3 reasons general contractors should prequalify their subcontractors

Here are three reasons why subcontractor prequalification is an absolute must for general contractors to avoid irreparable damage to their projects and businesses.

There are plenty of reasons general contractors avoid dealing with prequalification. In an industry built on relationships, they may select subcontractors who they have a personal history with, regardless of how qualified that subcontractor is for the job. In a bid environment, there’s often pressure to go with the lowest bid every time, and time constraints make it tempting to skip steps in the preconstruction process whenever possible. In today’s industry, however, these choices open general contractors up to a substantial amount of risk.

By avoiding the crucial step of prequalification, general contractors expose themselves to disaster down the road: lengthy project delays, heavy financial losses, and even litigation that could lead to bankruptcy. When general contractors choose prequalification, they can quickly and effectively assess a subcontractor’s financial condition, safety record, and insurance coverage — all factors that will greatly influence the amount of risk they’re taking on by working with them. Prequalification takes time, but it’s well worth it when considering the level of risk avoided as a result.

As general contractors continue to prequalify subcontractors, they develop a pool of go-to businesses that meet their criteria for future projects. It makes selecting subcontractors easier and easier over time. Qualified contractors may even be incentivized to price their bids more competitively because they know they’re only competing with qualified firms.

Prequalification workflows also help encourage transparency between risk management and estimating teams where bottlenecks may otherwise occur. Because subcontractors have to complete the prequalification process before being permitted to bid a project, estimating teams won’t waste time reviewing proposals from subcontractors who turn out to be a poor fit.

A dedicated, systematic approach is key to a prequalification process that ensures all risks are taken into account. With the growing adoption of subcontractor default insurance, general contractors are relying less on bonds and sureties as a way to prequalify subcontractors. Instead, they’re bringing prequalification in-house, developing a more integrated process that creates visibility into the risks that each bidder brings.

That’s where technology comes in. For instance, TradeTapp by BuildingConnected helps general contractors identify risk while also giving them the tools they need to create, strategize, and build smarter — mitigating issues before they happen. With built-in workflows that can be tailored to any organization, TradeTapp helps general contractors formalize and streamline their unique prequalification process during the preconstruction phase.