Improving Security of Payment Building and Construction Industry

10. Prequalification Page 118National Public Works Council IncImproving Security of Payment in the Building and Construction IndustryPrequalification by Principals on Head Contractors also occurs in theprivate sector although typically this is on a project specific basis.Companies and investors such as Coles Myer Limited and ColonialMutual adopt such an approach for their major projects. The HeadContractor will often be subject to several levels of prequalificationscrutiny not only from the Principal but also from the project financier.This prequalification assessment will be an intensive process andusually addresses the technical, financial and managerial capability ofthe Head Contractor. For smaller projects the prequalificationprocesses conducted by the private sector are less formalised.• By Principal on SubcontractorIt is unusual to find direct prequalification by Principals on Subcontractors ineither the public or private sectors. It is occasionally found in the publicsector indirectly through the Principal requiring the Head Contractor toevaluate Subcontractors.• By Head Contractor on PrincipalPrior to seeking appointment for any significant project the Head Contractorwill typically undertake an elementary assessment to ensure that the Principalhas the capacity to fund the project under consideration.• By Head Contractor on SubcontractorFormalised prequalification systems do not readily exist between HeadContractors and Subcontractors in Australia. However, in practice, HeadContractors do assess informally the technical and managerial capacity of aSubcontractor to complete a project. Such assessment is generally based onpast performance and general industry knowledge of the Subcontractor's workperformance. Often the Head Contractor will work with a core group ofSubcontractors whom they know are adequately skilled and technicallycompetent.