- Supplier qualification in construction checks that a subcontractor or supplier can do the work safely, legally and solvently before it is allowed to bid or be awarded.
- The core criteria are safety performance (EMR, OSHA recordable and DART rates), financial stability, bonding capacity, insurance, state licensing, relevant project experience and current capacity.
- Some criteria are pass or fail, like an active license or required insurance. The rest are scored, and anything above your risk threshold goes to a person with the reason attached.
- Collecting, reading and screening the evidence can be automated. The decision to qualify a subcontractor, and every exception, should stay with a named person.
What is supplier qualification in construction?
Supplier qualification, or prequalification, is the check a general contractor or owner runs before a subcontractor or supplier can bid or be awarded work. It answers four questions: can they do the work safely, are they legally allowed to do it, can they finance it until they are paid, and have they done this kind of work before.
In construction the stakes are higher than in most procurement. A subcontractor works on your site, under your safety program, and a default mid-project costs far more than the contract value. That is why prequalification weighs safety record, bonding and insurance as heavily as price.
What criteria should you check?
Most US construction prequalification programs check the same seven areas. What changes between companies is the threshold, not the list:
| Criterion | What to collect | What it tells you |
|---|---|---|
| Safety performance | Experience modification rate (EMR), OSHA 300A summaries for the last three years, recordable (TRIR) and DART rates, written safety program, fatalities or OSHA citations. | An EMR above 1.0 means more workers' comp losses than the average for the trade. Rates are calculated as cases × 200,000 ÷ hours worked. |
| Financial stability | Reviewed or audited financial statements, working capital, current backlog, bank reference, litigation and liens. | Whether the subcontractor can carry payroll and materials until it is paid on your schedule. |
| Bonding capacity | Letter from the surety with single-job and aggregate limits. | Federal construction contracts above $150,000 require performance and payment bonds under the Miller Act; most states have similar rules for public work. |
| Insurance | Certificate of insurance for general liability, workers' compensation, auto and umbrella, with additional insured endorsements. | Limits and endorsements match your contract, not just the subcontractor's standard policy. |
| Licensing and certifications | Contractor license in each state where the work happens, trade licenses, and certifications such as DBE or MBE where the project needs them. | License is active, in the right name, and covers the trade being bought. |
| Experience and capacity | Comparable projects with size, type and owner, references, key personnel, current workload and crew size. | Whether the subcontractor has done this kind of work at this scale, and has people free to do it now. |
| Compliance and integrity | Form W-9, business registration in good standing, OFAC and SAM.gov screening, signed code of conduct. | The entity exists, matches its tax ID, and neither it nor its owners are sanctioned or excluded. |
What evidence should you request?
A practical baseline for a subcontractor file, to adapt by trade, project and owner requirements:
- Completed prequalification questionnaire, signed by an officer.
- Form W-9 and proof of business registration in good standing.
- Certificate of insurance at your required limits, with the additional insured and waiver of subrogation endorsements your contract requires.
- EMR letter from the workers' comp carrier or rating bureau, for the last three years.
- OSHA 300A summaries for the last three years and the written safety program.
- Contractor and trade license numbers for every state where the work happens.
- Bonding letter from the surety with single-job and aggregate capacity.
- Reviewed or audited financial statements for the last two years, or a bank reference for smaller subcontractors.
- List of comparable projects with references, and resumes of the project manager and superintendent.
- Signed code of conduct and, where it applies, DBE, MBE or WBE certification.
The prequalification workflow, step by step
Set the requirement set by trade and project type
A drywall subcontractor on a private office fit-out and a steel erector on a federal hospital do not need the same file. Define the documents, minimum limits and thresholds for each trade and project type before you send anything.
Send the prequalification questionnaire
Use one standard form so answers are comparable. Many teams start from the AIA A305 Contractor's Qualification Statement or ConsensusDocs 721 and add their own safety and insurance questions.
Collect and verify the documents
Read each document against the requirement, not just file it: certificate holder and endorsements on the COI, EMR year and carrier, license number and status on the state board, surety limits on the bonding letter.
Screen the entity and its owners
Match the legal name and TIN to the W-9, confirm good standing, and screen the entity, owners and officers against the OFAC SDN list and SAM.gov exclusions.
Score the risk
Apply the pass or fail gates first, then score the rest on a defined scale. Record the score and the reason for every point deducted.
Review and decide
Below the threshold, the file goes to the approver for a standard sign-off. Above it, a person reviews the specific issue and decides: qualify, qualify with conditions (a lower contract limit, extra insurance, a safety plan) or reject.
Re-evaluate on a schedule and on change
Insurance, licenses and EMR letters expire every year. Re-check before each expiration, after any serious incident, and when the subcontractor's ownership, bank details or financial position changes.
