CMD Group is a ConstructConnect™ company. Learn more

The Importance of Matching Volume to Contractor Capacity in JOC Procurement Strategy

07/10/2014 by

Share

JOC takes an investment from both owners and contractors.  There is the concrete investment in cost data and software, but that pales in comparison to the investment in training staff in use of the cost data and JOC process.  In addition, there is the front-end and continuing investment in the relationship.  In a sizable JOC program, the investment pays off in increased efficiency for both parties.  Contractors escape the low-capture low-bid cycle and see financial return on relational investments, and owners don’t have to coach a new contractor about processes and ground rules with each small project.

But those efficiencies are only realized when there is regular interface among team members.  It requires a certain project “churn” to achieve relational and process efficiencies.  I peg that minimum volume at about $2 million in annual volume per contractor.   At this level of volume, you have dedicated staff, which many people think is key to the type of ongoing service and partnership that characterize JOC at its best.

The first JOCs were at military bases.  The “barrier to entry” of working on a military base—both in terms of expertise and security access—was high, and the single dedicated contractor model met those needs very well.  As JOC has expanded to different types of owners with different logistics—more geographically dispersed work as in a school district or large municipality—the dynamic has changed.  It opens up the JOC market to contractors who may wish to dabble in JOC, or use it as one component of a work program for their staff.  Also, there is often a political imperative to spread the work around to multiple contractors, who are all taxpayer stakeholders, thus watering down the efficiencies that can be gained with adequate volume.

I won’t say that JOC can’t be successful with lower volume.  We are working with a populous northeastern state now that is implementing JOC under pilot legislation that limits volume to $1 million maximum contracts.  Many owners feel comfortable with smaller contractor volume and more contractors when they are first using JOC, and there are some advantages to working with different contractors, who may have different approaches to job order development .  It can work, if an owner can implement an efficient training and implementation program that engages multiple contractors simultaneously.

But a diffuse procurement strategy changes the nature and benefits of JOC.  What an owner is really buying for their minimum volume of $2 million is a dedicated staff.  For $2 million you are probably buying the full time attention of two people, a project manager and a superintendent in the field, with some part-time administrative support.  At higher volume—say, $6 million—you are buying a more efficient mix of people, with multiple PM and field staff being supplemented by administrative, safety, and quality assurance staff.  It’s important for owners to realize that when annual volume drops below this level, you are receiving the divided attention of your JOC staff.  They will necessarily be working on projects for other clients as well as yours.  This changes the nature of a JOC, especially when a contractor has to mix hard-bid work and the mentality that entails with the performance-based mentality that JOC demands.

I’m an advocate of owners going “all-in” when they bet on JOC.  Maximizing contract volume, and being willing the make the investments of time and money—on training, relationship-building, and process definition—greatly increases the odds that your JOC will succeed and produce the results you are looking for.  Giving your contractor(s) enough volume that they can also be “all-in” also contributes to your success.

JOC takes an investment from both owners and contractors.  There is the concrete investment in cost data and software, but that pales in comparison to the investment in training staff in use of the cost data and JOC process.  In addition, there is the front-end and continuing investment in the relationship.  In a sizable JOC program, the investment pays off in increased efficiency for both parties.  Contractors escape the low-capture low-bid cycle and see financial return on relational investments, and owners don’t have to coach a new contractor about processes and ground rules with each small project.

But those efficiencies are only realized when there is regular interface among team members.  It requires a certain project “churn” to achieve relational and process efficiencies.  I peg that minimum volume at about $2 million in annual volume per contractor.   At this level of volume, you have dedicated staff, which many people think is key to the type of ongoing service and partnership that characterize JOC at its best.

The first JOCs were at military bases.  The “barrier to entry” of working on a military base—both in terms of expertise and security access—was high, and the single dedicated contractor model met those needs very well.  As JOC has expanded to different types of owners with different logistics—more geographically dispersed work as in a school district or large municipality—the dynamic has changed.  It opens up the JOC market to contractors who may wish to dabble in JOC, or use it as one component of a work program for their staff.  Also, there is often a political imperative to spread the work around to multiple contractors, who are all taxpayer stakeholders, thus watering down the efficiencies that can be gained with adequate volume.

