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Innovative Contracting Best Practices
See also Innovative Contracting Best Practices, Part 2

By Dave Cotts, P.E., CFM

The problem: Outsourced facility management services–often an inevitability–may mean using low-bid contracting to select and manage the contractor. The contractor then works down to those low-bid expectations, facility management departments get a black eye, and customers get upset.

The solution: Better ways have been devised to help facility professionals manage their outsourced contractors and provide their customers with top notch services.

At first glance, innovative contracting may sound like facility magic–not management. Documented by researchers at Arizona State University, innovative contracting methods can improve the quality of customer service, reduce costs, eliminate administrivia, and dramatically improve the worksite environment in an outsourced situation.(1)

Innovative contracting can be used by any facility manager who really wants to perform well through the use of a service contractor with a proven track record. This article will explain job order contracting (JOC), a specific form of indefinite demand and indefinite quantity (IDIQ) contracting. The second part of this examination (featured in an upcoming issue) will look at performance based contracting.

What Is JOC?
JOC is a method of IDIQ based on an agreement that includes:

• Standard general and special conditions;
• A unit price book of work items; and
• A contractor’s coefficient that includes profit and overhead.

When the facility department gets a customer’s request, the facility department issues the contractor a short-form request for proposal (RFP), sometimes even orally. The facility staff and the contractor then jointly define the scope of work and complete any design, if needed. (JOC often needs less design for small and medium sized tasks).

The contractor subsequently submits a cost proposal using the unit price book costs multiplied by his/her coefficient. The facility department then approves the cost and design, if appropriate, and issues a task order for a fixed price. The contractor does the work, bills against the task, and is paid. Contractors are often working on multiple tasks at one time; up to a dozen is not uncommon.

Customer Service
The ultimate test of any facility management practice should be how it affects customers. One successful JOC practitioner is George Williams, director of engineering and construction at the National Institute of Health. Recently, Williams credited JOC with an absolute turnaround in the attitude of his customer towards his department.(2)

Ken Jayne, a facility professional who has seen JOC as a customer, a contracting officer, a JOC provider, and now as a consultant feels JOC provides 12% to 16% savings over similar services procured under low-bid contracting at the same location.(3) Part of this savings is due to the elimination of administrivia in contract administration and "the need for having checkers to check checkers on job sites." (For more proof of JOC’s potential, see "JOC At The World Bank," which appears after the footnotes that accompany this article.)

Does JOC Work?
JOC has a 20+ year track record within the Department of Defense. There are literally hundreds of successful JOC contracts at military installations under the name of JOC, DOC, SABER, and many more.

Colleges and universities are also starting to use JOC more frequently, particularly when the director of physical plant had previous experience with them. Gradually, JOCs are being incorporated into practices by counties, municipalities, and K-12 school systems.

Currently, JOC is barely recognized by private sector facility departments. However, this may change when facility departments realize this approach is equally applicable to the private sector.

The Center For Job Order Contracting Excellence
In 1998, Dr. Dean Kashiwagi, a former Air Force facility engineer at the Center for Job Order Contracting Excellence (CJE) at Arizona State, published a five-year study of JOC. In this study, Kashiwagi set out to determine objective criteria based on real contract performance.

The most relevant finding was that performance ratings for similar services at the same locations were 33% higher for JOC contractors than for low-bid contractors.(4) While Kashiwagi examined many kinds of JOC applications–both successful and unsuccessful–the overall results were consistent with the findings in the study.

Ultimately, this research will give facility professionals a much better understanding of the concepts of performing and non-performing contractors. In fact, this data will help facility professionals select a performing JOC contractor every time.

Where To Begin
While JOC is not complex, facility professionals should not try to implement it without some preparation. After a program is in place, facility professionals may wish to join CJE to keep updated on the latest information from other practitioners and academic researchers. It is an excellent place to meet contractors and consultants in the field. (See "Additional References" sidebar for contact information on the CJE.)

Facility professionals should also consider hiring a consultant for their first JOC project. A consultant can help with the unit price book and contract form development, while managers work with customers, staff, and purchasing departments to ensure the contract gets off on the right footing.

Since outsourcing is inevitable in facilities management, JOC provides a way to forge a partnership between facility departments and contractors. By promoting partnering, JOC inspires both parties to provide outstanding services to customers every time.

Cotts is an Alexandria, VA-based management consultant specializing in facility management teams. He is past president of the International Facility Management Association (IFMA), a member of its first class of Fellows, and the author of several well known facility management reference books. His new book will be published by the American Management Association in 2003. Cotts can be reached at (703) 971-8094 or dgcotts@aol.com.

Next, Cotts will examine the practical results of the 1998 study, performance based contracting, and how to apply it to the contracting of outsourced service. To comment on this article, e-mail schwartz@groupc.com.

Additional References

The Del E. Webb School of Construction is home to several non-profit research organizations that assist facility managers. These resources include:
• The Alliance for Construction Excellence (ACE). Call (408) 965-5324 or visit http://construction.asu.edu/ace.
• Center for Job Order Contracting Excellence (CJE). Call (480) 965-5324 or visit http://construction.asu.edu/ace/cje.htm.
• The Performance Based Studies Research Group (PBSRG). Call (480) 965-4371 or visit www.eas.asu.edu/pbsrg.

Footnotes

(1)Dr. Dean Kashiwagi, P.E., Ziad Al-Shamani, and Syed Raza, "Job Order Contracting Performance," Center for Job Order Contracting Excellence/Performance Based Studies Research Group (Tempe, AZ, 1998).
(2)Keynote address to CJE seminar, Atlanta, GA, July 23, 1999.
(3)Ken Jayne (president, Applied Innovative Management, Houston, TX) in a personal communication to the author.
(4)Kashiwagi, op. cit., pp. 33-49.

David Cotts: JOC At The World Bank

I initially stumbled onto innovative service contracting methods in my own practice at The World Bank headquarters in Washington, DC. I joined the team there in 1981 to assist in the establishment of facility management within the organization. Prior to this, the delivery of building maintenance, repair, renovation, and minor construction had a terrible reputation among customers.

We handled a huge workload. Considering projects alone, we faced 200 to 250 assignments annually; this meant starting or closing a project every working day. On top of this load, we handled 75,000 annual service orders.

Our customers wanted their work done on a timely basis and in a high quality manner. The international nature often challenged us further with service problems that we had to be prepared to meet. Unfortunately, much of our work was not necessarily biddable by separate contracts because of the pressure of time, the lack of project definition, and the sheer volume of the work.

The facility department (myself and a staff of four) was committed to outsourcing. My boss, Dick Keilman, suggested something from his days in the military: IDIQ contract for outsourcing. We tried it, and it was successful beyond belief.

Over the next 15 years, we managed budgets of between $2.5M and $12.5M annually, performed some truly remarkable tasks (like supporting 9,000+ moves in nine months), and developed very high service ratings from our customers. If the customer wasn’t happy, then we weren’t happy.

While it was difficult to quantify, we estimated that we saved 10% to 20% by reducing the paperwork associated with contract administration. Also, partly because of the leadership and mission orientation of my staff and our contractor, we were able to spend all of our management time solving user problems while the contractor got the job done.

Over the years, we added services such as moving, maintaining and repairing information technology, wiring networks, running a signage shop, repairing executive furniture, and running a frame shop to our IDIQ contracting. In addition, we dropped some services to meet the needs of our customers. (This also occurred when the overall administrative structure within the bank re-organized.)

When I retired, my successor, wanting more control over individual tasks, introduced the method of JOC and effectively took the innovation to the next level.

See also Innovative Contracting Best Practices, Part 2