Three Principles of a Successful Qualification Workflow

What makes it so hard and how those things can be overcome

When it comes to the subcontractor qualification process in commercial construction, the term “successful” can mean many things. So, it must be clear: as contractors recognize the need for more data-driven decision making, success hinges squarely on their ability to create effective collaboration between risk management and operational teams.

Many contractors fail to implement a balanced workflow due to a variety of reasons: their company structure, having many office locations (jobsites) without any workflow centralization, long-standing relationship-driven decision making, or general resistance to change. Nevertheless, effectively managing subcontractor risk requires the ability to communicate and work together across departments.

Achieving this success, as explored below, is not about reorganizing the workflows or introducing more stakeholders. Thoughtful technology in actuality can facilitate a successful qualification process. Here are three key principles worth adhering to.

Principle #1: Be comprehensive

The more you know, the better off you are. Focus on data that can be measured and compared from subcontractor to subcontractor. Risk evaluations are most effective when they leverage a comprehensive set of information, preferably across several recent years. With trade contractors: recent project history, past safety performance, backlog position, financial health, revenue growth, and trends across these areas are all key indicators of potential risk.

The landscape for sharing information is also changing. Providing financial statements, OSHA safety history, insurance data, and more are becoming more of the norm and less of the exception for commercial projects.

What it requires: Efficiency

It can be frustrating to chase down all the data necessary from subcontractors. Typically, contractors have a fair amount of back and forth before receiving all the data they need. So it begs the question, how can contractors be comprehensive without slowing down the process even further? The answer: user-friendly and thoughtful data-collection software can help bridge this gap. The key is to make the experience enjoyable for subcontractors, not a pain-in-the-neck.

Principle #2: Be project-based

It’s crucial not to evaluate in a vacuum. How a subcontractor actually fits on a project is far more important than what they look like on paper. While it’s certainly important to understand a company’s financial or safety standing independent of any other variables, it lacks the context of assessing the actual fit with the award they’re being considered for. The specifics of the project (i.e. its duration, location, award size, market sector, ownership type, etc.) are significant factors to be considered at the time of award.

What it requires: The right tools & speed to analyze

The primary reason it’s difficult to be project-based in each evaluation is because contractors typically rely on third-parties for their subcontractor vetting. One of the major downfalls of relying on third-parties for subcontractor vetting is that the analysis is very general in nature. Rarely are project-specific parameters considered in the evaluations. Furthermore, the information may even be outdated by the time it is being used in decision making.

Technology can help change this reality twofold: first, data is collected annually and then updated when applicable at the time of award. This facilitates a continuous qualification cycle and also allows for a project-based evaluation at the time of award or bid.

That’s the key: timing. Having project-based evaluations that don’t create bottlenecks for purchasing or estimating teams is fundamental towards having a collaborative workflow that works for all parties. Decisions need to be made quickly and communicated with enough time to be considered during the bid leveling process.

Principle #3: Be practical!

Without a doubt, the most important element of the qualification workflow is that it needs to be practical. Far too many existing vetting “solutions” (third-party or otherwise) are absolute in their nature, with outputs like “approved,” “rejected,”  “red light,” or “green light.” Being absolute in qualification puts operational teams in a corner when they are negotiating the realities of project budgets, ownership demands, or the like.

Instead, utilize a “yes, but” approach for each evaluation, which is to say “yes we can make this award, but here are the risk mitigation controls we need to implement in order to protect our profits.”

What it requires: sophistication and communication

Creating a “yes, but” approach requires sophistication and the ability to leverage a comprehensive set of data quickly to make decisions. Being sophisticated also means having an ability to factor industry data and performance trends into each evaluation. Once all of this information is used to properly understand the specific risks of a prospective award, then you can accurately devise a plan to mitigate.

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Being comprehensive, project-based, and practical is a surefire way to avoid most subcontractor related issues. Technology can play a key role in implementing these principles when implemented effectively. Making subcontractor qualification a more collaborative and efficient process is the genesis of an effective risk management program.

BuiltWorlds partnered with TradeTapp to bring you this article.