Potential Problem Areas:

Although JOC is an excellent program, it can have problem areas, which have nothing to do with the concept itself but, rather the way it has been implemented at some locations. There have been two primary problems with the way JOC has been implemented: (1) JOC contracts have been awarded to the lowest bidder rather than the best performer, (2) More than one JOC has been awarded for a particular area (multiple awards).

Several years ago, the practice of awarding JOC contracts to the low bidder became common. This caused top-performing contractors to become concerned. The assumption of a "low-bid" award is that all the contractors will provide equal services and perform to the same level to reduce "lifecycle costs." The "low-bid" award encourages cutting corners, providing lower performing facility systems, and recouping losses forced by the "low" price. It discriminates against performing contractors who are structured to perform and to continually increase their level of performance. These contractors were not able to compete for the contracts unless they made cuts in their performance and quality and reoriented their business practices to focus on winning contracts rather than performing.

The second problem that has recently started to manifest itself is the practice of awarding more than one JOC contract for one location. The theory behind this is that two contractors will compete against one another and thus the user will get a better price. However, what actually happens is a smaller version of a low bid environment. This brings about the problems that arise from the low-bid system. The JOC system rewards a performing contractor with a large volume of work. To make the JOC concept work, it has to be a "win-win" situation. The JOC contractor must set up an "on-site" management and design to be responsive to the facility owner's needs. The contractor is rewarded for the "set-up" costs by being able to do a sufficiently large volume of work, over which the "set-up" costs are able to be distributed. The result of having multiple contractors "on-site" is to force multiple contractors to set-up, and then compete on jobs based solely on cost. Sooner or later, the additional cost of multiple "set-ups" must be absorbed by the end user. Motivation to use multiple contractors on a JOC is motivated by the following reasons:

• The facility owner mistrusts the contractor.
• The facility owner perceives that JOC can be a "win-lose" proposition (win for the facility owner and lose for the contractors).
• The facility owner does not understand the difference between performance of contractors.
• The facility owner does not understand construction, construction management or facility systems.
• Someone within the facility management organization is being perceived as having value by reducing the short-term cost of JOC construction. Somehow this individual(s) has convinced the decision makers that in the long run, the facility owner will be the winner by forcing contractors to provide services with minimal or no profit.

The facility owner perceives that a contractor who works at a minimal profit can be a "performing" constructor and a long term partner to reduce facility renovation costs. Studies have proven this to be a "nonexistent" alternative.

Another problem with multiple awards is that it eliminates the benefits of partnering associated with a single contractor working together with a facility owner. One of the nicest features of JOC is the teaming and partnering it brings between the facility owner and contractor. Multiple award JOC contracts take away from this teaming and represent a return to the adversarial perspective associated with low bid contracting.

Of course, the best way to avoid these problems and other, potential problems is to have a well thought-out implementation plan. Prior to starting a JOC program at your location, it would be wise to consult with someone who is familiar with the intricacies of this system. JOC is very simple to use once it is implemented, but it is not very simple to properly implement. There are consultants who specialize in helping facility owners implement Job Order Contracting.