Prequalification reduces risk of subcontractor default

Description

Abstract: General contractors can’t afford to just award subcontracts to the lowest bidder. In today’s challenging economy, some subcontractors bid on jobs that are outside their comfort zones in terms of skills, capacity or financial resources. Thus, prequalifying subcontractors is critical to ensure that they have the funds to complete their work in a satisfactory manner and to minimize the risk of default. This article discusses the prequalification process and what to look for in a subcontractor. A sidebar provides five key ratios that can help a contractor stay in the green.