Our strategy team has recently prepared an insight paper looking at supplier verification in the construction industry. The paper outlines the different approaches adopted by construction companies such as mandated use of a third party accreditor, in-house verification and hybrid models and assesses potential market headroom for third party accreditors. The paper is based on c.25 interviews with leading contractors and end purchasers and sets out their views on future trends including the drive to harmonise the pre-qualification process.

1. Supplier verification –
managing risk in the UK
construction supply chain
August 2018

2. 2

3. © 2018 Grant Thornton UK LLP. Confidential and for
information only.
Supplier verification in UK construction | August 2018
The UK construction industry is dominated by a small number of Tier 1 contractors
which between them account for around three quarters of industry revenues. Much of
their work is subcontracted out to Tier 2 subcontractors, many of whom then further
sub-contract to smaller Tier 3 firms that are often specialised in a particular niche
trade.
In the context of reputational risk, regulatory requirements and tight industry
profitability, Tier 1 contractors and their end-clients (especially public sector) need to
verify that their subcontractors are financially robust, appropriately insured, and able
to meet minimum standards around quality and health and safety.
In this paper we examine the approach taken by Tier 1 contractors and public sector
organisations to supply chain verification, their use of third party accreditation
providers and the prospects of standardising the pre-qualification process.
Our work is based on c.25 interviews including Tier 1 contractors, Tier 2 contractors,
NHS Trusts, local authorities and housing associations.
Introduction
3

4. © 2018 Grant Thornton UK LLP. Confidential and for
information only.
Supplier verification in UK construction | August 2018
Tier 1 contractors adopt different
approaches to supplier verification
4
Margin and regulatory pressures have led main
contractors to increasingly focus on verifying that their
supply chains meet minimum requirements to avoid the
potential for fines, cost of rework if initial works
completed are of substandard quality, and potential for
loss through supplier bankruptcy.
Supplier verification is typically completed in two
stages:
• Stage 1: ensuring that subcontractors meet
minimum required standards to work with the
company. This is normally based on the criteria
established by the Government’s PAS91 framework
which covers financial robustness, insurance,
business and professional standing, as well as
health and safety and quality. Tier 1 contractors
adopt a range of approaches to assessing this
including in-house verification (typically based on an
internal Pre-Qualification Questionnaire (“PQQ”)) as
well as outsourcing to a third party supplier such as
Achilles, CHAS or Constructionline. In addition, a
number of public sector bodies, particularly NHS
Trusts, will utilise national frameworks such as
Procure21+ to choose pre-approved contractors
which have already had these requirements
assessed
• Stage 2: assessment against project specific
requirements. This is normally completed by an in-
depth project specific PQQ and builds from the stage
1 assessment
Stage 1: supplier verification models
“We split the supplier verification process into two
stages. In the first instance, we verify that the
supplier meets minimum standards around financial
history, criminal checks and indemnity insurances.
This is largely a hygiene factor. For the second
stage, we undertake a robust assessment of whether
they are right for a specific project. The level of detail
will depend on how high risk the project is.”
– Tier 1 contractor
“We utilise [third party accreditation provider] to
assess our contractor base in phase 1. The
subcontractor is required to upload supporting
documentation to a portal and [third party
accreditation provider] then verifies this is accurate.
Notifications will be sent out if insurances etc are up
for renewal. We have access to a database of
approved suppliers though our accreditation provider.
We mandate that all suppliers are accredited on the
system although there may be rare exceptions for 1
and 2 man bands.” – Tier 1 contractor
In-house supplier verification
• Managed through in-house
PQQ
• Have internal teams to check
that information provided by
subcontractors is accurate
• Cost of verification lies with
main contractor
Outsourced to third party
• Outsource supplier verification
to third party and mandate that
all sub-contractors are verified
by that provider
• Cost of accreditation lies
with subcontractor
Hybrid
• Subcontractors required to
upload essential information to
a free-to-use third party
database (eg Builders Profile)
• Main contractor verifies
information is accurate
• Cost of verification lies with
main contractor
Tier 1 contractors using third party supplier verification
tools will typically only mandate that their direct
subcontractors (Tier 2) have the required accreditation.
However, some contractors are beginning to mandate
that any subcontractors used by their direct
subcontractors also fulfil the same accreditation
requirements. Sub-contractors that work with more than
one Tier 1 contractor may have the burden of needing
to complete multiple PQQ processes.