I won’t say that JOC can’t be successful with lower volume.  We are working with a populous northeastern state now that is implementing JOC under pilot legislation that limits volume to $1 million maximum contracts.  Many owners feel comfortable with smaller contractor volume and more contractors when they are first using JOC, and there are some advantages to working with different contractors, who may have different approaches to job order development .  It can work, if an owner can implement an efficient training and implementation program that engages multiple contractors simultaneously.

But a diffuse procurement strategy changes the nature and benefits of JOC.  What an owner is really buying for their minimum volume of $2 million is a dedicated staff.  For $2 million you are probably buying the full time attention of two people, a project manager and a superintendent in the field, with some part-time administrative support.  At higher volume—say, $6 million—you are buying a more efficient mix of people, with multiple PM and field staff being supplemented by administrative, safety, and quality assurance staff.  It’s important for owners to realize that when annual volume drops below this level, you are receiving the divided attention of your JOC staff.  They will necessarily be working on projects for other clients as well as yours.  This changes the nature of a JOC, especially when a contractor has to mix hard-bid work and the mentality that entails with the performance-based mentality that JOC demands.

I’m an advocate of owners going “all-in” when they bet on JOC.  Maximizing contract volume, and being willing the make the investments of time and money—on training, relationship-building, and process definition—greatly increases the odds that your JOC will succeed and produce the results you are looking for.  Giving your contractor(s) enough volume that they can also be “all-in” also contributes to your success.

