Is Your JOC Program Audit Worthy? z Scott Creekmore

1. Is Your JOC Program AuditWorthy?zScott Creekmore www.NAEPnet.org

2. Everyone Thinks Their JOC Program is Audit Worthy • But in the last 24 Months several JOC programs have been audited by either the OAG or TEA • In all instances, discrepancies were found in the JOC proposals • Many employees were terminated as a result of the investigations

3. So the Question is… • What does a good JOC program look like? • What does a bad one look like?

10. Job Order Contracting Definition • A procurement process • Firm, fixed priced • Competitively bid • Indefinite quantity • Primarily Used For • Repair • Alterations • Minor new construction • Horizontal and Vertical construction • Fundamentally different construction procurement relationship • Contractors are subjected to different motivations and behaviors • Non-adversarial relationship between owner & contractor • Prices are based on pre-determined & pre-priced construction tasks

11. What Does an Auditable Program Look Like? Four Parts to a JOC Program: • RFP • Contractor Selection • Proposal Review • Project Closeout CRITICAL POINT!! 90% of all audit issues occur at the Proposal Review.

12. Accurate Proposals + Accurate Pricing = Audit Worthy JOC Programs 90 Percent of your battle is won with an Auditable JOC Proposal

13. You Agree to Pay Your JOC Contractor a Fixed Dollar Amount to Perform a Construction Task

14. Get to Know This Saying: “That’s not my Problem.”

15. Your Daily Battle with JOC The red Flags

16. We Start With a Simple Proposal to Install 700 sq. ft. of VCT…Here is the Proposal that the Contractor Turned in

17. When You Get a Proposal, Don’t Focus on Price … IT’S A TRICK!!!!!Instead, Focus on Accurate Scope and Quantities.

18. Red Flag Item You ask: “Why do you have 241 extra sq. ft. of VCT in this proposal? Contractor says: “I just can’t make this line item work, I am losing money!”

19. Your Response “That’s Not my Problem!”

20. The Responsibility for a JOC Contractor to be Profitable is on the JOC Contractor, Not You! You have a contract with him to pay him $2.80 a sq. ft. times his factor to install that VCT. If he can’t be profitable then he is a poor businessman or bid a factor too low just to get your business. Either way, “That’s not my problem!”

21. Red Flag Item Contractor says: “Well, I will just use another line item that will equal the amount I need.” You say: “No, this is the correct line item. You need to reduce your quantity. That’s not my problem!”

22. Red Flag Item Contractor says: “My subcontractor prices are higher than this.” You say: “That’s not my problem! Find different subs.”

23. Red Flag Item Contractor says: “The price book prices are off and that is why I put in the extra amount. They are really just estimates, not specific prices for this area.” You say: “Then why are we using this book? Should we use an accurate pricing guide? Again, that’s not my problem!”

24. Red Flag Item Contractor says: “All our guys went to the book training class and really know how to use it and make it work. This is how we do it at other agencies.” You say: “That’s great, I am still only going to pay you for the agreed upon price times your quantity.”

25. This seems like a lot of work for one proposal, but it has to be done to be Audit Worthy. Here’s why: • If you approve this line item, then you are telling an auditor that you purchased 941 sq. ft. of VCT. If they go and measure this site and find only 700 sq. ft. Someone will ask “Where is the 241 sq. ft. of VCT we bought?”

26. Cooperative JOC: Not Immune to Audit Issues • Select carefully when considering using a CO-OP JOC program. Know the differences. • One performs an end of project audit • One performs a proposal review • Many have no oversight whatsoever

27. CO-OP JOC Proposal Audit… • This audit is performed after the job is complete and only if the agency requests it. • The co-op will get with the JOC contractor, get his sub costs and then compare them to what you paid. If they deem it fair and reasonable then everything is OK. If they feel the JOC contractor overcharged based on his sub cost, they will require a refund back to the agency. • Problem with this is that it still doesn't give you an accurate proposal based on the work preformed, so you still have an audit issue.

28. CO-OP JOC Proposal: Proposal Review • This review is performed at the start of the JOC process. A cooperative PM walks the job with your PM to ensure complete understanding of the Scope of Work. • Once the contractor turns in a Proposal, the CO-OP JOC expert reviews the Proposal to make sure all quantities and construction task items are correct. Again, accurate proposal = accurate pricing • This CO-OP JOC process is the most audit worthy.

29. It’s Okay to Ask for Help. Hire a JOC Expert to Assist You. • Think about what you do in a day. • What percentage is spent on JOC? • JOC Contractors do nothing but work on JOC. • Maybe you should level the playing field…

30. Hiring a JOC Expert • First, make sure they have a history of creating audit worthy programs • Make sure they develop a Construction Task Catalog specific to you • Make sure they use your specifications when developing the price book • Make sure they have unlimited training and support • Make sure they are performance-based; only pay them if they are successful

31. Review of the Red Flags • Talking price when reviewing a JOC Proposal is a trick • “I’m losing money on this job” • “I’ll find another line item that will work for me” • “My sub price is higher than this” • “Well the price book really means this…” • Co-op after project audit

32. QUESTIONS & COMMENTS