All Contractors...

...are not created equal. Yet, with prescriptive specifications and an invitation to bid, they all may appear equal to the end user. This results in a total disregard for past performance, which, will all due respect to the stock brokers out there, does in fact provide some indication of future performance. Real estate stakeholders should have the opportunity to compare contractors, not just their prices. Safety, financial stability, quality and service are what they should be looking for, not just a low price. Those are what creates value. Let's look at a couple examples of why prequalifying contractors can be beneficial.

1. We have a contractor that can provide a bond because they meet their surety's requirements to do so. However, the surety may not be looking at their safety record, just their books. They may have a high EMR or a high OSHA T.R.I.R. That contractor is low bid, gets awarded the project, but has a significant accident. Or has a significant accident on a different project. What has this done to their financial stability?

2. We have an owner reroofing a facility. The bids range from $200,000.00 to $225,000.00. The bidder at $200K does okay work, and comes back when called, but they do have the occasional leak. The contractor at $225K has not had a roof they installed leak in the last 12 years. If the owner is storing wood pallets, he may be comfortable with the risk associated with the low bid. But if he is storing perishable goods or electronics, he may want to spend the extra money and reduce the risk.

In both examples, properly prequalifying the proponents can provide the information necessary for the owner to identify the best value proposal for their needs. This has touched on some of the benefits of prequalification. Later we will talk about the benefits of performance-based contracting.