Job Order Contracting A State of the Art

What Are We Going To Talk About? • Recently, the National Institute of Governmental Purchasers presented an award to the purchasing department at the City of Miami Beach, Florida. • After having been named one of the three finalists from over 1400 nominees, The City of Miami Beach won the prestigious Robin J. Zee Presidential Citation for Excellence and Outstanding Achievement for implementing The Gordian Group’s Job Order Contracting System for Construction and Maintenance Projects. • The Gordian Group Job Order Contracting System, currently being used by over 125 public agencies throughout the nation, is the topic of today’s presentation. Copyright © 2007 The Gordian Group, Inc. , all rights reserved Page 2

NIGP Best of the Best Practices Award • The City of Miami Beach was able to track and record the differences between their traditional construction contracting system and The Gordian Group JOC System. • The results truly merited the “Best of the Best Practices” award. Projects Completed Procurement Time Change Orders Protests/Litigation Traditional JOC 78 in 5 years 184 days/project 273 9 131 in 2 years 21 days/project 0 0 Copyright © 2007 The Gordian Group, Inc. , all rights reserved Page 3

How Is Construction Work Accomplished Today? • 3 Categories of Maintenance/Repair/Minor Construction Projects • Small, Single Traded Projects (<$50 K) • Normally Accomplished by In-House Work Force • Small to Medium Sized Projects ($50 K-$1 M) • Normally Accomplished by Traditional Construction Contract • Large Projects (>$1 M) • • Traditional Construction Contracting Process • • • Normally Accomplished by Traditional Construction Contract Full Design Competitive Bid Award to Lowest Responsive, Responsible Bidder Mobilize Construct Major Shortcomings with Traditional Contracting Process • Average Time from Project Inception to Start of Construction is 6 -14 Months • High Design Costs for Routine Renovation & Repair Work (7 -12%) • High Post Award Costs (Claims & Change Orders) • Fosters an Adversarial Relationship between Public Agency and Contractor Copyright © 2007 The Gordian Group, Inc. , all rights reserved Page 4

What is Job Order Contracting? • • Job Order Contracting (JOC) is a System for Procuring Construction Services It is an Indefinite Quantity, Competitively Bid System Featuring Firm Fixed Prices for Thousands of Construction Tasks The Nature of the System Fosters a Non-Adversarial Relationship Between Owners and Contractors. Introduced in 1985, The Gordian Group JOC System is Currently Being Implemented by States, Cities, Counties, Transportation Authorities, School Districts, Universities and Other Public Agencies Throughout the United States. Representative Agencies Include: The United States Postal Service New York City (Multiple Agencies) Metropolitan Atlanta Rapid Transit System Los Angeles Unified School District New York State Dept of Transportation City of San Jose, California Chicago Transit Authority Fulton County, Georgia City and County of San Francisco Cal State University System City of Chicago (Multiple Agencies) The Ohio State University Emory University Georgia Building Authority City of San Diego And over 100 more! Copyright © 2007 The Gordian Group, Inc. , all rights reserved Page 5

Job Order Contract Documents • Construction Task Catalog • Technical Specifications • Contract Terms,

Construction Task Catalog ™ • Construction Task Catalog™ (CTC) • • • Contains Thousands of Individual Construction Tasks Represents the “Scope of Work” of the Contract Inclusion of Tasks Should be Customized for each Public Agency Includes Specific Agency Approved Products Priced Using Local Prevailing Labor, Material, Equipment Prices Copyright © 2007 The Gordian Group, Inc. , all rights reserved Page 7

Technical Specifications • Customized for Each Agency & Incorporates the Agency’s Quality Standards • Includes Standard Detail Drawings which Show the Proper Installation of Various Items of Work • Clearly Tells the Contractors What is Required for Each Task in the Catalog • Specifications Must be Linked to Tasks in the Catalog Copyright © 2007 The Gordian Group, Inc. , all rights reserved Page 8

Contract Terms, Conditions & Bid Documents • Contract Terms, Conditions & Bid Documents JOC Specific Clauses ü Overview of Contract • Critical Document ü Procedure for Ordering Work • Must Accurately Explain the JOC Process ü Proposal Preparation • Some Standard Clauses Need to be Modified for JOC Modified Standard Clauses • Poorly Drafted Contract Language Increases Risks & Costs ü Updating Adjustment Factors ü Scope of Work ü Extra Work ü Time Extensions ü Liquidated Damages ü Substantial Completion ü Payment ü Close Out Copyright © 2007 The Gordian Group, Inc. , all rights reserved Page 9

