Job Order Contracting

Oct 09, 2013

Job Order Contracting (or JOC, as it has come to be known) was a brainchild of the US Army, where small projects were taking up to 18 months in design and procurement phases, and cost growth was up to 50% due to excessive change orders. JOC is a long-term contract that meets federal acquisition regulations (and almost all government procurement codes) for competitive procurement through the application of a unit price book. By establishing contractual pricing up front, multiple projects can be executed throughout the life of a long-term contract (typically four to five years) without an extensive procurement process.

JOC is appropriate for smaller projects (typically $25,000 to the $1.5 million) where the need for quick execution can outweighs the value of an extensive design and procurement process. JOC allows for the proactive involvement of the contractor in the project development process, providing added value to the owner by keeping projects within budget.

Extensive studies in the Army have proven that Job Order Contracting provides clear benefits to owners, including faster delivery of small projects, lowered administrative costs, fewer change orders, claims and litigation, and even higher quality because there is an incentive for contractors to perform well in the long-term contract structure. Any owner of large facility infrastructure who has a steady supply of these smaller projects can garner these benefits by implementing a JOC program.

What about benefits to contractors? Contractors with JOCs weathered the Great Recession better than most, because JOC provides a stabilized revenue stream. Even when capital construction dollars dry up, owners must maintain and reinvent their existing building stock to meet changing missions and needs, and this is JOC’s sweet spot. JOC also rewards contractors for performance. Typically these open ended contracts have a low guarantee but a high potential volume of total project. This means that the contractors who serve owners the best generate the most work opportunities within a JOC contract. And all of this without the constant investment in bidding projects. Capture ratios in JOC contracts can exceed 90%.

RSMeans was the first and is still the most widely used cost data for JOC programs. RSMeans also provides JOCWorks™ software that helps contractors and owners alike manage these vast data sets, as well as manage projects within a JOC program. Training in both the software and in the principals of using the line item cost data are available.

For more information about JOC, visit http://www.reedconstructiondata.com/market-intelligence/job-order-contracting/ or watch for upcoming webinars.

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