Job Order Contract AUDITS
Independent, third-party audits are key to any successful JOC Program in terms of controlling construction costs and assuring that appropriate project team roles and responsibilities are observed.
State/County/Local JOC Program Audits
Arizona
Contract Management Audit June 2019 –
“Contracts and Procurement did not maintain an accurate listing of current contracts.” “Contracts and Procurement did not maintain evidence to support the contract closeout process or completed the applicable closeout documentation for seven contracts.” “Contracts and Procurement did not retain consolidated records in a contract file or a centralized location (such as SharePoint or the Contract Binder) to support the contract lifecycle. “ – Full Report
City of Scottsdale – Selected JOC Construction Contracts, Audit No. 1804, By Sharron Walker, city auditor, 480-312-7867, June 27, 2018 – Report
– The audit of Selected Job Order Contract Construction Contracts was performed to review compliance with contract terms and evaluate the effectiveness of contract administration. Job order contracting (JOC), which uses individual job orders written against a “master” contract, is one method the City’s Capital Project Management (CPM) staff uses to procure construction services.
Auditors selected three JOC contracts and reviewed one construction project for each contract. Payments for these three JOC contracts totaled about $9.5 million in FY2016/17 and are estimated to total about $9.1 million in FY2017/18.
Negotiating the cost for individual projects is critical to ensuring the City receives quality work at a fair and reasonable price. The audit found that cost controls should be improved in the proposal evaluation phase. Guidelines have not been established for evaluating and negotiating JOC proposals, and subcontractor selection requirements were not enforced. Further, some required project approvals were not obtained, and one reviewed project appeared to have been split to bypass the individual job order limit.
More effective cost controls are also needed during the project delivery phase. CPM staff did not compare the subcontractors used to those submitted in the proposal and did not always ensure required reviews and approvals were obtained for contractor pay requests. Further, CPM did not effectively ensure the required performance and payment bonds were provided.
As well, improved records retention practices and contract documentation can improve efficiency and consistency of contract administration.
City of Scottsdale City Auditor’s Office Audit Report No. 1409 – “Cost controls for the Job Order Contract are not evident” – Learn more…
California
2023-2024 – LAUSD – Los Angeles Unit School District – The use of contracts awarded through the Job Order Contracting (JOC) process continues to be an area of vulnerability requiring more District and OIG oversight. To
assist with these efforts, the OIG will continue investing in fraud awareness training and reporting mechanisms for referring suspected fraud, waste, and abuse to the OIG. (RESOLUTION 2023-18 BOARD REPORT NO. 269-22/23 FISCAL YEAR 2024 OIG WORK PLAN/STRATEGIC EXECUTION PLAN – SCHOOL CONSTRUCTION BOND CITIZENS’ OVERSIGHT COMMITTEE) – Report
2021 – City of Long Beach Airport Construction Audit https://4bt.us/wp-content/uploads/2021/08/Long-Beach-Airport-Construction-Performance-Audit-Long-Beach-Airport-Construction-Performance-Audit-1.pdf
City of Long Beach – Job Order Contract Audit Report May 25, 2016, Laura L. Doud City Auditor ““Overall, the city had very little oversight over JOC project costs or project quality…The city created an environment where speed of project completion, contractors’ unrealistic, low bids, and lack of controls over the program resulted in projects no longer being competitively priced.” – Laura Doud, City Auditor
Presentation – https://4bt.us/wp-content/uploads/2022/02/Job-Order-Contract-JOC-Audit-Presentation-1.pdf
We found a significant systemic lack of controls over all key areas of the process, creating an environment that is highly vulnerable to fraud. The lack of formality over processes and procedures, the extensive use of outside consultants for project management, and relatively no internal program reporting, all contribute to creating the high-risk environment.
Contractors’ percentage has declined 31% since program inception, significantly decreasing the likelihood contractors are able to make a profit. The current JOC contractor percentages range from .50 to .71, meaning the contractor is contractually obligated to perform work at 50-71% of catalog pricing. The City’s lack of structure and oversight in the JOC program creates multiple opportunities for program manipulation to occur.
Vague Project Requirements – Beginning with the project proposals, we found scopes of work (SOW) that were vague and lacked sufficient detail to determine if contractor pricing was appropriate. When the detailed work to be performed is not clear, it is difficult for the City to identify when cost have been inflated or are unrealistic. In other JOC programs, proposals are reviewed and priced by an independent source aside from the project manager and contractor, creating a mechanism to gauge whether the contractors’ proposals are reasonable. The City has not established such a control. The poorly designed SOWs have resulted in numerous change orders and cost overruns, occurring in 91% of the projects we reviewed during our 17-month audit period. Approximately $1.9 million in savings possible if limits had been placed on use of non-catalog items.
Excessive use of non-catalog items – Most JOC programs cap the amount of non-catalog items that can be used in a project. This is because non-catalog items are priced at 110% versus catalog items priced using the JOC contractors’ lower bid percentages (50% – 71%). Long Beach does not have a cap on how much non-catalog items can be used as a percentage of project cost. As a result, 42% of total project costs identified during our audit period were non-catalog items priced at 110%.
Limited City involvement -Project managers are responsible for all aspects of a project, including approval of work performed and payments to all parties. Due to staffing shortages caused by budget cuts, the Department relies heavily on consultants to fill the role of project manager. Of the projects reviewed during the audit, 64% of the project managers were consultants, which is higher than other JOC programs we surveyed. In addition, some of the contracts for which the consultants are working under allow for the firm to provide a variety of services, creating potential conflicts of interest. Overall, oversight by City employees is limited. There are no formal policies, procedures, or guidelines over the program, creating inconsistencies in project management and documentation. During our audit, we found no required or comprehensive reporting of key project information to the JOC program supervisor or other Department management. As a result, the city has very little oversight or control over JOC project costs or the quality of work. One major benefit of using a JOC program is that it decreases the time to initiate a project. This is because the traditional procurement method is replaced with bids based on a pre-priced catalog. However, we found the time required to move City JOC projects through the design and proposal phase is significantly longer than the industry standard. The vendor overseeing the pre-priced catalog for JOC programs reports the average industry time to complete project initiation and start a JOC project is 25 days without design and 55 days with design. While it is unclear how many projects during our audit period included design, to be conservative we measured all projects against the 55-day benchmark. Projects costing $4.4 million (34% of total project costs) did not fall within the 55-day time frame and seven projects consisting of $3.3 million in costs took more than 90 days to initiate.
