Prequalification: What GCs Look at Before Hiring You

What Is Prequalification and Why Does It Matter?

Prequalification is the process by which a general contractor evaluates a subcontractor before awarding them a contract. It's designed to answer one question: "Can this subcontractor perform the work and complete it successfully?"

Prequalification matters because it's the gatekeeper to most commercial construction projects. If you're not prequalified, you can't bid. And if you can't bid, you can't grow.

The Documents GCs Ask For

• Financial statements: Balance sheet, income statement, and cash flow statement — audited or reviewed, if possible.
• WIP Schedule: The most important document. GCs want to see that you track job profitability and manage over/under-billing.
• Bonding capacity: A letter from your surety showing your current bonding capacity and backlog.
• Insurance certificates: Proof of general liability, workers' compensation, and other required coverage.
• Project list: A list of completed and current projects, including contract values and references.
• Organizational chart: A chart showing your key personnel and their experience.

What GCs Look For in Your Financials

• Working capital: Do you have enough cash to fund the project? A common benchmark is working capital equal to 5% to 10% of your annual volume.
• Job profitability: Are your job margins consistent? Wildly fluctuating margins suggest inconsistent estimating or job management.
• Debt levels: Are you over-leveraged? Excessive debt is a red flag.
• Liquidity: Do you have access to cash or a line of credit?

What GCs Look For in Your WIP Schedule

• Consistency: Do you prepare your WIP Schedule monthly? Gaps suggest a lack of discipline.
• Over/Under-Billing: Are your jobs balanced, or are you consistently over-billed or under-billed? Both extremes are concerns.
• Profit fade: Are job margins staying consistent, or are they declining over time? Declining margins suggest poor job management.
• Change orders: Are change orders being billed promptly, or are they accumulating unbilled?

The Red Flags GCs Look For

• Gaps in the WIP Schedule: Missing months suggest you're not reviewing your jobs regularly.
• Negative working capital: If your current liabilities exceed your current assets, you're at risk.
• High AR aging: AR over 90 days suggests collection problems.
• Frequent subcontractor defaults: A history of defaults suggests poor subcontractor management.
• Insurance lapses: Even a single lapse in coverage is a serious red flag.

How to Prepare for Prequalification

• Clean up your financials: Review your financial statements for accuracy. Pay down debt where possible.
• Update your WIP Schedule: Make sure it's current and accurate. Address any problem jobs before the GC sees them.
• Review your insurance: Ensure all coverage is current and adequate for the project size.
• Prepare your references: Have a list of recent projects with contact information for references.
• Be proactive: Don't wait for the GC to ask for documents — have them ready.

Frequently Asked Questions

How long does the prequalification process take?

It varies — anywhere from a few days to several weeks, depending on the GC's process and the completeness of your documentation.

Can I bid on a project if I'm not prequalified?

Usually not. Most GCs require prequalification before you can submit a bid.

What if I fail prequalification?

Ask the GC why. Understand the gaps and work to address them before the next opportunity.

Can I be prequalified by multiple GCs at once?

Yes — many subcontractors are prequalified by multiple GCs. In fact, it's a sign of credibility.