How do you score subcontractor risk?
A useful score is one anyone on the team can explain. Separate the gates, which a subcontractor passes or fails, from the scored criteria, and keep the weights visible. The weights below are an illustrative example, not a standard:
| Area | What is measured | Weight (illustrative) |
|---|---|---|
| Gate | Active license for the trade and state, required insurance limits, no OFAC or SAM.gov match | Pass or fail. A fail stops the file. |
| Safety | EMR, TRIR and DART against your thresholds, citations, safety program | 30% |
| Financial | Working capital, backlog relative to size, bank reference, liens and litigation | 25% |
| Experience | Comparable projects, references, key personnel | 20% |
| Capacity | Current workload, crew size, bonding headroom | 15% |
| Dependency | Whether this is your only qualified subcontractor for the trade or region | 10% |
Then set two numbers: the score below which a subcontractor is qualified with a standard sign-off, and the score above which it goes to a named person for review. Many teams also tie the score to a maximum contract value, so a newer subcontractor can be qualified for smaller packages while it builds a record with you.
When should a person review the file?
- Any potential match on the OFAC SDN list or SAM.gov exclusions, even if it looks like a false positive.
- EMR, TRIR or DART above your threshold, a fatality, or a serious OSHA citation in the last three years.
- Insurance limits or endorsements below the contract requirement, or a policy expiring during the project.
- A license that is inactive, under a different name, or does not cover the trade.
- Bonding capacity below the contract value, or backlog that leaves little headroom.
- A change of bank account or ownership since the last review.
Each of these is a judgment call, not a data problem. The person reviewing should see the specific issue, the evidence and the subcontractor's explanation in one place, and record the decision with a reason.
What audit trail do you need?
When an owner, a surety or an auditor asks why a subcontractor was on site, you need to show what was checked, against which source, with what result, who approved it and when. Keep the documents, the screening results, the score with its reasons and the approval in one record per subcontractor, with the expiration dates that will trigger the next review. A file spread across email threads may be complete, but it cannot be shown.
Qualification, onboarding and approval are different steps
- Qualification evaluates whether the subcontractor meets your criteria. It ends with a recommendation and a score.
- Approval is the decision a named person takes on that recommendation, with conditions if needed.
- Onboarding is the administrative setup after approval: vendor record in the ERP, banking, tax and payment terms. It never comes first.
Keeping them apart matters for the audit trail. A vendor created in the ERP before the file was approved leaves no way to show that the checks came first. The supplier onboarding guide covers the steps after approval in detail.
Which part can be automated?
Most of the time in prequalification goes into chasing and reading: a COI with the wrong certificate holder, an EMR letter from last year, a license that needs checking on the state board. That is the work Nora, Traza's supplier qualification agent, takes on. She sends the requirement set for the trade, follows up every 3 business days, reads each document against the requirement, screens the entity and its owners against OFAC and SAM.gov, and scores the risk on your scale.
What she hands your team is one approval pack: what was checked, what passed, what she is unsure about and a recommendation. A person on your team approves, qualifies with conditions or rejects. Any sanctions match and any score above your threshold always goes to a person. Only after approval is the vendor created in your ERP.
Frequently asked questions
What is the difference between prequalification and supplier qualification?
In construction they are mostly the same thing. Prequalification is the industry term for qualifying a subcontractor before it can bid. Supplier qualification is the broader procurement term, and also covers material suppliers and service providers.
What is a good EMR for a subcontractor?
An EMR of 1.0 is the average for the trade in that state. Many general contractors set a threshold of 1.0 or slightly above and review anything higher. The right threshold depends on the trade and the project; a single bad year can raise the rate for three years.
How often should subcontractors be re-qualified?
There is no single federal rule. The usual practice is to re-check each document before it expires, re-evaluate high-risk subcontractors every year, and repeat the checks after a serious incident or a change in ownership or bank details.
Do we still need our own process if subcontractors are in ISNetworld or Avetta?
Yes, for the decision. Third-party prequalification platforms collect and grade documents against shared criteria. Your thresholds, your project's insurance and bonding needs, and the decision to qualify are still yours. The platform export is one more piece of evidence in the file.
Can supplier qualification be automated?
The execution can: sending the questionnaire, chasing and reading documents, checking license status, screening OFAC and SAM.gov, and preparing the score. The decision to qualify and the review of exceptions should stay with a person. That is how Nora, Traza's supplier qualification agent, works.
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Sources
This article is for information and is not legal or insurance advice. Federal references were checked on October 21, 2026. Licensing, bonding and insurance requirements vary by state, owner and contract; check what applies to your projects.