Job order contracting
Encyclopedia
Job order contracting is a way for organizations to get numerous, commonly encountered construction projects done quickly and easily through multi-year contracts. JOC reduces unnecessary levels of engineering, design, and contract procurement time along with construction project
procurement costs by awarding long-term contracts for a wide variety of renovation, repair and construction projects.
With an emphasis on partnering and team work between owners and contractors, JOC provides the methodology to execute a wide variety of indefinite delivery, indefinite quantity
, fixed price, multiple simultaneous orders for renovation, rehabilitation and repair work for large facilities and infrastructures.
JOC contractors are selected on qualifications and performance at a best value or low price or low bid depending on local, state or federal statutes. JOC is about performance, reliability, dependability and quality. At the same time, JOC is about results and working within budget and time constraints. The JOC contractor provides “on call” construction services from concept to close-out.
JOC today has more than a 25-year record of implementation within the United States Department of Defense
. Currently, there are hundreds of successful contracts going by the JOC name or by its counterparts of delivery order
contracting (DOC), task order contracting (TOC) and simplified acquisition of base engineering requirements (SABER).
JOC deployment hasn’t remained solely federal. The JOC concept and principles have been further embraced in all areas of publicly funded state facilities, universities, housing authorities, transportation agencies, and school systems. Not only public sector but also private sector facility owners are expanding the use and implementation of the JOC procurement system.
book (UPB), which provides preset costs for specific construction tasks. The unit price book can cover nearly every construction, repair or maintenance task, whether it’s replacing air filters, installing carpeting, replacing windows or doors, or even painting or it can be limited to specific areas of work or a particular trade. If a task is not in the UPB, it can be negotiated, priced and added at any time to the book.
Contractors can be selected based on best-value or low bid, depending upon the owner's requirements. As part of its proposal, or bid, the contractor submits a coefficient (a multiplier) to be applied to the preset unit prices appearing in the UPB. The coefficient must include not only the contractor’s overhead
and profit, but also any adjustment that may be needed to the UPB prices based on the contractor's costs in the local area of the contract(which are functions of labor costs, subcontractor
base, market conditions and client-specific conditions).
After contract award, and during the course of the contract, the coefficient will be used to calculate the price for each project which will be the preset unit prices multiplied by the quantity multiplied by the coefficient.
The partnership aspect of the JOC contracting process is exemplified by the JOC contractor usually establishing a permanent office near the facility’s management staff. This way, the JOC contractor’s project manager can become an essential, hands-on advisor to the owner’s facilities management team.
JOC contracts don’t define actual, individual jobs but normally award a potential maximum amount of work over a year. For example, a contract may have an annual maximum of $5 million or more but only a minimum guaranteed amount such as $35,000. As a result, the JOC contractor is not guaranteed any level of revenue
, driving it to generate the best performance possible.
For each project, the owner and the contractor follow the same five steps:
(1) Conduct a joint scope meeting at the site to review and discuss the work and the construction schedule; (2) prepare a detailed scope of work; (3) contractor prepares a price proposal using unit prices from upb, quantities, and coefficient, and submits a proposed construction schedule, list of subcontractors and other documents required by owner; (4) owner reviews price proposal to make sure the right tasks and quantities were used; (5) if owner is 100% satisfied with price, schedule, subcontractors, etc. owner may issue work order for the project.
This relationship carries with it a strong motivation for the JOC contractor to provide outstanding service and quality work to receive additional work orders, because the amount of work being assigned by the facility owner or manager is based on the JOC contractor’s performance. The agreement should also foster increased communication between the contractor and owner to enhance the partnership aspect of the JOC contract.
Top-performing JOC contractors achieve a high percentage rate for completion of projects on time and on budget. Also, the JOC process provides for a single contract to be used for the delivery of multiple or repeated work orders without having to re-bid the same work as required in other commonly used delivery systems. It allows for back and forth communication and development efforts throughout a project. This differs greatly from the one way efforts of design–bid–build. JOC provides the greatest advantage in situations involving recurring work when delivery times, type of work and quantity of work are indefinite. While JOC is not used for major new construction, it is best for minor construction, adjustments, renovation, repair and maintenance of facilities.
