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Multicriteria decision making for contractor selection

Raviraj Wagh1, S.V.Joshi2

1PG Student, Government College of Engineering, Karad, Maharashtra, India.

2Professor, Government College of Engineering, Karad, Maharashtra, India.

Abstract - The selection of contractor for construction project is very important in the successful completion of project.Intheprequalificationofcontractors,theselection processisbeingconsideredasoneofthemostsignificance processbecauseitdealswithakind ofselectionoperation whichistoselectthecapablecontractorandthatisthemain factor within the construction management. While prequalification ofcontractors,someofthefactorsoughtto beconsidered.Thispaperpresentsareviewofevaluation of five criteria’s and it sub criteria’s. Other shortcomings include inappropriate criteria adaptation, inappropriate significanceofthecriteria, andinappropriatemethodology for the contractor selection, equivalent to the task of the contractorevaluationandselectionare.

Keywords: Contractor evaluation, Inappropriate criteria, Prequalification, Project success factors.

1. INTRODUCTION

Soundselectionofcontractorsbycorrectprequalificationis vital to successful achievement of a construction project within budget, schedule and agreed programme. Even if youdidn’thirethewrongcontractor,alotofprojectshappen behind time and over budget. This defense is most pronouncedinthegovernmentcontractwherethecontracts are given on not to the responsive bidder to the lowest bidderas theyhadmettheprequalificationrequirement’s which is one of the requirement during the selection of contractors.Modelmodelsusedincontractor'sassessment, andeachmodelhasdifferentcriteriaforselectingamodel suitableforuseintheassessmentofacontractor.

Based on the contributions reviewed, this paper presents prequalificationasakeymethodforevaluatingcontractors to ensure they meet the necessary criteria before being invited to submit detailed bids for a construction project. This evaluation occurs prior to the release of plans, specifications,andproposalrequests.Theprocessinvolves assessingawiderangeofrequirements,which especially in a recessed economy are often based on qualitative, subjective,andsometimesimpreciseinformationprovided bycontractors.

The standard prequalification procedure involves a structured screening process using a defined set of parameters.Theseparametersarecomparedandassigned relative weights to reflect their importance. For final

decision-making, the TOPSIS (Technique for Order Preference by Similarity to Ideal Solution) method is employed, using weights derived from multi-criteria decision-making tools such as the Analytical Hierarchy Process (AHP). This paper examines how various prequalification parameters impact key project outcomes, specificallyintermsoftime,cost,andquality.

2. LITERATURE REVIEW

Russell (1996) categorized contractor prequalification criteriaintothreebroadgroups:(1) preliminary screening criteria, which include references, reputation, and past performance; (2) contractor resources, such as financial capacity,technologicalcapabilities,andthestatusofongoing work; and (3) project-specific factors. Similarly, Palaneeswaran and Kumaraswamy (2001) organized prequalification criteria into three categories: Responsibility, which covers timeliness, reliability, completeness of submitted information, adherence to deadlines,andconsistency; Responsiveness,whichincludes compliance with local laws, government regulations, standards, and the presence of a health and safety managementsystem;and Competence,referringtofinancial capital, equipment and plant, human resources, technical expertise,andcurrentworkloadconstraints.

Building on these classifications, Cheetham (1993) emphasizedthatprequalificationaimsnotonlytoassessthe managerial competence of contractors but also to reduce subjectivity, favoritism, nepotism, and potential fraud especially in recessed economies where selection criteria often vary across regions. The paper highlights that commonly considered factors in prequalification systems includetechnicalexperience,tradehistory,safetyrecords, and staff availability, though the emphasis on each factor maydifferdependingonthecontext.

To objectively assess contractors, these factors are frequently incorporated into a weighted scoring system, whichhelpsincomparingcontractorsbasedontheirassets andliabilities.Inpublicsectorbidding,severalMulti-Criteria Decision-Making(MCDM)methodshavebeendevelopedto guideclientorganizationsincontractorselection,aimingto prevent project delays, cost overruns, fund misappropriation,andprojectabandonment(Russell,1988; Russell&Skibniewski,1988).

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Hatush(1997)exploredtheuseofanalyticaltoolstoreduce subjectivityincontractorscreeningin SaudiArabia,while Olatunji (2006) studied contractor selection processes in Nigeria and found a strong correlation between technical capabilityandprojectperformance,placinglessemphasison other criteria. More recently, Kissi and Adinyira (2019) conducted an empirical investigation into the impact of contractor prequalification on project delivery. Their findings emphasized the importance of adhering to due processinachievingtimelyandqualityoutcomes,regardless ofprojectcostconsiderations.

