Selecting Subcontractors: Performance Trumps Price

As the construction industry shifts toward data-driven decision-making, evaluating subcontractor performance is becoming a central focus for head contractors, driving both successful project outcomes and commercial gains.

Recent government mandates on using data, such as Australia’s goal to become a modern data-driven society by 2030, continue to fuel the industry’s embrace of technology.

According to ProcurePro’s new 2024 Subcontractor Ratings Industry Report, developed with input from leading construction firms such as Richard Crookes Construction, McNab, Kapitol Group, Hansen Yuncken and more, an overwhelming 93.7% of builders would opt for a high-performing subcontractor over a cheaper option–even when they are dealing with cost escalations. 

Additionally, 93.8% of respondents said vendor ratings will directly influence their subcontractor selection process.

These findings challenge the current supply chain inflation narrative, revealing that what the industry truly values is performance—not lower costs. High rates of insolvencies have meant that performance, quality and reliability of subcontractors is of utmost importance.

While subcontractors with higher performance ratings may come with a steeper upfront cost, they offer long-term savings by reducing project risks, delays, cost overruns and unseen variations.

“Vendor ratings will enable greater transparency of the competency and suitability of subcontractors, hopefully reducing letting risks. It will also help provide a more robust assessment of vendors, beyond just a cost analysis,” says Chris Mayhew, Manager PMO at Hansen Yuncken.

The report also highlights the industry’s preference for a set of default evaluation criteria, customisable to individual company needs. Quality, HS&E, Communication & Cooperation, Cost and Programme were identified as the five most important criteria for builders to assess subcontractors on.

Additionally, 97% of construction executives expect to be notified and involved in the rating process, indicating a high level of leadership accountability and willingness to be involved in procurement decisions.

Timeliness and early feedback are also emerging as important trends, with 90% of respondents expecting vendor ratings to be finalised within 30 days of Project Practical and nearly 88% willing to rate vendors before the project’s completion.

These findings signal a new era of transparency, accountability, and precision in construction procurement, reshaping how head contractors manage vendor relationships for better outcomes.

“By consistently evaluating vendors, Alchemy can ensure that only high-quality vendors are engaged, leading to better overall project outcomes. It will also help in identifying potential risks early, allowing Alchemy to take proactive measures to mitigate them if needed,” shares Adrian Gilmore, Contracts Manager at Alchemy Construct.

Read the full 2024 Subcontractor Ratings Industry Report from ProcurePro.