Due to inadequate project file documentation, it was impossible to determine why the City’s projects took longer. However, project manager workload and negotiating pricing outside the catalog are two potential reasons for some of the delays.
Issue #1. Program Capacity Unknown – There does not appear to be any analysis on the number and type of projects the JOC staff can handle at any one time to ensure projects are managed timely and appropriately. The pressure to complete projects quickly has resulted in project costs and adequate oversight being of lesser importance. We heard a consistent concern from the project managers that there is pressure to get projects done quickly, reducing the time to deal with JOC contractors during proposal review.
Issue #2. No Project Prioritization – A list of all pending infrastructure needs or a formalized process for prioritizing the pending projects does not exist. This results in the Department of Public Works (Department) reacting versus strategically planning which projects should be completed next. Political pressures involving the City Council’s annual discretionary funding allocations contribute to the poor planning. These monies are required to be spent within the fiscal year, giving priority primarily based on funding and not necessarily need.
Issue #3. Projects Do Not Fit Criteria – Industry best practices indicate JOC should be used for routine and minor construction tasks and not large, complex projects that require extensive design or are likely to encounter changes and revisions during construction, The City’s JOC program is being used to bypass the lengthy traditional procurement process so that projects can be pushed along quickly, regardless of size or type, and without considering if JOC is the best option. Although quick completion of a project is a benefit of JOC, it should not be the only factor taken into consideration. Cost and timing should also be considered to determine if using the JOC program is better than traditional procurement methods for that particular project.
Issue #3a – Large and Complex Projects – JOC projects should not exceed $500,000, and currently average $100,000. However, we found examples of projects processed through JOC that exceeded $500,000, some with substantial change orders. Examples include the Belmont Pool Demolition valued at $2.6 million, the Harbor Department’s remodel of new administrative offices totaling $14 million, and the Traffic Management Center relocation costing close to $500,000. These projects appear to be assigned to JOC solely to ensure quicker implementation.
Issue #3b “Saving” Projects The program is being used to “save” projects that initially started outside the JOC program but then developed issues. Instead of ensuring proper oversight and problem resolution with the original contractor, the project is moved into the JOC program so it can be pushed quickly along without adhering to usual City procurement or contract amendment policies.Issue #4. No Process or Policy – Even though the JOC program has been in place for 13 years, formal policies, procedures, or guidelines have not been established. Without formal policies and procedures, staff who managed or operated within the program did not have guidance on their roles or responsibilities, resulting in inconsistent handling of projects and incomplete documentation.
Issue #5. Poor Program Management – Oversight and management of the JOC program by City employees is limited. The City relies on outside consultants to fill many of the project manager positions but provides little direct oversight to their activities. This is particularly risky given project managers are responsible for all aspects of the project, from selecting the contractor to approving payments, with little accountability. As such, the City would not know if the consultant was personally benefiting or if inappropriate activities were taking place.
Issue #6. No Formalized Reporting – Comprehensive reporting of key project information, such as status, budget/costs, milestone dates, or outstanding issues from the project managers to JOC program management or other Department management did not exist during our audit. This results in very few individuals within the Department being aware of how the program is operating and any potential problems. For example, the supervisor over the JOC program retired at the beginning of our audit and no one else in the Department was adequately knowledgeable of how the program operated.
Issue #7. Bid Percentage Factors at All-Time Low – Since the inception of the JOC program in 2003, contractor’s bid percentage factors have declined 31%. The current JOC bid percentage factors range from .50 to .71, meaning they are contractually obligated to perform work at 50-71% of the catalog price. It is highly unlikely contractors can earn a profit using these low percentages. Many of the contractors have held JOC contracts since 2003. Their long-term relationship with the City and experience with the JOC program influenced the decline in bid percentage factors.
Issue #8. Warning of Risk Ignored – In December 2014 (just before the last JOC contracts were approved), the JOC program manager received a letter from The Gordian Group (Gordian Group), warning the City to reject all bids because the factors bid by the contractors were too low for the program to operate as intended.
Issue #9. Lowest Percentage Factors in Survey – We surveyed five agencies in Southern California that also use a JOC program and found the City’s current bid percentage factors are the lowest among the agencies surveyed. While the other agencies also have concerns over low factors (in addition to non-catalog items and proposal review), they are more pro-active finding solutions to mitigate or lower the risks. This is different from the City, which appeared to be unaware of the significance of the problems and was not looking to change the risky situation.
Issue #10. Contract Amount Exceeded – The JOC contractors are awarded a spending authority limit, which is then established in blanket purchase orders (BPOs) so payments can be processed. During the audit, we found that the BPO amounts exceeded the spending authority by $13.6 million. A separate BPO for $13.6 million was established by the Harbor Department (Harbor) when it received approval to use the JOC program for improvements for the interim Port headquarters building; however,the City erroneously added the same $13.6 million to the non-Harbor BPO, thereby doubling the authority amount granted to the contractors. With this additional authority, the City paid a JOC contractor approximately $1 million more than the approved JOC contract amount. Further review found that the $1 million was charged to the JOC program, although costs did not actually relate to JOC projects. The payments were for costs associated with another separate contract the JOC contractor had with the City and should not have been paid through the JOC BPO. This situation is an example of the City’s poor contract administration and lack of adequate program reporting that should have captured this error.
Issue #11. Lack of Transparency – Communication to Council regarding contract terms and contract extensions has not always been clear and transparent. For example, the former JOC program manager chose to renew the contracts early, before his retirement, even though there was still $3.9 million of spending authority remaining on the current contracts. The early renewal awarded the JOC contracts an additional $17.5 million in spending authority and created an overlap in terms causing some contractors to have two contracts in place at one time. It is unclear if Council understood they were creating an overlap in contract terms and spending authority, because this issue was not adequately discussed in staff report to the City Council.
Issue #12. Contract Terms Not Updated – We found conflicting language within the contract and bid specifications. The audit clause language within the JOC contract documents is inconsistent and outdated,… The audit language in the bid specifications is similar to the standard audit clause language used in current contracts. However, the audit clause in the contract is restricting and states the City only has the right to audit if the contract is funded with federal, state or county funds. We expressed our concern over the conflicting language; however, the City stated the terms were not conflicting and there was not a problem. Not only does the conflicting language create confusion but could be problematic if the right to audit were challenged.