Contract Structure & Bidding Guidance • Public Agency Establishes a Fixed Initial Term • Typically One Year • May Include Options to Extend • Public Agency Establishes a Guaranteed Minimum Dollar Value • Some Nominal Amount - Typically $25, 000 • Public Agency Establishes a Pre-Established Maximum Value • Represents the Expected Amount of Work to be Accomplished • Based on Public Agency’s Budget • Prior to Bidding the Public Agency Does Not: • Identify or Commit to any Specific Project or Location • Identify or Commit to Any Specific Quantities or Tasks in the Catalog of Construction Tasks Copyright © 2007 The Gordian Group, Inc. , all rights reserved Page 10

JOC is a Competitively Bid Contract! • Each Bidder Must Bid Two Adjustment Factors to the Prices Published in the Task Catalog • Regular Time & Overtime • Same Two Adjustment Factors Apply to All Tasks in the Catalog of Construction Tasks • Adjustment Factors Must Include all Indirect Costs & Profit • Fixed for One Year • Lowest Adjustment Factors (i. e. Lowest Bid) is the Basis of Award to the Lowest Responsive, Responsible Bidder • A typical adjustment factor might be 1. 10 or 1. 15. • The same adjustment factor applies to every task in the Catalog and cannot be changed. Copyright © 2007 The Gordian Group, Inc. , all rights reserved Page 11

How Does JOC Work? • Joint Scope - Public Agency & Contractor Jointly Develop & Document the Scope of Work as a Team • Public Agency Determines Level of Documentation for Each Work Scope • Architect/Engineer & Subcontractors May Also be Part of Scoping Team • Contractor Develops Price Using Tasks & Prices in the Catalog • Total Task Price = Catalog Task Price x Quantity x Adjustment Factor • Price is Fixed - Only Scope is Discussed • Also Develops Schedule, Shop Drawings, Material Samples, Subcontractors, Compliance Documentation • Contractor’s Total Proposal is Reviewed & Approved • Public Agency Issues a Lump Sum Job Order • • Risk of Performance Remains with Contractor - No Adjustment of Quantities After Issuance of Job Order Average Time from Joint Scope to Issuance of Job Order is ~ 28 Days Copyright © 2007 The Gordian Group, Inc. , all rights reserved Page 12

Why It Works! • JOC is a Series Of Individual Small Projects • • • Contractor Is Guaranteed Only a Small Minimum Amount of Work Contractor Has A Continuing Financial Incentive To Provide: • Responsive Services • Quality Work • Lower Cost Future Job Orders Tied to Contractor Performance • No Obligation To Give A Specific Project To JOC Contractor • Additional JOC’s May Be Bid And Awarded If Public Agency Is Not Satisfied With Contractor Performance • JOC Does Not Replace Traditional Methods For Accomplishing Work Copyright © 2007 The Gordian Group, Inc. , all rights reserved Page 13

Lower Costs • • Cost of Construction • Overhead and Profit Spread over Entire Value of Contract • Greater Maximum Value=Lower Adjustment Factors=Greater Savings Lower Procurement and Administrative Costs • • • Fewer Change Orders and Claims • Joint Scoping Process Eliminates Misunderstandings About Scope • Contractor Develops the Cost Proposal & is Responsible for Errors and Omissions Reduction of Architect/Engineer Fees • • JOC Eliminates the Need to Use the Full Procurement Cycle for Smaller Projects Currently Many Small Projects Are ”Fully Designed" for Procurement Purposes Only Typical Total Overall Savings ~ 15% Copyright © 2007 The Gordian Group, Inc. , all rights reserved Page 14

Why Would A Public Agency Want to Implement JOC? A. To procure construction services under a simplified system…. • • Faster – 80 – 90% faster than traditional methods With Higher Quality – Contractor motivated by financial incentive At Less Cost – Studies show JOC is 8 – 15% less expensive With Increased Control – Contractor Must Perform to Receive More Work • With Improved MBE/WBE/DBE Participation – Nationwide average is 40% B. Because a Public Agency can try the system at NO UPFRONT RISK OR COST! Copyright © 2007 The Gordian Group, Inc. , all rights reserved Page 15