CEFPI Journal job order contracting opens doors to new era


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Researchers have shown that the all too adversarial atmosphere enveloping today’s construction industry can be attributed to traditional contracting methods, forcing conflict versus performance and results. In part, the situation stems from the very nature of contracting itself. Little room for communications, interaction and collaboration are allowed. For any long term commercial relationship to work, an element of trust is required. But trust, it seems, is the element that is absent so often today in the relationship between facility manager and construction contractor. Why is it so scarce?

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CEFPI Journal job order contracting opens doors to new era

  1. 1. Educational Facility Planner: Volume 42, Issue 112Researchers have shown that the all too adversarial atmosphere enveloping today’s construction industry can be attributed totraditional contracting methods, forcing conflict versus performance and results.In part, the situation stems from the very nature of contracting itself. Little room for communications, interaction and collaborationare allowed. For any long term commercial relationship to work, an element of trust is required. But trust, it seems, is the element thatis absent so often today in the relationship between facility manager and construction contractor. Why is it so scarce?The real reason stems from the fact that facility owners and construction firms routinely find themselves straight-jacketed by low-bidcontracts, surrounded by a wall of non-interaction and limited communications.With only this limited type of contract in place, facility owners cannot hope to change their minds or direction about a project, once itis awarded, without suffering repeated financial penalties in the form of change orders, while contractors cannot hope to deliver aproject and earn a profit without cutting corners. The lack of joint scoping, collaborative development, creativity in solutions impactsthe results and performance of the facilities construction projects.Job Order Contracting (JOC) Opens Doorsto a New Era in Facility ConstructionBy David CarrithersJob Order Contracting (JOC) is fast gaining ground among owners around the nation. According to theauthor, with its innovative focus on trust, JOC converts owners and contractors from adversaries to allies,because both parties win.FACILITY CONSTRUCTION
  2. 2. Educational Facility Planner: Volume 42, Issue 113The absence of trust between partners resulting from the low-bid method of procurement leads almost inevitably toadversity, confrontation and ill-will.Fortunately, born out of a desire to respond to the past singlemethod of construction contracting, a new path was formedthat promises to end the adversity and is fast gaining groundamong owners around the nation: Job Order Contracting(JOC). With its innovative focus on trust, JOC convertsowners and contractors from adversaries to allies, becauseboth parties win. Owners, under the demand to deliverconstruction projects quickly, but without sufficient staff tomanage the projects, find palpable relief from the pressure.And contractors, shouldering evermore risk while seeing theirmargins under pressure, enjoy predictable profits andrevenues based on performance. In addition, the localsubcontracting and small businesses benefit from aprofessionally developed and managed JOC program –keeping project dollars local.Compared to traditional low-bid contracting, JOC is in factproving so advantageous to both parties that adoption of themethod could spread a new and much needed non-confrontational spirit throughout the industry, even usher in anew era—a “era of performance-based” cooperation.Putting Owners and Contractorson the Same TeamJOC permits owners to realize greater value by allowing themto build a strong, trusting relationship with a contractor. WithJOC, the contractor becomes an extension of the owner’steam: the owner’s goals become the contractors’. Onceawarded a JOC program, the contractor stands ready to setaside self-interest in favor of listening carefully to the ownerand responding to its needs. Individual projects under a JOCreceive definition through detailed scope documents preparedby the contractor to match precisely the owner’s objectives,budget and timeline. The precision put into preparation of thescope documents eliminates change orders and claims.Key to JOC are pre-established unit prices, which can be foundin a variety of “unit price books,” such as those published byR.S. Means or custom versions by The Gordian Group. Whenseeking a contractor for support of construction projectsfocused on repair, renovation and rehabilitation, the ownerusing JOC cites a particular unit