Other advantages include:
The American Recovery and Reinvestment Act of 2009, in section 1554, states that:
To the maximum extent possible, contracts funded under this Act shall be awarded as fixed-price contracts through the use of competitive procedures. A summary of any contract awarded with such funds that is not fixed-price and not awarded using competitive procedures shall be posted in a special section of the website established in section 1526.
JOC is a firm-fixed-price, indefinite quantity contract that is competitively procured. JOC is ideally suited to accomplish work with stimulus funds because it expedites the procurement process, saves money and is completely transparent.
Attempting to compete multiple contractors on a JOC project is motivated by the following reasons:
Construction
In the fields of architecture and civil engineering, construction is a process that consists of the building or assembling of infrastructure. Far from being a single activity, large scale construction is a feat of human multitasking...
procurement costs by awarding long-term contracts for a wide variety of renovation, repair and construction projects.
With an emphasis on partnering and team work between owners and contractors, JOC provides the methodology to execute a wide variety of indefinite delivery, indefinite quantity
IDIQ
IDIQ is a contracting acronym meaning Indefinite delivery/indefinite quantity. This is a type of contract that provides for an indefinite quantity of supplies or services during a fixed period of time...
, fixed price, multiple simultaneous orders for renovation, rehabilitation and repair work for large facilities and infrastructures.
JOC contractors are selected on qualifications and performance at a best value or low price or low bid depending on local, state or federal statutes. JOC is about performance, reliability, dependability and quality. At the same time, JOC is about results and working within budget and time constraints. The JOC contractor provides “on call” construction services from concept to close-out.
JOC today has more than a 25-year record of implementation within the United States Department of Defense
United States Department of Defense
The United States Department of Defense is the U.S...
. Currently, there are hundreds of successful contracts going by the JOC name or by its counterparts of delivery order
Delivery order
A Delivery Order is a document from a consignor, a shipper, or an owner of freight which orders the release of the transportation of cargo to another party....
contracting (DOC), task order contracting (TOC) and simplified acquisition of base engineering requirements (SABER).
JOC deployment hasn’t remained solely federal. The JOC concept and principles have been further embraced in all areas of publicly funded state facilities, universities, housing authorities, transportation agencies, and school systems. Not only public sector but also private sector facility owners are expanding the use and implementation of the JOC procurement system.
Basic principles of job order contracting
A major element of the JOC contracting process is the use of a unit priceUnit price
Average prices represent, quite simply, total sales revenue divided by total units sold. Many products, however, are sold in multiple variants, such as bottle sizes. In these cases, managers face a challenge: they must determine “comparable” units. Average prices can be calculated by weighting...
book (UPB), which provides preset costs for specific construction tasks. The unit price book can cover nearly every construction, repair or maintenance task, whether it’s replacing air filters, installing carpeting, replacing windows or doors, or even painting or it can be limited to specific areas of work or a particular trade. If a task is not in the UPB, it can be negotiated, priced and added at any time to the book.
Contractors can be selected based on best-value or low bid, depending upon the owner's requirements. As part of its proposal, or bid, the contractor submits a coefficient (a multiplier) to be applied to the preset unit prices appearing in the UPB. The coefficient must include not only the contractor’s overhead
Overhead (business)
In business, overhead or overhead expense refers to an ongoing expense of operating a business...
and profit, but also any adjustment that may be needed to the UPB prices based on the contractor's costs in the local area of the contract(which are functions of labor costs, subcontractor
Subcontractor
A subcontractor is an individual or in many cases a business that signs a contract to perform part or all of the obligations of another's contract....
base, market conditions and client-specific conditions).
After contract award, and during the course of the contract, the coefficient will be used to calculate the price for each project which will be the preset unit prices multiplied by the quantity multiplied by the coefficient.
The partnership aspect of the JOC contracting process is exemplified by the JOC contractor usually establishing a permanent office near the facility’s management staff. This way, the JOC contractor’s project manager can become an essential, hands-on advisor to the owner’s facilities management team.
