When staffing capital construction projects, it’s critical to hire contractors who have the experience, capabilities, staff, and availability to complete work safely and at the quality level you expect.

Insight into a contractor’s capabilities and past performance become even more critical on large projects. Safety incidents or contractor defaults expose owners and builders to expensive claims. They may also introduce new layers of interdependent safety, financial, and quality risks that can derail project timelines and erase profit margins.

That’s why owners and builders often develop a prequalification process for evaluating contractors. The process typically involves collecting a large amount of information about the contractor’s past performance using a prequalification form.

Here we cover the pros and cons of using a prequalification checklist. We also introduce an alternative approach, Contractor Success.

What is a Contractor Prequalification Form?

The traditional approach to risk management is perfunctory prequalification. This static assessment considers a contractor’s risk based on lagging risk indicators, collected through a contractor prequalification form during the bid phase.

However, this type of prequalification provides a false sense of security because it looks in the rear-view mirror. Prequalification fails to differentiate between truly great partners and those who are simply lucky.

When Contractor Prequalification Falls Short

A small business’s financial viability can change rapidly as they take on larger projects. One job may be all it takes to create an undue situation. Relying solely on historical data–such as Experience Modification Rating (EMR) and Days Away, Restricted Duty, or Job Transfer (DART) Case Rates–penalizes small partners because they can’t absorb a single adverse event. To truly assess a contractor’s risk profile, owners need dynamic insight into their partners’ capacity at each project phase.

Even if they effectively assess partners upfront, the decision to hire them is often based on other factors. Work may not be awarded to the safest partner, but to the one with the lowest bid, the right capabilities, specific availability, or a relationship with the hiring company.

The end result of the prequalification model is a lot of going through the motions without actually mitigating your risk.

Contractor Success: A Shift from Contractor Prequalification

Contractor Success is a new movement among leading construction firms and asset owners. Its core tenet is that the path to success is to actively collaborate with contractors to boost their capabilities for delivering great work.

It’s a fundamental shift in mindset — from up-front screening to collaborative, dynamic mitigation of risk.

Contractor Success allows organizations to meet any partner wherever they are in their risk-mitigation journey and elevate them to do better work.

This happens when organizations:

1. Engage the highest-potential partners and chart a path to shared success

2. Collaborate with partners on the job to dynamically mitigate new and evolving risks.

3. Review project and partner performance together to continuously learn and improve.

Instead of using typical contractor prequalification forms, builders need to create a full, 360-degree assessment of risk indicators that show both the past performance and the future potential a contractor brings with them on a project. There is still a lot of contractor data to collect; the difference is that this data is used to develop a complete picture of a contractor’s capabilities instead of facilitating a binary “yes” or “no” hiring decision.

Checklists: Contractor Information to Collect for Contractor Success

Contractor Success requires gathering a lot of information from contractors who might not have the same compliance and administrative resources as your firm. This can quickly get out of control if not properly managed.

In your earliest communications with potential partners, (especially on your website), articulate your vision for risk mitigation. Contractors and their employees want to work for owners who care about their safety and their livelihood. Remind them that delivering your vision requires their full engagement.

Precede any enrollment process with an email, explaining the information that will be gathered and outlining the benefits of this process to your partner.

First, ask your contractors to complete a basic profile questionnaire on your website to gather this information:

• Trades / Divisions

• Specialties within each trade

• Project types (e.g. new build, renovation)

• Industry experience (e.g. pharmaceuticals)

• Service area

• Largest projects completed

• Disadvantaged business entity status

• Key contacts by role

Then, use these checklists to help contractors gather the safety and financial information they need to demonstrate their lagging risk indicators to submit their bid. These checklists are similar to the contractor prequalification checklist that owners used before transitioning to Contractor Success.

Safety and finance aren’t the only areas to uncover lagging risk indicators. Owners and builders can use end-of-project performance evaluations to capture quality-related metrics, such as total days of rework. The total days of rework required creates aggregated data over multiple projects that you can use to calculate an ‘Average Days of Rework per Project’ metric.

Best Practices for Collecting Contractor Information:

Without a dedicated management system, owners must manually input the incident and financial data into spreadsheets to calculate the contractor’s incident rate. If the owner keeps thorough records of these calculations, they can compare partners’ rates.

To benchmark potential partners against the industry average for their trade, owners will need to look up the Bureau of Labor Statistics industry averages for incidents and manually compare their contractors against the established industry average.

Remember, this is an assessment exercise, not a prequalification activity. Relying

on lagging indicators alone, especially without context, can unfairly penalize smaller

contractors who can’t absorb an adverse event due to their low number of

work hours.

That’s why owners also need to collect and review leading risk indicators. These leading indicators demonstrate a contractor’s commitment to improving their performance and delivering safe, high-quality work.

Overall, these indicators can be grouped into the following three categories:

Any owner that works with (or assesses) more than 100 contractors should develop a structured approach to scoring each partner across risk factors. A well-balanced scoring and assessment method considers lagging and leading indicators, with each individual indicator assigned a weighting based on its relative importance. The final output creates a comprehensive risk score for each potential contractors. This objective approach to assessment will allow you to compare “apples to apples” as you assess partners, as opposed to prequalification and contractor checklists.

Related Resources

Read the Contractor Prequalification Guide – For years, contractor prequalification has been the gold standard in assessing a contractor’s financial health, safety record, and capacity to perform the needed work. But that is starting to change. Read more about process misconceptions.