Issue #13. Training Needed for Project Managers – The JOC program does not provide training for project managers to ensure they maintain sufficient controls necessary for the program to operate as designed. This includes the critical function of properly reviewing contractor proposals to ensure the City is paying a fair price for projects. Agencies we surveyed recognize the importance of the project manager role and have developed specific training academies or programs providing skills needed specifically for managing JOC projects.
Issue #14. Vendor Did Not Provide Required Training – Services included in the City’s contract with Gordian Group require the vendor to provide the City with ongoing training regarding JOC program management. However, training was not provided even though Gordian Group account manager during the audit period was aware of the program issues and the challenges faced by the project managers.
Issue #15. Poor Scope of Work Preparation –The City prepares a project’s detailed scope of work (SOW), which should serve as the roadmap for the JOC contractor to build an accurate and thorough cost proposal that meets the City’s needs. Based on projects we reviewed, the SOW did not always contain comprehensive information of project requirements. We saw instances where the SOW had only a general description and did not detail the necessary components of the project. Vague SOWs create an opportunity for the contractor to manipulate project costs to their advantage as the City appears not to have clarity of project requirements or expectations.
Issue #16. Project Cost Overruns – Inadequate project planning and poorly designed SOWs led to numerous change orders and cost overruns. Table 5 illustrates the significance of change orders in a sample of projects over $100,000.
Issue #17. Manipulation of Catalog Items – During the audit, we heard a recurrent concern from project managers that JOC contractors regularly inflate proposals, since it is impossible for them to make a profit with the low bid percentage factors. This requires the project managers to spend additional time negotiating with the JOC contractors to arrive at a reasonable price agreed to by both parties. However, there is no guarantee the negotiated prices accurately reflect the catalog items or quantities needed to perform the work. Ultimately, this means the project costs are no longer competitively bid, and the city is paying more than contractually obligated.
In April 2013, a former City project manager issued a letter to a JOC contractor, New Creation Builders. The letter alleged New Creation Builders was padding proposals by manipulating the catalog and quantities to inflate proposal costs. The JOC program manager at the time was copied on the letter; however, the city, through other project managers, continued to give $3.8 million in work to the contractor, with $15.7 million paid to them since inception of the program in 2003. The city accepted New Creation Builders’ bid percentage factor of .50, which was the lowest contractor bid in January 2015.Issue 17a. Better use of Catalog Pricing – The catalog was originally developed specifically for the City using local market pricing and contains over 100,000 task items. Given the volume of the catalog, it requires someone with a level of expertise within the construction industry to properly break down projects to a level of detail where the catalog can be used appropriately. Some agencies we surveyed tend to “bundle” items that are used together frequently to make it easier to use the catalog. However, the city does not currently bundle catalog items, making it very time consuming to use the catalog correctly. Because there is a strong emphasis on quick project implementation, the extra time needed to price items correctly is a deterrent for all parties.
Issue #18. Excessive Non-Catalog Items – Other JOC programs we surveyed institute a cap or maximum of non-catalog items that can be used in any project. However, the city places no cap on the quantity or frequency of use of non-catalog items.
Issue #18a. No Independent Quotes
Issue # 18b. – Vague Product Descriptions#18c. Poor Management of Catalog Issue – Per their contract, Gordian Group is to “conduct research to identify recurring use
of non-catalog tasks” and “develop new catalog tasks for recurring non-catalog tasks”. Considering the excessive use of non-catalog items, this did not occur. When we asked the former Gordian Group account manager why the non-catalog items weren’t being added to the catalog, he indicated the project managers didn’t reach out to him for assistance. However, Gordian Group’s fees are based on
1.95% of total project costs. Therefore, they directly benefit by using products outside the catalog that contribute to higher project costs.#19. City Preferred Vendors and Items – City departments may have preferred products or materials they want used in their projects.
The City does not have an official pricing list of preferred products and materials. Instead, the City treats preferred products and materials as non-catalog items, priced at 100% plus the 10% fee. When preferred vendors are used, the JOC contractor acts as a middlemanIssue #20. Insufficient Project Files- The Department does not specify what documentation or information should be retained in the project files, leaving it solely up to the project manager. We found inconsistent and often insufficient documentation within project files.
Issue #21. No Formal Project Close Out – A formal close out process helps to ensure that project quality meets City standards and
appropriate close-out documentation is performed, such as a Notice of Completion. Unfortunately, a formal and consistent close-out process did not occur for JOC projects during our audit period. The city defers to the project manager to decide what is appropriate for each project, which results in significant inconsistencies in handling project close outs.Issue #22. No Cost or Time Evaluation- A post-project evaluation of costs and time would assist project managers with improving
efficiency and cost effectiveness of future projects. However, this type of analysis did not occur with projects we sampled.Issue #23 No Evaluation of Subcontractors – Subcontractors perform the majority of the work on JOC projects. However, the city currently does not perform a post-project evaluation of subcontractor performance to ensure work was done with quality and to the City’s satisfaction. Instead of just assessing how quickly work was performed, an effective evaluation or scoring of subcontractors would include multiple areas, such as communication, responsiveness, and quality of work.
Issue #24. Excessive Access to Files – A web-based software, eGordian (formally ProGen), is used by project managers to access the catalog and develop project SOWs. The data in eGordian serves as the City’s official list of JOC projects. During our audit, 33 individuals had access to deleting and editing data within the system. However, eight of these individuals are no longer City employees, including one who left the City over 5 years ago. It is apparent that the Department is not monitoring access levels or assessing whether it is appropriate for the user to have access at all.
Issue #25. Numerous Parties Involved – It is common practice for JOC projects to have several parties involved in the project, including numerous layers of subcontractors. With no mechanism to detect potential excessive costs or inappropriate relationships between the parties, the risk of fraud is very high. Issue
#26. Subcontractor Information Not Disclosed – The contracts require the JOC contractor to perform at least 20% of the maximum contract amount, including all work in the contractor’s designated trade. JOC contractors essentially function as job brokers performing a small percentage of the actual work.
Issue #27. Vendor Conflict of Interest – During the audit, the City’s Gordian Group account manager held a contractor’s license which was being used by a local construction company. This information was held in secrecy and was not disclosed by the account manager to the City or to his employer. Given the lack of information and documentation held by the City on subcontractors, it is unknown if this company was functioning as a subcontractor within the JOC program. If this was the case, there would have been the potential for this person to personally benefit from increased project costs.
