Market Intelligence

JOC (Job Order Contracting)

Local Renovation Projects Looking to JOC (Job Order Contracting) to Cut Costs

JOC (Job Order Contracting) is a delivery method to streamline the costs of renovation within various facilities. JOC is used primarily for renovation projects under $10 million and is established as an IDIQ contract between the owner and designated JOC contractor.

In these economic times, according to the RSMeans Business Solutions Expansion Index the vertical building market of higher education has the same rate of expansion for new construction projects as renovation projects. In healthcare the renovation rate is 75% of new construction and is predicted to be the case during the next several years.

JOC greatly reduces the amount of project bidding activities; thereby, allowing for faster project delivery and significantly reducing the project backlog. JOC further helps to foster long-term relationships between the owner and the general contractor which is based on the quality delivery of services.

JOC is philosophically similar to the design/build methodology that is used for “ground up” (e.g. new buildings) facility construction. Construction professionals who are familiar with Design-Build should be comfortable with the use of JOC.

From the experiences of those who have implemented it, the key to a successful JOC application is to understand the fundamental methodology, and both its strengths and limitations. JOC is most successful when applied to the general contracting situations for which it was designed — a large number of repair, renovation and upgrade projects, performed by a single general contractor under a fixed-price bid, who are constantly evaluated on the quality of the work delivered.

JOC revolves around the use of a mutually-accepted Unit Price Book and estimating techniques; therefore, accurate and timely location construction data is critical. It is fundamental to the success of JOC that both parties understand the components of the JOC line-item estimates, and the application of JOC estimates for any given scope of work.

Discussions have shown that construction innovators on both sides of the table (client and contractor alike) are expanding the application of JOC — successfully modifying the original methodology to suit their needs — which are always centered on the quality delivery of a large number of simultaneous repair, renovation and upgrade projects.

A RSMeans survey was conducted among contractors and clients in the school and municipal markets. Contractors were asked about the adoption of JOC in the school, municipal and hospital markets. These markets are ideal for JOC. Because of the safety and security of the patient population in a hospital setting, the General Contractor would typically bid a higher coefficient to perform the work.

In the school and municipality groups, there is growing adoption of the JOC methodology. The critical success factor appears to be the amount of experience and familiarity with JOC procedures. In some instances, state legislation can pose obstacles having been written in an era of multiple bids, lowest price contracting, and not with the awareness of the single-award, multiple projects nature of JOC. In many states, legislation is silent on the issue. Certain states (such as notably Texas, Arizona and Washington State, to name a few) have embraced JOC as a contracting tool for state contracts. Since schools (exclusive of private schools and universities) and municipalities utilize public funds prevailing state legislation can impact their ability to utilize JOC.

Municipalities and schools are embracing JOC, but as is the case anywhere, this is highly dependent on their experience with JOC, and having an advocate within the organization. In certain cases, facilities engineering and construction managers who are ex-military have been hired, and can easily bring the JOC approach into their organization as JOC had its’ start in the military sector. Alternately, some owners may hire a consulting firm to manage their program.

A respondent who had been a medium-sized contractor stressed that a useful exercise for contractors who want to become familiar with JOC was to work up a JOC-type bid on a previous project that they had won and completed, and therefore knew their actual costs. This exercise could consist of working up JOC bids on the following four areas of the project using the Masterformat or CSI unit price organization: Division 2 & 33, Site Work, Division 9, Finishes, Division 22 & 23, Mechanical and Division 26, Electrical. These four divisions constitute approximately 90% of JOC awards. This would permit the contractor to become comfortable with working up an estimate utilizing a JOC Unit Price Book, and the bid coefficient obtained based on past profitable work. It was estimated by this former contractor that each division would take about a day to estimate.

One manager respondent felt an internal staff (he has five contract administrators each of whom will oversee 15 to 20 projects simultaneously, and 40 to 50 per year) was necessary to administer JOC the way that he does. He felt that it was necessary to generate his own estimate, because otherwise he would have to do estimating anyway to check the contractor's JOC estimate. What he does is to have his staff develop the JOC estimate together with the contractor's estimate — then, they conduct a site visit and review each line item jointly. He reports that agreement is reached with this process 90% of the time.

A comment made by a municipal construction manager was that he felt the contractors had to be based in the regional area. It had been his experience that contractors who are based in other, non-adjacent states were staffed too thin locally and could not provide the adequate level of field supervision needed by JOC-type contracts. We can note that experienced and effective national JOC General Contractors will hire local sub-contractors to perform the work; this benefits the local community with jobs and has clearly shown to support and increase EEO requirements.

JOC Experience in LEED®-certified projects
The City of Phoenix completed its LEED Silver certification for the Convention Center with a JOC-administered installation of a 100KW photovoltaic (PV) system. Due to budgetary constraints, the system had not been funded for two years while the convention center was built. When budget funds became available, the city wanted its contractor, Parsons, to move as quickly as possible to install the PV system and complete the LEED certification application.

Using the JOC system for contract administration, Parsons was able to utilize design-build for the PV system, and identified the peel-and-stick PV system as being the best for the application due to light weight and low cost per KWH as compared to other systems. Parsons and the City of Phoenix utilized the “open book” aspect of JOC to quickly identify and price the optimal PV system. Conventional system evaluations and bidding would have taken much longer. The entire system cost was approximately $850,000.

Parsons estimates that by utilizing JOC, the contract time savings was 20% or more compared to conventional contract administrative methods. The state of Arizona legislatively enabled JOC as an accepted form of contracting.

The benefits of a well-administrated JOC program involving both experienced clients and contractors are well documented. These include: increased construction dollar value, steady and profitable work for qualified contractors, satisfied clients and end users. Few construction methodologies can match these benefits for all parties involved.

RSMeans Business Solutions offers JOC services including consulting and project management, JOCWorks™ software, training and a local Unit Price Book to monitor costs during the course of the JOC contract. To join an informational webcast, contact Robert Gair at rgair@rsmeans.com or 781-422-5103. RSMeans is a business unit of RCD (Reed Construction Data) at www.reedconstructiondata.com

Facility owners are using a new project delivery method for renovations - Job Order Contracting - that effectively addresses project backlog by reducing schedules by as much as sixty percent. Furthermore, JOC dramatically decreases administrative costs by as much as twenty five percent and virtually eliminates change orders. Find Out More>>


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