contractor pre qualification

5/25/2018 Contractor Pre Qualification

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CONTRACTOR

PRE-QUALIFICATION

ByAwadh S. Al-Shehri

King Fahad University of Petroleumand Minerals

07/11/01

Under Supervision of:

Professor:Sadi A. Assaf

Department: Construction Engineering &Management

Abstract:

One of the most cases of complexity in theconstruction industry is the selection of theappropriate contractor. This summary thesisinvestigates the concepts of contractor per-qualification requirements. It has three majorparts. The first part deals with the nature of PQand the necessity/benefit of conducting PQprior to bidding. PQ methodology and how toapply rating strategies are presented on thesecond part. Eventually, mathematical modes

techniques with sample calculations are listed inthe third part. The main purpose of thismathematical/statistical analysis is to eliminateor minimize the subjectivity in selection ofqualified contractors.

Table of Contents

List of figuresName

Figure (1): PQ of Tenderers

Figure (2): Flow Diagram of Contractor PQ Process.

Figure (3): Determining For Weights Evaluation

Figure (4): The Evaluation Matrix

Figure (5): Example of Decision Parameters

List Of Tables

Table (1): Results of Dimensional Weighting Strategy forContractor PQ

NameCHAPTER 1

INTRODUCTION PROBLEM STATEMENT PRE-QUALIFICATION BENEFITS TO PUBLIC PROJECTS

CHAPTER 2

TENDERS PRE-QUALIFICATION

ELEMENTS OF PER-QUALIFICATION

1-LITTER TO CONTRACTORS (invitation)

2-PRE-QUALIFICATION FORM

a. Information For The Contractor

b. Pre-Qualification Questionnaire

c. Certification and Waves

3-CONTRACTOR RATING STRATEGIES

a. Dimensional Weighting

b. Two-step Pre-qualification

CONTRACTOR DATA SOURCES

CHAPTER 3

BASIC TECHNIQUE TO PRE-QUALIFY CONSTRUCTIONCONTRACTOR

a. Paired comparison criteria weighting

b. The evaluation matrix

MODEL PHILOSOPHY

THE CALCULATION OF MODEL PARAMETERS

Calculation of Decision Weights

DATA COLLECTION

MODEL ADVANTAGES

SIMPLE DADA CALCULATION

CONCLUSION


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C h a p t e r 1

INTRODUCTION

A successful construction program can occuronly if it is performed by a combination ofcapable and knowledgeable people. The goal inconstruction, from point of view of the owner, isto provide him with appropriate facilitiesrepresenting an effective and efficientexpenditure of his money. A qualified contractorwill minimize problems and complete the projectaccording to the owners expectations. However,if that contractor is not qualified by experience,skill, integrity, and responsibilities, and does nothave the financial means to provide a completedproject, the result will be disappointing.

Contractor pre-qualification means screeningconstruction contractors according to a predetermined set of criteria in order to determinetheir competence or ability to participate in theproject bid.

PROBLEM STATEMENT:

In the case of public project, the contract isnormally given to the lowest responsible bidderin a competitive bidding delivery system.However, a major problem may arise in thepublic sector during the competitive biddingphase, this problem is to determine theresponsibility of the contractor and his ability toperform the owners project. Therefore,depending solely of the lowest price is notwarranted approach. Beside that, the publicowner bases his decision on subjective judgment,which does not follow a sequential structured

approach to determine short-listed qualifiecontractors.

Responsible bidder refers to more than th

capacity, skill, reliability, and integrity of thbidder. The awarding authorities should verifthat the bidder:

1. Has adequate financial resourceexperience, personnel resources, anequipment to perform the task.

2. Has the ability to comply with threquired performance and time schedule.

The responsible contractor may be required t

vouch for the responsibility of his subcontractoas well as his material suppliers. It should brealized that using a pre-qualificatioquestionnaire alone does not mean using strategy for per-qualification because it is only means of gathering information needed foevaluation. Ensuring contractors characteristicand capabilities matching the requirements of thproject under consideration is significant step.