Issue #28. Use of Consultants – Project managers are responsible for all aspects of a project, including approval of work performed and payments to all parties working on the project. Due to budget cuts, the
Department has turned to the use of consultants as project managers. The City maintains a number of “as-needed” contracts for consultant services. The use of consultants in the City’s program was higher than that of other agencies surveyed, which ranged from 25%-50%. Of
the projects we reviewed, 64% of project managers were consultants, many of them former City employees.Issue #28a. Consultants Reporting to Consultants – While use of consultants may be necessary, there are risks associated with allowing
consultants to have total control over a project with little to no City oversight. We noted a project where the consultant acting as project manager reported directly to another consultant instead of reporting directly to the JOC program manager.Issue #28b. Consultant Role Not Defined – The project manager has a high level of authority over the decisions and management of the project. However, that role has not been sufficiently defined. This creates a gray line between the roles of the project manager and the contractor.
Issue #29. There are a wide range of consulting services that can be provided via the City’s “as-needed” contracts and use on JOC projects, such as project management, design, inspection, engineering services and construction management. There are no JOC program controls to monitor or prevent multiple consultants from one consulting firm working in different capacities on the same project. Allowing this to occur could create a potential conflict of interest. While we understand the need to occasionally supplement City staff, allowing consultants from the same firm to function in different roles on a single job creates the opportunity for the firm to have multiple ways to benefit from increased project costs.
City of Long Beach – Audit Response – https://4bt.us/wp-content/uploads/2021/08/City-of-Long-Beach.pdf
County of San Diego
JOB ORDER CONTRACT MANAGEMENT AUDIT
FINAL REPORT
Chief of Audits: Juan R. Perez Report No. A19-011 October 2020
Finding I: Insufficient Internal Controls Over JOC Task Order Management
Finding II: Strengthen Controls Over Non Pre-Priced Items
Finding III: Accountability Over Project Management Support Costs Needs Improvement
Full Report – JOC AUDIT – COUNT OF SAN DIEGO
City and County of San Francisco https://4bt.us/wp-content/uploads/2022/01/San-Francisco.pdf
Job Order Contract Program Lacks Sufficient Oversight to Ensure Program Effectiveness
City Services Auditor (CSA), Office of the Comptroller
- JOC program lacks a policy establishing the program’s purpose that could provide staff guidance when determining which projects to authorize for implementation under JOCs.
- Use of JOCs for some projects undermines the intent of the JOC program. The Administrative Code indicates that repair, maintenance, and minor construction projects with costs less than $400,000 should be completed under JOCs. However, four of SFPUC’s JOC projects were not for repair or maintenance and exceeded the $400,000 limit. Also, some evidence indicates that SFPUC may have divided some larger projects into smaller projects and executed them
under JOCs. - Despite prepricing of construction materials and tasks being a practice that helps ensure that the City and County of San Francisco (City) receives competitive pricing for JOC projects, 14 (35 percent) of 40 sampled task orders contained non-prepriced tasks. In eight cases, the non-prepriced tasks represented the majority of the total project costs. Heavy reliance on non-prepriced tasks reduces the effectiveness of the competitive solicitation process for JOCs.
- Lacks procedures for choosing among JOC contractors when assigning projects and does not document project assignment decisions.
- The JOC program inadequately assesses contractors’ qualifications, resulting in a heavy reliance on lowest bid criteria when awarding JOCs.
- The JOC program inadequately monitors the quality of contractors’ work. The program does not consistently and promptly inspect JOC projects and ensure that project managers submit contractor evaluation forms on time.
County of San Jose – Report
Building Operations has no written standards governing the quality and timeliness of completing work orders. In addition, it does not know how long it currently takes to carry out work orders. As such, Building Operations should implement a six-month pilot of establishing clear deadlines for work orders, expected performance standards, and service levels. A follow-up audit should be conducted to review the new policies and procedures and evaluate staffing levels and productivity using the new data. – 2018 – Auditor
LA County – COUNTY DEPARTMENTS’ USE OF JOB ORDER CONTRACTS REVIEW (June 14,2016, Board Agenda ltem 2) -COUNTY OF LOS ANGELES DEPARTMENT OF AUDITOR.CONTROLLER
Based on our review, County management needs to significantly increase its oversight of the County’s JOC program. We noted serious deficiencies in the department’s controls over the review and approval of contractor proposals.
These deficiencies may have resulted in projects costing more than what the County should have paid and appear to be the result of a culture or environment where expediency and/or convenience takes precedence over proper controls.
These deficiencies may also be contributing to/encouraging other serious issues noted during our review (i.e., contractors padding
and/or inflating cost proposals to compensate for low bids). FULL REPORT
Orange County Report No. 427 December 2012 Report by the Office of County Comptroller
” Based on the results of our testing, we found the County Divisions reviewed did not comply with contract provisions for issuing purchase orders under the job order contract. Specifically, we noted that work was not priced in accordance with contract terms and dollar limits were exceeded. … In our opinion, the controls over the review and approval of price proposals, including whether the items proposed were needed to perform the agreed-upon scope of work and whether the price proposed and paid represented an appropriate amount for the actual work performed, were not adequate. “- Office of the Comptroller Learn more…
LA County – Office of the Inspector General 0 Los Angeles Unified School District – 2015
Los Angeles Unified School District Office of the Inspector General Contract Audit Unit -October 30, 2015 – Special Review Job Order Contracting Program – Contractor Prequalification and Selection Processes –
“Conclusion Our review found that the JOC contractor prequalification and selection policies and procedures are not operating effectively. As a result, the contractor prequalification scores (CPS) do not accurately reflect the performance of the bidders and the JOC master contracts are not always awarded to the most qualified prequalified bidders as required by the Public Contract Code. ” Learn more…
CA 09-865 October 17, 2011
Annual Report Fiscal Year 2012, CA 15-1044 October 30, 2015,Office of the Controller, City and County of San Francisco Audit report, July 18, 2013 April 6, 2015
The audit found that some SFPUC practices are inconsistent with the intent of the JOC program and that SFPUC’s administration of the program has some weaknesses. Further, the JOC program inadequately assesses contractors’ qualifications, resulting in a heavy reliance on lowest bid criteria when awarding JOC contracts; and inadequately monitors the quality and performance of contractors’ work. The program also does not consistently and promptly inspect JOC projects and ensure that project managers submit contract evaluation forms on time.
