Pre-qualification: need, advantages, disadvantages

Pre-qualification (PQ) is the screening of contractors before the tender on their experience, finances, equipment and personnel, so that only qualified firms are invited to bid for the project.

Why necessary

• Ensures that only capable contractors take part in big, complex or specialised works, reducing the risk of delay, poor quality and abandonment.
• Saves the client the time and cost of evaluation, and saves unqualified firms the cost of bid preparation.
• Promotes fair competition among serious bidders and avoids unrealistically low bids.

Advantages

1. Reliable contractors; lower risk of failure.
2. Fewer bids, so faster and more detailed evaluation.
3. The bidders know their competitors are of similar strength, which encourages them to bid seriously.
4. Reduces disputes and claims during execution.
5. Better chance of the project finishing on time, within cost, and with quality.
6. Lets the client match the size of the contract packages to the capacity of the market.

Disadvantages

1. Takes extra time and cost before the bidding.
2. Reduces competition, and may lead to higher bid prices or cartels.
3. Risk of bias or favouritism if the criteria are not clear; disputes from those rejected.
4. May exclude new, small or local firms with potential.
5. A firm's qualification (for example, its financial position) can change between PQ and bidding, so a recheck is needed.
6. The PQ documents need effort from both the bidders and the client.