Most contractors agree that prequalification is an essential process for construction risk management. It allows GCs to assess a specialty contractor's safety record, experience, and financial stability. On the subcontractor side, the prequalification process enables lower-risk subs to rise to the top of the bid list and obtain repeat business.
In a perfect world, the subcontractor qualification process would be easy and efficient, particularly with software like Autodesk's TradeTapp by BuildingConnected, which offers custom questionnaires, project-specific assessments, benchmarking tools, and financial integrations to improve decision-making.
This all sounds well and good, but the reality is that industry standard prequalification processes are riddled with inefficiencies from the start.
For starters, questionnaires can be labor-intensive, and filling them out is a repetitive and highly manual process. Most subcontractors are already stretched thin, so they don't always have enough resources to gather updated data and complete forms.
These challenges can lead to incomplete or inaccurate questionnaire responses. As a result, GCs end up spending too much time waiting for answers or going back and forth with subs. This adds more risk, as general contractors can award subcontractors a job without a complete picture to make the best decision.
It’s also worth noting that specialty contractors themselves can end up receiving little value and control in the process. Low engagement rates are common, creating even more distrust and silos across project teams.
The current prequalification process is broken on both sides. If we want to improve project outcomes and reduce risk, we as an industry must rethink prequalification in construction and develop processes rooted in transparency, efficiency, and value for all parties involved.
Construction involves risks and rewards; unfortunately, most specialty contractors find themselves more on the "risk" side of the equation. Research by Billd shows that in 2022, subcontractors faced an unexpected surge in costs, amounting to an additional $97 billion in materials and labor. And despite 60% of subcontractors reporting an increase in revenue, 57% said profitability declined or remained the same because the price of bids didn't increase at the same rate as their expenses.
Compounding these financial challenges is the scarcity of skilled labor, with 49% of subcontractors identifying this as their primary risk in the coming years according to the same Billd report.
Not surprisingly, the risk of subcontractor default is also a significant concern. Nick Bilski, Risk Management Director at Building Group writes, "History has shown that when a subcontractor defaults, it often costs 1.5 to 3 times the original subcontractor's contract value to hire another firm to complete the defaulted subcontractor's scope."
In addition to subcontractor default, GCs face other risks. General contractors can't afford to skip prequalification because doing so could expose projects to risks, including safety hazards and financial instability.
Additionally, today’s contractors are under increasing pressure to meet tightening deadlines and budgets. A KPMG survey revealed that only half of construction projects were delivered on time, with 87% facing greater scrutiny.
“At Choate we look at prequalification and risk management as an ever-evolving process,” says Catherine Sharp, Compliance Administrator at Choate Construction Company. “As projects, economics, and labor forces change, so do our valued trade partners.”
While tools like TradeTapp help mitigate some of these issues like subcontractor default, we believe a more profound change is required to eliminate these challenges on both sides of the fence.
Our take: we need to overhaul current prequalification practices to lower subcontractor default and enhance trust, balance, and efficiency.
Our vision at Autodesk is to create a process that's so proactive, the risk that comes with selecting subcontractors is minimized. One way to accomplish this is to introduce more dynamic and interactive prequalification tools.
For instance, questionnaires (while industry standard) are inefficient. So, what if we remove these forms altogether? What if we use a shareable profile for subcontractors that organically captures data and gives subcontractors insight into their evolving risk?
Additionally, instead of having custom prequalification for every job, what if we streamlined the process so subcontractors only need to respond to job-specific queries while sharing their standard qualification info with a single click?
This shift would not only improve engagement from subs, but also deliver value to subcontractors themselves. Not to mention, it would eliminate the frequent need to trigger insurance, leading to smoother and more efficient project execution.
These process improvements aren’t just wishful thinking. At Autodesk, our long-term goal is to get to a point where there's so much value in prequalification for both GCs and specialty contractors that it becomes an integral and mutually beneficial part of every project.
Reimagining the prequalification process requires the industry to challenge its mindset and integrate innovative tools.
To improve—and ultimately transform—subcontractor prequalification, we must embrace new ways of thinking and working, particularly when capturing and sharing data automatically.
While there is some controversy with subcontractor benchmarking and risk management tools conflicting with a GC's proprietary mechanisms, these solutions won't degrade the tools that general contractors have. Instead, they're meant to create an open, collaborative, and mutually beneficial process.
A big part of improving subcontractor prequalification is eliminating manual work. “We like to think of our subcontractors as some of the best in the business, this also means they are some of the busiest,” says Sharp. “Our risk team is constantly working towards streamlining the prequalifying process for our subcontractors so they can spend less time in front of the computer and more time in the field doing what they do best.”
Consider the amount of time subs spend on answering custom questions within questionnaires. For subs, it’s time-consuming to pull new data every time there is a lack of standardization in questionnaires. For GCs, this also means more time waiting around for answers. Instead, automating how we share information significantly reduces time spent on data entry and review.
This change would benefit both subcontractors and general contractors. GCs will be able to reduce the amount of custom questions that require them to wait for answers, while subcontractors can focus more on execution rather than cumbersome paperwork.
One way to do this now is to leverage a centralized network like the Builders Network in TradeTapp, which enables users to analyze and mitigate project risk, ensuring they work with top-level qualified subcontractors.
“Together with the Autodesk team we have been able to create a user-friendly resource where our Preconstruction, Safety, and Operations teams can find in-depth, up to date, personalized information on all our subcontractors. Thus, allowing for proactive, informed partnership choices and risk mitigation planning at every point along the road from bid invite to project completion,” adds Sharp.
An open and shareable profile gives specialty contractors the opportunity to actively manage their risk profiles. Instead of GCs having to monitor subcontractors, subs are provided with tools upfront that allow them to gain a deeper understanding of and address their own risks more effectively.
As a result, the construction process becomes more efficient and transparent, leading to stronger partnerships and a higher quality of work across projects.
Our current industry prequalification workflows are inefficient. They can burden specialty contractors and lead to back-and-forth and delays, increasing risk for entire projects.
TradeTapp processes more than 100,000 qualification applications annually. Our goal is to improve collaboration between general contractors and subcontractors by making the prequalification process more efficient and effective.
“Choate Risk department is committed to providing our project teams with the best possible trade partners. We believe that excellent people deliver excellence, and we take great pride in fostering long-term relationships with those who share our commitment to safety, integrity, quality, and hard work. Together with Autodesk’s efforts, we feel like we have been able to provide our teams with the best information available,” says Sharp.
Driven by this shared vision, we strive to develop innovative solutions that eliminate the need for custom questions, automate data sharing, and minimize risk. We understand that there is still work to be done, but we are dedicated to empowering you with the tools and resources needed to transform your prequalification processes today and tomorrow.
Try TradeTapp today and unlock the true potential of your projects while safeguarding your success.
