Understanding the Contractor Score
The Contractor Score focuses on immediate financial health and liquidity. Every calculation is rooted in objective data. Quarterly updates are recommended.
Inputs for the Score:
- The contractor’s latest audited or reviewed fiscal year financial statement.
- The most recent fiscal quarter’s financial statements (even if internally generated).
- Externally declared credit lines from bank statements.
- Matching backlog and work-in-process statements for both the fiscal year and quarter.
0 – 350 (Weak): This score indicates potential liquidity and profitability issues. Such contractors might have limited or no access to external credit lines and operate with minimal margin for error.
350 – 650 (Fair): Contractors in this bracket have better resources compared to those rated as ‘Weak’. However, they could face challenges if confronted with a series of unforeseen issues.
650 – 1000 (Good): A ‘Good’ score suggests contractors have sufficient resources to navigate financial and manpower challenges in their current projects. Their risk profile is generally within standard expectations for project completion.
Over 1000 (Excellent): These are the industry frontrunners. They typically have substantial external credit access, superior operating metrics, and often adopt conservative financial policies. While they have the potential for higher returns, they might opt for smaller, more guaranteed returns. For clients, working with such contractors often means benefiting from a shared project risk approach.
In essence, a higher Contractor Score indicates reduced likelihood of default or significant project failures. However, it’s important to note that these scores can change rapidly, and even a high score doesn’t immune a contractor from potential challenges.
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