Recent Comments




Article Archive

Date Article
11/17/14 Top 10 largest construction project starts in the U.S. - October 2014
11/14/14 Non-residential Construction Starts Rose Gently in October
07/10/14 The Importance of Matching Volume to Contractor Capacity in JOC Procurement Strategy
07/10/14 Consider a Seed Project as Part of Your JOC Procurement Strategy
07/10/14 The Best Unit Price Book for Your Job Order Contract
07/02/14 ECONOMIC NUGGETS – July 1, 2014
10/23/14 Twenty major upcoming Water Treatment Plants and Manufacturing & Warehousing construction projects - U.S. - October 2014
10/23/14 Twenty major upcoming Alberta and British Columbia construction projects - Canada - October 2014
10/15/14 Trend lines of construction starts in Canada - September 2014
10/15/14 Top 10 largest construction project starts in Canada - September 2014
09/17/14 Twenty major upcoming midwest and northwest construction projects - U.S. - September 2014
09/17/14 Twenty major upcoming medical and educational construction projects - Canada - September 2014
09/17/14 Trend lines of construction starts in Canada - August 2014
09/17/14 Top 10 largest construction project starts in Canada - August 2014
08/15/14 Twenty major upcoming medical and educational construction projects - U.S. - August 2014
08/15/14 Twenty major upcoming industrial and water treatment construction projects - Canada - July 2014
08/15/14 Trend lines of construction starts in Canada - July 2014
08/15/14 Top 10 largest construction project starts in Canada - July 2014
07/24/14 Twenty major upcoming entertainment facility and stadium/arena construction projects - U.S. - July 2014
07/24/14 Twenty major upcoming Ontario and Quebec construction projects - Canada - July 2014
07/24/14 Trend lines of construction starts in Canada - June 2014
07/24/14 Top 10 largest construction project starts in Canada - June 2014
07/16/14
07/14/14 Top 10 largest construction project starts in the U.S. - June 2014
02/03/14 Infographic: Where Can You Use Project Leads in the Construction Process?
07/25/13 The Canadian Economy’s Two Great Blessings
02/15/13 Construction Economic Notes – February, 2013
11/05/12 Recycled-Content Tile
10/05/12 Fiber-Cement Siding
09/18/12 Return on Your Green Home Improvement Investment
08/09/12 Green Building Solutions to Stormwater Runoff
08/07/12 An “Aha” Moment Solves Challenge of Cost Estimating Local Circus Roof
07/19/12 Estimate Types
06/20/12 Ground-Source Heat Pump
05/14/12 Universal Design for Outdoor Living
04/23/12 What Is Universal Design?
04/09/12 Natural Landscaping
03/14/12 Green Material Alternatives for Plumbing Fixtures
03/02/12 Budgeting & Financing Green Construction
02/22/12 Greening Your Firm
02/10/12 Roofing Defects
02/06/12 Roofs: energy efficiency strategies
01/18/12 Commercial Real Estate and Green Construction
12/14/11 Renewable Energy & Distributed Generation Technologies
11/04/11 Tubular Skylights
10/04/11 Are Online Ads An Endangered Species?
09/27/11 Performance Bonds Guarantee Clients Receive Exceptional Service
09/15/11 Deconstruction for Green and Economic Benefit
09/01/11 4 Ways for Businesses to Create a Good First Impression on Twitter
08/11/11 Building Information Modeling (BIM) for Green Building
07/21/11 Green Alternatives for Concrete
07/12/11 Evaluating Products Over Their Life Cycle
06/30/11 Low-Cost Green Strategies
06/28/11 Bricks are from Venus, Clicks are from Mars
06/17/11 Zombie Avoidance Techniques for Building Product Manufacturers
06/08/11 Blogs & Websites: The 5 Signs of Website Wellness
06/06/11 Building Product Manufacturers & Green Products
06/01/11 Is Fear of Sharing Information Costing Your Company Sales?
05/26/11 What Are Green Products?
05/20/11 The Building Envelope
05/16/11 Blogging: Website Heal Thyself
05/03/11 Metals Compared to Wood for Sustainable Construction
04/12/11 Storm Water Collection & Infiltration
03/23/11 Commissioning the Green Building
02/23/11 Building Program for Green Design
01/21/11 Building Deconstruction Process
05/02/11 Why Building Product Manufacturers and Social Media Are a Marriage Made in Heaven
05/06/11 Building Product Manufacturers: How Understanding Architects Can Help Your Business
10/21/09 Distributors & Manufacturer Representatives
07/15/10 Estimating Doors: Tips from the Experts
07/06/10 How to Handle Construction Materials to Prevent Mold
06/21/10 How to Maximize the Benefits of Exterior Security Lighting
06/04/10 SmartBuilding Index
06/01/10 Regional Housing Construction Tracking and Forecast Information
05/28/10 How to Find Regional Construction Tracking and Forecast Information
05/24/10 Building Product Manufacturers
05/18/10 Practicing the Art of Sustainability - Why Atlanta's Current Building Codes Need Updating Now
