A Sound Strategy

There has been a shift toward more computer-assisted facility management (CAFM) software. Many FMs rely heavily on software data to better understand their total cost of operations (TCO) and support educated guesses or gut instincts. TCO is not limited to the initial investment in facilities but its entire life cycle. Unexpected things happen and are generally not within the budget, especially when it comes to construction. There is an option that will help FMs deliver projects in a timely manner, on budget and transparently. It is called job order contracting (JOC), and it is best suited for simple projects with smaller budgets – more specifically, projects that are necessary due to unforeseen conditions or deferred maintenance that have a tight timeline.

JOC originated in the early 1980s and was used chiefly by the U.S. Department of Defense, specifically the Army Corps of Engineers. Today, JOC is still used by federal agencies, but its growth has continued in the public sector, state, city and local municipalities, school districts and health care organizations. JOC is a form of integrated project delivery, and it is an indefinite-delivery/indefinite-quantity (IDIQ) procurement method.

FMs are not typically involved in the construction process, which can be detrimental to the facility’s overall operations because often the practical operations of the facility are not taken into consideration until after a project has reached substantial completion. However, JOC projects are most often driven directly by an FM/owner because the JOC projects are not new construction, they are repairs or minor renovations. The JOC process is based on transparent communication, understanding of the project scope and clearly defined project schedules. JOC relies heavily on the relationship between the contractor and the FM or JOC administrator. The foundation of a JOC program consists of projects, people, processes and funding.

The JOC process, on a high level, is like any other project. Stakeholders will meet to discuss the construction project, define the scope of work and establish clear objectives. These discussions would include risk assessments, budget constraints and the project schedule, to name a few; but JOC nearly eliminates the daunting bidding process as pricing is established through the bidding of a unit price book.

What is a job order contract and what is a unit price book?

It is a contract agreement between the FM/owner and the contractor. Contracts are based on the construction industry's average-priced goods. Unit price books (UPB) are often created using a construction cost estimation database, and most UPBs use the CSI Master Format system to organize items. Pricing includes the cost for labor, equipment and materials for a task.

A UPB is established based on commonly used items in construction and is customized to fit an organization’s construction needs by pricing out specific items unique to the organization. It can be all-encompassing, using single line items for a construction task, giving it application versatility or it can include construction assemblies for more consistency. Typically, line-item costs include equipment, labor and construction materials. A UPB does not determine the means or methods of a project. The industry market rates typically drive the pricing throughout the unit price book. Labor is defined by the rates in a geographical area and often uses prevailing wages. The UPB is locked in for the duration specified by the contract.

Once unit prices are established, contractors will bid an adjustment factor on the book. Adjustment factors can include everything from overhead profits and taxes to shipping costs. Contract pricing is prenegotiated, guaranteed maximum pricing with the intent to reduce or eliminate costly change orders on a project.

How is a JOC program administered?

There are a few ways that a JOC can be managed.

1. A third-party consultant dedicated to JOC can administer the program. Some companies chiefly work as JOC consultants and help clients navigate the JOC process. They establish a unit price book and assist with requests for proposals (RFP) and finding prime contractors to work in the program. JOC consultants work throughout the entire JOC project process.

2. The client could work directly through their procurement department, wherein the procurement officer would receive industry standard pricing through an estimation service. Based on the data received, an RFP would be released to contractors for bid.

3. The FM could be responsible for sending RFPs out to qualified contractors; they can review the RFPs and recommend the contractor that fits all the qualifications. An FM can work through their procurement officer, who would release RFPs to contractors and manage the process. While rare, an FM can also handle their process in-house.

What makes for a successful JOC project?

An essential aspect of a JOC program is the relationship between the contractor and the FM/owner. A solid foundation of trust and understanding must be built and fostered. As with any design/build construction project, the client must have confidence that a construction team will have their best interests in mind. A contractor must understand and balance their client's needs and wants. This process happens through clear communication and collaboration, transparency being a vital component of the process. Think of it as a three-legged stool: the legs hold up the project, but the rungs are just as important; if any of them are off balance, the less successful a project will be.

 

What is the JOC Process?

The cycle of a JOC project is straightforward and has seven basic steps. This can vary depending on the terms laid out in the awarded contractor’s JOC terms and conditions. It is assumed that this is a continuous process, as multiple projects can run concurrently.

1. Project request: A client may request a project be scoped out with their contractor or third-party consultant.

2. Project processing: If a third-party consultant is involved, they will schedule a meeting with the contractor and the client to discuss the scope of work.

3. At the joint scope meeting, the stakeholders will review the site and discuss numerous items, such as: defining the scope of work, resources necessary to do the job, any risks involved and the project schedule. This is also when preliminary take-offs will be done; contractors and project managers will take measurements and gather specifications and pertinent documentation to help develop the scope of work.

4. The project manager, or, interchangeably, the account manager, will take all the information gathered at the joint scope meeting to create a formalized detailed scope of work that will be agreed upon by the client and the contractor. Then, the RFP will be released to the contractor so a price proposal can be prepared.

5. The contractor will fulfill the RFP utilizing the detailed scope of work and other site-specific information. Price proposals are built from the unit price book established in the contract. The contractor will submit the price proposal to the client/project manager. All price proposals are lump-sum, and the goal is not to have a change order. One thing to note is that many JOC contracts have a nonrefusal clause, meaning a contractor cannot refuse requested work.

6. Once the contractor has submitted their price proposal, the client or the client’s representative (third party) will review it. If the price proposal is rejected, the client and the contractor will again review the detailed scope of work.

7. If the price proposal is accepted, the client will issue a notice to proceed (NTP) or release a purchase order, and construction will begin.