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Purpose

The primary purpose of this article is to provide an overview of the recommended best practices for conducting and participating in the process of pre-qualifying the construction contractors and trades who may participate in a bid process.

The prequalification process, and the recommended practices, apply equally to public and private sector projects, large or small.

The intent of these practices is to ensure that only qualified bidders who can demonstrate they are capable of meeting the project’s objectives participate in the bid process. Prequalification is frequently used for public projects, where the opportunity to be considered as the proponent must be open to all, while at the same time allowing the owner to manage the risks associated with the open tender process.

 

Process

As a concept, the pre-qualification process allows an owner, through pre-determined criteria, to assess if candidates have the necessary financial capacity, technical expertise, managerial ability, project success, or relevant experience to undertake the project at hand.

The design of a prequalification system should place emphasis on qualifying construction service providers rather than on disqualifying them. To this end, the owner should produce a written document requesting all the information required to be submitted by proponents seeking qualification, typically referred to as a Request for Prequalification (RFPQ).

In the design of a prequalification system, there are three fundamental principles:

• Transparency: owners should always be impartial and provide clear, understandable procedures and rules that identify how proponents will be evaluated and the requirements for success. Owners should provide proponents with a debriefing if they are not successful in order to clearly communicate the reasons for failure and to enable the proponent in being more successful in the future.
•  Openness: the process should be open to all potential proponents. Publicly funded require this and privately funded projects can benefit from this process. Advertising in local newspapers and through online procurement systems allows the maximum number of potential proponents to participate in the process.
• Fairness: the terms ‘objective’ and ‘subjective’ are often used in defining the success or failure of this component. If a ‘weighting system of points awarded’ is to be used to determine qualified proponents, then the goal is to keep the allocation of these awarded points as objective as possible. It is possible to subdivide the selection criteria into two categories. Some criteria can be simple yes/no or pass/fail evaluations of which all responses must be positive, or the applicant is not awarded any points or may not be considered any further. The second category of criteria usually requires ranking on a scale. This can very easily be a subjective ranking. One approach that has achieved some success in reducing subjectivity is to require that no two proponents receive the same ranking for any given criteria. This helps to separate the proponents by rank and is useful if only a limited number of otherwise similarly qualified proponents will be invited to participate further.

Owners may choose to limit the number of prequalified proponents for the following reasons:

1. To reduce the overall number of proponents to ensure that the ones selected remain interested in bidding - because if the number of proponents is relatively small (e.g. 6 to 8) the chance of being successful is higher.

2. To reduce the number of copies of printed documents produced during the bidding phase. This may be considered in order to reduce production costs, however, if the cost of document production is relatively low compared to the overall project costs this may not be a significant consideration.

 

Risks

Attempting to quantify proponents’ qualifications is by its very nature bound to be an imperfect endeavor, and some might argue ineffective. While the purpose is to provide quantifiable means to assess the contractor or subcontractor, standard forms such as CCDC 11-2018 that provide a structure to do so are often weighted towards or only include clearly definable aspects of a company. Without careful consideration establishing the prequalification parameters, the process may result in unintended consequences such as:

• A smaller contractor or subcontractor joins forces with another, smaller, specialist company to achieve the prequalification’s requirements for a particular expertise and ultimately becomes the successful bidder. Once the project is underway it may become apparent that the specialist company’s influence or ability to bring the required level of experience and expertise to bear is limited (whether by size or internal contractual relationships). Following start up meetings and completion of key submittals or mock ups perhaps, their presence wanes or their capacity proves to be too limited to effect the value add professed in prequalification or the workmanship is not up to required quality standards. All of this may amount to only an increased administrative burden to manage a smaller contractor getting their experience but it may also result in an inferior or non-compliant component of the work.
• A subcontractor prequalifies based on past project values, years of experience as a company, but not necessarily on a directly comparable class of projects, perhaps in completing large condominiums vs smaller but more finely detailed theatres, or the like. They too ultimately become the successful bidder, potentially because of a low price; however, not being familiar with the expectations and crucial aspects of the design they may repeatedly submit alternate products or systems without regard for the impact on related components or features. These alternates may meet the some parameters of the specifications, but not all. Justification provided may be based on limitations of their suppliers (not that any/all suppliers could not provide the required product, only that their supplier cannot). These and other issues such as misunderstanding engineering requirements for delegated design may result in significant design changes.
  