Contractor qualifications such as financial strength, relevant experience, business strategies, and technical competence alongside project characteristics (including cost,duration,complexity,location,andcontracttype)are critical to the success of construction projects. Poor contractorselectionisoftenlinkedtoprojectdelaysandcost overruns.Therefore,athoroughreviewofbothcontractor credentials and the specific needs and risk profile of the client is essential to determine the most suitable procurement and tendering strategy. Quality contractor performanceremainsacornerstoneofclientsatisfactionin constructionprojectdelivery.

3. PRINCIPLES OF PREQUALIFICATION

Theprimaryobjectiveoftheprequalificationprocessisto identify contractors who can deliver the project costeffectivelywhilemeetingtherequiredstandards.Onlythose contractors who meet the eligibility criteria are invited to participate in the tendering process. Importantly, there should be no bias in the selection, ensuring equal opportunityforbothlocalandinternationalcontractors.

Prequalificationaimstoensurethattheselectedcontractor possesses the necessary expertise to meet the quality expectationsandspecificrequirementsoftheprojectowner. Itinvolvesevaluatingwhetherthecontractor'scapabilities alignwiththeproject'sdemandsbyestablishingaclearset ofcriteriaagainstwhichtheircompetenceisassessed.

As such, prequalification is a critical component of the constructionprojectlifecycleandplaysasignificantrolein riskmanagement.Toderivemeaningfuloutcomesfromthis process, it is essential to understand how different contractor selection criteria affect the project's core objectives namely,time,cost,andquality.

4. CRITERIA’S FOR PRE-QUALIFICATION

Toensurecontractorquality,aprequalificationprocesscan beconductedinadvancetoevaluatetheirsuitability.During this stage, the project owner focuses on the contractor’s abilitytomanagethebusinessandoperationalaspectsofthe project.Asaresult,thecontractorcanshifttheirattentionto

the specific technical details of the project only after successfullypassingprequalificationandbeingshortlisted.

In its simplest form, prequalification is a preliminary screening process used to identify the most qualified candidatesfromthoseexpressinginterestinthetender.This process involves evaluating a range of criteria to assess a contractor’s overall suitability. These criteria typically include general qualifications, technical expertise, managerial and financial capabilities, financial stability, operational efficiency, professional competency, relevant constructionexperience,businessscale,andsafetyrecord.

A. Financial Soundness

Since most contractor firms involved in maintenance contracts are selected primarily based on the lowest bid, initialpricingisconsideredahighlyrelevantcriterioninthe selectionprocess.

In addition, evaluating the contractor's credit rating is a crucialstepinassessingtheirfinancialstabilityandoverall financialstanding.

Table 1 Main Criteria and Sub-criteria for Contractors Prequalification

Financialsoundness TenderPricePositiveCreditRating Bankingarrangementsandbonding CashFlow

Technicalability Experience Plant and equipment

Managementcapability

PersonnelQualityassurance

Performanceandconsistencyofthe past Organization and project management Professional workers experience Knowledgemanagement

Healthandsafety Safety Experience modification ratingOSHAIncidentrate

Reputation Past failures Length of time in business Owner/contractor relationshipOtherrelationships

Financial stability and reliability are essential aspects of contractorevaluation.Creditassessmentsprovideinsights into a contractor’s financial strengths and weaknesses, as wellastheircommitmenttofulfillingprojectobligationsand meeting responsibilities toward financial partners and stakeholders.

Additionally,bankreferencesandagreementsarecommonly reviewedasindicatorsofacontractor’sfinancialsoundness. Theseareconsideredcriticalfactorsinfluencingbothproject timelinesandcostmanagement,andtheyplayakeyrolein selectingqualifiedcontractors.

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Cashflowrequirementsarealsoavitalconsiderationduring prequalification. Since most contractor payments are handledincash,maintainingadequatecashflowisessential for effective business operations. A contractor’s ability to meetcontractualobligationsisoftenreflectedintheircash flowcapacity.

B. Technical Ability

Practical fieldexperienceis a critical factorandshould be prioritized when evaluating a contractor. Selecting the lowest bid should not be the owner's sole objective, as experience often contributes more significantly to project success.

