Impact of Change Orders on Job Order Contracting (JOC) Thresholds

Within the State of Washington, Job Order Contracting (JOC) is considered one of three alternative public works contracting procedures, in addition to Design-Build and General Contractor/Construction Manager (GC/CM). These alternative processes to Design-Bid-Build are authorized in chapter 39.10 RCW.

A work order authorized under Job Order Contracting is limited to $300,000 except that within a contract year, a public agency may issue up to two work orders valued up to $350,000.

Is it a problem if an agency issues a work order for $290,000 and executes change orders that push the total work order amount over $300,000? Assume for the sake of this discussion that the agency has already used up its two $350,000 work orders.

There are two general opinions on this question. Under the first reading, the intent of the JOC statute appears to limit the dollar amount of work orders to $300,000. Given that a work order is negotiated based on a mutual understanding of the project, most parties would expect that there would be fewer change orders on a JOC work order than on a typical Design-Bid-Build public works project. I would anticipate that any auditor would hold a public agency to the standard of $300,000 inclusive of all change orders. However, chapter 39.10 RCW does not directly address the question of change orders, and so a position that doesn't permit work order amounts to exceed $300,000 with change orders isn't specifically supported by the law.

The second school of thought on whether change orders to a JOC work order can take the work order amount over $300,000 comes from a somewhat tortured reading of state law. RCW 39.10.450 (1) states that a public body "shall not issue more than two work orders equal to or greater than three hundred thousand dollars in a twelve-month contract period." Under one reading of this sentence, as long as the public body doesn't issue any work order over $300,000, it's okay. Again, however, I don't think the drafters of this legislation had change orders in mind when they wrote the law. Thus, we are left with no specific direction one way or another from the actual language of chapter 39.10 RCW.

The better reading, in my opinion, is to look at what I think is the intent of establishing a threshold amount in the first place. The drafters thought that the maximum would be the maximum. Had the subject of change orders been raised during the development of the law, I would guess that the discussion would have quickly moved to limit to amount to $300,000, inclusive of all change orders.

The prudent and cautious approach for agencies using Job Order Contracting is to ensure that its work orders do not exceed $300,000, even with change orders.