Job Order Contracting Best Practices: 4 Tips for Reviewing a JOC Price Proposal

A Gordian Job Order Contracting (JOC) construction project follows a proven process we’ve refined in our 30+ years of overseeing construction work. The first step in that process is the Joint Scope Meeting, a pre-construction site visit where all stakeholders scope project conditions, discuss the project and agree on the work to be performed. Next, the project owner sends the JOC contractor the RFP and a Detailed Scope of Work that describes exactly what the JOC contractor is obligated to do. The contractor then uses the Detailed Scope of Work to create a JOC price proposal for the work using tasks from Gordian’s Construction Task Catalog®, a Unit Price Book customized to meet the owner’s needs by Gordian engineers.

Accurate price proposals ensure the project owner is paying for the correct construction tasks, quantities and coefficients (also called Adjustment Factors), so it is critical for project owners to understand how to review a price proposal. Since no one knows how to do that better than Gordian’s Account Managers, the “boots on the ground” professionals who make sure every JOC project goes as smoothly as possible, we enlisted a few to explain how to best review a price proposal.

Gordian's Job Order Contracting Best Practices for Price Proposal Review.

JOC Price Proposal Tip 1: Start with the Big Picture and the “Big Note”

Before digging into construction tasks, take the time to make sure the big boxes are checked. “You want to make sure you receive the entire proposal package,” says Rene Pedroso, a Senior Account Manager with 19 years at Gordian under his belt. “That means you have the planned progress schedule, list of proposed subcontractors and suppliers, and the estimated utilization plan. Don’t even it look at the price proposal until you have the full package.”

Project owners using a Gordian Job Order Contracting program should familiarize themselves with general contract conditions and instructions, what we call “the Big Note,” says Gene Kusin, a Senior Account Manager who covers the New York City area. “You need to know this section because it tells you how to use the Construction Task Catalog,” Kusin says. “The first six pages [the length of the Big Note] tell you what’s in the labor, material and equipment costs, whether or not bonds are reimbursable, at what height scaffolding is allowed, etc. It’s very important to know this section.”

Nick Jones, a Senior Account Manager covering parts of the West Coast and a former JOC contractor agrees. “The Big Note lays out the rules of the game. It tells you how line items are designed and what is included in contractor’s Adjustment Factor. It’s critical to understanding and reviewing a price proposal.”

Getting familiar with the Big Note is the first step to a successful JOC price proposal review.

From there, our specialists agree that it’s best to focus on the big-ticket items. Zeroing in on big-ticket line items enables the reviewer to quickly make an initial evaluation of a proposal’s accuracy before getting into the smaller details. “Look for incorrect quantities, misunderstood units of measure, or inaccurate quality of materials or equipment,”  Jones advised.

Russel Stiles, an Account Manager in the northeast U.S., recommends keeping an eye on the contractor’s Adjustment Factor, also called a coefficient. An Adjustment Factor is a multiplier on the line items in the CTC and represents what a contractor must charge to turn a profit. Different Adjustment Factors may be used for different types of work – emergency work, after hours work, etc. It’s the owner’s financial interest to ensure the correct Adjustment Factor is applied throughout the proposal.

“You have to pay attention to the details to make sure the work aligns with the project,” according to Gene Kusin. “It’s like a paint-by-numbers — you only use the colors you’re supposed to use. If you’ve been given red, blue and green, those are your paints. If someone throws a yellow in there, the end result will be wrong.”

See all of Gordian’s Job Order Contracting Best Practices, from program implementation to project execution and reporting, to find out how project owners across North America are running best-in-class JOC programs.

JOC Price Proposal Tip 2: Use the Price Proposal to Mentally Build the Project

A JOC price proposal represents all the tasks necessary to complete the Detailed Scope of Work. A proposal that deviates from the scope may result in the project owner paying for work they don’t need, materials they don’t want, or a final product that fails to meet project requirements. That’s why Rene Pedroso recommends mentally building the project using the tasks from the CTC and the guidelines published in the “Big Note.” This takes attention to detail, concentration and strategy.

