Center for JOC Excellence

Presentation on Job Order Contracting

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CJE Board of Directors CJE Members:
Bob Gair, Member at Large
Clint Owings, Past Industry Chair
David Carrithers, Industry Chair Elect
Gary Aller, ASU Representative & ACE Director
Joe Martin, Member at Large
Mike Ladino, Member at Large
Ron Ecker, Industy Chair




Emeritus Members
Bill Sweetser,
3D International*
4Clicks Solutions, LLC*
Alpha Building Corporation*
Applied Innovative Management*
Arizona Repair Masons, Inc.*
Basic Industries, Inc.*
CBIC Construction & Development*
Centennial Contractors Enterprises, Inc.*
City of Phoenix*
Council of Educational Facility Planners International
DMJM Management*
Estimating Systems, Inc.
Galveston Independent School District
Harris County Dept. of Education*
Hidalgo County
Horizon Group International*
Jamail Construction*
Kellogg Brown & Root*
Loudoun County Public Schools*
Mohave Educational Services Cooperative*
Northside Independent School District*
Nouveau Technology Services*
PinnacleOne*
R.S. Means Consulting Services
Sanders Engineering Co., Inc.*
SDB, Inc.*
Shaw Beneco, Inc.
SKE International*
TCPN - Region IV Education Service Center
Texas State University*
The Gordian Group, Inc.*
Valley Metro Rail*
Volmar Construction




Individual Members:
Introduction:

In 1994 a group of Job Order Contractors gathered at Arizona State University to discuss the successes and failures of Job Order Contracting (JOC), as well as the future of the JOC industry . They discussed the concepts of differentiation of performance, the shortcomings of the "low-bid" procurement system, information systems, and the unstable structure of the construction industry. The result of the meeting was the formation of the Center for Job Order Contracting Excellence (CJE)

CJE Goals and Objectives:
  • Expand the JOC market through the education of potential users and practitioners to the benefits and practices of JOC.
  • Encourage the use of 'best value" selection of JOC contractors and consultants by developing an Owner Practices & Procedures Manual including forms, guidelines and documents.
  • Continuously improve the industry through performance feedback, education, and training.
  • Expand membership by enhancing member benefits with publications of CJE goals, activities and results.
  • Enhance CJE viability through communication with current, past and potential members.

CJE Benefits:
  • Network and interact with others active in JOC.
  • Participate in the education of interested parties in the benefits of JOC
  • Receive timely unbiased performance-based information that allows facility owners to differentiate between performing and non-performing contractors
  • Participate in research to improve the JOC industry
  • Learn about upcoming projects before they are published; hear about the status of current projects from your colleagues.
  • Tap the research capabilities of ASU and gain access to other ASU resources.
  • Recognition as an industry leader.

Annual Membership Dues:
  • Individual...........................................................$275
  • Professional......................................................$575
  • Corporate..........................................................$1750

For more information on membership levels, please click here.

*Dues includes membership in the Alliance for Construction Excellence as well as CJE.

CJE Committees:

Upon joining CJE, you can serve on any of the following committees:
  • Membership & Member Benefits Committee
  • Legislation Committee
  • Education Committee
  • Practice & Selection Committee
  • Performance-Based Committee

About Job Order Contracting (JOC)

A Job Order Contracting (JOC) system is based on a competitively bid indefinite delivery-indefinite quantity (IDIQ) contract between a facility owner and a construction contractor. The contract typically has a base year with 2 to 4 option years. The contract sets parameters such as the types of work that can be done, location of the work, design criteria and maximum amount of work to be awarded. The contract also has a unit-price book (UPB) that establishes a unit price to be paid for each of a multitude of construction line items. A typical UPB has over 40,000 line items and covers almost every construction task. Items that are not in the UPB can be negotiated, priced, and added to the UPB at any time.

Ideally, contractors compete for JOC contracts on the basis of performance as well as price. The contracts price is put in terms of a coefficient, which is a multiplier that covers the contractor's overhead and profit as well as any adjustment between the UPB and actual local prices. Once awarded a contract, the JOC contractor normally establishes a permanent office in close proximity to the facility management staff. The contractor's project manager becomes part of the owner's facilities management team. The facility owner or manager decides how much work is performed by the JOC contractor based on the need and the performance of the contractor. There is a strong incentive for the JOC contractor to impress the facility owner with outstanding service and quality.

Once a JOC contract is in phase, facility work requirements can be accomplished very easily and quickly if the contractor is a "performing" JOC contractor. Typically, the facility owner needs to give the contractor a simple description of work to start the process. The contractor's project manager then arranges for a site visit and prepares a simplified design. Once the design is approved, the contractor and the facility manager prepare a cost estimate by compiling the appropriate quantities of necessary UPB line items. Normally, the UPB data is linked with an estimating software system; thus, the estimating process goes very quickly. After the cost estimates are completed, the contractor and user negotiate to resolve differences in line items and/or quantities. Once a price is agreed upon, a job order is issued to the contractor and construction begins. The entire process usually takes anywhere from 20 to 30 days from the time the work was first identified. The following flow charts show how the JOC process compares to the traditional design-bid-build process.