Some SFPUC practices undermine the intent of the JOC program and make it vulnerable to abuse. SFPUC could better administer the program and better assess the quality and performance of JOC contractors.
The audit found that:
• SFPUC’s JOC program lacks a policy establishing the program’s purpose that could provide staff guidance when determining which projects to authorize for implementation under JOCs.
• SFPUC’s use of JOCs for some projects undermines the intent of the JOC program. The Administrative Code indicates that repair, maintenance, and minor construction projects with costs less than $400,000 should be completed under JOCs. However, four of SFPUC’s JOC projects were not for repair or maintenance and exceeded the $400,000 limit. Also, some evidence indicates that SFPUC may have divided some larger projects into smaller projects and executed them under JOCs.
• Despite prepricing of construction materials and tasks being a practice that helps ensure that the City and County of San Francisco (City) receives competitive pricing for JOC projects, 14 (35 percent) of 40 sampled task orders contained non-prepriced tasks. In eight cases, the non-prepriced tasks represented the majority of the total project costs.
Heavy reliance on non-prepriced tasks reduces the effectiveness of the competitive solicitation process for JOCs.
• SFPUC lacks procedures for choosing among JOC contractors when assigning projects and does not document project assignment decisions.
• The JOC program inadequately assesses contractors’ qualifications, resulting in a heavy reliance on lowest bid criteria when awarding JOCs.
• The JOC program inadequately monitors the quality of contractors’ work. The program does not consistently and promptly inspect JOC projects and ensure that project managers submit contractor evaluation forms on time. Some SFPUC practices undermine the intent of the JOC program and make it vulnerable to abuse. SFPUC’s use of JOCs for some projects undermines the intent of the JOC program. The Administrative Code indicates that repair, maintenance, and minor construction projects with costs less than $400,000 should be completed under JOCs. However, four of SFPUC’s JOC projects were not for repair or maintenance and exceeded the $400,000 limit. SFPUC could better administer the program and better assess the quality and performance of JOC contractors.The Job Order Contract Program Lacks Sufficient Oversight to Ensure Program Effectiveness. JOC program lacks a policy establishing the program’s purpose that could provide staff guidance when determining which projects to authorize for implementation under JOCs. JOC projects were not for repair or maintenance and exceeded the $400,000 limit. Also, some evidence indicates that SFPUC may have divided some larger projects into smaller projects and executed them under JOCs. Despite prepricing of construction materials and tasks being a practice that helps ensure that the City and County of San Francisco (City) receives competitive pricing for JOC projects, 14 (35 percent) of 40 sampled task orders contained non-prepriced tasks. In eight cases, the non-prepriced tasks represented the majority of the total project costs. Heavy reliance on non-prepriced tasks reduces the effectiveness of the competitive solicitation process for JOCs. …lacks procedures for choosing among JOC contractors when assigning projects and does not document project assignment decisions…. The JOC program inadequately assesses contractors’ qualifications, resulting in a heavy reliance on lowest bid criteria when awarding JOCs. The JOC program inadequately monitors the quality of contractors’ work. The program does not consistently and promptly inspect JOC projects and ensure that project managers submit contractor evaluation forms on time. In almost every instance,
the review of the calculation is done by outside construction management firms acting as an
extension of SANDAG staff. Given these issues, we recommend SANDAG revisit its practice on how profit margins
are calculated and negotiated to ensure the appropriate profit is being paid to the contractors.”“We further noted that SANDAG is allowing profit margins on material costs that may have already
been included in the Pre-price catalog items associated with installing these materials. Our
understanding is that when contractors bid under these JOC contracts, they bid a factor, or
“coefficient” as referred to in the industry, applied to each unit price in the Unit Price Book. This factor
includes all costs for the installed unit of measure including materials, labor, overhead and profit and
sometimes bond and tax. If this is the case, then has profit already been provided to the contractor for
installing material costs? Is the additional profit on material costs up to 8.43 percent warranted ?”“SANDAG’s current practice…. diminishes the effectiveness of procurement oversight.”
PERFORMANCE AUDIT REPORT – 2018-003
SANDAG JOD AUDIT 2018 – “…Audit Results: : 
“We found no documented evidence that profit margins are being negotiated as required. ”
” we identified two areas that could benefit from improvements to SANDAG internal procedures. First, certain practices involving profit calculation and documenting negotiations for NPP work should be reviewed to determine
whether SANDAG can improve its oversight in this area. Second, SANDAG should consider
changing its current procedure of not forwarding contract change orders (CCOs) to Contracts &
Procurement for approval.
Additionally, our audit research noted that several public agencies establish limits on the
quantity and/or value of NPP work items that should be included in job orders before additional
approvals are necessary.
Ventura County – Concern over how Ventura County is implementing Job Order Contracting.
Los Angeles County – 2018
Los Angeles Unified School District – LAUSD – Overpayments
Florida
Broward County – Broward County JOC Program Review for Agenda 12-13-11
City of Miami Capital Improvements Program ITB Number: 08-09-043, Brevard County, Internal Audit Review of Facilities Construction, July 15, 2003
In October 2002, the County implemented JOC as one of their continuing contracting methods to provide construction services for smaller projects ($2,500 – $250,000). During our testing, we noted the following:
Although Facilities Construction utilizes a system provided checklist, there are no formal written policies or procedures over JOC.
Two out of the three JOC contractors had expired insurance certificates for the general liability, automobile and workers compensation coverage’s. The third JOC contractor had an expired workers compensation insurance certificate.
Due to a software limitation the system does not allow for change orders. In order to process a change order, a new JOC order number has to be generated and a separate file setup.
Although we noted no exceptions during our testing, there is no documented process to reconcile the fees charged from the Gordian Group (consultant) to the amount of “Notice to Proceed projects” in the JOC system. Impact
Clear, concise and standardized processes and procedures help minimize inconsistencies, misunderstandings and inadvertent oversight of obtaining proper documentation.
In the event of employee turnover, lack of clearly defined procedures may lead to inefficiencies, possible discrepancies, and potential non-compliance with laws or policies.
Because change orders have to be setup as separate jobs in JOC, when the entire project is not tracked in the same file, the potential exists that the individual project components costs could exceed required management approval levels. The current system also has the potential to circumvent timely management monitoring of contract progress and total project costs.
