What You Need to Know About Job Order Contracting

The idea behind Job Order Contracting (JOC) is to eliminate the most irritating parts of a facility manager's job. Are you sick of extra steps like hiring an engineer to spec every small job before the bidding process? With JOC, that step isn’t necessary. Are you tired of change orders that seem suspiciously pricey compared to the original bid? With JOC, you’ll never have to deal with those. In fact, what if you could establish a long-term relationship with a top-notch contractor and you could have complete cost certainty on every job? That’s JOC.

Here’s how it works:

First, you choose a price guide that specifies the costs associated with the jobs you might need to have done. The contractors then bid in fractions according to how much they would require to do a job—any job—compared to the prices in the guide. A bid of 1.1 means that the contractor will work for a 10 percent premium over the prices listed in the guide. You award the contract to the lowest bidder, and they’re committed to doing any job you assign to them at the price you specified for the length of the contract. If you don’t like their work, you’re under no obligation to give them more work. (There’s a minimum guaranteed to the contractor, but it’s negligible.)

If it sounds too good to be true, you probably wonder what’s in it for contractors. The answer is volume.

“We have a continuous stream of business, we keep our people working, and we make money because we have long-term relationships,” says Patrick Stock, director of business development for Sorensen Gross Construction Services in Flint, Mich., which has a JOC agreement with the U.S. Postal Service. “We’ve done good work, and because of that our workload has expanded beyond what we would have hoped.”

JOC works best on small projects like repairs, alterations and minor new construction. Facilities managers are likely to want to go through the full engineering and bidding process for larger jobs. On smaller jobs, though, “all you need from that engineer or architect is to convey the scope of the work to your contractor. Or, just call the contractor and tell them to meet you at the site, and you can document it from there,” says Robert Coffey, president of the Mauldin, S.C.-based JOC consulting firm The Gordian Group.

Contractors like Stock are happy to be involved early in the process, and glad, Stock says, “to have the variables defined up front.”

The hard part is covering all the variables.

There are a lot of them in construction, and it’s important to locate a JOC price guide to cover the materials and tasks that your jobs will include. A source like the RSMeans Building Construction Cost Data Book may be exhaustive enough to cover your job; if it’s not, there are resources like The Gordian Group’s Construction Task Catalog®, an ultra-detailed price guide that’s customized by region and updated frequently to reflect market fluctuations. In addition to local pricing, the Gordian Group can also help its clients set up their JOC systems and holds seminars to educate and recruit local contractors through its JOC Complete Solution product. The RSMeans guide costs about $150.

JOC is taking root with large government organizations like the U.S. Postal Service and state transportation departments. It’s just emerging as an option for facilities managers with smaller operations, who may not have enough volume to interest contractors in a JOC agreement. Coffey says the magic number is about $1 million in contracts annually. If an organization falls short of that, one solution is to pool together with several similarly sized organizations in the region to offer a JOC contract based on the aggregate volume. The Gordian Group has a system that makes the connections for you called EZIQC.

JOC aims to help you complete small, repetitive construction tasks quickly and with controlled costs. Trying something other than a traditional design-bid-build approach can be a significant paradigm shift for facilities managers, but a system that promises to be faster and cheaper, and to provide consistent quality, is probably worth a look.