Key Points:
- Job Order Contracting (JOC) is a unique construction project delivery method in that it relies on a Unit Price Book (UPB) for bidding on programs and completing work.
- While uncommon, there are circumstances that require items from outside the UPB to finish a JOC project.
- Gordian has a time-tested process for adding a non-pre-priced item to Price Proposal that entails receiving three quotes from subcontractors or suppliers, documenting the items and submitting them for the owner’s approval.
Job Order Contracting (JOC) is a unique approach to construction project delivery in that it uses a Unit Price Book (UPB) filled with preset costs of construction for bidding on programs and pricing individual projects. A UPB is, in and of itself, a binding legal contract and all JOC work done over the life of a contract must be completed using the costs therein. It doesn’t happen often – especially with Gordian’s comprehensive UPBs that offer contract holders 275,000 items to choose from – but every once in a blue moon, a project can only be completed using non-pre-priced items (NPPs), meaning items outside the UPB. This post explores the mechanics of adding non-pre-priced items during a JOC project, including who is responsible for researching costs and the assurances project owners have that NPPs won’t bust their budget.
Understanding a JOC Unit Price Book
Before getting into the weeds about adding NPPs, it is important to understand what a UPB is and why it is considered the backbone of a JOC program. Simply put, a Unit Price Book is a published catalog of construction costs for completing the work the contract holder expects to do with the contract. It might be helpful to think of a Unit Price Book as functioning like an à la carte menu that enables project owners to order a number of projects that meet their exact specifications and needs.
At the beginning of the contract, area contractors bid a multiplier called an Adjustment Factor or a coefficient on the UPB, satisfying competitive bidding requirements and applicable procurement laws. After being awarded, JOC contractors use the UPB to build out Price Proposals, effectively “building” the project on paper, one line item at a time.
In Gordian’s 35+ years of experience, we have found that the most successful JOC programs use a procurement-specific Unit Price Book. Built for construction delivery as opposed to construction estimating, the line items in a procurement-specific UPB include costs for material, labor, equipment and productivity, as well as modifiers for material variations and volume discounts, and demolition costs if necessary. Given that they offer an all-in price for work, it is helpful to think of these line items as the costs for tasks. That’s what you get with a procurement-specific UPB: Holistic, all-inclusive costs for delivering work.
Behind every great Job Order Contracting program is a strong Unit Price Book. That’s why Gordian spends over 20,000 hours per year researching and validating construction costs with suppliers and contractors. Furthermore, that’s why we offer 275,000 tasks with which our customers build their UPBs.
Yet even with such a robust and comprehensive task library, there are occasions that necessitate using a non-pre-priced item. Next, we’ll look at when NPPs are necessary, how they get added and how to keep them from driving the budget through the roof.
Dive deep into all things JOC by watching our Job Order Contracting 101 video series
How to Add a Non-Pre-Priced Item to a JOC Project
When Are Non-Pre-Priced Items Necessary?
Simply put, any time a JOC project cannot be completed without one. These are rare circumstances when specialized material or equipment is needed to complete the project to the owner’s specifications and/or expectations.
What is the Process for Adding Non-Pre-Priced Items?
It is the awarded contractor’s responsibility to research the cost of NPPs. Bear in mind, the standard to meet for this research is matching the procurement-specific costs found in the UPB. That means contractors must research costs for materials, labor and equipment if necessary. More often than not, they gather quotes from at least three relevant subcontractors and select the one that they have the highest confidence can complete the work within the project budget and timeline.
The contractor then adds the item in question to the Price Proposal, clearly identifying it as an NPP and leaving a detailed justification with all relevant documentation, including subcontractor quotes. The project owner then reviews and approves the proposal, just as they would for any other project.
Non-Pre-Priced Items and Project Budgets
Project owners should be, and often are, wary of NPPs taking the project beyond its original budget. After all, one of JOC’s major benefits is that using preset pricing helps keep budgets predictable, and relying too heavily on non-pre-priced items undermines that predictability. Many JOC contracts mitigate potential financial hazards by limiting the use of NPPs to a fraction of the overall project cost, usually in the 5-10% range, limiting the project owner’s risk. Even if a JOC contract does not contain such a provision, owners can set the same expectations with contractors and, since a contractor’s ability to get a future job depends on their performance on the present job, they have plenty of incentive to meet the owner’s demands.
Next up, we look at a project that demanded the use of NPPs.
Case Study: Elevator Repair Requires Non-Pre-Priced Items
Broward County, Florida’s Imperial Point Library had suffered damage as a result of flooding, particularly during the King Tides season. As a result, the elevator malfunctioned often, inconveniencing the library’s patrons, many of whom are elderly. In September of 2022, the county endeavored to repair the water-damaged elevator with Job Order Contracting.
Awarded contractor Florida Palm Construction, subcontractor Oracle Elevator Company, county personnel and Gordian representatives assessed the project’s needs and found that some of the required construction tasks were so unique they were not listed in the applicable Unit Price Book. Not a big surprise given the elevator’s age, but one that required its fair share of non-pre-priced items. The contractors maximized the budget by replacing only failing or obsolete parts, requiring them to conduct extensive research to find several new old stock parts that had been warehoused for decades. Additionally, they installed new elevator controls, which, in compliance with local procurement laws, were non-proprietary.
Even with all the NPPs, progress continued unimpeded. As Bryce W. Bounds, AIA, NCARB, CGC, Construction Project Management Supervisor for Broward County Public Works, Construction Management Division, describes, “I find that one of the strengths for JOC is the way that it can do the non-pre-priced items while still adhering to and respecting the procurement processes of the state that protect our citizens from fraud. It allows us to do specialty things without veering into having any preference for specific companies.”
The project, even with bespoke parts, came in around $154,000, resulting in approximately $4,000 saved for taxpayers from the initial budget.
Part of the JOC Landscape
Just like weather delays and scope changes, the use of non-pre-priced items is part of the JOC landscape, albeit a narrow one. Through open communication, a clear understanding of desired project outcomes and adherence to the process, project owners can use NPPs to complete projects without compromising either quality or cost control.