A lack of documented procedures to reconcile invoices received from the Gordian Group to the Notice to Proceed projects within the JOC system in a timely manner could result in discrepancies and possible over charges.
City of Tampa – JOC Audit
Audit Issues
- Contractor price proposals were not always adequately reviewed prior to acceptance.
- Work performed on JOC projects that were not based on established unit prices is not
consistent with the JOC methodology and diminishes its cost effectiveness. - While most of the JOC Project Managers appeared more than capable to administer their
respective projects, others do not appear to have the requisite background in the various
construction trades to adequately monitor construction. - While the JOC procurement method provides a significant reduction in administrative labor
and overall project time when compared to the City’s formal bid process, these criteria aFlone
should not determine the procurement method used.
Kansas
District Inspector General for Audit, Great Plains District, Report: 98-KC-204-1001 March 10, 1998
We concluded the JOC program was developed with internal control weaknesses, implemented with management deficiencies, and abused by a contractor. In addition, the JOC consultant, The Gordian Group (Gordian), did not fulfill all its responsibilities under its contract. As a result, the HAKC was not adequately prepared to administer its JOC program. Inadequate Scopes of Work. Inadequate Independent Cost Estimates. Inadequate Review of Contractor Cost Proposals. Inadequate Staffing.
New York
City of New York Office of the Comptroller, Audit Report on Job Order Contracting by the Department of Environmental Protection, FR07-121A June 30, 2008
“We found significant weaknesses in the Department’s administration of the JOC program. Specifically, the Department does not have adequate procedures to ensure that required project documentation is submitted and approved.
Moreover, the Department lacks any written policies or guidelines that spell out the circumstances—including a monetary threshold—under which the use of job order contracting is appropriate.
Further, the Department has not ensured that inspections of proceed order work are adequately conducted and documented by reports, daily logs, and photographs. These weaknesses have led to contractors being assigned work outside their contract locations and contractors not completing all required work, not performing work satisfactorily, and not completing work on time.”
“We found problems with the Department’s mainframe computer system PASSPORT and the Division’s PROGEN databases.”
“The Department’s response attempted to obfuscate the serious issues raised in the report by speculating that the auditors do not understand the job order contracting program; by contending that the opinions expressed in the audit were predicated on the auditors’ “philosophy”; by submitting information that contradicts documentation in its files; and by providing irrelevant information.
Clearly, the Department has failed to understand the salient conclusion of this audit report—that the Department has not properly managed the administration of the JOC program.
In addition, the Department does not have a system in place to review “Construction Task Catalog” prices that are used to determine the cost of JOC work. Our own independent review found a wide fluctuation in those prices.
While some work cost up to 41 percent more than industry standard pricing, other work cost up to 47 percent less.
Consequently, we cannot conclude with certainty that the cost of JOC work is reasonable.
City of New York Office of the Comptroller, Audit Report on Job Order Contracting by the Department of Design and Construction, 7e11-120A June 28, 2012
Audit Findings and Conclusions
The Department is unlikely to attain between $2 million and $3.7 million in cost savings from the JOC program because the program is not being administered as effectively as it should be. Had the program been administered more effectively, the Department might have achieved a cost saving that, according to the Department’s JOC Training and Reference Manual, could “save a typical facility owner 8-15% [highlighted in the manual] in overall project costs as compared to traditional contracting methods.” Specifically, we found that job orders are not developed in a timely manner, cost estimates are not reliable indicators of the actual cost of work, and construction work is not carried out in a timely manner. Moreover, there is a lack of guidelines that spell out the circumstances and monetary threshold for job order work and a lack of standards for measuring whether the JOC program is, in fact, achieving anticipated cost savings.
Furthermore, when job order work was delayed, the Department did not impose liquidated damages totaling more than $450,000. Additionally, problems with the Department’s PROGEN database impede the Department’s ability to effectively monitor the status of JOC project work and ensure that projects are proceeding expeditiously. Finally, our observation of sampled job order projects and a review of file documentation leads us to conclude that the quality of work overall was satisfactory.
Audit Recommendations
This report makes a total of 12 recommendations, including that the Department:
- Formulate measurement criteria to assess whether the JOC program is attaining its goal of achieving savings in overall project costs.
- Complete development and submit job orders for registration within the required 45-day timeframe.
- Provide independent estimates for job order work.
- Ensure that JOC contractors complete work on schedule.
- Develop and implement written guidelines that stipulate the circumstances and monetary threshold under which the use of job order contracts would be appropriate.
- Ensure that all job orders contain provisions for liquidated damages. Determine whether liquidated damages should be assessed for the cases noted in this report.
- Ensure that accurate and complete information is recorded in the PROGEN system.
Agency Response
In its response, the Department stated that “The Department of Design and Construction (DDC) appreciates the City Comptroller’s efforts with respect to this audit of DDC’s administration of the Job Order Contracting (JOC) program and will be using this report to help improve our process.” The Department agreed with eight recommendations and disagreed with four recommendations.
One of the areas of disagreement concerns our recommendation that the Department formulate measurement criteria to assess whether the JOC program is attaining its goal of achieving savings in overall project costs as compared to traditional contracting methods. The Department disagreed with this recommendation for the following reasons:
- that the main purpose of the JOC program, which is to expedite the procurement process for work for which it is ideally suited, may not necessarily translate to cost savings, and;
- that the criteria that we used to estimate possible cost savings and which we obtained from the Department’s JOC Manual, was simply part of the Department’s JOC consultant’s marketing material. Consequently, the Department intends to remove any “marketing materials” from its updated JOC Manual.
We disagree with the Department’s position. Despite the Department’s efforts to repudiate its JOC Manual and its goal of seeking cost saving by effectively carrying out the JOC program, we consider cost saving a valuable objective. Accordingly, we reaffirm our recommendation.
The full text of the Department’s response is attached as an addendum to this report.
Learn more…Download full report.
Texas
Attorney General of Texas Opinion No. GA-1028 City of Austin Website Job Order Contracting Related Documents University of Houston Job Order Contract – Guidelines & Procedures July, 2010
Audit of Job Order Contracting 2015-2019 – Dallas ISD FULL REPORT
Dallas ISD – Video– Dallas ISD chief auditor faces job review despite finding contract overpayments in district“I believe the administration is trying to cover up the violations of law and policy…” the auditor explained in an email, responding to a query.
