Approved Contractor Lists and Staying Competitive

We hear the term 'resilience' more frequently these days, and for good reason: staying competitive means more than pricing and labor availability.

An element of staying competitive is reinvesting to improve company operations. Among the best reinvestments are systems that make a company more resilient.

Resilience refers to a company's ability to

• anticipate,

• prepare for,

• respond, and

• adapt to

changing conditions while keeping safe operations.  

This concept goes back decades, if not centuries. Substitute teachers, spare tires, and the flashlight on your bedside table are examples of resiliency systems. Computer back-ups, cross-trained workers, and employee assistance programs are examples in a work setting.  

But today, we are discussing approved contractor lists and how they can help you stay competitive and be more resilient.

For many organizations, success depends on the strength of their supply chain. And a big part of the establishing strength is implementing contractor management systems. Effective contractor management systems ensure safety, quality, and efficiency.

Using an Approved Contractor List (ACL) is an essential contractor management practice. Prequalifying contractors and maintaining a segmented ACL offers numerous benefits, providing a framework for effective contractor selection and oversight.

Let's explore how your ACL builds resilience in your organization.

Enhanced Safety and Compliance

Maintaining an ACL allows organizations to ensure that contractors meet specific safety standards and compliance requirements.

Purchasers can reduce incidents on their projects by prequalifying contractors based on their safety capacity, certifications, and training programs. The prequalification process helps ensure contractors meet relevant regulations and industry standards.

Improved Quality and Performance

An ACL helps hiring organizations promote contractors with a proven history of delivering high-quality work.

Organizations can improve the quality of work on their projects by evaluating contractors based on their quality systems. Policies and procedures that prevent substandard installations and find defects when they occur save resources. Fewer rework issues, warranty claims, delays, and cost overruns are worth investing in.

Cost Savings

Maintaining an ACL can lead to cost savings in several ways. Purchasers can reduce project costs by selecting contractors with competitive pricing and a history of completing projects within budget.

Additionally, organizations can avoid costly delays and insurance claims by reducing the likelihood of incidents and rework, leading to overall cost savings.

Efficient Contractor Selection Process

Approved contractor lists streamline the contractor selection process.

Instead of starting from scratch for each project, hiring companies can refer to their ACL to identify prequalified contractors. Saved time and effort in the contractor selection process allows projects to ramp up more quickly. Likewise, when your go-to contractor is unavailable, you have backup options that have previously met your standards.  

Risk Management

Maintaining an ACL is a proactive approach to risk management. Buyers can identify potential risks by assessing and categorizing contractors based on their capabilities and qualifications.  

Purchasers implementing risk mitigation strategies, including close monitoring of high-risk contractors, tend to get better outcomes.

Legal and Reputation Protection

Maintaining an ACL helps ensure contractors have the necessary licenses, certifications, and insurance to perform their work.

An up-to-date list helps protect from legal liabilities, financial exposure, and the reputational damage of working with unqualified or non-compliant contractors.

Consider technology to manage your contractor's dated documents. An ACL is only as good as it is current. If dated documents like contractor insurance policies are expired, you have unmanaged risk, and the value of your list is degraded.

List Segmentation

Segmenting an approved contractor list into groupings specific to the operations is a best practice.

For example, segmenting for service type and capacity is an important step. Many contractors claim they can deliver all kinds of services but may not have relevant experience or qualifications.

I once worked for a maintenance general contractor who said they'd haul dynamite because our client was in a bind when their usual specialty contractor was unavailable. It's wild the risks contractors will (sometimes) take to stay in good stead with their clients. Fortunately, in this case, an acceptable and compliant alternative was found at no more cost than some elevated blood pressure and bruised egos.

Responsible clients know better than to award work beyond the contractor's capability. Likewise, top-shelf contractors don't take on work they have no history with without carefully planning and resourcing how they will execute a new scope. A carefully segmented list will head off mismatches in capability vs. scope.

Another recommended segmentation is a classification for contractors permitted to hire subcontractors. This classification goes hand-in-glove with assessing the contractor's ability to oversee subcontractors. It shouldn't be a given. It's a conversation at the very least, and more than that, as the risk and complexity scale up.

Other typical segmentations include highly regulated activities like asbestos abatement, lead handling, and the use of any explosive, flammable, radio-active or cancer-causing agents.  

It is highly advisable to have specific upgraded requirements when designating a general contractor as the prime contractor on a project or scope of work.

To sum up, maintaining an approved contractor list is a best practice.  

ACLs enhance safety, improve quality, reduce costs, streamline the contractor selection process, and help manage risk and legal compliance.

Purchasers can improve contractor outcomes, lower risk, and boost resilience by investing in prequalifying contractors and maintaining a segmented Approved Contractor List.