Job Order Contracting in Canada

October 23, 2013

Why the Job Order Contracting model could work in Canada

STEPHEN BAULD & LISA COOLEY

A proven contracting methodology from the United States may be a model for solving some of Canada’s current contracting demands.

Job Order Contracting (JOC) was born of the United States military contracting world, where small construction projects were taking up to 18 months and 20 per cent of project budget to design and procure.  JOC was designed to procure and execute those projects in a more efficient way by providing a competitive and flexible pricing structure for the execution of these small, repetitive projects.

Key to JOC is the availability of a commercial catalogue of construction prices, called a Unit Price Book (UPB), such as those produced by RSMeans Company, LLC.   Contractors bid a coefficient, which is applied to the UPB to arrive at contractual prices. For instance, if a contractor’s bid is .97, it means they offer a three per cent discount off the commercial prices as established by the UPB.

In this way, JOC is similar to the standing order contracting that we are familiar with, with a few important differences. The first is reliance on that unit price structure rather than labour and material pricing.   This provides a clear pricing structure based on a complete, installed unit of work, which prevents padding with extra hours or expenses and rewards the most efficient contractors. It also provides a higher level of pricing transparency for municipalities and their constituents.   By leveraging a commercial price book with tens of thousands of line items, virtually any scope of work for small construction and renovation can be covered. Procurement of the contract including the pricing structure is done once, but is then used for multiple projects over the contract term through individual delivery orders.

Another important difference is that JOC has a well-defined project development process for each delivery order that requires the active involvement of the contractor, not unlike design-build or integrated project delivery.

The contractor under JOC is expected to take an active role in defining the scope of work and providing a facility solution to the owners prior to pricing the project. The delivery order proposal for each projects provides a clear scope and sometimes a simplified design deliverable, as well as line item pricing detail for the outlined scope of work. Once the owner accepts the proposal, the project becomes lump sum for the contractor-defined scope of work, so there is no haggling over quantities and unit prices once construction starts.

After the implementation of JOC in the U.S., numerous studies were conducted and the results were clear: JOC results in fair pricing, better quality construction with fewer claims and litigation and much faster delivery of small projects. JOC is typically used for projects in the $25,000 to $1,000,000 range, with  overall annual construction volume under a JOC $2M to $70M.

JOC should not be used for larger construction projects where a full design process is needed. Rather, it is best focused on the kind of ongoing, repetitive facility upgrades that are required in a municipality of any size. Typical JOC projects might include renovations, upgrading classrooms or conference rooms, lighting replacements, paving, or fencing.

The long-term contract structure (3-5 years) covering multiple projects is key to the success of JOC. Typical contract provisions will guarantee a very small amount of work ($25,000 to $50,000) but provide clear opportunity in the form of an annual maximum ($2 million to $5+ million) creating an incentive for the contractor to perform well to achieve maximum contract volume and thus profitability.

Contracts are typically awarded for a base year with two or more options, so that an owner can retain a performing contractor or easily replace one that is not non-performing. The long-term relationship that this promotes between the contractor and the owner leads to multiple project execution efficiency.

While contract bundling of larger projects has been a topic of concern recently, the research on JOC clearly points to increased opportunities for small businesses.

This is because the type and variety of projects requires extensive subcontracting of portions of work, in a project bandwidth where small local companies are the most competitive. Small business can be further supported in a JOC by requiring that a certain percentage of the work be subcontracted, as in Washington State legislation, or by establishing specific goals for awarding of prime or subcontract dollars to small, local business.

It may be time to take a look at JOC as a model for Canada’s municipalities to deal with the increasing volume of small facility upgrades while promoting small local business and making procurement staff more efficient and effective.

This approach would work very well in municipalities throughout Canada, and is available to come and talk to procurement staff to explain how this process could be applied in municipal procurement contracts. Government procurement is always looking for ways to create value for money as well as a way to be completely fair, open, and transparent to all contractors. JOC would be the ideal way to create a level playing field for everyone involved in the process of government procurement.