02/23/10 Learning to use EE
01/11/10 Earn AIA CEU Credit Attending RCD Webcasts
07/17/09 Cost Estimators Winning Work With BIM
07/16/09 Becoming an Invited Bidder - More Tips
07/16/09 Becoming an Invited Bidder - Tips
07/16/09 Becoming an Invited Bidder
07/16/09 SmartBIM Object Modeling Guidelines for Revit
07/15/09 Interference Check and BIM
06/26/09 A Look at Contractor Failure: Part 2
06/19/09 RicciGreene Associates
06/19/09 Doug Thornton AIA, LEED A.P. of AERC, PLLC
06/18/09 A Look at Contractor Failure: Part 1
06/12/09 Owners and SmartBIM Objects – What You Need To Do
06/10/09 Dealing with the IRS
06/05/09 Getting Paid on Construction Contracts
06/02/09 BIM Coordination and Collaboration
05/28/09 Marketing Your Construction Firm on the Cheap
05/20/09 Little Habits with Big Payoffs for Contractors
05/12/09 SmartBIM Spaces
05/07/09 AIA Show Recap as Seen by the SmartBIM Solutions Team
04/27/09 Business Case Study - Survey Of Spending Patterns In Educational Facilities
04/23/09 Taking Advantage of the Recession: Hiring the Right People
04/20/09 Cork as a Green Flooring Option
04/08/09 Owners - It's Time to Substantially Increase Your Architect's and Engineer's Fees
03/05/09 There's a Solution to Performing Time Consuming Quantity Take-Offs
02/20/09 SmartBIM Library is Half-Off for a Limited Time Only
02/09/09 You are Wasting Your Money
01/20/09 Obama: 'Dramatic Action' On Economy Needed
01/14/09 Use of BIM Jumps Dramatically Over Last 12 Months
12/10/08 Minimizing the Size of Family Files (Revit Objects)
11/11/08 Maximize Online Advertising Dollars
11/07/08 Architects and Engineers, WE NEED YOU
10/29/08 Why Do You Need SmartBIM Objects
10/28/08 Why Building Information Modeling?
10/29/08 10 Questions To Ask About BIM Objects
10/08/08 The Object Mess
10/07/08 Implementing BIM to Your Office
10/06/08 Meeting the Needs for Governmental BIM Compliance while Avoiding Current Liability Obstacles
09/15/08 The BIM Transformation is Manageable with the NEW SmartBIM Library v3
09/14/08 KOLBE Windows and Doors vs. Building Information Modeling
09/12/08 The Evolution of Building Information Modeling: BIM 1-2-3
08/11/08 BIM 101 Overview - From Hand Drawings, CAD and now BIM
08/12/08 Draper, Inc. on BIM Object Developments
07/08/08 IFD Library Partners work to establish standards for creators of BIM software
06/23/08 Architectural Education
06/17/08 Parametric Revit Objects – Part I - Fundamentals
06/17/08 Window Glazing Coefficients
06/01/08 Frequently Asked Questions About Building Codes
06/05/08 Calling All Current and Prospective Revit Users - This Blog Is For You
05/06/08 System Requirements for SmartBIM Library
05/06/08 SmartBIM Library 2.0 Release Notes
05/05/08 Building Information Modeling Moves into AEC Mainstream, Adding Value to Project Delivery Process
04/08/08 Flooring: Cost Considerations
02/08/10 General Contractors & Trade Contractors
01/24/08 Building Element Models (BEM)
12/21/07 LEED Certification Primer
12/13/07 Building Integrated Photovoltaics (BIPV)
09/24/07 Mixed-mode Building Design Combines Old and New Ideas
10/15/07 Checklists Identify Potential Envelope Design Improvements
10/24/07 Greenroofs as High Performance Design
10/21/07 What Makes a Building Product Green
10/24/07 Lighting Considerations in Green Building
10/24/07 Water Conservation in Green Buildings
10/24/07 Rainwater Collection Systems
10/24/07 Efficient Cooling Methods for Green Buildings
10/24/07 Controlling Heat Transfer in Green Buildings
10/24/07 Limiting Heat Loss Through Windows
10/23/07 Formaldehyde Use in Building Construction
10/23/07 Using Plants to Improve Indoor Air Quality
11/05/07 Greening Healthcare
10/19/07 Daylighting Controls
10/19/07 Use of Windows, Skylights and Light Pipes in Daylighting
10/19/07 An Overview of Daylighting
10/19/07 An Overview of Solar Ventilation Air Heating
10/19/07 Types of Collectors for Solar Water Heating
10/19/07 An Overview of Solar Water Heating
10/19/07 Cooling Load Advoidance
10/19/07 Components of Passive Solar Heating Designs
10/19/07 An Overview of Passive Solar Heating
10/23/07 Improving Indoor Air Quality
10/19/07 An Overview of The LEED Rating System
10/19/07 Cost Considerations in Building Deconstruction
10/17/07 Building Deconstruction
10/25/07 Roofing Considerations in Green Building
10/19/07 Green Site Selection and Development
10/24/07 Reducing Energy Use in Buildings
10/17/07 Green Demolition
10/18/07 Integrating Solar Power Generation into Buildings using Thin Film PV
09/10/07 Compost Company Promotes Green Environment
03/31/06 Green Roof Sets An Example For Minneapolis Sustainable Design

CMD Group- construction industry news-image” title=