PRE-QUALIFICATION BENEFITS TOPUBLIC PROJECTS:

The contractor will benefit by assurance that hwill be on a reasonable even basis with hcompetition. Moreover, both the owner anA/E benefit through the problems eliminatioof selecting unqualified contractor. Otheadvantages are:

Assuring that the low prime bidder and hmajor subcontractors will be competent thandle the task without becominoverburdened.

Eliminating the contractors who havlimited financial resources or experience.


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Controlling the number of bidders, so thequalified will stay.

Protecting the contractors from beingawarded a project that they are incapable ofperforming.

Speeding the process of the evaluation andawarding the contract.

Shifting the process form subjectivity toobjectivity by bringing a structure to thepre-qualification process.

Chapter 2

DESCRIPTION OF THE CONTRACTORPRE-QUALIFICATION PROCESS

TENDERS PRE-QUALIFICATION:This procedure consists of three main stagepre-qualification of tenders, obtaining tenderand opening and evaluation of the same. Thpre-qualification stage includes the steps frompreparation of enquiry documents and invitatioto contractors to pre-qualify (see fig1).

Employer/ Engineer Contractor

Acknowledge Receipt

Analyze PQ data:Company/Joint venture structureExperience & Resources. Financial & General stabilit

Select Company/Joint venture forinclusion in list of Tenderers.

Notify all Contractors/Joint ventureof the list of selected Tenderers.

Invitation to Contractorto Pre-qualify.

Issue and Submission oPQ Documents.

Respond toQuestionnaires onCompany/Joint venture

Acknowledge Receipt

Confirm Intention tSubmit Valid Tender

Analysis of PQ Dataselection & Notificationof List of selection

Place PQ Advertisement In Press,Etc. As Appropriate Stating:Employer & EngineerOutline Of Project (Scope,Location, Etc.)Enquiry Issue & TenderSubmission Date.Instruction For Applying PQ.Submission Date For Contractor.PQ Data.

Request PQ Documents

Issue PQ instruction &Questionnaire requesting from eachcompany/ Joint venture:

Organization and Structure.Experience in Same Type of work.Resources (Managerial, Technical,

labor, etc).Financial Statement

Figure (1): PQ of Tenderers


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The first step includes invitation to contractorsthrough advertisement telling the contractorswhere they can obtain the pre-qualificationquestionnaire. A typical questionnaire includes

the following information: Introduction: a brief description of the

project.

Organization: classification and companysorganizational chart.

Financial resources: financial capability ofthe contractor.

Physical resources: contractor manpower,equipment, etc.

Experience: contractor experience on similarprojects.

When the pre-qualification questionnaires aresubmitted back to the owner, data evaluationswill began to eliminate contractors who dontmeet the minimum requirements. After short-listing contractors, a notification is sent to eachasking them to collect project documents andbid. A general pre-qualification decision-makingprocess is presented in fig2.

ELEMENTS OF PER-QUALIFICATION:This includes three major elements:

1. LITTER TO CONTRACTOR(invitation):

This letter is sent to each contractor askinhim to pre-qualify. A typical letter mainclude the name of owner, a briedescription of the project, and the source opre-qualification documents.

2. PRE-QUALIFICATION FORM:This consists of three parts:

a. Information For The Contractor:i. Objective and Scope of Work: whic

includes construction sketches and projecdescription in addition to the scope of work

ii. General Information:

1. Degree of Eligibility:

This refers to the contractors capacity to bassigned one or more construction portion of contract.

2. Formation of Partnership or JoinVenture:

A license proving the validity of this shall bsubmitted to the owner if he solicits.

3. Bonding Capacity:

Certificates of the bonding company must battached signifying its willingness to issue bid operformance bonds to the contractor. I

addition, the name of the banks with which thcontractor is conducting the business must battached.

4.Official Language:

English is always preferable unless otherwisstated.

Develo ment of Criteria uestionnaire

Gather Contractor Data (PQ Questionnaire)

Check Sufficiency & Correctness of Data

Available Data not Sufficient tomake a Decision

Available Data Sufficient tomake a Decision

Gather More Data Apply Contractor Data to criteria

Decision

Qualify Contractor Reject Contractor

Contractor Informed to CollectBidding Documents

Inform RejectedContractors

Contractor Submits a Proposal

Figure (2): Flow Diagram of Contractor PQ Process.