  

To manage risks such as those outlined in the above examples, it is therefore crucial that the Request for Prequalification (RFPQ) includes specific requirements of qualification and experience, both quantitatively and qualitatively.

Prequalification Submission Criteria

Proponents should be required to submit materials outlining their credentials and ability to perform the types of construction for which they are being prequalified. Generally, the criteria fall into two categories - mandatory and evaluated. The mandatory criteria should be capable of being objectively evaluated and proponents must meet all the mandatory requirements to be considered for further prequalification. If they fail to meet the mandatory criteria, their submission is rejected in its entirety. Following evaluation of the mandatory requirements, owners may use an evaluation team to assess the evaluated criteria to determine if the proponent is prequalified.

• Mandatory Requirements
  
  
•  Some of the general mandatory requirements include:
•  Bonding Verification
•  Bonding Limits
•  Insurances
•  CCDC Document 11 (Contractor’s Qualification Statement)
•  Bank Reference
•  WSIB Clearance Certificate (Workplace Safety & Insurance Board)
•  Declarations
  
  
•  Evaluated Requirements
•  Some of the general evaluated requirements include:
•  Experience
•  Value of Completed Work
•  Value of Work Currently Underway
•  Details of Similar Projects
•  Résumés of Key Personnel
•  Organizational Structure
•  Resources
•  Methodology
•  Quality Control Program
•  Safety Qualifications
•  Safety Policy Statement / Record
•  References
•  Membership Affiliation

Project Information

The opening section of the RFPQ document is an opportunity for the owner to introduce the project to potential proponents. The purpose of the owner providing this basic but essential information is to clearly outline some parameters that a potential proponent needs to determine their ability to prequalify and to determine their desire to continue with the process in general.

The information typically includes name of the project, general description of the project, type of anticipated contract including supplementary conditions, if any, location of project site, project/construction budget, anticipated schedule, communications protocol, submission evaluation criteria, etc.

 

Mandatory / Optional Briefing

Depending on the nature of the project; potential proponents may be invited to visit the project site and be briefed on the project scope to ensure they have a better understanding of the project.

If the site visit is mandatory or if late attendees will not be allowed to take part, then very clear consequences should be stated in the RFPQ so that all potential proponents are aware of these criteria prior to the date of the site visit. It is a recommended practice that briefings be minuted and the minutes be distributed to those present, and attendance recorded.

 

Project Description

The purpose of this section is to provide as much information as possible about the nature of the project to all potential proponents in order to assist them in their decision as to whether or not to submit a proposal on any particular project.

Potential proponents will often decide on whether or not to apply for prequalification based on the project’s size, schedule or complexity.

By providing as much clarity as possible, the chances of unqualified proponents submitting is reduced, thereby reducing the overall time spent on reviewing the submissions in general. Clarity in the project description gives proponents an opportunity to develop their submission to suit the particulars of the RFPQ and demonstrate their best qualities.

 

Schedule

Owners should clearly outline their proposed project schedule showing milestone dates. This allows proponents to assess if they have the resources available to execute the project and to properly plan and allocate resources to it. If there is uncertainty regarding the schedule, owners should identify this in the RFPQ to inform the proponents of the risk and impact of delays.

 

Closing

As with any proposal, there is a deadline associated with its submission. In order to prevent confusion, the more accurate the information provided to the proponents the better.

A typical RFPQ should include the following basic closing information:

• Closing Date
• Closing Time (before 00:00:00)
• Which clock will be used
• Delivery Location
• Acceptable Delivery Methods
• Addressee
• Specific closing requirements (i.e. separate envelopes, Owner-supplied envelopes, number of required hard copies, electronic submission requirements, etc.)

