Turning the Tables: Why Subcontractors Should Prequalify Their General Contractors
In construction, the concept of prequalification is well-established—general contractors (GCs) vet subcontractors to assess financial strength, capacity, and reliability. But what if the tables were turned and subcontractors began prequalifying the GCs they choose to work with? It’s a perspective gaining traction across the industry, and one that deserves closer examination by contractors, subcontractors, and surety professionals alike.
The Traditional Lens: Prequalifying Subcontractors
Traditionally, GCs use prequalification to manage risk. They review a subcontractor’s financial statements, safety record, past performance, and bonding capacity. This helps ensure subcontractors can deliver on time and on budget.
Surety companies support this process through underwriting and issuing performance and payment bonds, providing an added layer of protection for project owners and GCs. However, this top-down approach assumes the GC is inherently trustworthy and financially sound.
According to the Construction Financial Management Association (CFMA), construction businesses now wait more than three months on average to collect payments, double the recommended 45-day threshold. While most GCs are responsible partners, subcontractors who verify financial health and payment history upfront are in a stronger position to protect cash flow and reduce risk.
A Growing Shift: Subcontractors Taking the Lead
Subcontractors often absorb the most financial pain in the event of project delays, owner disputes, or GC default. That risk can—and should—be managed. In a January 2025 webinar hosted by the National Association of Surety Bond Producers (NASBP), Construction Financial Management Association (CFMA), and American Subcontractors Association (ASA) titled “Trust But Verify: Prequalifying Project Owners and GCs,” experts urged subcontractors to rethink their approach to upstream risk. A GC who values long-term relationships won’t shy away from sharing financials, references, or past performance metrics.
This is not just about protecting receivables, it's about empowering subcontractors to make informed decisions, reducing exposure to payment delays, project shutdowns, or disputes that can derail operations.
What Should Subcontractors Look for?
Just as GCs have developed prequalification checklists, subcontractors can benefit from a structured evaluation of their GCs. Key areas to consider include:
- Payment Practices: Investigate how promptly the GC pays its subcontractors. Online reviews, peer networks, and project experience can reveal red flags.
- Dispute History: Legal databases or industry contacts may help uncover a pattern of litigation or payment disputes involving the GC.
- Project Experience: Consider whether the GC has delivered similar projects successfully. Inconsistent history or excessive project delays should raise questions.
- Contract Terms: Scrutinize the subcontract agreement. Are payment timelines clearly defined? Is there a fair process for change orders and dispute resolution?
The Role of Surety Agents
Surety agents can play a pivotal role in supporting subcontractors through this process. They can help subcontractors understand what information is relevant, how to interpret financial indicators, and whether a project’s structure raises bonding concerns. More importantly, agents can advocate for subcontractors’ interests, connecting them with projects and GCs that align with their capabilities and risk tolerance.
A Culture of Mutual Accountability
This evolving mindset promotes a more balanced risk environment. It recognizes that all parties—GCs, subcontractors, owners—should be held to consistent standards of financial transparency, reliability, and ethical project delivery. For GCs, this shift represents an opportunity to strengthen trust and transparency. Demonstrating their qualifications—not just to owners and sureties, but also to the subcontractors they depend on—helps foster stronger project partnerships.
As construction continues to face margin pressure, labor shortages, and evolving project delivery models, subcontractors must be proactive—not reactive—about who they work with. Prequalifying GCs is a smart, strategic move that promotes stability and confidence on every jobsite.
Merchants Bonding CompanyTM encourages our surety agents to bring this conversation to their clients and partners. Because when all parties engage in mutual vetting, the entire industry stands to benefit.
How Do I Get A Surety Bond?
Surety bonds are issued by Merchants Bonding Company 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) to underwrite your bond.
All information provided is subject to change.