Best Practices for General Contractors in Subcontractor Evaluation and Prequalification

General contractors understand the crucial role subcontractors play in the successful completion of projects. Having the right team in place can lead to timely project delivery, adherence to budgetary constraints, and a safe working environment. Conversely, the wrong subcontractor choices can result in project delays, cost overruns, and safety incidents, potentially impacting a contractor's ability to secure surety credit.

Why Subcontractor Evaluation Matters

Evaluating subcontractors is not about finding the cheapest option, it's about mitigating risks and ensuring project success. A thorough evaluation process can help contractors identify reliable partners who will uphold contractual obligations and contribute positively to project outcomes.

How to Evaluate Subcontractors

One of the most straightforward ways for a general contractor to ensure the subcontractor is qualified, is choosing to have the subcontractor bond to them. That ensures the subcontractor has been prequalified by a surety to complete the work, vitally important for larger and critical-path subcontractors. 

4 Areas to Consider When Evaluating Subcontractors

  • Past Performance

    Analyze completed projects, seek client feedback, and evaluate adherence to deadlines and quality standards. A subcontractor with a proven track record of delivering excellence is a valuable asset to any contractor.
  • Experience and Expertise in Relevant Projects

    Look for specialized skills, certifications, and industry knowledge that aligns with the project requirements to ensure a higher likelihood of successful collaboration.
  • Compliance Record

    Perform background checks, verify licenses, check insurance coverage, find safety records, and investigate compliance with regulatory standards as a confirmation of their adherence to industry standards. 
  • Financial Stability

    If subcontractors are willing to share financial information - scrutinize financial statements, evaluate liquidity ratios, and review credit histories. A subcontractor with a strong financial standing is more likely to fulfill their contractual obligations, reducing the risk for the contractor and the surety.

Implementing a Comprehensive Evaluation Process

To mitigate risks effectively, general contractors should establish a comprehensive evaluation and prequalification process.  This process can be project-specific or ongoing, to maintain a pool of pre-qualified subcontractors for future projects. They can establish and rely on their own procedures, or require subs be bonded, in which case the surety assumes the responsibility of prequalifying. By prioritizing evaluation criteria such as past performance, experience, compliance and financial stability, contractors can make informed decisions and safeguard project success.

How do I get a Surety Bond?

Surety bonds are issued by Merchants Bonding Company (Mutual) through insurance agents. Contact your local insurance agent or use our Find an Agent tool. They will guide you through the process, informing you of what documents and information are needed by the surety (Merchants Bonding Company (Mutual)) to underwrite your bond.

All information provided is subject to change.