Contractor-owned equipment also plays a key role in the selection process. A contractor who owns and maintains theirequipmentisgenerallyconsideredmorereliablethan onewhoreliesonleasedmachinery.Therefore,assessingthe quantity, type, age, condition, and operational status of a contractor’sequipmentisessential.

Qualityassurance encompassesall processes andsystems necessary to instill confidence that the project will meet defined quality standards. A qualified contractor must be capable of consistently monitoring the performance of materials and construction methods, ensuring proper implementationtoachieveprojectobjectives.

C. Management capability

Pastperformanceandprojectefficiencyarekeyindicatorsin assessingacontractor'scapabilityandarestrongpredictors of future project success. Contractors with a proven track record are more likely to have learned from previous challenges, thereby minimizing delays and improving outcomesinfutureprojects.Assuch,contractorsshouldbe requiredtosubmitadetailedlistofcompletedprojectsfor evaluation.

Equallyimportantistheexperienceandqualificationofthe contractor’s professional staff, as this directly affects the qualityofworkdelivered.Theexpertiseofthemanagement team including technical proficiency, communication abilities,riskmanagement,negotiationstrategies,andteam leadershipplays a vital roleinensuringsuccessful project execution.

D. Health And Safety

Safety criteria are an essential component of contractor prequalificationandtypicallyincludetheevaluationofsafety management programs implemented on past projects, as wellastheriskassessmentmethodsemployed.

Onekeyindicatoristhe Experience Modification Rating (EMR), which serves as a benchmark for a contractor’s safety performance. An EMR of 1.0 or lower is generally

requiredtoqualifyforbidding,asitreflectstheeffectiveness ofthecontractor’ssafetypractices.

Another important metric is the OSHA (Occupational Safety and Health Administration) accident rate, which provides historical data on incidents involving workers under the contractor’s supervision. Contractors are also expected to comply with OSHA regulations, including the mandatory reporting of any fatalities within 8 hours and prompt notification of employee injuries or other serious incidents.

E. Reputation

Several factors contribute to the failure of construction projects, including lack of awareness, insufficient funding duetodelayedpayments,andanunskilledworkforce.

Contractor credibility is a critical factor in the prequalification process. The quality of the relationship betweenthecontractorandtheprojectownersignificantly impacts this credibility. Key influencing elements include mutual trust, effective communication, loyalty, and the contractor’s flexibility in fulfilling contractual obligations. Theseaspects,amongothers,arecarefullyconsideredduring the contractor prequalification process to ensure reliable projectdelivery.

5. Project Success Factors (PSFs)

A.

Project Success Factors (Psfs)

Project Success Factors (PSFs) are typically categorized intothefollowingthreekeyareas:

1)Time

Timely project completion is essential to align with the client's strategic plans and intended use of the facility. Clientsoftenprefercontractorswithaprovenabilitytomeet deadlines. Many contracts include incentive clauses to encourage early or on-time completion and to discourage delays. Therefore, contractors are expected to maintain steadyprogressandadherestrictlytotheprojectschedule.

2)Cost

Cost remains a major concern for most clients, who often seek the best value for money. In traditional competitive tendering,thissometimestranslatestoselectingthelowest bid. However, focusing solely on the lowest price can be misleading,asmanyprojectsultimatelyexceedtheirinitial budgets. It is crucial to balance cost considerations with overallprojectvalueandlong-termperformance.

3)Quality

Qualityisdefinedastheextenttowhichaproductorservice meets client needs and expectations. Concerns have been raisedthatrecentprocurementpracticesmaycompromise quality. As a result, quality remains a vital criterion in

International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395-0056

Volume: 12 Issue: 07 | Jul 2025 www.irjet.net p-ISSN: 2395-0072

contractorselection.Toensureprojectsuccess,contractors must demonstrate adequate staffing, consistent budget performance, strong financial management, and a robust qualityassurancesystem

B. Impact of prequalification criteria on project success factors

TheimpactofprequalificationcriteriasonthethreePSFsis referredfrompreviouscasestudiesandliteratureworksas below;

Financial capabilities

Based on several research analyses, financial capability is not always viewed as the most critical prequalification criterion. This is largely because contractors are often providedwithadvancemobilizationpayments,andclients typically ensure that adequate funding is available before awardingaproject.

