Contractor Prequalification – Dodge the Bad, Hire the Good
Engaging contractors to provide services for your business carries with it a certain level of risk. Not only do you need to have confidence in their ability to complete the task competently, but you also need to be assured that all their employees are working in a safe and professional manner. Now, many of us will work with the same contractors over and over again to mitigate that concern. Unfortunately, our usual contractors aren’t always available, and we all have to branch out from time to time to fill gaps in our business. The question then we need to ask ourselves is, ‘How can we be sure that new contractors know what they’re doing?’ And, ‘How can you ensure that they will adhere to workplace health and safety systems and best practices? One answer is implementing rock-solid contractor prequalification.
What is Contractor Prequalification?
Ultimately, contractor prequalification does what it says on the tin; it helps us to ascertain the competence of a contractor prior to hiring them. Prequalification is an information-gathering process that determines a contractor’s capability, capacity, resources and performance. The process usually takes place at the beginning of the procurement process, when we have the greatest ability to influence safety holistically. What that means is that, before we seriously consider their bid for the work, we have a good idea of whether they’ll be able to deliver. Prequalification forms a substantial part of contractor safety management, allowing business owners to avoid a large amount of risk early in the engagement process.
When Should Contractor Prequalification Happen?
While the ideal scenario is to prequalify contractors prior to hiring them, there are actually three stages at which pre-assessment of potential contractors can occur:
Before accepting bids - the pure prequalification method is to restrict bidders to only pre-approved contractors. This ensures that all prospective contractors are vetted. It’s worth bearing in mind that limiting the pool of contractors can push the overall price of bids up. However, it’s also worth taking into account that extra money spent hiring the right contractor could be saved in lost productivity and increased liability.
Alongside bids - this method allows more contractors to place bids. With the requested prequalification information sent along with the bids, you have an opportunity to weigh up the level of risk of each contractor alongside the price of the bid they have placed.
During contract - while prequalification should always take place prior to hiring a contractor, contractor safety management should be an ongoing process. Risks and liabilities can change over time, so it is an extremely worthwhile practice to periodically re-qualify your contractors.
Important Elements of the Prequalification Process
The prequalification process can involve any number of factors that are important to you and your business. However, three key areas should be covered to ensure you will attract contractors with the right characteristics:
Business information - you’ll want to know about how the business operates and if there are any issues with the company or its partners. Are they registered for GST? Are their insurance limits at an acceptable level for the services they are providing? Do they employ staff, and if so, do they have workers’ compensation insurance? This is also a chance for you to ensure that the contractor has the right qualifications, licences and checks in place to safely perform the work.
Safety procedures - maintaining workplace health and safety should be a top priority for all business owners. Prequalification allows you to verify a company’s safety track record and better gauge the risk involved in hiring them. As well as incidents that have occurred, the company’s compliance record should be taken into account as both indicate their approach towards workplace health and safety.
Financial stability - you need to ensure that your contractor will be able to fulfil the contract they are bidding for. This is an opportunity to look at past job history and revenue performance. Take into account their income, the size of their workforce, and whether they’ve ever filed for bankruptcy to ascertain the financial risk involved.
You will want to build a sound evaluation process that will identify any contractors that could cause problems to your business and create an increased workplace health and safety risk.
The Benefits of Contractor Prequalification
In short, contractor prequalification leads to a better understood, more sustainable relationship between a company and its contractor. By eliminating low bids from unqualified contractors, business owners are much more likely to get the best contractor for the job. According to a recent study of over 17,000 suppliers, prequalified contractors achieve better performance on traditional safety statistics than national averages. Prequalifying quite simply makes sound business sense as it mitigates a number of risks for your organisation.
And, it doesn’t just benefit business owners, it also helps the contractor understand customer expectations. If a contractor is under-qualified, they know whether or not it is worth placing a bid and can assess their own risk if they win the bid.
An Essential Element of Risk Management
Contractor prequalification reduces the inherent risks of outsourcing, minimises disruptions due to injuries and accidents and ensures safe operations. Building a prequalification process into your business should be one of the first steps you take toward building a sustainable and robust safety culture. Prequalify your contractors, and you’ll dodge the bad contractors, hire the good, and be all the safer for it.
For more information, contact us at +61 2 8883 1501, enquiries@conserve.com.au or subscribe to our newsletter for regular updates.