JOC contracts don’t define actual, individual jobs but normally award a potential maximum amount of work over a year. For example, a contract may have an annual maximum of $5 million or more but only a minimum guaranteed amount such as $35,000. As a result, the JOC contractor is not guaranteed any level of revenue
Revenue
In business, revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. In many countries, such as the United Kingdom, revenue is referred to as turnover....
, driving it to generate the best performance possible.
For each project, the owner and the contractor follow the same five steps:
(1) Conduct a joint scope meeting at the site to review and discuss the work and the construction schedule; (2) prepare a detailed scope of work; (3) contractor prepares a price proposal using unit prices from upb, quantities, and coefficient, and submits a proposed construction schedule, list of subcontractors and other documents required by owner; (4) owner reviews price proposal to make sure the right tasks and quantities were used; (5) if owner is 100% satisfied with price, schedule, subcontractors, etc. owner may issue work order for the project.
This relationship carries with it a strong motivation for the JOC contractor to provide outstanding service and quality work to receive additional work orders, because the amount of work being assigned by the facility owner or manager is based on the JOC contractor’s performance. The agreement should also foster increased communication between the contractor and owner to enhance the partnership aspect of the JOC contract.
Key elements of a JOC contract
A JOC contract follows certain procedures leading to an agreement focusing on achieving good work performance and reasonable costs. Among the procedures leading to the formalization of a JOC contract are the following items and provisions:- Standard specifications established in a master contract with a summary of work, also including any specific or client-driven conditions.
- A unit price book containing preset unit prices for construction tasks.
- Facility owner issues a request for qualifications (RFQ), evaluating firms using best-value, performance-based criteria, or an invitation to bid awarding to the lowest responsive and responsible bidder.
- A guarantee of minimum amount of work for the contractor. This is usually a small amount for consideration – a requirement in most states for contracts.
- Issuance of contractor’s work orders based on owner’s requirements.
- Costs for individual work orders are calculated by multiplying the preset unit prices by the quantities multiplied by the contractor’s coefficient.
- Open communication between facilities team and JOC contracting team, including a kick-off partnering session between everyone utilizing the contract.
Advantages of using a JOC program
The major advantages of job order contracting include:- Fast and timely delivery of projects.
- Low overhead cost of construction procurement and delivery.
- Development of a partner relationship based on work performance.
- Reduced legal fees.
- Elimination of change orders.
- Standard pricing and specification utilizing a published unit price book (UPB), resulting in efficient and effective estimating, design, and fixed price construction.
Top-performing JOC contractors achieve a high percentage rate for completion of projects on time and on budget. Also, the JOC process provides for a single contract to be used for the delivery of multiple or repeated work orders without having to re-bid the same work as required in other commonly used delivery systems. It allows for back and forth communication and development efforts throughout a project. This differs greatly from the one way efforts of design–bid–build. JOC provides the greatest advantage in situations involving recurring work when delivery times, type of work and quantity of work are indefinite. While JOC is not used for major new construction, it is best for minor construction, adjustments, renovation, repair and maintenance of facilities.
Other advantages include:
- Partnering and performance incentives result in high-quality construction and service and enhanced quality control. Quality JOC contractors have reduced and even eliminated punch lists.
- Simplified design documents and acquisition processes negate the need for complicated and repetitive contract documents and reduce contract administrative costs.
- The speed of JOC contracting ranges from 10 days to 21 days from request to construction start, since JOC projects don’t demand soliciting and acquiring a contract along with detailed plans and specifications.
- Facility owners do not have to provide a complete design, but rather rely on the JOC contractor to produce any essential drawings for the design.
- Employment of smaller subcontractors in the area to perform the work, allowing for the majority of the project funds to be spent locally.
- Minimal risk for the owner in the event of problems with the contractor because the owner can stop using the contract at any time. If a performance-based system is also used, the JOC contractor can be terminated for lack of performance.
- A win–win attitude or motivation for both the contractor and the facility owner produced by and through the long-term relationship.