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5.Supply Materials:

The owner may ask the contractor to procurematerials from certain sources desired by him.

6.Questionnaire Submission:The owner will specify a certain time, date, andlocation by witch the contractor should submithis per-qualification questionnaire.

7. Beginning and duration ofconstruction:

The owner will insert in the pre-qualificationform the recommended date to begin the projectand duration.

b.Pre-Qualification Questionnaire:i. Identification of the Contractor:

Such as the name of the firm, home address, Fax,and phone. Moreover, it tells whether the firm isan individual, partnership, corporation, or jointventure.

ii. Contractor Performance:

A list of current construction contracts

performed with details. Sometimesrecommendations from the owners of previousprojects are required.

iii. Contractors Equipment:

The amount, type, and condition of thecontractors equipment are important.

iv. Construction Ability:

The ability of the contractor to complete theproject should be thoroughly investigated.

v. Completion Ability:

The ability to meet reasonable completion datessuccessfully should be considered.

vi. Client Relationship:

The ability to work compatibly with the staff othe owner and how cooperative in the field important.

c.Certification and Waves:At the end of the pre-qualification form, eaccontractor will be asked to sign and declare thtruth of all information. In addition, the ownemay ask the contractor to write a waiver oclaim and confidentiality.

3. CONTRACTOR RATING STRATEGIES:

They all try to examine and evaluate the datarrived at the owners office from thcandidate contractors.

a.Dimensional Weighting:This process is based on the characteristics othe owner. Once the criteria are establishedcontractors can be rated with respect to thes

criteria. Contractors score is calculated as weighted sum of ratings over all the criteria. Thrank order of the scores can then be used focontractors selection (see table 1). Form thesvalues; cut line can be set to reject all contractorbelow. A subjective judgment may be used tmake a decision.


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Contractor

A B C

ContractorSelection

CriteriaWeight(%)X

Y X*Y Y X*Y Y X*Y

Experience inCompletion ofProject on Schedule.

60 9 5.4 8 4.8 4 2.4

Present Workload &Capability toSupport Project

25 6 1.5 7 1.75 7 1.75

Availability of first-Line Supervisors

15 3 0.45 5 0.75 6 0.9

Total Score 100 6.45 7.3 5.05

b.Two-step Pre-qualification:Step 1 entails the contractors are qualified ordisqualified based on how well they satisfy anumber of preliminary screening dimensions. Inorder for the contractor to be eligible to proceed

to the second step in the pre-qualificationprocess, he must meet these criteria. The secondstep utilizes the dimensional weighting strategyby using more specific criteria to determine thecompetitiveness of the contractor as described.The application of the two-step pre-qualificationallows rapid elimination of unwantedcontractors.

CONTRACTOR DATA SOURCES:

This can be divided into two kinds: internal dataand external data. The internal data compare thecontractors performance of past projects donefor the owner. They are much more reliable thanany other source of data. The decision makermay find them through monthly progress reports

and discussion with owners personnel who werin contact with the contractor. On the othehand, the external data are gathered through:

The questionnaire filled by the contractor. Some additional data source such as th

banks, subcontractors, and suppliers thcontractor deals with.

Site visits to the propjets currently beincompleted by the contractor.

Table (1): Results of Dimensional WeightingStrategy for Contractor PQ


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Chapter 3

BASIC TECHNIQUE TO PRE-QUALIFYCONSTRUCTION CONTRACTOR:

This technique was divided into two processes:the paired comparison criteria weighting processand the matrix analysis process.

Paired comparison criteria weighting: Thesecriteria differ between projects and owners needso they must be assigned different weight valuesaccording to their impact on the project. Thisstrategy is called Paired Comparison (see fig.3).

This process can be done through:I. List all criteria that are considered

important.

II. Determine how important each of these tothe owner and the project. The importanceof one criterion over another can be major(given 3 points), medium (2), minor (1), ornone (0).

