Subcontractor Prequalification

Most GCs collect a completed questionnaire from a sub and move on. The form isn't the work — verifying what's in it is. Each of the six categories below has a version that passes a quick read and a version that reveals a problem.

• Company information. Legal name, years in business, organizational structure, prior names, litigation history, and prior defaults. Red flag: a name change in the last three years without clear explanation — it sometimes means the sub is distancing from a prior default or license action. Also check whether they use their own workforce or rely on brokered labor. A sub that consistently backfills with day-labor when they're busy will send whoever's available to your job.
• Financial health. Most recent fiscal-year financial statements, bank line of credit confirmation, and current project backlog. A sub who declines to share financial statements is telling you something. The output you're looking for: a single-project capacity limit and an aggregate limit — the maximum work they can carry at once without overextending.
• Bonding capacity. A letter from their surety naming the single-project limit and the aggregate limit. A $2M single-project limit means nothing if they're already bonded on $2.8M of active work against a $3M aggregate. If the aggregate is already 80% consumed, you're not getting their capacity — you're competing for what's left.
• Safety record. The EMR (Experience Modification Rate — the multiplier on their workers' comp premium, where 1.0 is the industry average), the OSHA 300 log for three years, and their written safety program. Ask for the actual safety program document. A cover letter that says one exists is not a safety program.
• License and insurance status. Active contractor license in the right classification, and current certificates of insurance. A sub with a residential license on a commercial project is a compliance problem that shows up at inspection, not at bid time.
• Project experience and key personnel. Who will actually run your job — not the company's three best projects, but the PM, superintendent, and foreman who will be on your site. If they can't name those people at prequal, they don't know yet. That's a staffing signal, not an administrative oversight.

One standard form covers all six categories. ConsensusDocs 721, developed by a coalition that includes AGC, is available at consensusdocs.org — the right starting point if you don't already have a form you've built in-house.

The EMR — the multiplier on a company's workers' comp premium — is the fastest safety signal in a prequal package. A 1.0 is the industry average. Below 1.0 means fewer claims than average for their trade and size class. Above 1.0 means more, and their premium reflects it.

EMR is calculated on a rolling three-year window, excluding the most recent policy year. In California, the calculation runs through the WCIRB (Workers' Compensation Insurance Rating Bureau of California), not NCCI, which covers most other states. New companies without three years of history are assigned a default of 1.0.

Most large GCs use 1.0 as their upper limit for unreviewed subs. Above 1.2 is a common disqualification threshold on commercial projects. Above 1.25 is frequently a hard disqualification — and where it isn't, a written corrective safety plan is typically required before the sub can bid. Many public projects treat an EMR above 1.0 as a bid barrier.

To get the number, ask the sub to provide their current EMR letter from their workers' comp insurer. If you're working with a small sub who may be exempt from EMR calculation, request three years of loss runs from their carrier instead — it tells you the same story.

EMR measures past losses, not current safety culture. A sub with an EMR of 0.95 and an OSHA 300 log full of near-misses is a different risk than one with the same EMR and a clean log. Request both.

The bonding capacity letter names two numbers: the single-project limit and the aggregate limit. A sub with a $3M single-project limit and a $5M aggregate that is already bonded on $4M of active work can only take on $1M more until something closes out. A letter that only lists the single-project limit is incomplete — always ask for both.

Sureties tightened their underwriting across commercial construction after 2024, when subcontractor distress climbed — 70 percent of GCs surveyed reported increases. A sub's capacity letter may now name a lower limit than their track record would suggest. Ask them directly about the gap.

Financial statements add the picture behind the bonding letter. Three things to check: the current ratio (current assets ÷ current liabilities — below 1.0 means the sub may struggle to meet short-term obligations), net worth trend over three years, and backlog relative to net worth. A sub carrying 12 months of booked backlog against a net worth that supports 6 is overextended whether or not their bonding line reflects it yet.

Audited financials carry the most weight. Reviewed statements — where a CPA reviewed but did not audit — are the standard floor for subcontracts above $1M. Compiled statements, where a CPA assembles what the company provided, are acceptable for smaller jobs but shouldn't anchor a capacity decision on significant work. If a sub's financials raise concerns, your options are: require a payment and performance bond (their problem to obtain, your protection if they can't), start with smaller scope before awarding larger work, or tighten retainage terms.

