02 Sep Q & A: Contractor Prequalification & Legal ramifications.
Question: Which components in the contractor prequalification process, if not addressed, could result in the most significant legal ramifications?
Two of the highest value prequalification activities that limit legal exposure are contractor assessments and adequate insurance.
Contractor Assessments
Contractor assessment essentially determines if the contractor is capable and has a track record of safely executing the work proposed. Activities included in such assessments can consist of reviewing previous projects of similar size and scope, financial and industry reference checks, a review of the contractor’s business processes, including health, safety, environmental and quality standards, and a study of performance metrics.
Our advice: Ensure your company has a process to establish criteria expected of the contractors you are hiring and have the correct individual(s) in place to determine their competency. The requirements generally have two pieces: previous performance (usually a mixture of leading and lagging indicators) and a review of safety management systems. (It’s good to note that establishing criteria is a legal requirement in some jurisdictions (i.e. Alberta). The intent of setting standards and making an assessment is to determine if you should hire the contractor based on their previous performance. If you hire the contractor, do they have the capacity to manage their business safety?
Insurance
Secondly, ensuring that the contractor obtains adequate insurance coverage when awarding the contract is a fundamental legal protection activity. Commercial general liability coverage, and specialized insurance coverages provide protection for both the contractor and the purchaser in the event of a significant event. Any general contractor subcontracting work can be liable for the direct cost and the legal liability if incidents occur and there is no coverage in place.
Our advice: Use a database, not a spreadsheet, to manage documents that have expiry dates. Whether you use an internal database or a third-party service, they are the best tool. Many want to trust an Excel sheet: this does not do the job. Ensure that contractor insurance certificates are tracked, and expiry dates are anticipated!
You may also enjoy A GUIDE TO QUALIFYING CONTRACTORS: RISKS AND BEST PRACTICES.
Have a question? We’d love to hear from you. Send us your question!
Looking for an additional resource, check out the COAA’s Contractor Environment Health and Safety Management: Best Practice
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