Contractor rating systems, also known as contractor prequalifications, are one of the larger cost-saving practices available and more routinely applied by governmental organizations as a means of avoiding the high cost and inflated pricing that results from reduced competition on public work by using
bonding and
surety
In finance, a surety , surety bond or guaranty involves a promise by one party to assume responsibility for the debt obligation of a borrower if that borrower defaults. Usually, a surety bond or surety is a promise by a surety or guarantor to pay ...
to guarantee performance of public work.
Years ago,
public purchasing officials began applying prequalification and short-listing of pre-selected contractors for bidding on public
procurement
Procurement is the method of discovering and agreeing to terms and purchasing goods, Service (economics), services, or other works from an external source, often with the use of a tendering or competitive bidding process. When a government agenc ...
contracts. A
subjective process is in many places the exclusive means of getting on a
bidders list for public contract work.
These ratings and processes now make the whole issue of bonding and surety, (that has been around since the late 19th century to guarantee of performance and paying large
premiums), obsolete and redundant since the public officials have already reduced risks and are paying premiums associated with reducing competition by using the prequalification process and rating systems.
{{DEFAULTSORT:Contractor Ratings
Construction