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Government Purchasing: When Contractor Performance Matters

By Gordian

This week's blog post is authored by Paul Schreyer, the Director of Operations for the Northeast Region.

Everyone has heard the saying, “You get what you pay for.” Most often, this phrase is stated as a warning to those who pay little for some good or service and expect a disproportionate return on their investment. In a recent column for Governing, titled, “Cheaper Isn’t Necessarily Better for Government Purchasing,” the authors note that many states and localities are unable to take into account contractor performance when selecting winning construction bids, and those that do have inconsistent ways to evaluate past contractor performance. Even at that, past performance may not be an indicator of future performance. State and local governments would benefit best from a method that drives contractors to perform well on construction projects, and helps purchasing officers track performance over time. This method exists and many use it successfully today. It’s called Job Order Contracting (JOC) and is generally used to complete straightforward, routine, construction projects such as renovations and replacement-in-kind projects.

The Governing column mentions a 2014 survey conducted by a San Francisco services auditor that states that awarding contracts to poor performers can lead to “project delays, abandoned projects, substandard work, and, at times, claims and litigation.” The result may be fighting with a bonding company to complete the work, or paying extra to correct or finish a project, and dealing with frustrated internal clients or constituents when a project is not completed on time.

Many state and local governments are bound by law to accept the lowest, responsive, responsible bidder. But adding the word “responsible” is not always a solution. As the Governing column points out, there are many differing views on how to apply the word “responsible” when evaluating bid responses. Read more about what constitutes a “responsive, responsible” bidder in this blog post. And in many cases, “responsible” is a low threshold – interpreted to mean financial and business capacity to perform the work. 

Job Order Contracting satisfies competitive bidding requirements while promoting quality construction work, and motivating contractors to perform well. It is an indefinite quantity construction contract whereby an owner can have a contractor perform a series of construction projects, all at competitive prices. The opportunity for future work is tied to JOC contractors’ current performance. Those who perform well may find that their business grows and their companies expand. There is no guarantee of work, state and local governments who are dissatisfied with a particular contractor’s performance are not obligated to give them any more work. JOC is a performance based contract.

Since JOC is a series of individual projects, the contractor’s performance can be evaluated after each project, and used to determine whether the contractor will receive the next project. The flexibility not to award a particular contractor a specific project based on the contractor’s performance introduces an element of best value for owners accustomed to awarding construction based on lowest, responsive, responsible bid.  Those in government who seek for a procurement method that accounts for contractor performance should consider the JOC process.

About Gordian

Gordian is the leading provider of Building Intelligence™ Solutions, delivering unrivaled insights, robust technology and expert services to fuel customers’ success through all phases of the building lifecycle. Gordian created Job Order Contracting (JOC) and the industry-standard RSMeans Data. We empower organizations to optimize capital investments, improve project performance and minimize long-term operating expenses.

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