Best Practices in Calculating the Coefficient for JOC Contractors

Contractors who are new to Job Order Contracting (JOC) solicitations may find the bidding process overwhelming at first, and those who are familiar may wonder if they are developing their factor using the most efficient methods. Here are some best practices for JOC contractors to calculate a competitive coefficient.

Best Practice #1: JOC is a Long Term Relationship:
Read the solicitation carefully and understand what you can expect.

In order to prepare to calculate a new coefficient, you must take into account bid considerations:

  • Annual anticipated volume of work
  • Type of work expected
  • Construction site location
  • Staffing necessary

The solicitation should provide an annual anticipated volume of work and the type of work that is typical or expected for the JOC.  Be sure to note the location of the work – a college campus may be an easier site to manage than a state prison system.  Some solicitations require a staffing plan be submitted with the bid package and may even require minimum staffing levels for the duration of the contract.

Best Practice #2: Put the Right Staff in Place:
In new staff members, look for problem solvers with people skills who are able to develop a non-adversarial, partnership relationship with the facility owner.

A JOC contractor needs to have a professionally competent staff capable of being responsive to the facility owner and familiar with the JOC process including proposal development and review.  A common worst practice is to low-bid the coefficient in order to win the contract, then hire staff from the previous JOC contract.  The previous staff may have developed bad habits in scoping or Price Proposal development, and any previous pressures in their relationship with the owner is now strained even more by the new, lower coefficients.  A smarter approach to a new JOC award at a location with an existing JOC program may be to hire all new staff or retain only a few staff members from a previous JOC.  Quality employees are going to be much more valuable over the long-term to ensure a successful program.

Continuing on the subject of staff, a JOC contractor should consider their subcontractor base an extension of their own staff.  Ultimately, the JOC contractor is responsible for ensuring that quality construction is completed on time.   Engaging specialty trades like electricians, plumbers, and mechanical contractors early in the process can help to ensure that the subcontractors take responsibility and deliver the finished product for which the facility owner is looking.  This is also true prior to the award of the JOC contract.

Best Practice #3: Know the Value of the Price Book:
Engage the subcontractor base and have the various trades review and comment on the pricing. These tradesmen are much more aware of variations in cost and can review the details in their section of a price book quickly and efficiently and compare that to the prices they are accustomed to paying locally.

The contractor should select a representative project that was recently completed then build a Price Proposal from the pricing documents to ensure the correct coefficient is being bid.  The next step is to compare the result to real costs from the representative project.  This exercise will require the contractor to select a good sample project, and will require the estimator to perform a realistic and acceptable takeoff and develop an accurate Price Proposal. It also gives the contractor an opportunity to engage their subcontractors to determine which are most technically capable for this type contract.

Best Practice #4: Volume Driven System: Select more than one representative project to price with varying scopes and sizes for the sample set, including multi-trade renovations, minor new construction, and horizontal projects.

A key mistake that is often made when a contractor’s business development team does not engage any of the end users prior to submission of their bid coefficient.  When a coefficient is bid too low, the JOC team begins the contract term being set up for failure.  The result is that the contractor may feel forced to add unsupportable items or exaggerated quantities to a proposal, which in turn takes longer to review and leads to delays in Job Order development.

Best Practice #5: Evaluate Risk of an Unrealistically Low Bid:
Engage everyone in the workflow pipeline to ensure that the bid coefficient can meet the expectations of both the contractor and the owner.

A coefficient that is too low can create an adversarial relationship, which will lead to a reduced volume of work and could lead to the owner choosing not to extend future contract options.  To avoid this scenario, the contractor needs to engage not only the subcontractor base, but also the project managers and estimators who would be working on the project.  The input from the end users can help mitigate the risk of a bid coefficient that is unrealistically low.

The coefficient that is bid is a reflection of the contractor’s understanding of the value of the unit pricing and is often the primary factor in determining which contractor wins the award.  By the time of the solicitation, the owner has selected a source for pricing data to bid a coefficient against, so the only control that the contractor has with regards to price is the number that will be multiplied against the book.

Best Practice #6: Understand How to Price Projects for the JOC:
Know the level of detail of the price book, what is included and excluded, and review the approach to how pricing is established.

Traditionally, owners use one of two books to price the construction tasks for JOC projects: estimating guides, or a unit price book like the Construction Task Catalog®. The bidder must consider his or her approach differently, based on the type of book used. For example:

  • What are the costs for mobilization and execution?
  • Does mobilization include storage boxes, portable toilets, and/or an office trailer?
  • What is the approach to demolition?
  • Is demolition priced as a unit (like the install) or per square foot?
  • How is waste handled, and what about moving furniture or protecting the existing space?
  • What are the specifications associated with these prices?
  • What is considered working height?
  • What city cost index or area cost factor is to be used?
  • Are permits included in the coefficient, or are they added as a separate line item?

The list of questions and considerations goes on, but contractor must be familiar with, and pay close attention to, the differences between both books, and the details of how the book is to be properly used.  For Instance, if the estimator adds a crane to set a RTU on a single story building but the crane is included in the equipment cost of the unit price, then the estimator has made a huge mistake in developing the JOC project Price Proposal which will be reflected in the bid coefficient.

These six industry best practices will help a JOC contractor develop a coefficient and continue to be successful after the contract is in place. Keep in mind that most successful contractors know they have to evaluate every single solicitation on its own terms, and they will NOT base their bid on a previous JOC award.