price book in its request forproposal. In turn, the contractor responds by offering a “pricecoefficient” (multiplier) for the work and materials described.Thanks to the availability of unit prices, JOC programs allowsthe contractor to establish its competitiveness up front—without knowing quantities, schedules or timing.Typically, owners will award a JOC program on other than thesole basis of price coefficient. A contractor’s pastperformance, technical ability and safety record—qualitiesessential to the success of the future relationship—are alsoweighed.Predictable PerformanceA JOC isn’t awarded for a specific project. Instead, it awards aconstruction “program” based on a potential maximumamount of work over a year or a number of years. (Forexample, it may award an annual maximum of $5 million over3 to 5 years, with average individual projects of $150,000 to$350,000, but without obligation on the owner’s part to do anywork at all.)The contractor—without guarantee of specific revenue fromthe JOC program—has every motive to deliver a high-qualityproject with each job order issued. (As one owner said, everyjob order is an “audition” for the next one.)Rapid ResponseRapid response to owners’ timelines and occasional emergenciesmay be the most noteworthy advantage of JOC.Not only is the initial time spent to procure construction serviceswith JOC about 75 percent less than that devoted to procurementwith the design-bid-build method, but the time required later toaward specific projects under a JOC program is typically just amatter of days, not months.Rapid response is of critical interest to owners such as municipaland school facility managers, who typically have small windows ofopportunity to complete construction projects.Speedy, safe project delivery is standard with JOC, because thecontractor providing construction services under a Job OrderContract has a vested interest in building and maintaining itsrelationship with the owner.Local BenefitLastly, JOC allows owners to invest their construction funds inthe local business community. Owners see more buildingfunds “stick” close to home because the contractors retainedunder Job Order Contracts manage nearly all the constructionwork by using local subcontractors. In fact, up to 95 percentof the work under a Job Order Contract will be executed bylocal companies, including small, minority and disadvantagedbusinesses.Owners SpeakWhile the advantages of JOC have been touted for years bypioneers and advocates, only recently have owners been polledabout their degree of satisfaction with this innovative purchasingmethod.In 2006, a research team, led by Greg Ohrn, P.E., an assistantprofessor at Northern Arizona University, interviewed owners andfacility managers who use JOC. The conclusions—statisticallyaccurate—are telling:JOC is convenient. Far and away, owners value JOC for itsease-of-use. Seventy-one percent say that JOC is easier to usethan other procurement methods.Facility Construction
  3. 3. Educational Facility Planner: Volume 42, Issue 114Facility ConstructionJOC is more satisfying. Sixty percent of owners say JOCprovides greater overall satisfaction than other procurementmethods. Sixty-nine percent say it’s more satisfying, inparticular, than design-bid-build.JOC is favored for time-critical projects. Forty-three percentsay the primary reason for adopting JOC is to meet demandsto complete work in a timely manner.JOC requires less startup time. Seventy-five percent of ownerssay projects take less time to start with JOC than they do withother procurement methods.JOC requires less design time. Fifty-seven percent of ownerssay that projects require less design time with JOC.JOC requires less close-out time. Sixty-three percent sayprojects take less time to close out with JOC.JOC also scores well with owners when it comes to costs. Amajority of owners say projects cost the same or less whencompleted under a Job Order Contract.Owners of publicly funded facilities everywhere are operatingunder extreme pressure due to time constraints and a lack ofdependable resources. So it’s crucial they embrace the rightconstruction management tools. JOC is one of those tools. Itopens doors to teamwork, innovation and new thinking aboutdesired outcomes.JOC in Action in School ConstructionAfter one of its major school construction projects ran intoproblems under a design-bid-build contract, Santa Fe PublicSchools committed an additional $1 million in funding to fix andfinish the work – this time under a Job Order Contract. TheAlbuquerque office of Virginia-based Centennial ContractorsEnterprises was awarded the JOC.A forensic architect was engaged to help determine the problemswith existing building systems, and to lead a “strategic encoding”programming process. This process prioritized the school’s needswithin the available