Prequalification, Part Of Due Diligence – Why It Is So Important To Have Proper Procedures In Place

The banking and financial sectors have recently come under intense scrutiny regarding the extent, or lack thereof, of accountability, that the organisation and senior management face in assessing risk factors within their industry. While the focus of current investigations and media coverage has been on the financial industries, directorial accountability is a topic that should be discussed in all companies, especially so when it comes to health and safety when the stakes can quite literally be the difference between life and death.

Australian WHS law dictates that the directors cannot take a backseat when it comes to worker safety. Due diligence requires an officer (which includes company directors) to take reasonable steps to ensure the business complies with its work health and safety obligations. They cannot simply believe adequate systems are in place but must take a proactive stance in implementing relevant practices and have oversight of those practices.

What is contractor prequalification?

Contractor prequalification is the process of collecting and assessing relevant information and documentation pertaining to potential contractors prior to engaging them for work. You can think of it as an audit of their qualifications, safety systems, insurance coverage and general ability to complete the required work in a safe, and low-risk manner.

The level of prequalification may vary depending on the industry and type of contractor. In some lower-risk industries, e.g. the financial sector, the prequalification process may focus more on the contractor’s abilities and history of competently completing the work required to excellent standards and with keen attention to project budgets. The process in higher-risk industries, e.g. construction, may take a greater focus on their safety qualifications, licenses, and their history of completing jobs on time and with minimal risk of incidents.

Why are proper prequalification processes important, and what are the consequences of ignoring them?

Whatever the prequalification process and criteria, it is a crucial step in ensuring that work can be completed on time, on budget, and with minimal risk as possible to workplace safety.

Of course, not all companies prequalify their contractors. It could be that the company believes it is the duty of the contractor to ensure they are fully qualified and able to complete the work required, or it could be that the company or management has a history with the contractor and trusts their work. In either case, it is hard to make a case for intentional malice, however, that does not negate the responsibilities and legal obligations under WHS law in Australia.

The risks and fallout associated with failure to prequalify contractors can be devastating. Workers who are unqualified for a job they are undertaking not only put their own lives at risk but the lives of everybody they are working with. But the risk of physical harm is only one of the issues, albeit a significant one, faced by unqualified contractors.

The law states that companies and their directors are responsible for ensuring the safety and health of contractors. That means in the case of incidents involving unqualified contractors, all parties involved — the contractor, the company, and in particular, the directors – can face severe financial, legal, and reputational repercussions. For example, if a contractor’s insurance has lapsed and an incident occurs, the injured party can sue both the contractor and the company, costing massive amounts in time and money on top of the potential legal penalties.

The legal requirements of implementation and oversight do not mean that directors and management must micromanage everything, however. Hiring a trusted third-party specialist not only fulfils those requirements but can help to reduce your workload and costs, increases job success rates, and ensures workplace safety. Furthermore, they can ensure all contractors are prequalified to a singular high standard. Key information can be made easily accessible through online databases and always kept up to date. They can also provide thorough performance reviews to utilise when selecting candidates in the future. Our team at Conserve has over 20 years of experience in workplace safety and contractor prequalification management, helping make your workplace safe and efficient, while also limiting liability.

Contact Conserve today to see how we can help you.

For more information, contact us at +61 2 8883 1501, enquiries@conserve.com.au or subscribe to our newsletter for regular updates.