Prequalification: mutual recognition at last

The issue of qualification, as the Construction Industry Board (CIB) called what is now generally referred to as prequalification, has been with us for a long time. The CIB was formed following Sir Michael Latham’s hugely important report of 1994, Constructing the Team.

Latham highlighted qualification as an industry problem. He distinguished between qualification and prequalification in this way. “Qualification means a contractor getting onto an approved list. Prequalification means drawing up a list of firms that are suitable for a particular project. The first stage is the necessary gateway to the second.”

As with many CIB recommendations, we chose to ignore it and refer to prequalification (or prequal, as it is often more unattractively referred to) as the method for getting onto a long list. Straight away we have successfully managed to muddle things up.

Prequalification (as we now use the term) is a perfectly acceptable process. It is a procedure where an organisation is required to demonstrate its suitability to be considered for working for a client. Demonstrating it is suitable is no guarantee it will actually be included on a tender list. This long-list process qualifies a firm for being considered for a shortlist, when further criteria have to be addressed.

Latham recommended: “As a first step and as a matter of urgency, the [then] Department of Environment should set up a task force… to prepare a single qualification document for contractors seeking to do work for any public sector bodies. That is, one prequalification process for the whole public sector.”

Constructionline was born.

The intention of Constructionline was fine but the implementation was flawed. It was flawed because the government could not legally impose Constructionline on public sector procurers, and so at best it had to be a system of choice. And flawed because there was a charge for contractors to be qualified and included on Constructionline’s register. Introducing Constructionline created a commercial market.

Operators have, of course, taken advantage of this market opportunity, and we have seen schemes such as Exor, National Britannia and Achilles emerging.

The proliferation of prequalification schemes is now a pernicious cancer that involves the whole supply chain, from consultants through main contractors to subcontractors
and suppliers

The proliferation of prequalification schemes is now a pernicious cancer that involves the whole supply chain from consultants through main contractors to subcontractors and suppliers. It has created an enormous cost to the industry, and is one of the most wasteful aspects of the construction process. The time taken by senior staff completing similar but different forms and registration fees has to be paid for. The costs are built into a company’s overheads, which are included in the preliminaries of contracts. Clients pay and so they are the ultimate losers.

Those who have to prequalify know the problem, and there is no need to elaborate on it here. What is being done about it is what companies want to know. There has been sustained lobbying by many bodies in the industry for a number of years. Constructionline’s lack of take-up was identified and considered a problem by the Trade and Industry Select Committee when it was considering the different issue of retention some six years ago.

In its review of the construction industry last year, the select committee also highlighted prequalification as a major problem. The consequence was that the Construction Unit at the [then] Department of Business, Enterprise and Regulatory Reform (BERR) was instructed to address the matter and, with significant input from the ECA, is now making good progress working with the British Standards Institution (BSI) in identifying core criteria that can be used to attain “deemed to satisfy” status in schemes.

Health and safety is an excellent example of how this can work. Again with major input from the ECA, the Safety Schemes in Procurement initiative was launched in May (see News page 6), which is intended to increase cross-recognition among the various prequalification schemes. BERR has noted that success and is looking to develop a similar approach to other elements of the process, using a BSI “Publicly Available Specification” (PAS).

SEC Group is represented on an Office of Government Commerce (OGC) forum set up to deal with recommendations regarding prequalification in the important Glover Report on SME procurement. BERR and the OGC met in April to compare notes and move the matter forward.

This is not an easy issue to resolve as different clients want different levels of prequalification data. Some complex approaches have been described as resembling Framework Agreements rather than a long-list prequalification. Getting consultants, contractors and suppliers qualified is now a major commercial task, and once there is commercial activity, new operators will come onto the market.

Had Constructionline been a free service when it was first launched some 10 years ago, would things now be different?

Originally published as "A qualified success" in EMC Jul/Aug 2009