Subcontractor Prequalification Checklist (2026)

Why Prequalification Matters

When a subcontractor defaults, it costs 1.5x to 3x the original subcontract value to complete their scope. According to The Surety & Fidelity Association of America, this multiplier accounts for replacement contractor premiums, schedule acceleration costs, delay damages, and extended overhead.

A 2024 AGC/FMI study found that 70% of general contractors reported increased subcontractor distress compared to the prior year. Nearly half experienced project disruptions from sub defaults. Meanwhile, CURT reported that subcontractors absorbed $97 billion in unexpected material and labor costs in 2022 alone—financial pressure that increases default risk.

A formal prequalification process helps you:

• Reduce project delays caused by sub failures
• Lower exposure to safety citations under the controlling employer doctrine
• Avoid liability for uninsured worker injuries
• Protect against wage violation pass-through liability
• Meet owner and surety prequalification requirements

The Three Cs Framework

Surety underwriters evaluate bond applicants using Character, Capacity, and Capital—the same framework applies to subcontractor prequalification.

Character: Reputation and Reliability

Character evaluates the subcontractor's ethical standards, past performance, and legal/regulatory compliance:

• Federal exclusion status (SAM.gov debarment check)
• OSHA citation history and safety record
• DOL wage violation history
• Litigation and contract dispute history
• References from recent project owners and GCs

Capacity: Resources and Technical Ability

Capacity measures whether the subcontractor can execute your specific project:

• Current backlog vs. available workforce
• Project experience at similar scale and complexity
• Key personnel qualifications
• Equipment ownership or rental relationships
• Operational systems (scheduling, QC, safety programs)

Capital: Financial Health

Capital refers to the subcontractor's ability to sustain operations and fund project cash flow:

• Working capital relative to project size
• Bonding capacity and current utilization
• Financial statement trends (growth vs. decline)
• Banking relationships and credit availability

Complete Subcontractor Prequalification Checklist

Use this checklist to standardize your vetting process. Request these documents before bid evaluation, not after award.

1. Company Information & Licensing

2. Insurance & Bonding

3. Safety Records & Compliance

4. Financial Stability

5. Experience & References

6. Legal & Compliance Verification

7. Operational Capabilities

EMR Requirements by Project Type

The Experience Modification Rate (EMR) compares a contractor's workers' compensation claims history to the industry average. An EMR of 1.0 means average; below 1.0 indicates better-than-average safety performance.

Under California Labor Code Section 4420, public works bidders must meet minimum safety qualifications based on EMR. Private project requirements vary by owner and GC policy.

Typical EMR Thresholds

EMR is a 3-year rolling window—one serious injury can spike an otherwise safe contractor above 1.0 for years. Use "acceptable" thresholds as your baseline and "preferred" for A-team subs.

EMR Verification Methods

• Request EMR verification letter directly from the sub's insurer
• Check workers' compensation certificate—some list EMR
• Contact the state rating bureau (e.g., WCIRB in California)
• Require proof for current year plus prior three years

What a High EMR Signals

An EMR above 1.0 means the contractor has more claims than average. Companies with EMRs above 1.25 pay premium surcharges of 25% or more on workers' comp. Beyond cost, a high EMR indicates:

• Inadequate safety programs or enforcement
• Poor supervision or training
• Higher probability of job-site incidents on your project
• Potential for OSHA citations that expose you as controlling employer

Red Flags That Should Disqualify a Subcontractor

These warning signs warrant immediate disqualification or, at minimum, executive-level review before proceeding.

Automatic Disqualifiers

• Active SAM.gov exclusion — Federal debarment or suspension makes them ineligible for federal contracts and signals serious misconduct
• Expired or suspended contractor license — Illegal to work without valid licensure; exposes you to liability
• No workers' comp coverage — Unless legitimately exempt (sole owner, no employees), this is a violation and transfers injury liability to you. Note: In California, high-risk trades (C-8, C-20, C-22, C-39, C-61/D-49) cannot claim exemption even as sole owners
• Willful OSHA violations — Within past five years; indicates intentional disregard for worker safety
• EMR above 1.5 — Severe claims history; most sureties won't bond them
• Multiple CSLB complaints with disciplinary action — Pattern of consumer complaints resulting in board action
• Bankruptcy in past 24 months — Recent financial failure is a major default risk
• Refusal to provide current insurance certificates — If they can't produce a COI, something's wrong. And verify certs are real—fake COIs are common. Call the insurer directly.