Key Benefits to JOC:
  1. Excellent Quality: Partnering and performance incentives produce high quality construction and service. Also, the JOC contractor can prequalify and use only the finest subcontractors. These subcontractors are held to strict quality standards and periodic evaluations.
  2. Fast and Responsive: Takes 20 to 30 days from request to construction start. Urgent requests can be done much faster. This speed is possible because projects do not require soliciting and acquiring a contract, detailed plans and specifications, and a long approval process. Having the contractor located on site also contributes to speed and responsiveness. Two years of research at the Center for Job Order Contracting Excellence (CJE) have identified the quick turnaround and delivery time of facility systems the greatest advantage of the JOC.
  3. Dependable: Long-term relationship, fixed pricing and simplified paperwork all help in meeting customer expectations for performance and price. The contractor is motivated to impress the facility owner with fast, dependable, quality service in order to receive the maximum possible amount of work from referrals and call backs.
  4. Simple: The simplified design documents and acquisition process eliminates the need for complicated and repetitive contract documents. Job orders are negotiated on a line-by-line basis under the guidelines and specifications of the overall contract.
  5. Time and Cost Savings: Three years of investigation at the CJE have shown that the timely and fast construction is the major advantage of JOC. It is obvious that with a performing JOC contractor, the reduction in administration, design, and construction management cost would be substantial, but as of yet, there has not been a comprehensive study to determine the extent of these cost savings.
  6. Minimal Risk: The JOC process has been proven to work very well at hundreds of locations nationwide. In case there are problems with the contractor, the owner can unilaterally decide to stop using the contract once the guaranteed minimum amount is awarded. Usually this amount is quite small. If a performance based procurement system is used, the JOC contractor can be terminated due to a lack of performance.

Potential Problem Areas:

Although JOC is an excellent program, it can have problem areas, which have nothing to do with the concept itself but, rather the way it has been implemented at some locations. There have been two primary problems with the way JOC has been implemented: (1) JOC contracts have been awarded to the lowest bidder rather than the best performer, (2) More than one JOC has been awarded for a particular area (multiple awards).

Several years ago, the practice of awarding JOC contracts to the low bidder became common. This caused top-performing contractors to become concerned. The assumption of a "low-bid" award is that all the contractors will provide equal services and perform to the same level to reduce "lifecycle costs." The "low-bid" award encourages cutting corners, providing lower performing facility systems, and recouping losses forced by the "low" price. It discriminates against performing contractors who are structured to perform and to continually increase their level of performance. These contractors were not able to compete for the contracts unless they made cuts in their performance and quality and reoriented their business practices to focus on winning contracts rather than performing.

The second problem that has recently started to manifest itself is the practice of awarding more than one JOC contract for one location. The theory behind this is that two contractors will compete against one another and thus the user will get a better price. However, what actually happens is a smaller version of a low bid environment. This brings about the problems that arise from the low-bid system. The JOC system rewards a performing contractor with a large volume of work. To make the JOC concept work, it has to be a "win-win" situation. The JOC contractor must set up an "on-site" management and design to be responsive to the facility owner's needs. The contractor is rewarded for the "set-up" costs by being able to do a sufficiently large volume of work, over which the "set-up" costs are able to be distributed. The result of having multiple contractors "on-site" is to force multiple contractors to set-up, and then compete on jobs based solely on cost. Sooner or later, the additional cost of multiple "set-ups" must be absorbed by the end user. Motivation to use multiple contractors on a JOC is motivated by the following reasons:
  • The facility owner mistrusts the contractor.
  • The facility owner perceives that JOC can be a "win-lose" proposition (win for the facility owner and lose for the contractors).
  • The facility owner does not understand the difference between performance of contractors.
  • The facility owner does not understand construction, construction management or facility systems.
  • Someone within the facility management organization is being perceived as having value by reducing the short-term cost of JOC construction. Somehow this individual(s) has convinced the decision makers that in the long run, the facility owner will be the winner by forcing contractors to provide services with minimal or no profit.

The facility owner perceives that a contractor who works at a minimal profit can be a "performing" constructor and a long term partner to reduce facility renovation costs. Studies have proven this to be a "nonexistent" alternative.

Another problem with multiple awards is that it eliminates the benefits of partnering associated with a single contractor working together with a facility owner. One of the nicest features of JOC is the teaming and partnering it brings between the facility owner and contractor. Multiple award JOC contracts take away from this teaming and represent a return to the adversarial perspective associated with low bid contracting.

Of course, the best way to avoid these problems and other, potential problems is to have a well thought-out implementation plan. Prior to starting a JOC program at your location, it would be wise to consult with someone who is familiar with the intricacies of this system. JOC is very simple to use once it is implemented, but it is not very simple to properly implement. There are consultants who specialize in helping facility owners implement Job Order Contracting. Contact CJE at (480) 965-5324 for more information.