U.S. Army Corps of Engineers Controls Costs of International Construction

Challenge: Pricing Federal Construction in Foreign Markets

When you think about Federal construction projects, you might think of an agency or department relocation, the building of a new Army barracks or repairing a bridge at a national park. No matter what type of project comes to mind, the words “Federal construction” evoke work done within the United States. But with a presence and facilities around the globe, the U.S. Federal government completes scores of international construction projects. To do so, they use a variety of construction project delivery methods — including IDIQ programs.

No matter what delivery method a Federal facility owner chooses to execute construction projects outside of the U.S., pricing inevitably presents a challenge. Most projects are estimated and contracted using American cost data that cannot account for material, equipment and labor costs, productivity rates and business practices in the local market. In fact, there is no uniform standard for collecting local cost data in a foreign market. As a result, Federal Government Facility owners have low confidence in international construction project budgets, which can result in cost overruns, project delays, and funding loss.

To truly control costs, Federal facility owners need a procurement solution that includes the costs of the local market, including labor and productivity, materials and products, and even equipment and tools. The U.S. Army Corps of Engineers has been using JOC since the 1980s, and localized, customized data to support the Transatlantic Division of the Middle East District (TAM) since 2007.

Curious if JOC is a good fit for your department’s or agency’s next construction project and want to know more? Watch this on demand webinar “Job Order Contracting for the Federal Government: Roundtable Discussion” to hear Gordian experts share lessons and insights from their work and answer questions from your peers.

Solution: Job Order Contracting Delivers Accurate Costs, Expedited Project Delivery for International Construction

In 1982, Army Engineer Lieutenant Colonel Harry Mellon was serving at the Supreme Headquarters Allied Powers Europe (SHAPE) in Belgium. Lt. Col. Mellon searched for a way to expedite project delivery for multi-trade projects involving repairs, renovations and straightforward new construction that was larger than the in-house tradesmen could handle. There was no procurement solution that did not involve full design with specifications in multiple languages, which could add at least a year to the procurement phase of the project. Lt. Col. Mellon needed to be more responsive, take control of the bidding process, control costs, and limit change orders, so he helped develop a procurement system for on-call contractors to support miscellaneous work, now known as Job Order Contracting (JOC).

JOC is an IDIQ contract that allows multiple projects to be completed through a single, competitively-awarded contract. Here’s a basic description of how JOC works: Imagine you have 10 construction projects to complete and each of these has to be put out to bid, which could take months. Job Order Contracting allows you to complete these projects with a single contract that is bid one time, supported by a Unit Price book. 10 projects, one pre-priced contract. With the JOC process, project owners and facility managers can eliminate the hassle of bidding projects separately, save procurement time, reduce design costs for straightforward construction projects, access readily available contractors, and begin work faster.

This expedience of JOC is a major advantage for international construction project owners in the Federal government. As Captain Colin Sexton explained in a story on the U.S. Army website, “Routinely it can take anywhere from four to six months for a project to be identified and developed into something that can be advertised to industry for competitive bidding. The bidding period for a project alone can take another three to four months. So by the time you see shovels entering the dirt, a minimum of one half to a full year has gone by. The JOC reduces that time to as short as 45 – 60 days in many cases.”

JOC was successfully deployed throughout the Corps of Engineers and institutionalized across the four branches of the military during Lt. Col. Mellon’s time in the  service, and after retirement he founded Gordian to bring JOC  to public works agencies where employees had left the Federal government and migrated to state and local public agencies and carried their interest in the JOC process with them.

Results: Over a Decade of Success in the Middle East

JOC contracts establish Unit Prices for construction tasks up front. Each Unit Price is calculated using local labor, material and equipment costs, so overseas facility owners have a greater measure of cost control than with traditional project delivery methods or with domestic cost sources.

The operative word in the description of a Unit Price is local. National or even regional averages won’t provide the price precision needed to implement a successful JOC program that benefits the project owner, the contractor and the taxpayer. International construction projects can’t be contracted accurately with U.S. costs, to put it plainly.

Gordian has supported the JOC program for the U.S. Army Corps of Engineers (USACE) TAM since 2002 and developed the TAM’s first localized price book in 2007. Gordian’s ability to deliver customized localized costs in a Construction Task Catalog® (our specific Unit Price Book) have been instrumental to the program’s success.

“Successes with the JOC have varied in both the cost magnitude of a task order and also the importance of the project to our mission partners,” Sexton said. “For instance, in August 2019, we awarded a task order at Kuwait Naval Base to renovate nine buildings that have gone into disrepair due to coastal winds and the harsh desert environment. The total value of that project is $1.5 million.”

Trust in the localized cost data and Gordian’s partnership with the military have made JOC a favorite solution the US Army Corps of Engineers, and specifically of Capt. Sexton, who says he has seen JOC used to award more than 25 task orders since joining the TAM team in 2018, and he has been personally involved with most of them. The success of the program make JOC a potential solution for construction procurement in other international markets.

 

Header photo credit: U.S. Army.