Houston Independent School District – Internal Audit of the Design and Selection Process of Job Order Contracts – May 10, 2015 – “
Overall Conclusion and Recommendation Based on our evaluation of the overall design and effectiveness of the JOC process, we recommend the Procurement Department cease the execution of future JOC contracts awarded by CSP project number 14-11-05 and re-bid the project after implementing the audit recommendations in the report detail…”-Audit Report Learn more…
Houston ISD – 2019
“Problems with contracting procedures are not a recent development within HISD. Historical
evidence of unlawful contract awarding can be traced to 2013 through internal documentation
of Job Order Contract misuse. HISD internal auditors investigated and confirmed the abuse of Job Order Contracts in which contracts were split in orderto avoid the $500,000 threshold as required by state law. In conjunction to these findings, the district’s former Chief Auditor, Richard Patton, filed a whistleblower lawsuit against HISD for terminating his contract after reporting unallowable contracting practices within the district. Government contracts are easily susceptible to fraud and therefore contract procurement rules
should be followed accordingly. However, HISD manipulated contract procurement rules through
the abuse of Job Order Contracts and multiple change orders. The district not only intentionally
split Job Order Contracts to avoid the $500,000 limit, they approved multiple change orders to
projects subsequently increasing the cost of projects, thus, proving fraudulent behaviors that
contribute to a lack of transparency.
Therefore, allegation four, “Did the HISD Board of Trustees fail to follow contract procurement
rules and procedures, and fail to ensure staff followed these rules and procedures when awarding
contracts for goods and services in violation of Tex. Educ. Code §44.031?” is substantiated
because on multiple occasions the HISD Board of Trustees violated the law by interfering with the
contract procurement process. The HISD Board of Trustees intentionally tried to award contracts
indirectly by contacting vendors during the RFP process, advocating for contractors, and HISD
was found to be manipulating contracts to circumvent contract procurement rules.”(Quotes above – Source – Case 1:19-cv-00684-LY Document 8-1 Filed 08/07/19)
Job Order Contract Audits provide an excellent summary of lessons learned.
Federal Sector Audits – Facilities Management and Repair, Renovation, Maintenance, and Construction Cost Management
Overall…”The federal government could better manage its real property, or real estate, portfolio by effectively disposing of unneeded buildings, collecting reliable real property data, and improving the security of federal facilities.” “Overall, the ratings for 20 of the 36 areas on our list are unchanged. Since our last update, 5 areas have regressed and 7 improved.” – GAO, 2021
Dedicated Leadership Needed to Address Limited
Progress in Most High-Risk Areas https://4bt.us/wp-content/uploads/2021/08/gao-21-119sp.pdfFederal Real Property Asset Management:
Agencies Could Benefit from Additional Information on Leading Practices – GAO-19-57 – https://4bt.us/wp-content/uploads/2021/08/Agencies-Could-Benefit-from-Best-Practices.pdfFederal Government Cost Management Issues – https://4bt.us/wp-content/uploads/2022/02/gao-22-105122-Federal-Government-Cost-Management-Issues.pdf
AOC – Architect of the Capitol – “GAO found that AOC’s cost estimating policies and guidance did not require a quantitative risk and uncertainty analysis nor the reporting of the resulting confidence level of the estimate. “https://4bt.us/wp-content/uploads/2021/08/AOC-Cost-Estimaitng-Issues.pdf
DEFENSE REAL PROPERTY – https://4bt.us/wp-content/uploads/2022/12/gao-22-104652.pdf
DOE – Department of Energy – “DOE has not had a policy that establishes standards for cost estimating in place for over a decade, and its guidance is outdated and incomplete, making it difficult for the department to oversee the development of high-quality cost estimates by its contractors.” DOE Lacks Efficient Construction Cost Estimating Capability
DOD – Defense Infrastructure: DOD Should Better Manage Risks Posed by Deferred Facility Maintenance 2022 – GAO-22-104481
- DOD has over 550,000 buildings and other facilities worldwide, with an estimated value of about $1.3 trillion.
- DOD’s goal is to fund at least 90% of its facility sustainment needs annually. Facility sustainment funding didn’t meet that goal in FYs 2017-2019 due to competing priorities. This contributed to DOD’s deferred maintenance backlog, which was at least $137 billion in FY 2020.
- To estimate the funding needed to sustain its roughly 550,000 facilities worldwide, the Department of Defense (DOD) uses cost factors that are comparable to those used by other selected federal agencies, including factors that account for geographic differences and inflation. (Note: The practice of using cost factors presents significant barriers to gaining cost visibility and enabling cost management.)
- DOD likely underestimates its annual funding requirements
- For fiscal year 2020, DOD reported deferred maintenance backlogs totaling $137 billion, and had yet to implement a Sustainment Management System (SMS)
DOD – Defense Health Agency (DHA) will need to address after it assumes responsibility for the sustainment, restoration, and modernization (SRM) of all military medical treatment facilities (MTFs) within the Military Health System (MHS) – Issues that the Defense Health Agency (DHA) will need to address after it assumes responsibility for the sustainment,
restoration, and modernization (SRM) of all military medical treatment facilities (MTFs) within the Military Health System. (MHS). 2020. 
DOD – Department of Defense – Action Needed to Increase the Reliability of Construction Cost Estimates
DOD – Department of Defense GAO-03-516 DEFENSE INFRASTRUCTURE Changes in Funding Priorities and Management Processes Needed to Improve Condition and Reduce Costs of Guard and Reserve Facilities
DOD – Department of Defense GAO-03-274 Defense Infrastructure: Changes in Funding Priorities and Strategic Planning Needed to Improve the Condition of Military Facilities (2003)
GAO is recommending that the Secretary of Defense direct the service secretaries to reassess the funding priorities attached to sustaining and improving their facilities. Also, GAO is recommending that the Secretary
- instruct the services to implement a consistent, departmentwide process to assess, rate, and validate facility conditions.\
- revise DOD’s facilities strategic plan to include detailed information on specific actions, time frames, responsibilities, and funding levels;
- clarify DOD’s guidance by specifying the organizational level at which its stated objectives should be achieved direct the services to develop comprehensive performance plans.
