How NOT to run a Job Order Contract – JOC

How NOT to run a Job Order Contract

Job order contracting can delivery a significantly higher number of quality renovation, repair, and maintenance construction projects on-time and on-budget.

There can be major issues, however, if an Owner is not fully involved and doesn’t have the ability to create and manage a JOC Program per best management practices.

Here are few items that should NOT be done in a Job Order Contract:

  1. Do not use Job Order Contracting as means to bypass the procurement/purchasing department, or to execute construction jobs that otherwise would not normally have been approved.
  2. As an Owner, do not pay a fee to a JOC consultant based upon the amount of construction associated with the JOC program, if  the consultant project approval authority.  This can create a potential, if not overt conflict of interest.
  3. Do not use JOC for projects under or over established dollar thresholds per contract.
  4. Do not make JOC awards to contractors solely bases upon price and/or coefficient.
  5. Do not allow any JOC task order to be approved without a detailed review of the contractor’s construction cost estimate.
  6. Do not start a JOC project without a joint site visit (with the contractor) and a project kick-off meeting.
  7. Do not approve any JOC project/task order that has nonprepriced items (line item not obtained directly from the approved JOC Unit Price Book) totaling  more than 10% of the total project cost.
  8. Do not omit to conduct internal JOC line item estimates for project over a specified threshold.
  9. Do not conduct a JOC Program without regular audits.
  10. Do not conduct a JOC Program without annual training for all participants.
  11. Do not approve or implement a JOC Contract wihout a comprehensive written JOC Operations Manual and its mandated use as part of the contract.
  12. Do not create or implement a JOC without a thorough review of applicable law / regulations.
  13. Do not expect a contractor to be able to create a construction estimate without provide a sufficient statement of work – SOW.
  14. Do not approve a JOC without a project timeline.
  15. Do not assume a JOC unit price book is static.  At a minimum the UPB should be updated annually, and adjusted quarterly via an economic factor.
  16. Do not approve coefficients outside of a range of 0.80 to 1.20 unless there are mitigating factors.

 

