Third-party JOC issues include inherent and valid concerns regarding transparency, efficiency, and the potential for systemic waste and fraud.
ISSUE
While JOC is a valuable construction procurement method intended to expedite small to medium-sized repair, renovation, maintenance, and new construction projects, reliance on external consultants for program administration introduces vulnerabilities that real property owners must proactively address.
Independent audits frequently highlight these vulnerabilities when program administration and crucial cost data management are outsourced to third-party consultants. Reports from bodies like the Government Accountability Office (GAO) and the Department of Defense Inspector General (OIG) have pointed to significant issues, including a failure to adequately verify/validate local market costs and insufficient oversight.
The core issue. howevern, often stems from two primary factors: (1) the structure of administrative fees and(2) a failure in owner oversight.
(1) Administrative fees based upon JOC construction volume, while ostensibly covering management costs, can significantly impact the overall budget and inflate project costs. These fees sometimes create a scenario where the third party’s incentive structure is misaligned with the owner’s goal of achieving maximum value.
(2) Furthermore, a failure by the owner organization to adequately monitor these outsourced processes results in a lack of accountability and difficulty in ensuring both efficiency and program compliance.. This oversight failure opens the door for inconsistencies in how “unit price books” (UPBs) are maintained and applied, sometimes leading to inflated costs that do not accurately reflect the actual current local market rates for labor, material, and equipment.
SOLUTION
To mitigate these substantial risks, savvy owners are increasingly moving toward self-managed JOC models. This strategic shift involves the owner organization retaining direct control over the software platforms, data licensing, and daily program administration.
By managing the process in-house, owners can enhance transparency, ensure strict adherence to procurement policies, and robustly audit costs internally. This approach directly addresses concerns about potential systemic waste and allows organizations to manage project costs comprehensively, ensuring budgets truly reflect accurate, current local market conditions for successful project delivery.
A self-managed model empowers owners to create detailed and realistic project timelines with complete visibility into key milestones, task dependencies, and critical paths. This internal control minimizes risks associated with delays and budget overruns by providing a clear project roadmap and direct cost control mechanisms. Ultimately, enhancing resource allocation and utilization is streamlined when scheduling and budget constraints are managed internally by a dedicated team aligned entirely with the owner’s mission.
References
[1] Auditing a procurement vehicle for construction services: A guidebook for public owners. National Association of State Auditors, Comptrollers and Treasurers (NASACT) JOC Best Practices Report, 2017.
[2] Beard, M. A. An analysis of the use and effectiveness of job order contracting in public organizations. Journal of Public Procurement, 14(2), 231-255, 2014.
[3] Office of the Inspector General (OIG). Audit Report: Opportunities exist to improve oversight and reduce costs in Army Corps of Engineers’ Job Order Contracts. Department of Defense, Report No. DODIG-2016-105, 2016.
[4] General Accountability Office (GAO). Federal contracting: Observations on the use of job order contracts. Testimony before the Committee on Small Business, House of Representatives, GAO-08-410T, 2008.
About Four BT, LLC
We help to create environments where the best people come together to do their best work. We all succeed together.
Join us as we pave the way toward a new future for public and private sector efficient project delivery.
- Estimate project costs comprehensively – Ensure budgets reflect the actual current local market labor, material, and equipment costs for successful project delivery.
- Create detailed and realistic project timelines – Identify key milestones, task dependencies, and critical paths.
- Minimize risks associated with delays and budget overruns – Provide a clear project roadmap and cost control mechanisms.
- Enhance resource allocation and utilization – Align resources and scheduling with budget constraints.
Learn more….
