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Top 3 Reasons Prequalification Programs Fail

 

So, what exactly is construction prequalification anyway?

At its core, prequalification is exactly what it sounds like, general contractor programs designed to gauge whether or not their vendors are qualified to reliably perform the work at hand.

So why bother, you ask? At their core, these programs are designed to reduce risk on the front end in an effort to avoid learning the hard way, through either good or bad experiences. The end result is a list of low risk subcontractors and suppliers vetted through a standardized qualification process, hence the name, prequalification.

Although prequalification tends to occur at the beginning of a project, pre-bid award, it can also play a role in the ongoing management of subcontractors through all stages of a project.

In fact, over the years the construction industry has seen an uptick in the adoption of prequalification programs. Since these programs are focused on reducing the risk of project default, prequalification as a whole has earned varying levels of appreciation from everyone involved. For instance,

  • Owners use qualification to create a more streamlined environment for collaboration with all types of contractors.
  • General contractors are better able to determine who they can rely on for different components of their projects. And,
  • Subcontractors can stand out from the crowd as trusted partners.

So this begs the question….

If prequalification is such a great thing for the construction industry, why do programs fail?

We’ve narrowed the list down to three main culprits:

  1. Lack of communication and commitment
  2. Unstable project structure and organization, and
  3. Out-of-date technology with no administrative support

Now you’re wondering, what can we do about it?

Obstacle #1: Lack of communication and commitment
Solution: Talking through the process

As a general rule, effective communication is going to be important no matter what you’re doing, but a brand new prequalification program will be particularly dependent on good communication to succeed. Especially in the beginning, it will be crucial for all parties to understand not only how the process will unfold but also why. Informing all internal stakeholders and decision makers of the specifics and earning their buy-in and approval will make the whole process a lot more palatable for the rest of the teams. However, beyond the initial stages, consistently communicating over time will ensure that everyone stays up to date with the entire prequalification process.

Finally, discussing prequalification and the move towards a qualification process with subcontractors will help to increase subcontractor adoption as well. Letting them know why you have chosen the program and how this will affect them, can go a long way to reducing any misunderstandings. Informing them of the timeline and information required and communicating throughout the entire process will ensure that subcontractors don’t feel alienated – and ultimately increase the likelihood that they embrace the new program.

Obstacle #2: Unstable project structure and organization
Solution: Construct and build

Any good process is ultimately the sum of its parts. While deciding to prequalify vendors is a solid first step, the success of prequalification programs is really determined by how good things look under the hood. Determining the structure of a qualifying program is critical.

It’s important to ask questions like,

Who is going to be responsible for contacting subcontractors?

Who is going to manage the data collected?

Managing information as an owner or general contractor can be quite a burden, and as you can imagine, there are many different qualitative and quantitative data points that go into determining whether a subcontractor or vendor is actually qualified to win a project bid. On top of that, qualification standards can vary from contractor to contractor. For example, any of the following could be required by a GC or owner:

  • Additional Insurance
  • Automobile Insurance
  • Banking Information
  • Bonding
  • Business Classification
  • Capabilities
  • Contractors Pollution Insurance
  • Employees
  • Excess Liability Insurance
  • Financial Information
  • Financial Statement Approver
  • General Information
  • General Liability Insurance
  • Generic
  • Geographic Areas
  • LEED Certification
  • Licenses
  • Litigation Information
  • Performance Information
  • Product Service Segments
  • Professional Liability Insurance
  • Quality Assurance
  • References
  • Safety Information
  • Safety Questionnaire
  • Software
  • Subcontractor Trades
  • Union Agreements
  • Workers' Compensation Insurance

Outside of creating a solid structure for qualification programs, the focus comes back to communication. Expectations and requirements for the structure need to be effectively communicated to subcontractors and vendors. And beyond basic communication, emphasizing the timely submission of relevant and up-to-date information can keep a program running much more efficiently. Remember, a program is only as strong as its weakest link.

Obstacle #3: Out-of-date technology with no administrative support
Solution: Build the right framework and get the right support

While it’s possible to run a prequalification program without technology, the burden on time and resources will likely be too great. Embracing new technologies can easily reduce the burden of managing the program manually – mercifully bridging the resource gap on both sides of the process. That being said, technology as a standalone isn’t enough. In order to be successful, it’s also important to think about getting the right people in the right places to support that technology.

For subcontractors, the ability to upload sensitive information, one time, to a secure environment not only helps prevent data entry errors but also removes the need to repeatedly (and manually) submit the same information over, and over again – with the additional benefit of being able to complete the task on time. From the general contractor's perspective, cloud-based programs help keep all of the documents organized in a central location and dramatically simplifies the process of analyzing the data they do receive.

The ideal qualification program is going to take advantage of current technology to make the experience better for everyone involved. SaaS solutions, such as Textura-Pre-Qualification Management™, deliver unique combinations of powerful technology, client services and program expertise. Ultimately, these programs improve prequalification outcomes for the entire construction project because they free staff to focus on the quality of the data rather than chasing paperwork. 

With good prequalification data comes the potential for good decisions that lead to better success.

We think it’s worth considering.

Interested in learning more?

 

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