The ACORD 25 tells you coverage existed when it was issued. It doesn't update when a policy lapses, and "additional insured if required by written contract" printed on a certificate is not an endorsement — the underwriter has to modify the actual policy for the protection to exist.

For what to check on a subcontractor COI — endorsement language, limits by coverage line, and how to verify a policy is still active — see the subcontractor COI compliance guide.

License verification is a lookup: find the number on the issuing board's public search. California uses the CSLB. Texas separates electrical, plumbing, and HVAC across TDLR and the Texas State Board of Plumbing Examiners. Most state boards show the same information: license status, classification, expiration, and disciplinary history. Check the disciplinary history while you're there — a prior suspension for a code violation in the relevant trade is a different situation than a late-renewal administrative flag.

Put license verification in your award checklist, not just prequal. A sub's license can be suspended between the time they fill out a form and the day they mobilize. Five minutes at license lookup costs nothing; discovering a license problem at the first inspection costs much more.

Two standard forms cover prequalification in commercial construction, and they flow in opposite directions. Knowing which one applies to your situation saves time and avoids sending the wrong form.

ConsensusDocs 721 is what a GC sends to subs. It covers company structure, financial capacity, bonding, licensing, safety, and project experience in one integrated document. If you're building a prequal program, this is the right starting form — available at consensusdocs.org, and designed for exactly the GC-vetting-sub workflow.

AIA A305-2020 is what an owner sends to you when you're bidding as prime. It's a sworn, notarized statement structured around five modular exhibits — owners request only the sections they need. Exhibit A covers company information; Exhibit B covers financials and performance; Exhibit C adds project-specific detail including proposed subs, insurance, and bonds. If you're bidding on owner-developer or institutional projects, expect to fill one out before you're listed as prime contractor.

The two aren't interchangeable. Send 721 to your subs. Fill out A305 when an owner asks for it from you.

A sub that was in good standing last year may have a higher backlog, a lower bonding limit, or an EMR that drifted upward since you checked. Annual updates exist to catch that before it becomes your problem mid-project.

At each annual update, request specifically: a current EMR letter (not the one from two years ago in your file), updated financial statements if the last set is more than 18 months old, a fresh bonding capacity letter — aggregate limits change as subs take on and close out work — and active license confirmation via the board's public lookup. Asking a sub to "send updated information" gets you whatever they want to send. A specific list gets you what you actually need.

Don't wait for the annual cycle if any of these happen: the sub wins a major new contract you hear about (their aggregate bonding capacity just got consumed), you get a call from another GC asking about their performance, or key personnel changes — especially a superintendent change on a project already underway. These are the moments where the picture you have is stale and the risk has shifted.

In over 35 percent of potential defaults, the warning signs were already in the prequalification data. They just weren't acted on. The problem isn't that GCs skip prequal — it's that one person collects the form and nobody is authorized to say no based on what's in it. Assign someone the authority to flag a sub, and make sure that flag can actually stop an award.

IRMI — Subcontractor Operational Prequalification — four-phase framework; 10% bid spread threshold; 167–240% cost overrun range, accessed June 1, 2026.

IRMI — Use the Results of Subcontractor Prequalification to Mitigate Risk — 35% potential-default red-flag statistic, accessed June 1, 2026.

ConsensusDocs 721 — Subcontractor Statement of Qualifications — six-category form structure, accessed June 1, 2026.

ConsensusDocs Prequalification Resource Center — 70% subcontractor distress figure (2024 AGC/FMI Study), accessed June 1, 2026.

AIA A305-2020 Instructions (AIA Help Center) — exhibit structure; notarization requirement; modular redesign rationale, accessed June 1, 2026.

Vertikalrms — EMR Rating in Construction 2026 — EMR thresholds; NCCI vs WCIRB for California; new-company default to 1.0, accessed June 1, 2026.

illumend — What Is an ACORD 25 Certificate — ACORD 25 contents and snapshot-at-issuance limitation, accessed June 1, 2026.