III. Sum the total raw score of each criterion.IV. Adjust the raw scores to a scale of 1(low)-10(high).

Project: --------------------Determining For

Weights Evaluation

CRITERIARAW

SCOREASSIGNED

SCORE

A Experience 6 10B Equipment 2 3.3C Financial Resources 1 1.7D Reputation 2 3.3

B C DA A-2 A-3 A/D

B B/C B-1C D-1

D

The evaluation matrix:

This is indicated in firg.4 and can be expressed a

Follows:

I.

Rank each criterion against each contractoThe scoring system used in the evaluatiomatrix is to assign 1(Poor)-5(Excellent).

II. Multiply the rank of each with the weight oeach criterion.

III. Sum the total score of each contractor anrank them for selection. Contractors havinthe highest total points are the ones choseto submit proposals.

Contractor Name: ----------------------Grade: ---------

Address: ---------------------------------

CRITERIAWeight

5Exce

4V.G

3Good

2Fair

1Poor

A Experience 10 4B Equipment 3.3 1C Financial Resources 1.7 5D Reputation 3.3 6

TOTAL SCORE 68

This technique cant handle a large number ocriteria and may trap when determining thpreferences of the criteria.

The involvement of quantitative and qualitativdata analysis is crucial. The purpose oquantitative analysis is to reveal thosquestionnaire items that have major influencand those having minor influence on thcontractor pre-qualification process. On th

other hand, the purpose of qualitative is to test the means of the questionnaire items provide bthe participants are statistically different aassigned level of significance.

Figure (3): Determining For Weights Evaluation

3- Major Preference.2- Medium Preference.1- Minor Preference.0- No Preference.

Figure (4): The Evaluation Matrix


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MODEL PHILOSOPHY:

This model utilizes a dimensional weighting

approach based of multiple-criterion decision-making. In this way, each decision factor(criteria) used for the evaluation and its weight isdetermined based on the preferences of decisionmaker.

The following assumptions are associated withthis approach:

1. The impact of each criterion can bequantified on a numerical scale1[unsatisfactory] to 10[excellent].

2. The numerical value can be reasonablyobtained from the pre-qualification (PQ)questionnaire made by the decision makerand filled in by the contractor.

3. The addition or deletion of any decisionparameters requires no dependency of themodels parameters.

In order to develop PQ model, two types ofparameters are need to be determined. They are

called Composite Decision Factor (CDF) andDecision Factor (DF). A CDF represents a singleconstruct made up of interrelated DFs (see fig 5).

Once the CDFs and their associated DFs aredetermined, the decision maker will give each aweight according to its influence on the PQprocess.

THE CALCULATION OF MODEPARAMETERS:

Calculation of Decision Weights:This enables to determine which extend eacdecision factor and sub-factor impacts the PQdecision process using a scale from zero (nimpact) to four (very high impact). Thresponses of each CDF will be translated tweights according the followings steps:

a. Calculate the mean impact for each Dincluded in each CDF. The

b.Calculate the DF weight to each DF fromequation:

)1.(

1

Eqm

DFMI

DFMIwij

i

j

ij

ij=

=

Where: wij = the weight of the DFjassociatewith the CDFi.

DFMIij = the mean impact of the DF

associated with CDFi.c.Calculate the mean impact for the CD

from equation:

)2.(1

Eqmi

mi

DFMIij

CDFMIij

==

Where: CDFMIi= mean value of CDF.

mi =the number of DFs in the CDF.

d.Calculate the weight of the CDF using thequation:

)3.(

1

Eqn

i

CDFMIi

CDFMIiwi

=

=

CDF (Experience)

DF (Size of Completed Projects)

DF (Type of Completed Projects)

Figure (5): Example of Decision Parameters


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e. Find the aggregate score of the candidatecontractor K using the following equation:

)4.(

11

Eqmi

jRijK

wij

n

iwi

AWSK

=

=

=

Where: AWSK: aggregate weighted rating forthe contractor K.

n = number of CDFs ; m= number of DFs inthe CDF.

RijK: score of the DFj in the CDFi for thecontractor K on scale of 1(unsatisfactory) to10(excellent for specific project). The approachto calculate this value is described in the

following paragraph.The CDFs are listed in levels whereby each CDFis placed at one level. At each level of CDF, threepossible decision answers exist.

1.To disqualify the contractor for this CDFand terminate the process (if RijK =0).

