Job Order Contracting Proponents Seek Market Growth
The use of performance-based contracts has blossomed in recent years with delivery methods such as design-build and construction manager-at-risk, particularly for large jobs. But another method, job order contracting (JOC), has been around for almost 30 years. As the industry looks increasingly toward maintenance of aging infrastructure, the South Carolina firm that claims the origins of JOC hopes its big time has arrived.
"JOC occupies a nice niche, but a small niche within the overall construction industry," says William Pollak, the new chief executive officer of the Gordian Group, Mauldin, S.C., which supports agencies in implementing and administering job order contracts. "We feel it could be bigger if we just went out and sold it. I see great opportunities. On the government side, we live in a world of cash constraints. Here is a fairly straightforward way of doing things more efficiently."
Development of the JOC concept is credited to Harry Mellon, a U.S. Army lieutenant-colonel who served as chief engineer for the Supreme Headquarters Allied Powers Europe in Belgium in 1982. Because competitively bid contracts, even for modest-sized tasks, took months to complete, Mellon came up with an idea for on-call contracting.
"He was having trouble getting European contractors to respond to the military's needs, especially when working for so many different national leaders," says president Robert Coffey, who helped Mellon found the Gordian Group in 1990. "Harry met with some key people and brainstormed how to get contractors to respond: 'What if we listed all the tasks and prices we were willing to pay and have contractors bid against that? We would only keep giving contractors work if they continued to perform.'"
For example, an owner would set a price it was willing to pay to install one square yard of carpeting. That price would include direct cost of materials, equipment and labor. The owner would not include any profit or overhead in the price. Then firms like the Gordian Group can provide a customized-task catalog of unit prices, including labor, equipment and materials costs, with which the on-call contractor and owner work. Proponents say this eliminates contract quibbles and maintains transparency. "Imagine bidding out every repair and alteration job—it's an administrative burden on both sides," says Coffey. "All that goes away with JOC. The contractor does not have to prepare bids for each and every job."
Mellon brought the concept back to the United States with support from the Army Corps of Engineers, although politics and contractor resistance stymied its initial growth. However, Mellon acquired clients like the Miami-Dade County Schools and the Chicago Dept. of Transportation—which remain among Gordian Group's JOC clients to this day.
"It was a slow start," says Coffey. "But we've been very fortunate to grow methodically over the last 22 years. Now we have staff around the country feeding that data. The staffers support clients daily and do research on local costs."
The pricing catalogs are updated constantly. "A few years ago, because of China, steel prices went up 100% overnight," recalls Coffey. "There was a lot of angst among facilities folks. When there's a hurricane, that affects plywood prices."
Scott Forshey, senior project manager for the Lusk Group, Columbus, Ohio, notes that there are other construction cost catalog suppliers, such as RSMeans. With the caveat that his firm has worked with the Gordian Group since 2002, he says that when doing JOC in the 1990s, "RSMeans was not as detailed for building a cost proposal as a Gordian Group book."
Charles Bowers, Arizona business development manager for Centennial Contractors, a member of the Bilfinger SE Engineering and Services Group, says JOC requires a contractor to have integrity and a focus on customer service as core values—and to be flexible and responsive. "Generally the projects are high profile and critical to meet infrastructure needs," he says. "The owner wants it done safely, quickly and by a contractor it can count on. Generally there are lots of small projects going on at one time; you need a sense of urgency, skilled professionals and proven processes. There's not much reaction time in the execution of these jobs. A lot of pre-planning is required because that often lasts longer than the job itself."
For example, Centennial contracted to replace a school's transformer just a couple of days before the school was to open, he says. "We have people who are experts in various fields, who know where to go to get what is needed." Within four hours, a truck was on its way from Los Angeles to Phoenix with the transformer.
The New York State Dept. of Transportation has worked with the Gordian Group for a decade, says Peter Weykamp, NYSDOT chief bridge maintenance engineer. In late 2007, the Federal Highway Administration (FHWA) approved federal funding for a three-year NYSDOT pilot program using JOC for basic bridge maintenance.
A 2011 FHWA report said: "JOC does provide a vehicle to attend to minor repairs in a timely manner. … Initial comparison indicates that work performed through the JOC contract is substantially less costly than a 'where and when' contract."
The NYSDOT catalog has been updated for bridges, highways, overhead signs and culverts, says Weykamp. "If you made discoveries in the field under a lump-sum contract, say unsound concrete, it was difficult to find limits on a traditional estimated bid. With JOC, you just pay for what was removed. There's no fighting over how it was removed and no bringing in a backhoe when you could do it with a shovel."
Nathan Crozier, a district program manager with the Ohio Dept. of Transportation, utilizes JOC for county garages and other buildings. "It has worked well with projects that have a timeline attached to them and when I need a capable contractor to get the job done at a competitive price," he says. "I normally have more control over the time frame and cost."
The process is not a panacea. Proponents caution that it is not applicable for larger facilities or major new construction. Weykamp notes the learning curve and time needed for contractor buy-in. But he says, "We get an average of four to six bidders per contract. The pricing is fair, the bid has an adjustment factor that's typically under what you get in disputes. I definitely think it is essentially a mini-version of design-build. We've let about 64 contracts, and there has not been a single dispute."
As for the learning curve, "JOC is a bit of a round peg in your square hole," Weykamp says. "The superintendent now has to go through that catalog and find items, and that is difficult. The Gordian Group does provide a field guide that really helps us find the right items."
The Lusk Group's Forshey notes that during the procurement, "all the line items, everything is all on the table. The owner sees exactly what they're getting. For a contractor it's nice, because it's the same thing. The cards are all out there from the start."
The firm also recently began offering cooperative JOC purchasing, called ezIQC. "JOC lends itself well to facilities, so agencies with budgets of a few million dollars and above are typical JOC users," says Coffey. "But a lot of agencies out there spend a couple hundred thousand a year. So we put out a cooperatively purchased JOC." That has helped boost Gordian Group's client list to nearly 400.
But the firm, in which global private equity firm Warburg Pincus recently acquired a majority ownership, looks to grow even more aggressively. "Thanks to the ezIQC product, we've signed up a lot of smaller entities, like park departments and municipal transportation departments," says Pollak. "We'd like to accelerate that. No region is saturated with JOC. If anything, we have to restrain ourselves as to what we go after."
One of the opportunities may lie in selling information in the construction task database, which grows with every new client. "We have this database for pricing local data with 260,000 data points," says Pollak. It's used every day by our clients, and I believe there are other people out there interested in that data."
Bowers, a long-time secretary for the Center for Job Order Contracting Excellence, a nonprofit advocacy group, also is confident the method will spread. He teaches part of the first-ever certificate program, now in its second year, in JOC Alliance of Construction Excellence at Arizona State University. "Every project is an audition for your next job. If you don't do a good job, it comes home to roost very quickly. There is a sense of fairness built into the JOC system. It's invigorating. I have a 45-year background in construction, and I have a ball doing this."
