction procurement by having a competent, on call contractor as a single point of contact.
Whatever the reason for implementing a JOC program, a successful approach still goes beyond the RFP solicitation. In the end, both the manager and the winning contractor must be aligned to a common goal of creating a program based on performance, results, and trust.
As a former Air Force contracting officer and now a director of market development in the southeastern U.S. for Centennial Contractors Enterprises, Inc., King has experience in executing a successful Job Order Contract from both the owner’s and contractor’s perspective. Prior to joining Centennial, he was responsible for procurement and contracting for electricity and natural gas for Siemens USA. Duobinis, senior market development manager for Centennial Contractors Enterprises, Inc., is responsible for market development for the mid-Atlantic and midwest regions of the U.S. He has written several articles on JOC.
To discuss some of your experiences in real time, come to FacilityBlog; to comment on this article, send an e-mail to tfm@groupc.com; for past Professional Development columns, visit this link.
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