Guidelines for assessing construction works suppliers

The Construction Supplier Register assesses all applications for pre-qualification in construction works categories against consistent pre-qualification criteria. The following guidance is provided to help construction works suppliers to understand why the criteria listed are used, and to indicate some of the processes used to conduct assessments.

If you have any questions regarding pre-qualification please contact us.

Pre-qualification criteria

Occupational Health & Safety management

Contractors must complete the Construction Supplier Register's Occupational Health and Safety checklist and provide documentary evidence of third party certification to an approved assurance system or an organisation-specific management system. Based on the evidence provided, the Construction Supplier Register will obtain a report from an independent assessor. Contractors must meet or exceed all of the  criteria.

Industrial relations management

Contractors must complete the Construction Supplier Register's Industrial Relations Self-assessment checklist. Where requested  the contractor must provide suitable evidence of Industrial Relations management system elements.

Financial criteria

Turnover

The level of construction-related turnover is used to help determine the maximum project size (in $ terms) for which a contractor should be pre-qualified.

The financial pre-qualification level is usually limited to 50 per cent of the contractor's average annual construction-related turnover however, for levels below $1.5 million  this ratio may increase towards 100 per cent.

Tangible Net Worth (TNW)

Tangible Net Worth  defined as ((Total assets – Intangible assets) -  Total Liabilities); must be positive.

Paid Up Capital

The level of Paid Up Capital is viewed as an indicator to the company's commitment to its business.

Profitability

Profitability is used as an indicator of the management capability and success of the company.

Working Capital

Working Capital (WC) must be positive and is used as an indicator of the company's ability to pay. The CSR prefers Working Capital to be 10 per cent or more of construction-related turnover. At higher levels of pre-qualification (above $5 million) the Working Capital ratio is expected to be met or exceeded.

Payment history

The Construction Supplier Register talks to trade supplier, sub-contractors and other referees to determine the contractor’s payment history.

Consistently late payment is an indicator of potential financial difficulty.

Credit standing

A credit assessment is carried out by an independent credit rating agency.

The credit report helps the Construction Supplier Register to determine the best pre-qualification level.

Financial statements

A minimum of two years trading. All financial statements provided in support of the application must be prepared in accordance with Australian Accounting Standards and must be signed by the preparing accountant and the business owner/s for a sole trader or partnership in the case of a corporate entity the company director(s) of the applicant company must sign.

For pre-qualification at or above $15 million audited financial statements must be provided.

Building practitioner registration

In the case of a sole trader or partnership the owner/s must have current building practitioner registration with the Victorian Building Authority in an appropriate category for commercial and/or domestic construction. For a corporate entity at least one company director and the company must have current building practitioner registration with the Victorian Building Authority in an appropriate category for commercial and/or domestic construction.

Past work history

The applicant must provide evidence of successfully completed projects of a similar size and complexity to the pre-qualification categories being sought.

The Construction Supplier Register interviews project referees to verify project information and to evaluate performance.

The following steps may be used by applicants to gauge their suitability and pre-qualification financial capacity..

Step 1 The applicant must have:

  • as a minimum, a current ratio of 1; and
  • net tangible assets that are not less than 5 per cent of the applicant’s construction related turnover.

Step 2 The maximum financial capacity is usually based on the lesser of the following:

  • 100 per cent of the applicant’s average previous two years’ construction related turnover; or
  • 10 times working capital

In calculating the above financial criteria and maximum financial capacity, assets and liabilities will be allowed where it can be demonstrated that they can be relied upon for supporting the entity in the event of default or insolvency. Examples of these assets and liabilities may include all contingent assets, all shareholder loans, and all related entity loans.

Step 3 The maximum pre-qualified project level or contract value:

  • The maximum contract value for prequalification is usually determined based on the lesser of:
    • the highest value of any successfully completed contract; and
    • the contractor’s maximum financial capacity.
Reviewed 18/01/2019
Was this page helpful?