Related DOD Audits/Reports – 2021 – DEFENSE REAL PROPERTY DOD – Needs to Take Additional Actions to Improve Management of Its Inventory Data https://4bt.us/wp-content/uploads/2021/08/Defense-Real-Property.pdf , “‘Environmental Liabilities: Long-Term Fiscal Planning Hampered by Control Weaknesses and Uncertainties in the Federal Government’s Estimates” GAO-06-427, “Comprehensive Cost Information and Analysis of Alternatives Needed to Assess Military Posture in Asia”- https://4bt.us/wp-content/uploads/2021/08/DOD-Comprehensive-Cost-Information-Needed.pdf
DOT – Department of Transportation – GAO-02-702T – “GAO found problems with the costs and oversight of major highway and bridge projects because cost containment was not an explicit statutory or regulatory goal. ”
GSA-PBS Northeast and Caribbean Region Not Overseeing Operations and Maintenance Contracts Effectively
Full Report – https://4bt.us/wp-content/uploads/2022/02/A201046-Limited-Scope-OM-R2-Final-Report-508-for-issuance.pdf
Strategies to Renew Federal Facilities (2023) “The committee found the Builder system to be unsuitable for estimating renewal costs because of its limited scope and issues with its inspection and forecasting methods necessary to report anticipated annual maintenance and repair needs.” National Academies of Sciences, Engineering, and Medicine. 2023. Strategies to Renew Federal Facilities. Washington, DC: The National Academies Press. https://doi.org/10.17226/26806.
GSA – General Services Administration – “These can be summarized into eight categories: breakdowns in communication, ineffective design reviews, costly foundation problems, inadequate testing and inspections, management control weaknesses, after-occupancy problems, delays in project approval and funding, and miscellaneous problems.” https://4bt.us/wp-content/uploads/2021/08/GSA-Problems-1.pdf
GSA has failed to meet challenges to establishing a comprehensive and effective system of
internal control and….
1. Establishing and Maintaining an Effective Internal Control Environment Across GSA.
2. Enhancing Government Procurement.
3. Maximizing the Performance of GSA’s Real Property Inventory.
4. Prioritizing Agency Cybersecurity.
5. Managing Human Capital Efficiently to Accomplish GSA’s Mission.
6. Safeguarding Federal Facilities and Providing a Secure Work Environment.
7. Managing Revolving Funds Effectively.
8. Implementing GSA’s Role Under the Comprehensive Plan for Reorganizing the Executive Branch.
Source: Assessment of GSA’s Management and Performance
Challenges-Office of the Inspector General https://4bt.us/wp-content/uploads/2021/12/Assessment_GSAs_Management_Performance_Challenges_FY2019-508-1.pdf
Federal Real Property: GSA Should Improve Accuracy, Completeness, and Usefulness of Public Data https://4bt.us/wp-content/uploads/2021/08/Federal-Real-Property-GAO.pdf
NSF – National Science Foundation – “the agency’s policies did not incorporate procedures on how NSF officials are to ensure that those estimates meet best practices.” https://4bt.us/wp-content/uploads/2021/08/NSF-Construction-Cost-Estimating.pdf
VA Real Property: Enhanced Communication and Performance Measurement Could Improve Capital Asset Management GAO-22-103962
- The Department of Veterans Affairs operates one of the largest health care systems in the country. It owned 5,625 buildings and leased 1,690 more in FY 2020 to help provide this care. VA has a growing maintenance backlog and estimated that it needs $22.6 billion to correct facility deficiencies. It also needs to adapt facilities for changing veteran demographics.
- The VA doesn’t have measurable goals for how (facilities) conditions should improve over time—so it’s unclear whether its facility management efforts are meeting the VA’s needs.
- The VA should develop a set of performance goals and related measures based on key practices to allow VA to assess the performance of its capital assets and make any necessary improvements to its management of those assets. https://4bt.us/wp-content/uploads/2022/08/gao-22-103962-VA-Real-Property.pdf
VA – Veteran’s Administration – “VA Real Property:
Preliminary Observations on Challenges Limiting VA’s Ability to Effectively Manage Its Assets” – “GAO’s key characteristics of an asset management framework state that effectively managing assets requires, among other things, maintaining leadership support that provides the necessary resources; a collaborative organizational culture; and a system for evaluating and improving asset management performance. However, GAO’s previous and ongoing work has found that VA continues to face challenges on these fronts. ” https://4bt.us/wp-content/uploads/2021/08/GAO-REPORT.pdf
“In recent years, we have highlighted VA’s higher than estimated spending on NRM (non-recurring maintenance, and the agency’s budget estimates.”
Related Reports –
Veterans’ Health Care Budget: Transparency and Reliability of Some
Estimates Supporting President’s Request Could Be Improved.
GAO-12-689. Washington, D.C.: June 11, 2012.
VA Health Care: Estimates of Available Resources Compared with Actual
Amounts. GAO-12-383R. Washington, D.C.: March 20, 2012.
Veterans Affairs: Issues Related to Real Property Realignment and
Future Health Care Costs. GAO-11-877T. Washington, D.C.: July 27,
2011.
VA Health Care: Need for More Transparency in New Resource
Allocation Process and for Written Policies on Monitoring Resources.
GAO-11-426. Washington, D.C.: April 29, 2011.
VA Real Property: Realignment Progressing, but Greater Transparency
about Future Priorities Is Needed. GAO-11-521T. Washington, D.C.:
April 5, 2011.
VA Real Property: Realignment Progressing, but Greater Transparency
about Future Priorities Is Needed. GAO-11-197. Washington, D.C.:
January 31, 2011.
Veterans’ Health Care: VA Uses a Projection Model to Develop Most of
Its Budget Estimate to Inform President’s Budget Request. GAO-11-205.
Washington, D.C.: January 28, 2011.
VA Health Care: Overview of VA’s Capital Asset Management.
GAO-09-686T. Washington, D.C.: June 9, 2009.
VA Health Care: Challenges in Budget Formulation and Issues
Surrounding the Proposal for Advance Appropriations. GAO-09-664T.
Washington, D.C.: April 29, 2009.
VHA Should Improve Activation Cost Estimates and Oversight ,“VA’s estimates substantially met one, and partially or minimally met three of the four characteristics associated with reliable cost and schedule estimates.” https://4bt.us/wp-content/uploads/2021/08/VA-Cost-Estimating-Issues-Continue.pdf, VA REAL PROPERTY Clear Procedures and Improved Data Collection
Could Facilitate Property Disposals, “Better management of VA’s large inventory of aged capital assets could result in savings that could be used to enhance health care services for veterans.” https://4bt.us/wp-content/uploads/2021/08/Overview-of-VAs-Capital.pdf