Yellow Flags (Need a Conversation)

• EMR between 1.0 and 1.35 — Ask what happened. A single serious injury can spike EMR for three years even at a safe shop. Get the story.
• Multiple serious OSHA citations — Pattern suggests systemic safety issues; review their corrective actions
• DOL back wage orders — Indicates payroll compliance problems; may signal financial distress
• Bidding outside their swim lane — Residential contractor bidding commercial work, or vice versa. Different world.
• Company age doesn't match claimed experience — Owner says "20 years experience" but company incorporated last year? They may have renamed after a bankruptcy or lawsuit.
• Declining financial statements — Year-over-year revenue or margin decline increases default risk
• Negative working capital — May not have cash to fund project operations
• Bonding capacity near limit — Taking on your project could overextend them
• References that don't respond — Burned relationships
• Incomplete or vague scope proposals — If they can't clearly define what's in and out of their bid, expect change orders

How to Implement Your Prequalification Process

Step 1: Standardize Your Application

Create a single prequalification form or use an industry-standard template (e.g., ConsensusDocs or AGC). Include all checklist items above. Make it available on your website so subcontractors can submit proactively.

Step 2: Set Minimum Thresholds

Document your minimum requirements for EMR, insurance limits, bonding capacity, and years in business. Apply these consistently to avoid discrimination claims and ensure fair evaluation.

Step 3: Verify Everything

Don't just collect documents—verify them. Check licenses directly with the licensing board. Search SAM.gov yourself. Call references. This is where SiteVetter can automate CSLB, SAM.gov, OSHA, DOL, and EPA verification.

Step 4: Score and Categorize

Many GCs use a tiered system:

• Tier 1: Approved for all projects up to [limit]
• Tier 2: Approved with conditions (e.g., SDI required)
• Tier 3: Small projects only, enhanced monitoring
• Not Approved: Does not meet minimum standards

Step 5: Establish Annual Review

Prequalification expires. Require annual updates of financials, insurance, EMR, and database checks. Track insurance expiration dates and require renewals before coverage lapses.

Prequalification Software Options

For GCs managing more than 20-30 subcontractors, dedicated software can streamline the process:

• Procore Prequalification — Integrated with Procore's project management platform; good for existing Procore users
• Highwire — Focuses on safety metrics (EMR, TRIR) and insurance compliance
• COMPASS (Bespoke Metrics) — Uses standardized "1Form" that subs complete once and share with multiple GCs
• TradeTapp (Autodesk) — Part of Autodesk Construction Cloud; strong for BIM-centric workflows
• Appruv — Contractor management with insurance tracking and qualification workflows

When manual is sufficient: If you work with fewer than 20 subcontractors and have low turnover, a spreadsheet-based tracking system with calendar reminders for renewals may be adequate.

FAQ: Subcontractor Prequalification

How often should subcontractors be re-prequalified?

Annually at minimum. Update financial statements, EMR, and insurance each year. Re-check federal databases (SAM.gov, OSHA) before each new award, even for previously qualified subs.

What if a subcontractor refuses to provide financial statements?

This is a red flag. Legitimate contractors understand that financials are standard for bonded work. If they refuse, either require a payment bond on their subcontract or don't use them. Some smaller subs genuinely don't have CPA-prepared statements—in that case, request bank statements and credit references as alternatives.

Can you prequalify subcontractors on a per-project basis?

Yes. Some GCs maintain a master approved list (ongoing prequalification) while others prequalify for specific projects. Project-specific prequalification is common when the project has unusual requirements (e.g., owner-mandated EMR limits, security clearances, or specialty certifications).

What's the difference between prequalification and bidding?

Prequalification determines if a subcontractor is eligible to bid. Bidding evaluates price and approach among qualified bidders. Many GCs only invite prequalified subcontractors to bid—this ensures you're comparing apples to apples on proposals from vetted contractors.

How long does thorough prequalification take?

The actual verification work takes 45-90 minutes per subcontractor. But here's the reality: you send the prequal form, they send half of it back, you chase them for the rest, they send the wrong year's EMR, you chase again. That 45 minutes of work gets spread over 1-2 weeks of emails.

Build prequalification into your bid timeline. Don't wait until after award to discover they can't provide what you need. Automated tools like SiteVetter can verify license status, SAM.gov, OSHA, DOL, and EPA records in seconds—that's the portion you can accelerate.

Next Steps

Use the checklist above to standardize your vetting process, or use the automated verification in SiteVetter to check subcontractors before your next bid. For more context on specific verification areas, see these related articles:

• The Controlling Employer Doctrine: GC Liability for Sub OSHA Violations
• 5+ Contractor Red Flags in Federal Databases
• California Workers' Comp Requirements for Contractors
• AGC/ConsensusDocs Prequalification Resource Center