December 16, 2011
- Having a contractor or subcontractor go belly-up during construction is one of the biggest disruptions a project can face. To avoid that nightmare scenario, a growing number of project owners and general contractors are raising the bar on financial qualifications for their bidders.
Fiscal stability is a top priority for United States Alliance Fire Protection (USAFP), which maintains healthy cash balances and manages its money conservatively. As a result, the company has earned the highest possible ranking from Contractor Score, an organization that's rapidly becoming the gold standard for measuring contractors' fiscal health. Contractor Score also provides management consulting and investment banking services to the construction industry.
"We're running into more customers who are requiring a ranking from Contractor Score to qualify their bidders," said Mike Peterson, vice president of marketing/sales at USAFP. "These rankings are based on objective information, so they're very highly regarded in the industry."
Lack of liquidity or incompetent managers are two main reasons for contractor defaults, according to Contractor Score. The score focuses on objective metrics that give a good sense of the contractor's performance in these areas. Contractor Score ranks contractors based on empirical, verified information that comes mainly from outside sources, including:
- The contractor's most recent audited or reviewed fiscal year financial statements
- The contractor's financial statements for the most recent fiscal quarter, which the contractor may generate internally
- Corresponding backlog information and work-in-process statements for the fiscal year and quarter reviewed
- Bank statements for the contractor's lines of credit
- Management head count and wage information from the contractor's quarterly Internal Revenue Service Form 941
Contractor Score will rate any contractor who asks for a ranking and provides the necessary documentation. USAFP has requested a score multiple times since the ranking system launched several years ago, and Contractor Score's verdict is always the same: perfect. In September, USAFP once again received a score of 2500, the maximum number of points awarded.
"We work hard to maintain conservative fiscal policies and proactive cash management," Peterson said. "This score should remind customers that USAFP is a safe bet for contractors."
For more information about USAFP, contact Mike Peterson at (847) 247-4755 ext. 120 or [email protected]