5. © 2018 Grant Thornton UK LLP. Confidential and for
information only.
Supplier verification in UK construction | August 2018
In user numbers, the third party supplier accreditation
market is principally served by three providers: Achilles,
Builders Profile and Constructionline. In addition,
CHAS is expanding its services to enter the market,
from its origins as a SSIP health and safety accreditor.
Constructionline has historically focussed on providing
online only audits but has recently launched on-site
audits to expand its offering. Conversely, Achilles has
largely focused on on-site audits for higher risk
situations but has now launched a lower-priced online
accreditation product. Achilles does not have live
document functionality; as such its audit only verifies
that documents are valid at the point of review. By
contrast, Builders Profile acts purely as a portal for
subcontractors to upload documents, with all verification
performed by the Tier 1 themselves.
In addition to the above, there are c.25 bodies
registered with UCAS to provide SSIP accreditation
including Bureau Veritas and Intertek.
Top 10 tier 1 contractors – supplier
accreditation model
Constructionline, Achilles, and
Builders Profile are the main third
party providers of accreditation
5
Constructionline
Achilles
Builders Profile30%
20%
50%
Name
Document
portal
Online
audit
Onsite
audit
Live
documents
Comments
Constructionline
(Owned by
Warburg Pincus
PE)
✔ ✔ ✔ ✔ • Reportedly works with c.46,000 suppliers and 4,000 buyers
• Tiered pricing: c.£120 for its most basic non-audited package, c.£550 for standard
desktop package, £1,000 for desktop audit plus health and safety and c.£2,300 for
onsite audit
• Won contract to administer the RISQS rail supplier qualifications scheme in 2018
from Achilles
Achilles
(Owned by HG
Capital)
✔ ✔ ✔ • Works across the construction, automotive, chemicals, consumer goods, facilities
management, industrial, mining, oil and gas sectors
• c.2,000 suppliers (on full site audits) and 30+ buyers in construction
• Primarily focused on full on-site audits but recently launched desktop audit services
• Often required for subcontractors operating in high risk areas
• Online only audit costs c.£650 whilst a two day on site audit costs c.£3,500
Builders Profile
(Owned by
Management)
✔ ✔ • Builders Profile operates an online portal that subcontractors upload documents
such as insurances which are subsequently verified internally by the buyer
• Reports to work with c.30,000 subcontractors
• The basic package is free but subcontractors are charged c.£295 to appear in
project lists requested by buyers
CHAS
(Owned by
London Borough
of Merton)
(✔) (✔) (✔) • CHAS is primarily focused on verifying SSIP health and safety accreditation
• Currently branching out into other PAS91 areas with full launch expected in 2018
30%In-house
70%
Third party
accreditor
Source: Company websites
* Tier 1 contractors may use more than one third party
accreditor

6. © 2018 Grant Thornton UK LLP. Confidential and for
information only.
Supplier verification in UK construction | August 2018
Total # businesses that could be required to go through a PQQ process (2017, 000s)
Existing penetration of third party verification providers by volume of firms (000s)
We estimate market headroom for
third party accreditation providers of
c.54,000 firms
6
104
320
Total addressable
market
129
0-4 employees
> 10 employees
88
57
28
19
28
19
5-9 employees
274
Total construction firms 90% of construction
installation, and finishing
firms (0-4 employees)
100% of general
building firms with
0-4 employees
0-10
87
Potential to use
Currently using
1
17
16
53
34
10+
54
50
104
From our research, we estimate that there are currently
c.50,000 construction firms subscribing to third party
accreditation verification providers. The leading three
each claim to have c.30,000+ subscribers and our
research suggests that > 50% of these are on more
than one platform. Our research further suggests that
95% of the 10+ employee firms are already on a
platform. The remainder must comprise firms with <10
6
Source: ONS
ONS data suggests that there are c.320,000 firms in the
construction industry, the vast majority of which are
small firms with less than 4 employees. Many of these
small firms will be focussed on the consumer household
sector, and / or be reluctant to incur much cost with
respect to accreditation
As already shown earlier in this paper, the total number
of construction businesses with 10 employees only
represents 4% of the total. Our interviews suggest that
Employee size segment
Total
all small (<5 employee) general building firms and the
majority of small installation/finishing firms are either
focused on domestic build/repair markets or work under
a Tier 2 contractor, and as such do not tend to work
with Tier 1 contractors. Allowing for this suggests a
maximum pool of c.104,000 businesses that could need
to go through a PQQ process with a Tier 1 contractor.
employees. Given our estimate above of a total
addressable market of 104,000 construction firms, this
implies around half of businesses working with Tier 1
contractors are already using a verification provider;
many that do not are small – and some may only use a
provider as and when required for specific jobs