budget, and required consensus from allschool community members about which goals were mostimportant. Centennial’s active participation in this process was animportant way to rebuild trust and learn about the community’sconcerns.The scope of work included a major HVAC repair, providing hotwater and drinking water to all classrooms, exterior “hardscape”and landscape, major IT reworking, and various small,miscellaneous improvements that the school communityidentified.The JOC procurement system made a believer out of DeputySuperintendent of Operations of Santa Fe Public Schools BobbieGutierrez. “Often times we have emergencies and it’s great to havea company we can call on to do the work on short notice and nothave to put orders out to bid,” she said.Another school renovation project startedunder the design-bid-build procurementmethod and reissued as a Job Order Contractwas the renovation of an old gymnasium at aGulf Coast college campus in Texas – part ofThe Cooperative Purchasing Network, (TCPN),established to help manage renovation andremodeling projects in Houston area schools.This project was issued to KBR, a Houston-based global engineering, construction andservices company in early July 2004 after workhad been halted a year earlier due to lack offunds. With the new school semester rapidlyapproaching, the college had little time tocomplete this facility.KBR worked with college facility managers to expedite theselection and delivery of materials to meet their needs includingresurfacing the pool deck and installing sports flooring in someareas. KBR made arrangements for the main gym area to beavailable for registration as work continued. With areaprioritization, scheduling, and close coordination with thecollege, gym activity areas were available as they became needed toaccommodate classes and other activities. Work was completed insix weeks.The flexibility of JOC allowed for expedited selection, changes andpricing of finishes as work progressed. Additionally, the owner &KBR were obligated to a published price book for easy pricenegotiation.Satisfying Every Day NeedsOften times, JOC’s best application is for the completion ofsmaller, less clearly defined projects that need to be completedquickly and dependably.
  4. 4. Educational Facility Planner: Volume 42, Issue 115Facility ConstructionDavid Carrithers is vice president of marketing for Vienna, VA-based Centennial Contractors Enterprises and chair elect of the non-profitCenter for JOC Excellence. He can be contacted at 703-287-3042 or contact@cce-inc.com. More information is available atwww.CentennialNOW.com.In Loudoun County, Va.—one of the fastest growing counties inthe United States—JOC projects take a variety of forms. Recentlycompleted JOC projects include re-stabilizing and repaving thecounty’s 10-acre school bus storage and maintenance facility;replacing several school roofs; and replacing windows at manyolder schools. Smaller projects have included installing accessramps at school loading docks and installing recessed fireextinguisher cabinets (they had previously been hung exposed onthe wall) to make them comply with ADA standards.According to William Koltser, Director of Facilities Services forLoudoun County Public Schools, JOC allowed the projects to becompleted faster. “The smaller projects were completed throughJOC before we could even have gotten a design and received bidsunder normal contracting procedures,” he said.The JOC format also allowed the County to work cooperativelywith the contractor to develop a scope for the projects,eliminating any misunderstanding of what the completed workwould entail. “This is probably the biggest benefit,” added Kolster,“because the contractor is not overwhelming the owner withchange orders for flaws in the plans and specifications that youroutinely find in design-bid-build projects.”The cooperation during scope development results in a proposalthat addresses all of the aspects of a project, so the true projectprice is known up front and contractor-generated change ordersare eliminated.JOC also allowed for consistent results on several projects thatwould traditionally have been bid out separately. “In the case ofthe roof installations, working with our JOC contractor ensuredthat we had the same subcontractor installing all of our roofs toprovide a consistent level of performance,” said Kolster.“The profit for a JOC contractor is a direct result of performingmultiple projects over a long period of time,” he explained. Thiscreates the need for a contractor to develop a relationship with theowner that is non-adversarial. In a design-bid-build situation thecontractor may never be back so they do not go out of their wayto develop a partnership with the owner.”Additional information on Job Order Contractingcan be found at www.JOCexcellence.orgAbout the Author: