Contracts for commercial construction projects usually cover a complete scope of work, but large institutions often have ongoing needs for smaller projects. This is where job order contracting (JOC) comes in: JOC allows large entities to hire one GC to cover multiple smaller — and often not yet determined—tasks and projects without going through the bidding and contract process for each one.
Because JOC differs from the typical process for large construction projects, GCs need to understand the organizational requirements and procedures to manage these complex contracts successfully. In this article, we’ll explain the JOC process and its advantages and challenges — plus offer tips to succeed with job order contracting.
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Job order contracting, or JOC (pronounced “jock”), is a project delivery method allowing owners to award a single contract to a GC that will cover multiple jobs during a set period of time and with a budgetary cap. The scope of the contract is not defined at the bidding stage.
Job order contracts necessitate an ongoing working relationship between construction companies and the owner agency. They are often awarded by public entities such as:
State and federal agencies Military installations Housing authorities Schools & universities Airport and transportation authorities Prisons & JailsJOC may also be called task order contracting, on-call construction, or IDIQ (indefinite delivery, indefinite quantity) construction. These are all accurate descriptors for JOC: the “umbrella” contract will cover multiple tasks that the owner may know in advance or may determine within the contract term.
The contract, or Master Agreement, for the work will have a fixed term — often one or more years — and a maximum dollar value. Within the master contract will be task orders, which are separate, smaller projects that will be completed during the term and billed separately against the maximum lump sum set by the contract.
Some owners will hire a third-party company to help administer a JOC contract. This specialty company would act as an additional layer of project management with expertise in the specific processes and documentation necessary to keep JOC projects thoroughly organized.
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The JOC model uses design, construction and financial workflows that are unlike other construction delivery methods. To effectively manage and execute JOC contracts, team members must become familiar with the elements used in these projects.
JOC is well suited to tasks like:
Repairs and maintenance work Straightforward or commonly needed projects Emergency work Time-sensitive projects Replacements and upgrades Select new buildsThe tasks to be completed may be partially identified before the contract is awarded, but some or all may be needs that arise during the contract term. A contract could include almost any number of tasks of varied types, sizes and scopes.
The pricing for the tasks within the contract is laid out in a book called the Unit Price Book (UPB), sometimes called the Construction Task Catalog (CTC). Every type of industry-standard construction work will have a unit price listed. Each task order within the JOC contract is priced based on the UPB, with line items for each component of the work on the order.
Important note: Items in the Unit Price Book that are not pre-priced require extra time and approvals. Non pre-price items also require subcontract bids. For example, three bids must be supplied by the relevant specialty contractors before one is selected and approved in order to ensure fair pricing for the owner.
Depending on the scope of the project, the UPB can be understandably extensive and detailed. For example, this sample Construction Task Catalog produced by Gordian for the Capitol Region Council of Governments in Connecticut is over 2,500 pages.
During the bidding process on a JOC contract, the GC is required to come up with an adjustment factor, which is the percentage of variance from prices listed in the UPB that the contractor will charge. An adjustment factor of 1 would mean all charges in the contract would be precisely what is specified in the UPB. But to get a fair price for the work and compete for the job, companies will bid up or down from the one-to-one factor.
For instance, a contractor might bid the JOC contract at a factor of .97 or 1.04, which would mean that the charges on the tasks completed would be the preset prices listed in the UPB multiplied by .97 or 1.04 — whatever they have bid. Contractors run the risk that real-world prices may be higher or lower than those in the Unit Price Book.
The contract is usually awarded to the lowest bidder. GCs will consider many elements when they decide what adjustment factor to bid. For instance, if known hurdles could impede work for this agency, the GC might bid higher.
If a construction company has fewer projects lined up and wants to fill out its capacity, it might make sense to put in a lower bid. Additionally, strong confidence in the working relationship with the owner and specialty contractor in the area, or favorable market conditions could also cause a GC to go below 1 on their factor.
The complexity and nuance of this type of bidding require astute and knowledgeable personnel on the GCs team to determine what adjustment factor to bid.
During the job order contract term, the owner will define the work needed. Each project will be a task order, and during a joint scope meeting, the owner and contractor will walk the site and document the scope of work for the task. A GC may be working on multiple, staggered task orders simultaneously, each for a different type of work.
During the joint scope meeting, the contractor may identify parts of the scope that aren’t accounted for in the Unit Price Book. This would require the GC to get pricing from a specialty contractor and propose pricing for approval to the owner before proceeding with the work.
Most types of work included in a job order contract will be standard industry tasks. Each type of work will have a set price laid out in the Unit Price Book, and the contractor will look up that price and multiply it by the task unit quantity, adjusted for the adjustment factor of the contract. For instance, there would be a per-square-foot price for drywall installation. The task invoice would have a line item multiplying the price by the amount of drywall established in the take-offs, then adjusted per the master agreement adjustment factor.
Important note: Rapid price fluctuations in material and labor costs are difficult to forecast. Having fair contract terms that include escalation clauses and open dialogue can help mitigate cost changes.
Let’s take the example of a job order contract for a university to look at how the process can unfold.
The university puts out a solicitation for contractors to bid on the JOC. The level of detail on the anticipated tasks and projects can vary. GCs put in bids of their Adjustment Factor for the total contract.
The owner selects one contractor, usually the lowest bidder, and draws up a master agreement outlining the maximum duration and dollar value. This primary agreement allows multiple projects to be executed within the timeframe and under the monetary ceiling.
In the case of this university, the facilities management team and the general contractor begin to explore what work needs to be completed. The teams discover multiple buildings requiring roof repairs and identify some planned classroom upgrades.
The facilities team and contractor conduct separate joint scope meetings for these two different projects. The teams walk the sites, discuss the scopes and document the needs. The classroom upgrades have plans drawn up, but the roof repairs do not. Each will require a scope and separate pricing.
The GC draws up separate task order bids, drawing the pricing from the Unit Price Book and the details discussed in the scope meetings. Using numbers from the take-offs, the contractor multiplies the quantity of each work type by the UPB and their factor from the master agreement to come up with line-item pricing and, eventually, a total value for each task order.
Simultaneously, the GC would solicit bids from subcontractors that they need for the task orders to validate that the predetermined unit price will be supported.
If there is work needed that is not accounted for in the UPB, the GC will seek competitive bids from specialty contractors to add to the task orders and surface those to the owner group for approval.
Because of market volatility, material pricing may have increased. In this case, the GC needs to look at the escalation clauses in the master contract to determine the process and terms for possible price changes.
The GC submits the detailed task orders with pricing and discusses scheduling with the ownership team. Once approved, the GC can write subcontracts for specialty contractors and purchase orders for vendors.
The work may be staggered, so the roofing and classroom upgrades might run concurrently for a time but have different completion dates.
Each task order may be completed at a different time, and the project manager and superintendent will need to stay on top of all the smaller task orders on the JOC. When the roof repair task order is closed out, the GC can invoice the owner for that project. The classroom renovations may take longer and is typically billed once complete, but possible to implement progress billings for longer jobs. In the meantime, the facilities team may have scoped five other small projects, and work has begun on two of them.
The GC needs to be very organized and consistent with their naming/numbering convention on all task orders throughout the life of the JOC contract. For example, assigning a project number, like 1005, within the Master Agreement. Each task order on the project would have a variation of the project number, such as 1005.01 for roofing repairs, or 1005.02 for classroom upgrades.
Additionally, each task order would have separate daily logs and separate contracts. For example, having two separate contracts for a carpentry company. One contract is for the work that the company completes on 1005.01, and the other contract for the job on 1005.02.
There’d also be separate warranties at close for the work at closeout.
There are benefits for all parties involved in JOC projects, and the relationships between owner and construction company personnel can provide a level of comfort and familiarity that makes the execution of these contracts more successful.
Ongoing relationships: For GCs, working with the same project team and subcontractors leads to trust and smoother working relationships.
Profitability: With confident factoring on JOC project bids, construction companies can see steady profits from these contracts.
Speedier delivery of projects: Large institutions benefit from quicker execution of tasks and the availability of quick emergency work when needed.
Flexibility: Ownership agencies can order the work that aligns with their needs, and the JOC contract allows them to initiate projects as needs arise.
Access to a trusted contractor: Easy and immediate access to a GC with an ongoing collaborative partnership.
Thorough organization helps companies unlock the potential for job order contracting. JOC is a process-driven delivery system that requires GCs to be well-organized. Below are some of the critical elements to attend to.
Documentation, including detailed task orders, submittals, and financial reports give all stakeholders reference points. With numerous small and staggered projects going, clear documentation helps both teams keep track of progress.
Processes that are easy to replicate make the multiple, repetitive, smaller task orders more manageable. Establishing workflows will make it easier to execute the possibly varied types of tasks within the main contract.
Understand the owner’s requirements, such as billing forms and submittal expectations. Each project and owner will have their own processes, and GCs need a solid grasp of the particulars to keep the multiple task orders flowing smoothly.
Scope out clear roles and responsibilities for the project team at the outset. Getting to know the owner’s team and delineating tasks going forward will help avert problems and friction later.
Working with many stakeholders, including ownership teams, subcontractors, and possibly a gthird-party JOC administration company, can cause friction. Good relationships, strong organization, and clear team communication can decrease the probability of conflict.
Because job order contracting is distinct from other construction delivery methods, contractors and owner organizations must understand the workflows and requirements before embarking on contracts. However, with well-organized teams, this model can benefit construction companies and public entities that utilize job order contracts.
