Pre-qualification Contributes to the Rising Cost of Construction
Why is it that BCCA is adamantly opposed to pre-qualification of contractors as general practice? In a nut shell, it is because of the subjectivity of the process. As a general practice we don’t see that it can be completely fair, open and transparent. Somewhere in the methodology, a decision is made that affects a contractor’s right to do business with the government based on some subjective consideration. No matter how hard one tries to make the evaluation reasonable, an evaluator’s perception of the contractor can be based on their past relationship or marketplace information.
We have seen some extreme examples of some prequalification processes:
- Websites are being considered for professionalism and assessed as part of the scoring.
- One of two companies with similar names was outright rejected because they were considered to be same company, even though they were not.
- A pre-qualification call limiting the number of successful contractors to five in a hot market place. Would all five of these contractors then bid?
We are all aware of the rise in the cost of construction over the past five years. One of the factors that has contributed to the rise in cost is limited competition, some of which has been artificially stimulated by pre-qualification. As well, the red tape associated with responding to a prequalification adds to the cost of doing business and is added to the cost of construction.
Additionally, the double edged sword for contractors in pre-qualification is that the very public owner for whom they are working has the right to decide whether they get to bid on the owner’s next project. Will the need for a contractor to pre-qualify impact on the fairness of a decision where a contractor has the right to contest a judgment during the bidding or performance of the contract? Hence, bidders will often include a contingency for this risk, which will also add to the cost of construction.
Qualification of bidders at the time of bidding is also not a practice BCCA supports. As members of the Public Construction Council of BC, we endorse their guideline which states the following: ‘Qualification of Bidders – A clause requiring a bidder to submit details of his experience or financial status in the tender documents, should not be included. A clause requiring the successful low bidder to provide such information prior to acceptance of the tender is appropriate’. Contractors who have gone to great lengths and cost to prepare a bid should not have their bid evaluated on subjective conditions imposed on the bid.
Consequently, this incongruity and the subjectivity of the evaluation process is why BCCA believes that pre-qualification is only suitable in limited circumstances. BCCA and its regional associations recognize the need for pre-qualification on publicly funded projects only in limited circumstances. Generally the ability of the Contractor to secure the necessary bonds is the sole criteria by which Contractors should be pre-qualified.
For the BCCA policy on Pre-Qualification, we endorse the Public Construction Council Recommended Guidelines for the Use of Pre-qualification of General Contractors and Trade Contractors (http://www.pccbc.com/docs/PCC_Prequalification_Guideline_Sept06.pdf)