This week, our own Justin Levine (VP Risk Management Strategy at BuildingConnected) participated in a panel discussion all about third-party subcontractor prequalification at the 2019 Gallagher Contractor Summit in Nashville.
Here are some of the top takeaways from the session, plus some of the most interesting audience responses to the topics discussed.
Where are general contractors today when it comes to prequalification?
The session began with a series of live poll questions for the audience.
Do you use third-party prequalification?
30% of attendees said yes, meaning that a whopping 70% rely on home-grown systems — or don’t prequalify subcontractors at all.
Do you feel you’re doing a good job prequalifying subcontractors?
60% of attendees said they were happy with their prequalification process, while 40% said they were not.
The biggest burden in subcontractor prequalification is collecting information – true or false?
With 78% of attendees responding “true,” an overwhelming majority agreed that collecting information from subcontractors is the most difficult part of the prequalification process.
How has prequalification changed in recent years?
The panelists all agreed that the biggest change has been how risk teams deal with data. While others talked about the need for aggregate data or enhanced predictive models, Justin emphasized the importance of data connectivity.
He argued that the biggest players in construction are beginning to sunset their in-house systems in favor of third-party prequalification because they need better integration between the tools their teams use every day.
What trends are you seeing in subcontractor default?
There were a few key themes that popped up here, but the most prominent was overextension and backlog for subcontractors who find themselves experiencing extreme growth. That’s why there’s such a pressing need for recurring, automated prequalification processes: without regular updates, it’s easy to overlook these rapid changes.
"Subcontractors don’t die from starvation — they die from overeating."Justin LevineVP Risk Management Strategy, BuildingConnected
What are the biggest roadblocks to effective prequalification?
Many attendees said that they struggle to get accurate or up-to-date financials from their subcontractors, inhibiting their ability to effectively prequalify them. The panelists argued that in this situation, there are a few key metrics you can use to evaluate the health of a sub, the most important being their liquidity.
However, the biggest roadblock general contractors truly face is the failure to embrace the technology that will help them become faster, more collaborative, and more efficient at prequalification. The necessary tools exist — it’s a matter of choosing to forge ahead, adapt processes, and evolve alongside the industry.