How job order contracting improves construction efficiency
17 May 2022
If you want to know how any economy is doing, count the construction cranes. Many national economic indicators are linked to the status of the construction sector and there is a clear link between construction activity and economic growth. Construction is a bellwether for a community’s financial well-being, a sign of future opportunity.
How construction work happens can have significant financial impacts in the present. The delivery method determines how the architect and contractors execute a project and can significantly impact the budget and schedule.
Depending on the project scope and objective of the contract, owners have various project delivery methods at their disposal. These delivery methods include but are not limited to Design-Bid-Build (DBB) and Design-Build (DB).
How to make construction more efficient
In any process, small efficiencies can have major impacts. Construction project delivery is no different. Traditional procurement methods are rife with inefficiencies that can lead to bloated project timelines and lost patience. This is particularly true in the public sector, where procurement cycles are hampered by complicated, bureaucratic procedures. As a result, project delivery typically takes three or more months to complete and requires a significant amount of administrative and technical resources.
Job Order Contracting (JOC) is a project delivery method conceived to deliver hyper-efficiency so construction begins faster. Unlike traditional bidding where each project is identified, designed and then put out to bid, JOC establishes competitively-bid prices up front through a Unit Price Book (UPB) and eliminates the need to separately bid each project. Therefore, JOC is presented as a solution to reduce the bidding effort as an alternative to more time-consuming delivery methods for routine construction projects.
Some projects are more suited to JOC than others, such as: small or medium-sized jobs; time-sensitive and emergency work; backlogged projects; maintenance, repair and operations; projects with a fixed budget; and replacement-in-kind projects.
It is also particularly suited to the public sector where money is tight, procurement teams have endless projects on their hands, civil servants want to support the community and elected officials want to deliver on campaign promises.
Benefits of Job Order Contracting
While thousands of projects have been successfully completed through JOC for decades, there is still low awareness of it within the construction industry, especially among those who stand to benefit the most from using it. We embarked on data analysis published in a recent research report from NIGP and Gordian and discovered that 91% of the responders utilizing Job Order Contracting indicated that projects took 12 weeks or less to procure, with nearly 70% of them indicating the process was fewer than nine weeks. By comparison, more than 50% of the responses indicated that when using other project delivery methods, like DBB, DB or CMAR, the length of the construction procurement process rose to greater than 12 weeks.
Five practical ways public sector construction management professionals can achieve greater efficiencies in their projects:
Upfront Competitive Bidding: Once a Job Order Contract is awarded, the owner can ask contractors to perform a series of projects. This time-consuming front-end solicitation process is completed one time, rather than repeated for each project, so there is no need to prepare new bid packages each time you require a contractor to perform work.
Readily Available Contractors: Local contractors bid on the Job Order Contract, and once awarded, you have a pool of contractors readily available to work on your projects. All pricing is preset in the UPB, so contractors can start on your repairs, renovations, upgrades or emergency construction projects as soon as they are identified.
Aligned Incentives for Quality: While the Job Order Contract is in place for multiple projects, the contractor must still satisfy the owner’s standard of quality, time and construction to ensure future work. If the owner is satisfied with the working relationship, they are more likely to continue working with the contractor. The potential of a steady stream of work motivates the contractor to meet and exceed expectations with quality, on-time construction.
Clearly Established Project Scopes: The Job Order Contracting process naturally reduces change orders because all project stakeholders participate in a site visit called a Joint Scope Meeting. During this meeting, the team walks the job site to develop a Detailed Scope of Work (which the contractor will use to develop a price proposal) in a collaborative and constructive atmosphere. This step reduces the misunderstandings and mistakes that lead to most change orders, but that doesn’t mean changes never happen.
Increased Cost Control: Budgetary control is the cornerstone of Job Order Contracting programs. JOC helps contain and control costs because prices are locked in at the outset of the contract through the UPB. Each task in the UPB includes a detailed description, unit of measurement, unit price and, where applicable, demolition cost. The unit prices contain local direct costs for material and labor. There are a set of technical specifications for each of the construction tasks and general conditions that contain the contract language concerning the execution of the contract. This level of detail aids everyone involved in the project, and because prices are preset, there are no lengthy pricing negotiations.
One of the main issues of DBB and DB contracts is that they are very difficult to be planned, monitored and controlled unless advanced technologies are in place. Track and tracing systems, Industry 4.0 technologies, drones, or big data analytics, and even augmented reality are required to visualize some specific project parts before the actual construction. Public agencies have limited resources and often these advanced technologies are out of scope for the tracking of projects. The lack of transparency can lead to opportunistic behavior or mistrust between the project owner and contractor.
Governments face the challenge of looking for strategies and ways to build the relationship that assures them trust and a delivery of the project that is painless in terms of contract issues. They’re basically looking to collaborate with contractors and limit opportunistic behaviors. These aspects are much better in the context of JOC contractors. Our research indicates that JOC contracts, compared to other project delivery methods, seem to guarantee more effective governance of their relationship with the contractor.
JOC contracts seem to be less dependent on technology, which increases the capability of “less advanced” buyers to manage construction projects successfully.
The first step towards a successful project happens long before the groundbreaking ceremony - selecting the project delivery method best suited to meet the needs of the work at hand. Although JOC is moving into the mainstream of construction procurement methods, alongside Design-Bid-Build and other traditional project delivery, its use still represents unexplored territory for many organizations, especially in the public sector.
Andrea S. Patrucco, Ph.D. is Assistant Professor of Supply Chain Management in the Department of Marketing and Logistics at the Florida International University College of Business. Randy Horn is a Regional Director at Gordian with more than 20 years of experience in the fields of program management and construction management.