Use of federal funds
It is legal to use job order contracting when a project is funded, in whole or in part, with Federal Funds. This is also true for American Recovery and Reinvestment Act (ARRA) of 2009. The federal government uses the Federal Acquisition Regulation (FAR) to regulate acquisitions. Job Order Contracting is covered in the FAR in three key areas:- Subpart 6 Competitive Requirements,
- Subpart 16.202 Firm-Fixed-Price Contracts, and
- Subpart 16.504 Indefinite Quantity Contracts
The American Recovery and Reinvestment Act of 2009, in section 1554, states that:
To the maximum extent possible, contracts funded under this Act shall be awarded as fixed-price contracts through the use of competitive procedures. A summary of any contract awarded with such funds that is not fixed-price and not awarded using competitive procedures shall be posted in a special section of the website established in section 1526.
JOC is a firm-fixed-price, indefinite quantity contract that is competitively procured. JOC is ideally suited to accomplish work with stimulus funds because it expedites the procurement process, saves money and is completely transparent.
Potential problem areas
The practice of awarding more than one JOC contract for one location and then bidding the contractors against each other on each job order. Owners have the idea that if two contractors compete against one another, they will get a better price. The way to avoid the problem of only having one JOC contractor is to award multiple JOC's each having their own defined geographical boundaries. The work in a particular boundary will always go to the JOC contractor awarded that geographical area unless that contractor is failing to perform or is over committed. In that case the work could be given to another JOC contractor in an adjacent region. The goal is to never compete two JOC contractors on an individual project.Attempting to compete multiple contractors on a JOC project is motivated by the following reasons:
- The owner mistrusts the contractor.
- The owner perceives that JOC can be a "win-lose" proposition (win for the owner and lose for the contractors).
- The owner does not understand the differences in performance by the contractors.
- The owner does not understand construction, construction management or facility systems.
- Someone within the owner’s management organization will receive recognition for reducing the short-term cost of JOC construction by forcing contractors to provide services with minimal or no profit.
Further reading
- Example of Time and Cost Savings: Richmond, BC Japanese Cultural Center Article
- Arizona State University and CJE Presenation
- Time to Consider Job Order Contracting, Debbi Mulcahy
- Completing Construction quicker and better in Sacramento County, Paul Scott APWA Reporter, April, 2010
- What You Need to Know About Job Order Contracting, Steve Hendershot
- Job Order Contracting, Michael P. Quinn, PE and Paul Schreyer
- Use of Few Models for Project Delivery Results in Missed Opportunities for Lowering Cost and Speeding Delivery, California Performance Review
- Harry Humphry MellonHarry Humphry MellonHarry Humphry Mellon is a retired Lieutenant Colonel of the United States Army, American businessman, inventor of Job Order Contracting, entrepreneur, and founder and Chairman of The Gordian Group, Inc....
the creator of Job Order Contracting - Buildings Magazine Article on JOC and Reduction of Change Orders
External links
- Introduction - Job Order Contracting video produced by Corps of Engineers 1987 (1 of 7)
- Center for Job Order Contracting Excellence
- Innovative Contracting - Utah State University
- https://www.nigp.org/eweb/DynamicPage.aspx?Action=Add&site=NIGP&ObjectKeyFrom=1A83491A-9853-4C87-86A4-F7D95601C2E2&WebCode=ProdDetailAdd&DoNotSave=yes&ParentObject=CentralizedOrderEntry&ParentDataObject=Invoice%20Detail&ivd_formkey=69202792-63d7-4ba2-bf4e-a0da41270555&ivd_cst_key=00000000-0000-0000-0000-000000000000&ivd_prc_prd_key=00b4f493-25af-46e7-bc21-e33455cb9d6bNIGP Presentation on Job Order Contracting] National Institute of Governmental PurchasingNational Institute of Governmental PurchasingThe is a national, membership-based non-profit organization providing support to professionals in the public sector purchasing profession. NIGP provides its members with many services, including education, professional networking, research, and technical assistance.Organized in 1944, NIGP is an...
- Arizona State University Library/Store JOC Info