However,contractorswithstrongfinancialstandingtendto complete substantial portions of work before seeking payment. This approach supports uninterrupted project progress and helps avoid time overruns. Conversely, insufficientfinancialresourcescanlimitacontractor’sability to invest in high-quality equipment, skilled labor, and premium materials factors that are essential for maintainingconstructionqualityandconsistency.

Technical considerations

The professional capabilities of a contractor significantly influenceboththequalityandpaceofconstructionprojects. A contractor with strong technical expertise is better equipped to deliver high-performance results. Research consistentlyshowsthatacontractor’spastexperienceisa reliableindicatoroftheirabilitytomanagesimilarprojects effectively.

Demonstrating involvement in previous, comparable projectsisparticularlyimportant,asitprovidesevidenceof thecontractor’scompetenceandreadinessforthecurrent assignment.Infact,contractorexpertiseisoftenrankedas the top criterion in tender evaluations. Numerous studies confirmthataccumulatedexperiencegreatlyimpactsproject success.

Contractors with experience on similar projects are more adeptatanticipatingandaddressingunforeseenchallenges, thereby reducing the likelihood of delays. This familiarity alsohelpsavoidtherepetitionofpastmistakes.Therefore,a contractor’soverallknowledgeandtrackrecordshouldbe considered a critical factor during the prequalification process one that both clients and consultants should prioritize.

Management considerations

Managementencompasseskeyfunctionssuchasplanning, coordination, leadership, teamwork,andcontrol.Effective planning and monitoring are crucial to the successful execution of any construction project. During the prequalificationstage,contractorsmustdemonstratetheir ability to effectively schedule, manage, and coordinate projectactivities.

Clientsshouldassessacontractor’scapabilitytooverseethe entireprojectlifecycle.Strongmanagementskillspositively influence interactions with clients, suppliers, and subcontractors,contributingtosmootherprojectdelivery. However,despiteitsimportance,managementcapabilityis often given less emphasis than technical expertise and financialstrengthincontractorevaluations.

Health, safety and environmental considerations

Previousstudiesindicatethataccident-andinjury-related costs can account for approximately 8.5% of the total contractvalue.On-siteincidentsnotonlyincreaseexpenses but also delay construction activities, ultimately compromising the quality of the work. Inadequate health andsafetypracticeson-sitecansignificantlyextendproject timelines.

The growing emphasis on sustainability within the construction industry has led to greater consideration of environmental, social, and economic factors. The environmentaldimensionofsustainabilityaddressesissues such as risk mitigation and ecological degradation. Neglecting environmental concerns in favor of short-term human needs can lead to severe consequences, including global warming, land degradation, and ozone depletion. Therefore, a strong understanding of sustainability and environmental performance is essential. These factors shouldberecognizedascritical componentsofcontractor prequalificationcriteriatoensureresponsibleandresilient projectdelivery.

Reputation considerations

Reputationreflectsacontractor’strackrecordofsuccessand the professionalism demonstrated in previous projects. It serves as a valuable indicator for assessing a contractor’s suitability for future work. However, the quality of relationshipsparticularlybetweentheownerandcontractor can significantly influence project outcomes, either positivelyornegatively.

Despiteitsrelevance,evaluatingacontractor’sreputationis often challenging due to its subjective nature. As a result, reputation is frequently given less weight in performance assessmentsandprequalificationrankings.

International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395-0056

Volume: 12 Issue: 07 | Jul 2025 www.irjet.net p-ISSN: 2395-0072

6. Conclusion

Theexpertiseofthedecision-makerplaysacriticalrolein the construction industry, as contractor prequalification heavily depends on informed judgment. Given that prequalificationisacomplex,multi-criteriadecision-making process, selecting capable contractors is essential for ensuringprojectcompletionwithintheplannedbudgetand timeline.

Thisreviewidentifiesfiveprimarycategoriesofcontractor prequalificationcriteria:technicalcapabilities,management competence,financialstability,reputation,andhealth,safety, and environmental (HSE) considerations. The analysis highlights how a contractor's performance across these categories influences key project outcomes namely time, cost,andqualityeachindistinctways.Numerousempirical studies have shown that technical expertise and financial soundness are among the most influential factors in achievingsuccessfulprojectperformance.

The findings of this research can help project owners evaluate and improve their current prequalification processes.Itofferspracticalrecommendationsforenhancing the tender assessment framework and emphasizes the importanceofaligningprequalificationcriteriawithproject objectives. Ultimately, this study enhances both practitioners’andresearchers’understandingofthediverse conditions that affect contractor prequalification and selection.

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