Where the submission is required to be or may be in electronic format a few minor adjustments are required to incorporate electronic submission requirements into the process. This is done primarily by providing a single e-mail address and being clear that it is the only address to be used to deliver the submissions and any questions to during the pre-qualification period. In the same vein when sending out official documents such as clarifications this same address should be used. To avoid any conflict in date/time of receipt, an email delivery receipt for the files should be requested to verify that the info was received by the server and when it was received. Online services such as MERX and BIDDINGO can also manage these processes, including verifications.

This portion of the RFPQ document should clearly outline that the responsibility to deliver the RFPQ rests with the proponent. It should provide clear instructions and consequences should the RFPQ be late. It should state that submissions received after the deadline will not be accepted and will be returned unopened. Owners and architects may refer to CCDC 23-2018 (A Guide to Calling Bids and Awarding Contracts) for guidance.

 

Submission Format Requirements

This section sets the requirements for the format in which materials are to be submitted.

The goal of the submission format requirements is to assist proponents in preparing their submissions in a consistent structured format to allow evaluators to assess a variety of proponents’ abilities in an organized and consistent manner.

Owners or owner’s consultants need to recognize the costs of preparing a prequalification submission and act accordingly. Proponents need to recognize that the requirements are intended to overcome the challenges in evaluating prequalification submissions, especially when these arrive in a variety of formats.

 

Professional Courtesy

The prequalification process is often the first contact between a proponent and an owner or the owner’s consultant. Each party should recognize the opportunity and the need to establish cordial and professional communications.

In this regard, the owner or the owner’s consultant should:

• Reply to all enquiries from parties to the prequalification process in a timely manner.
• Recognize that events change quickly in construction, and that a firm that is prequalified may have legitimate reasons to withdraw from a project after being prequalified.
• Treat all proponents equally, advising them of the same project information at the same time.
• Promptly inform the proponents of any revisions or additions to the RFPQ documents.
• A debriefing for all unsuccessful proponents is recommended. The owner should inform all Proponents of the outcome of the RFPQ and provide them with a copy of their score sheet and ranking, if requested.
• Once the prequalification process is complete and qualified proponents have been identified (bid list established), additional proponents shall not be added unless a proponent withdraws and the terms and conditions of the RFPQ permit a substitution. The proponent should:
• Reply to all enquiries from an owner or an owner’s consultant in a timely manner.
• Prepare and submit enquiries and responses to all owner enquiries well in advance of the submission deadline.
• Where a proponent wishes to withdraw from the prequalification process, or the bid process after being prequalified, they should do so at the earliest possible time in writing to the owner or an owner’s consultant, describing the reasons for the action. Doing so allows the owner or an owner’s consultant to avoid investing time in assessing a prequalification submission or issuing documents to an unwilling proponent.
• The proponent should promptly inform the owner of any changes in their submission by following the stated procedure.

All parties involved in the RFPQ process should respect the privacy and confidentiality of the information and materials contained in or produced for the RFPQ, if necessary a confidentiality agreement may be used, also.

 

Conclusion

Prequalification of proponents, whether general contractors or trades, is a sophisticated tendering tool that provides an owner with an opportunity to mitigate many of the risks associated with an open tender process while offering interested general contractors or trades who possess relevant project- experience and capacity, a chance to make an early assessment of the proposed project and, if desired, to participate in the tendering process against other proponents of similar profile.

However, the prequalification process should be carefully planned, not only to prequalify contractors, but to ensure the experience and capacity of project critical sub-contractors, sub-sub-contractors, trades, sub-trades, etc. This is especially important in large complex projects, and projects that require special expertise and experience (i.e.; airports, hospitals, museums, etc.).

References

Ontario General Contractors Association Guide to Prequalification of Contractors, 2006

Canadian Construction Documents Committee CCDC 29-2016 Guide to Prequalification

 

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These articles do not represent OAA policy or guidance but rather are based on the opinions and experiences of members of the OAA and are prepared for the benefit of the profession at large.

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