Construction is risky for construction project owners and the contractors they work with. Each project brings the chance of delayed schedules, increased building costs, and disputes with other stakeholders. A thorough prequalification process at the project's outset can help both owners and contractors manage risks. Prequalification in construction means researching potential builders to get an idea of their experience, abilities, and financial stability — in short, whether or not they can do the job well.
Construction owners use specific criteria to ensure they hire a capable and reliable contractor to carry out a successful project.
Let's talk about the factors owners often consider during prequalification and how contractors can put their best foot forward.
What's the Point of Construction Prequalification?
When owners begin a new construction project, they put a lot of time and money into it before building even begins. The whole undertaking involves the owner risking financial loss, reputation damage, legal action, and who knows what else.
When owners hand the project over to builders, they want to be confident in how the project will run, how much time and money it will take, and the quality of the final asset. Confidence comes from doing homework on each potential bidder early on in the construction process.
Factors Owners Look at for Qualification
Contractors should understand what owners look for during qualification so they can have all the information looking good and ready to go.
Project History
Contractors will stand out to an owner if they’ve successfully completed projects with some of the same elements as the project under bid, showing they have the skills and knowledge to do the work.
Safety Record
A clean safety record assures the owner that the contractor maintains safe practices, reducing the risk of injuries. The owner will likely look into compliance results and the history of accidents, injuries, and near-misses. Contractors can use construction management technology to collect and organize all their safety information and keep it handy for sharing.
Insurance Coverage
Owners need contractors to have the required licenses and insurance to operate legally at the jobsite location. Contractors must provide the name of an insurance brokerage and the amount of liability insurance carried.
References and Reviews
Owners may look into contractor relationships by asking for references and looking at reviews from past projects. They may ask past project owners for information about communication skills, subcontractor and materials supplier payment timelines, and budget and schedule adherence. Each of these factors, if handled poorly, can lead to disputes, delays, and a whole lot of frustration.
Financial Statements
When a project owner is looking for a builder, they want to ensure the contractor has the financial stability to handle the project, especially when surprises come up. They'll check if the builder has ever filed for bankruptcy since it can point to past financial mismanagement. They’ll also want to peek at things like working capital, accounts receivable and payable, and cash flow. If the contractor's finances seem messy, it might raise red flags about how the project will go.
Steps to Achieving Prequalification
Owners begin to prequalify construction partners early in the construction process. For instance, on many projects, only contractors who meet specific criteria will be sent an RFP ahead of the bidding process.
Once an owner gets the contractor bids, they usually take a closer look at each builder’s qualifications before picking someone for the project. It’s all about making sure they’re the right fit. Even after the contract is awarded, owners often check in on the contractors throughout the project to ensure they’re still compliant, financially stable, and operating effectively.
Contractors can take steps to continue to pass muster with owners.
Create a Safety Plan
Contractors need to have a solid safety plan that everyone on the team knows inside and out. Train workers so they’re always up to speed with their roles. Also, regularly discuss safety. Mobile-friendly software empowers site workers to keep good records, access the safety plan from anywhere, and fill out forms digitally so safety records are always up to date.
Maintain Financial Records
Keep your financial statements updated, and deal with any tricky spots early. This has the dual benefit of alerting you any time things get out of balance. Integrated accounting and project management systems can help contractors monitor their financial health throughout a project. Digital software also makes financial records easier to access and update so they’re ready any time an owner requests information.
Keep Owners Happy During the Entire Project
Contractors sometimes let their good owner relations slip through the cracks as a project ends and workers begin to shift their attention to new jobs. Use construction technology to speed up and improve the closeout project and the handover package, and continue to have open communication with owners. Tackle any bad vibes right away. If you address issues up front, the owner will be more likely to give positive reviews when the project wraps up.
Prequalification as a Win-Win
Prequalification benefits both owners and contractors: Owners get the peace of mind that they’re dealing with professionals who have the capacity to complete their projects, while contractors are awarded the projects they’re most likely to succeed on.
Every contractor wants to win more bids and take on great projects. Contractors can improve their chances by using technology to beef up their processes so they’re always operating on a higher level and ready to show owners what they’re made of. Technology allows contractors to keep owners happy with open communication and good practices, maintain cleaner safety records, and stick more closely to the project budget and schedule. And a good construction management system can store records of all those good practices so they're ready to show off at any moment.