Stephen Bauld, Canada’s leading expert on government procurement, is a member of the Daily Commercial News editorial advisory board. He can be reached at stephenbauld@bell.blackberry.net.

Lisa Cooley, LEED AP, is a recognized Subject Matter Expert on Job Order contracting and an employee of RSMeans, a business line of Reed Construction Data Canada. She can be reached atlisa.cooley@reedbusiness.com

via 4Clicks.com:  Premier cost estimating and efficient project delivery software solutions for JOC, SABER, IDIQ, MATOC, SATOC, MACC, POCA, BOA, BOS … featuring an exclusively enhanced 400,000 line item RSMeans Cost Database, visual estimating/automatic quantity take off ( QTO),  and collaborative contract/project/document management, all in one application.   Our technology is currently serving over 85% of United States Air Force bases and rapidly growing numbers of other DOD and non-DOD (United States Army Corps of Engineers,  Army, GSA, Homeland Security, VA..) federal departments/agencies, as well as state/county/local governments, colleges/universities, healthcare,  and airports/transportation.  RSMeans Strategic Partner

A New Resource for JOC – Job Order Contracting Services

Flexible, scalable implementation and management support for owners standing up or improving Job Order Contracting programs.

Lisa Cooley Associates was recently launched to help Owners implement Job Order Contracting and other solutions to the big problems that small projects can present. The new company has been established to help Owners bring sophisticated thinking and efficient, scalable processes ongoing renovation, maintenance, sustainability, and minor new construction programs.

Job Order Contracting was a delivery method ahead of its time when it was introduced a quarter century ago. But with construction industry changes swirling around us, Job Order Contracting will continue to evolve and adapt to stay relevant, becoming a part of newer technologies and processes like BIM and collaborative cloud computing, and forward-thinking processes like LEAN, to make JOC even better.

The construction industry is the only US industry to lose productivity over the last 30 years. Job Order Contracting presents a path to greater efficiency, but only when implemented correctly.  Lisa Cooley Associates and its Partners can help Owners make the decisions and set up  JOC programs in a way that improves staff efficiency and that of your contractors. Reiterative LEAN processes can help drive greater efficiency and cost savings.

Strategic Planning for JOC

The road to JOC begins with a careful assessment of your potential program. Historic and budgeted volume and project type are reviewed. Internal staff skillsets and resources are evaluated. Existing project management systems and styles are assessed for their applicability to and interface with JOC. Procurement requirements, including small business requirements and governing body mandates, are researched in conjunction with your staff. The goal of this planning phase is to understand how JOC will work within your organization and establish a framework for success.

UPB and Software Selection

The selection of a Unit Price Book can be confusing amid industry rhetoric and lack of clarity around the options available. We can help advise you on standardized and customized pricebooks, periodic update options, customization of line items, and integration of specifications. Contract provisions which govern the use of line items can also be critical, and we can help you craft requirements that bring you the greatest value.

RFP Development

With our extensive knowledge and database of RFP provisions, we can help you craft a procurement document that will drive the results that you desire. Your standard general conditions will be reviewed and modified to the JOC environment as necessary. JOC-specific requirements will be incorporated to clearly communicate contractor expectations. We can guide you on potential selection criteria and weighting to ensure selection of the contractor that meets your needs.

Procurement Assistance

If JOC is a new process for your organization, it may be new for your contracting community, too. We can help orient and prepare your existing contractor base for responding to your RFP, or we can garner interest from leading Job Order Contractors around the nation. We can serve as a technical advisor to your selection committee.

Training

Training begins in the Strategic Planning phase, with Introduction to JOC sessions for internal staff as we work to define your program. More in-depth training occurs in the implementation phase, when we make sure that your staff is well-versed in the use of your software and line item estimating takes place.

