Job Order Contracting and the Use of Pricing Coefficients

This Blog topic has been developed in response to a question about Coefficients in Cost Estimating.

What is Job Order Contracting? Job Order Contracting (JOC) is a tailored contract type used in construction for renovation, remodel and repair projects. Job Order Contracting is authorized by the Federal Acquisition Regulation (See AFARS 5152.237-9000 Economic Price Adjustment (Job Order Contracts)). It is often a multi year (Base +) contract using established and documented unit pricing at its base. It is similar to an Indefinite Delivery Indefinite Quantity (IDIQ) scenario that allows for a contractor to be assigned tasks (work orders) IAW the negotiated book (IDIQ) price. Once a Job Order Contract is in place, individual work orders are issued that can be priced and executed in an efficient and timely manner. The negotiated book price is determined ( “marked up or down”) by the coefficient applied by the contractor to the base to achieve the contractor’s price.

Job Order Contracting is used broadly by the Federal Government, state governments, universities and community colleges, hospital systems, K-12 school districts, city, county and municipal governments and clients who have significant facilities infrastructure needs. A successful Job Order Contracting program exhibits a process to select qualified competitive contractors and the use of pre-agreed pricing that combines industry standard price information (e.g., a price book) and a contractor’s pricing coefficient.

What is a Coefficient? The coefficient, also referred to as the “multiplier “or “factor”, is the markup or markdown (discount) applied to the base IDIQ price to arrive at the contractor’s price. Examples: 1). A coefficient of 1.08 means the contractor will perform line items in the unit price book for an 8% markup. 2). A coefficient of .97 means the contractor will perform line items for a 3% discount. The coefficient is considered “fully loaded” and includes all costs including general conditions, overhead and profit.

Information excerpted from DAU, the AFARS, www.JOCExcellence.org and Wikipedia.

–Frank Lane