7. © 2018 Grant Thornton UK LLP. Confidential and for
information only.
Supplier verification in UK construction | August 2018
The industry is working to standardise
PQQ processes but change is slow
7
Despite the existence of third party accreditation
providers, there is some frustration amongst Tier 2 and
Tier 3 contractors about the current pre-qualification
process which often involves them having to submit the
same information for each piece of work they pitch for
or main contractor they onboard with. This can be
highly time consuming and subcontractors also note
frustration that they are often need to be accredited by
multiple third parties to work with different main
contractors.
The cost of accreditation with third parties in not
normally prohibitive for larger Tier 2 subcontractors but
can be a burden for smaller companies.
Main contractors are typically sympathetic towards their
subcontractors and do not want to burden them with
duplicative and onerous pre-qualification processes
given the view that this could restrict the available pool
of subcontractors, ultimately driving up their own costs
and placing further pressure on margins. However,
main contractors note that they must robustly assess
their supplier base as the cost of a subcontractor going
bankrupt, or losses resulting from a subcontractor
without the correct certifications, can also have a
significant impact on their already tight margins.
Build UK, an industry body established to deliver
change to the supply chain, is attempting to lead a
programme to harmonise the pre-qualification process.
The programme has widespread industry support with
leading Tier 1 contractors working together on a
steering committee. The idea is to agree a
standardised set of questions and levels of acceptable
responses. The scheme will be accredited by third
party assessment providers but will remove the need for
multiple accreditations. However, whilst the project has
made progress, a number of sizeable obstacles remain
and there are mixed views within the industry about
how successful the project will be, and when it will be
ready to roll out.
“We do want to modernise the industry and recognise
that the current pre-qualification processes are time
consuming for our subcontractors. I’ve been actively
involved in the Build UK steering committee. We have
made good progress and have essentially agreed a
set of standardised questions and are now working on
standardised responses. It has been a bit slow but
hopefully is getting there as it is important to try and
harmonise the processes.” – Tier 1 contractor
“To be honest, I am not confident that Build UK will be
successful in standardising pre-qualification. There
are lots of different opinions and so it is at least 3 or 4
years away.” – Tier 1 contractor

8. © 2018 Grant Thornton UK LLP. Confidential and for
information only.
Supplier verification in UK construction | August 2018
The construction industry recognises the importance of ensuring that all
subcontractors meet minimum standards around quality and health and safety, as
well as being financially robust with appropriate insurances in place.
Supplier verification processes have developed organically within individual Tier 1
contractors and as such frequently differ, with some preferring in-house verification
and others using one or more third party accreditors.
Our research suggests that most large (>10 employee) subcontractors already have
some form of accreditation (sometimes more than one) but that smaller firms
(typically Tier 3) may still need to get accredited as and when their main contractor
client requires it. We estimate that there are just over 100,000 companies that could
require accreditation of which just over half are already penetrated. This penetration
is likely to grow as the major Tier 1 contractors are expected by their clients to have
carried out some diligence on their subcontractor base. On the other hand, the
duplication of pre-qualification processes places a burden on subcontractors both in
terms of time completing PQQs and the cost of being accredited by multiple
companies.
The industry recognises the impact that current pre-qualification processes are
having and is working towards a standardised approach. However, this appears to be
at a relatively early stage, and as such is unlikely to be achieved in the short-term.
Conclusion
8

9. © 2018 Grant Thornton UK LLP. Confidential and for
information only.
Supplier verification in UK construction | August 2018
Contacts
Ven Balakrishnan
Partner | Strategy Group
T +44 (0)20 7865 2695
E ven.balakrishnan@uk.gt.com
Richard Parkin
Associate Director | Strategy Group
T +44 (0)207 865 2164
E Richard.m.parkin@uk.gt.com
Greg Smith
Manager | Strategy Group
T +44 (0)20 7865 2439
E greg.smith@uk.gt.com
Tom Eskell
Manager | Strategy Group
T +44 (0)207 728 2598
E tom.eskell@uk.gt.com
9

10. © 2017 Grant Thornton UK LLP. Confidential and for information only.
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and
advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant
Thornton UK LLP is a member firm of Grant Thornton International Ltd (GTIL).GTIL and the member firms are
not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by
the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and
do not obligate, one another and are not liable for one another’s acts or omissions. This proposal is made by
Grant Thornton UK LLP and is in all respects subject to the negotiation, agreement and signing of a specific
contract/letter of engagement. The client names quoted within this proposal are disclosed on a confidential
basis. All information in this proposal is released strictly for the purpose of this process and must not be
disclosed to any other parties without express consent from Grant Thornton UK LLP.
grantthornton.co.uk
2018