Job Order Contract PROGRAM CHECKLIST

JOB ORDER CONTACT  – PROGRAM CHECKLIST

job order contracting

  1. Staff for JOC Program Capacity –  Determine the number and type of projects the JOC staff can handle at any one time to ensure projects are managed timely and appropriately. Without appropriate staffing the pressure to complete projects  can result in inadequate project and cost and oversight. Staffing must be capable of contractor proposal review and core JOC administrative functions.
  2. Implement a Project Prioritization Process – List and prioritize all infrastructure needs to assure projects are in concert with strategically planning initiatives. Assure projects are based upon organizational need versus funding.
  3. Document and Adhere to JOC Project Limits –  JOC projects may have a statutory/regulatory limit and should have a contract limit.   For larger JOC Programs the maximum per project averages $500,000, with typical projects averaging $100,000. In no instance should a project exceeded the established maximum (including change orders) and combining multiple projects into one to circumvent the contract maximum is also inappropriate.
  4. Policy and Process – A Job Order Contract Operations Manual should be a component of the contract.   Formal policies, procedures,  guidelines, workflows and reporting requirements should be established. Roles, responsibilities, and deliverable should all be document and associated key performance indicators, KPIs, developed and monitored.
  5. Program Management – Oversight and management of the Owner is the established best practice.  The use of cooperatives or consultants/third parties to manage a JOC program should only be used when owner-management is not practical.
    Outside consultants  provides little direct oversight versus skilled owner personnel and furthermore represent a potential conflict of interest.
  6. Formalized Reporting –  Comprehensive reporting of key project information; status, budget/costs, milestone dates,  outstanding issues, project coefficients, … is needed to determine overall operational status.
  7. Best Value Procurement – JOC contracts and projects should not be exclusively awarded based upon lowest bidder / lowest coefficient, but rather upon consideration of mutiple factors included contractor experience and past performance.  Most JOC programs have coefficient within the 0.80 to 1.20 range.  Unusually low coefficients put contarctors and the overall program/project at risk.   “Reasonableness” should be a consideration when evaluating contractor coefficients.
  8. Full Financial Transparency – Contract terms and contract extensions must be
    clear and transparent.  Project contractor estimates must be reviewed by the owner for all projects.  Internal owner estimates must prepared for projects exceeded and established value per the contract.  All estimates must be prepared using detailed unit line items from the JOC unit price book (UPB), and include full descriptions in plain English, and detailed material, equipment, and labor costs.   The level of clarity of the UPB description is extremely important.  If the descriptions are vague it is difficult to determine specific items that are required. This can result in the unnecessary use of noncatalog/non-prepriced line items. No single project estimate should used non-prepriced line items (line items not contained within the current UPB) to a level exceeding 10% of the total project cost. Care should be also be taken to assure that JOC contractors do not inflate proposals (this can most likely occur if bid coefficients are too low).  Regular audits of JOC projects and the overall JOC Program also are critical.
  9. Current Contract Terms and Information – All JOC Program information and documents should be kept current. This includes the UPB (the UPB should be updated annually in terms of line items and quarterly in terms of a cost adjustment fact0r), specifications, reporting forms, and legal items.   The Owner and UPB supplier should assure  that research is conducted to identify recurring use of nonprepriced line items/tasks and develop new cost lines / tasks for recurring situations.
  10. Education, Training, and Technical Competency –  Initial, advanced, and ongoing training and certification should be mandatory for all JOC program participants. Focus upon collaboration, best value,  LEAN best management practices is important for all JOC Program participants. Sufficient JOC program oversight and control is impossible without ongoing training and continuous improvement.  Training should encompass how to manage JOC programs and projects, general workflows, policies and procedures, line item cost estimating, proposal review techniques, and negotiation methods.  If a third party vendor is used for the support the JOC contract, they must provide the requisite JOC training. job order contract
  11. Information Management –  The Owner and Contractor(s) must maintain all data and key a permanent record for each Proposal, Project/Task/Work Order and make available all data and records until the expiration of seven years after the data of final
    payment. These records should be keep in a unalterable format. Authorized Owner personnel must have access to all data and records for the established time period to inspect, audit and make copies during normal business hours. Contractor must require all subcontractors also comply.  The contract msut  specify what documentation or information should be retained in project files and associated content and format.  Information should include all correspondences (emails, written), workflow documents, approvals, etc. Without proper documentation, it is not possible difficult to obtain a thorough history of the project.
  12. Owner Scope of Work Preparation – Early and ongoing collaboration and communication is key to JOC Program success. The Owner’s project detailed scope of work (SOW) serves as the road map for the JOC contractor to build an accurate and thorough cost proposal that meets the Owner’s needs. The Owner SOW did not must contain comprehensive information of project requirements. General and vague SOWs do not detail the necessary components of the project and provide and environment where the contractor is subject to risk, or project costs can be manipulated.  Clarity of project requirements or expectations, as established by the Owner SOW, joint owner/contractor site visit, contractor cost estimate, and JOC project kickoff meeting is critical.   Examples of a detailed SOW, include noting the areas (square foot, linear foot, etc.), level of quality, time frame, unusual site conditions, etc.    Inadequate project planning and poorly designed SOWs lead to numerous change orders and cost overruns.
  13. Independent Quotes for Nonprepriced Line Items – In order to control the use of non-catalog items, three independent quotes are must be obtained for submission by the contractor for Owner review.
  14. Adequately Address Preferred Vendors and Items –  Owner should clearly note any required preferred products or materials for projects, and assure associated descriptions and price information versus the used of nonprepriced line items.   Using the JOC program for projects with preferred vendors not be the norm, as it basically allows Owners to forego traditional procurement that would produce competitive bidding and/or provide justification for sole source procurement.
  15. Formal close out –  A detailed close out process helps to ensure that project quality meets Owner standards and regulatory requirements and that appropriate close-out documentation is complete ( examples: Notice of Completion, Punch Lists, etc.)
  16. Key Performance Metrics – Leading, current, and post-project evaluation of costs, time, satisfaction, and other key performance indicators, KPIs drive efficiency, productivity, and continuous improvement.  Ongoing analysis is a key aspect of any JOC Program.   All JOC stakeholders must be included in these metrics – Owners, Contractors, Subcontractors (cost estimators, procurement/purchasing, project management, program managers, account payable, etc.)
  17. Appropriate Use of Consultants –  Project managers are responsible for all aspects of a project, including approval of work performed and payments to all parties working on the project. The use of consultants for JOC project management is not considered a best practice, especially if the consultants can benefit from the value of construction volume. In not instance should  consultants have total control over a JOC Program or a JOC project with little to no owner oversight. An appropriate level of independence of the project managers ensures project costs are appropriate and within the contract terms. Additionally, JOC Program documentation should narrowly defined consultant services and avoid terms such ” a wide range of consulting services that can be provided via the Owner “as-needed” contracts and used on JOC projects, such as project management, design, inspection, engineering services and construction management. Firstly,  JOC is specifically design NOT to require significant design or engineering services.  JOC program controls to monitor or prevent multiple consultants from one consulting firm working in different capacities on the same project should be also be in place to prevent situations of  potential conflict of interest.  Allowing consultants from the same firm to function in different roles on a single job creates the opportunity for the firm to have multiple ways to benefit from increased project costs. Roles and responsibilities for all JOC participants (owner, contractor, subcontractor, consultant, etc.) should be clearly defined and monitored in terms of potential conflict of interest and/or duplication of effort/efficiency.  For example the use of multiple contractors, subcontractors, and consultants for design, engineering, or construction services can be costly, inefficient, and also against contract or regulatory stipulations.  This situaion allows
    numerous parties to have influence over the project’s cost and outcome, with virtually no mechanism to detect potential excessive costs or inappropriate relationships between the parties.  In this situation the risk of fraud is very high.
  18. Subcontractor / MBE Information –  Many JOC programs have specified performance levels for local, small, and/or MBE businesses.  The percentage of work for each subcontractor and their license number should be recorded, monitored for compliance, and permanently stored.  This process is necessary to assure participants are appropriately licensed as well as whether an inappropriate or conflicting relationship exists between parties.