Program Alignment, Partnering, and Leaning

JOC is relational contracting. JOC programs suffer when there is a lack of alignment among team members. Our approach to partnering is different. It is based on data collection and oriented to process improvements using LEAN principles. We lead you and your JOC contractor in a series of meetings to map processes, clarify communications, and drive your program towards greater efficiency.

Independent Estimates and Line Item Proposal Review

The unit pricing structure of JOC has real value from a procurement and process point of view, but it can cause consternation among personnel that aren’t familiar with it. It is critical that your staff be empowered with an understanding of your unit price book, and our first goal is always to empower you with the skills to effectively review line item proposals for accuracy through in-depth training and support. But some owners lack the skill or the time to develop independent estimates (as the federal government does) or conduct a full line item review. We can help with a range of support from telephone help line support to full proposal review, reporting, and negotiation with contractors.

Ongoing Assessment

To maximize the effectiveness of your JOC, you need to continuously assess internal processes and gridlocks, contractor performance, user satisfaction, timeliness, and cost. We can help you design assessment tools and surveys to track progress, and generate reports for governing bodies.

Program and Project Management

 

 

THE HISTORY OF JOC

Intro to JOC

Job Order Contracting is an indefinite-quantity, performance-based delivery method for small- to medium-sized construction projects (the typical “sweet spot” for projects under a JOC program is $25,000 to $1.5 million, though projects can certainly fall outside of this range). The fundamental feature of a Job Order Contract is the use of a Unit Price Book (UPB) and competitive pricing through a coefficient (sometimes called a multiplier or factor) applied to all line items within the UPB. With a long-term contract in place and pricing agreed to up front, owner and contractor can turn their focus to the efficient execution of projects.

The beauty of JOC is a streamlined design and procurement process that right-sizes pre-construction work for smaller project. Scoping and design can be completed in days or weeks instead of months, with design at the level of detail that brings greatest value to the project. And while the unit pricing structure provides flexibility for emergency work, this well-defined scoping process more typically provides a clear scope of work for the contractor and a firm fixed price for the owner. Finally, the long-term contract with a low guarantee of work incentivizes a contractor to perform at a high level to maximize project volume.

Key features of JOC:

• A long-term (3-5 years) umbrella contract
• Competitive pricing through the use of a competitively-bid coefficient applied to a unit price book (UPB)
• Individual delivery orders are firm fixed price (based on defined scope of work and contractual pricing)
• A contract structure and contractor selection process that drive performance

 

History of JOC

JOC was developed in the US Army in the mid-80’s to address the big challenges faced in the execution of small projects. The Army found that these smaller projects were taking up to a year to procure, with 8-22% of the project budget consumed in design and procurement costs. Change orders were increasing final costs by as much as 50%, and claims and litigation were diverting the attention of project management staff. Ultimately, the Army determined that low bid procurement of these projects was driving low quality results. The impact was a large backlog of small projects and a negative impact to the Army’s mission.

So the Army crafted JOC to meet their needs for performance, efficiency, and procurement compliance. The results were clear. Early studies done on JOC in the Army clearly demonstrated that JOC provided faster delivery of projects, higher quality construction, fewer change orders and warranty issues, for a fair price. The study also showed that the contracting tool helped to maximize construction budgets and provided increased opportunity for small and disadvantaged business through subcontracting opportunities. Most importantly, the Army found that JOC transformed their adversarial contract relationships into productive partnerships.

Soon after the Army rolled out JOC at a number of pilot installations, other military branches followed suit (with the Air Force christening it SABER, or Simplified Acquisition of Base Engineering Requirements) and public owners outside of the federal government started to take notice. Early adopters included the National Institutes of Health, Spring Branch ISD and municipalities. From 2000 on, JOC saw widespread use in areas of high growth like Arizona, Texas, and the DC beltway. Around this time, the first cooperative purchasing JOC was implemented, and many owners began to access JOC by this means.

 

VIA http://www.4Clicks.com – Premier cost estimating and efficient project delivery software of JOC – Job Order Contracting, IDIQ, SABER, SATOC, MATOC, MACC, POCA, BOA.