2.To disqualify the contractor for this DF andcontinue for the next DF (RijK =0).

3.To qualify the contractor (RijK =x where1


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SIMPLE DADA CALCULATION:

For this sample calculation, three CDFs with eight (8) CFs were initiated to conduct PQ study for thre

different contractors. For evaluatingRijKor scoring for each DF as stated earlier, questionnaire should b

addressed with these criteria during information gathering and the evaluation shall be compromised wit

scoring of questionnaire results.

Contactor A:

CDF(1) DF DFMI Wij CDFMIi Wi Rijk Wij*Rijk AWSK1

Banking Arrangement 2 0.222 3 0.667

Bonding Capacity 4 0.444 4 1.778

Financial Statement 3 0.333 8 2.667


Success of Completing Projects 3 0.375 4 1.500

Size of Completing Projects 2 0.250 3 0.750

No of Similar Comletdd Projects 2 0.250 6 1.500

Types of Completing Projects 1 0.125 5 0.625


Current Work load Current Work load 3 1 3 0.375 7 7 2.625

AWSK (A)Total = AWSK1+AWSK2+AWSK3 = 5.635

73

8 4.375

Experience 2 0.25 1.09375

1.91667

5.111

Financial Stability

9

3 0.375

=

m i

jR ijKw ij

1=

m i

jDFMI ij

1

=

m i

jDFMI ij

1

=

m i

jDFMI ij

1

=

m i

jR ijKw ij

1

=

m i

jR ijKw ij

1

Contactor B:









Types of Completing Projects 1 0.125 8 1.000


Current Work load Current Work load 3 1 3 0.375 6 6 2.25

AWSK (B)Total = AWSK1+AWSK2+AWSK3 = 5.135

1.79167

4.778

Financial Stability

9

3 0.375


63

8 4.375

=

m i

jR ijKw ij

1=

m i

jDFMI ij

1

=

m i

jDFMI ij

1

=

m i

jDFMI ij

1

=

m i

jR ijKw ij

1

=

m i

jR ijKw ij

1


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From this sample calculation, the threecontractors can be ranked based on their AWSKearned scores. In this case, Contractor A has thehighest score followed by Contractor C thencontractor B.

CONCLUSION:

Form this research; it is clear that contractors PQare crucial to avoid poor quality and work delay.The addressing of several mathematical modelshere is aimed to minimize if not eliminate allaspects of subjectivities that may lead toundesirable results. The owner of the projectshall set the criteria required for the project to beconducted and assign weight for each criterionbased on how it is important form the owner

point of view. After that, questionnaires to bedistributed among the bidders for PQ them.Using the models explained above shall help theowner in determine a list containing only thequalified bidders.

BIBLIOGRAPHY:

1. Al-Alawi, Muhsen Ahmed; Contractor Prqualification; Dhahran; King Fahad Universiof Petroleum & Minerals; Aug, 1991

2. Clough, Richard H.; Construction ContractingNew York: John Wiley and Sons, Inc.; 1985.

3. Getting the Right Contractor on the RighJob; Consulting Engineer; May 1981; pp. 1213.

4. Gooch, K. O., and John Caroline; Constructiofor Profits; Reston: Reston PublishinCompany, Inc. ; 1980.

5. Wynne, James D.; Learning Statistics: Common-Sense Approach; New YorMacmillan Publishing Co. , Inc.; 1982.

6. Russell, Jeffry: Model for Owner PrQualification of Contactors; Journal oManagement in Engineering; January 1990; p59-75.

Contactor C :

CDF(1) DF DFMI Wij CDFMIi Wi Rijk Wij*Rijk AWS








Types of C om pleting Projects 1 0.125 7 0.875


Current Work load Current Work load 3 1 3 0.375 8 8 3

AW SK (C)Total = A WSK1+AW SK2+AW SK3 = 6.573

2.41

6.444

Financial Stability

9

3 0.375


83

8 4.625

=

m i

jR ijKw ij

1=

m i

jDFMI ij

1

=

m i

jDFMI ij

1

=

m i

jDFMI ij

1

=

m i

jR ijKw ij

1

=

m i

jR ijKw ij

1


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