For Nick Jones, proposal review normally starts with labor hours. Labor is accounted for in a CTC unit line item, but contractors who are new to JOC may list labor in addition to a unit line item by mistake. Such duplication means an owner will end up paying twice for construction work ordered. Anytime Jones is reviewing labor hours he is mindful that the line items from the CTC are to be used whenever they are applicable. This is the contractual basis of Job Order Contracting and prohibits contractors form circumventing Gordian’s pre-set construction prices.

Confirming the right tasks are selected in the price proposal means reading the line items carefully. Jones recommends noting material descriptors that are outside of the ordinary, as these often indicate that something is amiss. These discrepancies can be costly. For instance, a JOC price proposal using a mat foundation formwork line item will be far more costly than one that lists slab on grade foundation formwork. Jones also urges double-checking units of measure to make sure an owner is paying the appropriate dollar amount for ordered work.

Daniel Emmerich spent most of his career as a contractor, but he’s spent the last five years working as a Gordian Account Manager and helping owners in Wisconsin and Illinois. His advice for mentally building out a JOC project? “Look at the Detailed Scope of Work and think deeper to make sure nothing is missing. Think about what it takes to get people to the job site and remove and replace existing items.”

Russel Stiles advises owners to insist that contractors organize their JOC price proposals by category or by room or section, so they are easier to digest. “A JOC price proposal might have a hundred line items. As an owner, you can spend a lot of extra time trying to work backwards thinking about the contractor’s process, or the contractor could organize the price proposal and streamline the review.”

View more about completing a Detailed Scope of Work and Gordian’s price proposal review process in this video.

JOC Price Proposal Tip 3: Use a Price Proposal Software

If a project owner is reviewing a spreadsheet or otherwise manually checking a price proposal, then they are setting himself up for a tedious, error-prone process. Gordian’s price proposal software saves working versions of price proposals so owners know which proposal is the most recent, highlights changes to the proposal, allows owners to mark favorite tasks and create task collections and allows JOC contractors to save notes to any tasks. Russel Stiles identified reviewing notes as a price proposal review best practice. “Contractor notes explain their calculations and helps justify to the owner why the task is in the proposal, which helps the review process.” This sentiment was echoed by his colleagues.

In a JOC price proposal, contractor notes can help clarify a contractor's choices.

JOC Price Proposal Tip 4: Ask For Help When You’re Stuck

Sometimes, a price proposal just won’t add up. That’s when an owner should reach out to the project team to make sense of it. If the owner is working with Gordian, that means they have a direct line to a seasoned Account Manager who has attended the Joint Scope Meeting, had input on the Detailed Scope of Work and, in most instances, already reviewed the price proposal. Chances are an owner’s Gordian rep and the awarded contractor have already had a dialog about any line items that appear out of scope.  

“I’ve done all the trades and I speak the language. I know what looks out of place. So, if I see something outside the means and methods of the contract, I’ll reach out to General Contractors and tell them to talk to their subs about pricing,” Daniel Emmerich explained. 

Gordian Account Managers can explain anything that looks out of whack in a price proposal. However, if an owner is running their own JOC program, they may have to communicate directly with contractors and may not have any avenues for clarification during the price proposal review process.  

An experienced construction professional knows what to look for in a JOC price proposal.

Knowledge, Tools, Collaboration: The Keys to a Successful JOC Price Proposal

Collectively, Gordian Account Managers review 49,000 JOC price proposals in an average year. It’s safe to say they know a thing or two about doing it right. According to them, a successful price proposal review comes down to knowing how line items are built in the Construction Task Catalog, the rules outlined in the “Big Note,” a software tool to facilitate reviews and collaboration among the project team.

 

About Gordian

Gordian is the leader in facility and construction cost data, software and services for all phases of the building lifecycle. A pioneer of Job Order Contracting, Gordian’s solutions also include proprietary RSMeans data construction costs and Facility Intelligence Solutions. From planning to design, to procurement, construction and operations, Gordian’s solutions help clients maximize efficiency, optimize cost savings and increase building quality.