Eight construction companies fail in Australia every day. Many of them are on government procurement panels when they collapse — leaving councils with abandoned projects, budget blowouts, and communities asking:
“Why was this company on the approved supplier list?”
In 2023, Lloyd Group — a construction company with $276 million in revenue — became another statistic, collapsing into administration and leaving New South Wales and Victorian councils scrambling to find replacement contractors.
The collapse highlighted an uncomfortable truth: panel membership tells you very little about a supplier’s current financial viability.
Across Australia, councils rely on procurement panels like Local Buy (Queensland), WALGA’s Preferred Supplier Program (WA), LGP (NSW), and MAV Procurement (Victoria) to streamline purchasing and reduce risk. These panels collectively serve hundreds of councils and thousands of suppliers, and for many procurement officers, being on the panel is seen as proof a supplier is safe to engage.
But that’s not what panel membership actually means. Most panels explicitly state in their terms and conditions that councils remain responsible for verifying supplier financial viability. The problem is that buyers either don’t realise this or don’t understand what it means for their own due diligence obligations.
Part of the challenge is how procurement panels present themselves to buyers, using language like:
While these organisations play an invaluable role in procurement for member councils, based on the quotes above, you could be forgiven for thinking that they handle the entire due diligence process.
Most panels do not and cannot verify that “pre-qualified” suppliers are:
In other words: panel membership is a starting point, not a substitute for your own due diligence.
The problem is that this isn’t always mentioned as clearly as we think it should be.
CreditSource is listed as a “pre-qualified” supplier on multiple government procurement panels across Australia. We assess other companies’ financial viability for a living.
In joining these panels, we have never once been asked to provide financial statements, balance sheet information, or cash flow analysis.
Think about that. We could theoretically be trading insolvent, moments away from collapse, and still remain “prequalified” on panels where councils rely on our status as implicit endorsement.
That’s not a criticism of panels, simply an acknowledgement that “pre-qualification” typically means a credit check, insurance verification, or self-declaration. Not a comprehensive financial analysis.
And if councils don’t know this, they’re making procurement decisions based on a false sense of security.
Panels can’t ensure ongoing financial viability. That’s not their role, and it’s not realistic to expect them to. Panels do valuable work screening suppliers at admission, but that screening has inherent limitations:
By the time “assessment” is complete and the supplier is admitted, that snapshot is already outdated. In a landscape where an average of eight Australian construction companies collapse every day, financial positions can deteriorate rapidly between admission and engagement.
Even if panels had comprehensive financial information at admission (most don’t), they still lack the context to assess financial viability for your specific project.
A supplier might have adequate resources for a $200,000 project but insufficient capacity for a $2 million project. The relevant questions:
Panels can’t answer these questions at admission because they don’t know:
A supplier with comfortable capacity in March might be overextended by September after winning several large contracts. This is an inherent limitation of any point-in-time assessment.
Panel membership creates an implied endorsement, whether you intend it or not.
When your website says “rigorously prequalified suppliers” or “much of the due diligence has already been undertaken,” your members take that at face value. They assume these suppliers are safe.
We get calls from panel operators dealing with this all the time. A member reports that a listed supplier has gone bankrupt, or there’s been dodgy dealings, or a project’s gone sideways. The member wants to know: why is this company still on your preferred supplier list?
When a panel supplier fails, councils won’t blame themselves for not doing enough due diligence. They blame you for having that supplier on the panel in the first place.
These incidents chip away at your members’ trust, even when you haven’t done anything wrong.
Panel operators have two choices: strengthen processes to match buyer expectations, or aggressively clarify limitations so expectations align with reality.
Tell members what your supplier pre-qualification process checks and what it doesn’t. Make this information easy to find. Most panels are guilty of overemphasising the benefits and downplaying the due diligence limitations.
We talk to councils daily who believe panel membership means the financial vetting is done. And if you’re not making that crystal clear, your members won’t do the checks they need to do.
The result? Councils don’t do financial checks because they assume you’ve already done them. Then a supplier fails halfway through a project and everyone’s asking why nobody caught it.
If it’s important to you that you only admit financially robust suppliers, conduct your own pre-screening financial risk assessments at onboarding. More and more panels are taking this approach. It doesn’t replace the need for councils to do their own supplier risk assessments, but it does ensure that the suppliers you endorse are financially viable at the time of admission.
Set up periodic financial assessments or credit monitoring that flags payment defaults, court judgments, and adverse events. This prevents the quality of suppliers on the panel from decaying over time.
We specialise in supplier financial risk assessments. We analyse a supplier’s financials, including year-on-year trends and competitor benchmarks, to provide a forward-looking view of supplier viability.
Unlike credit reports, which only identify problems after the fact, we help you understand a supplier’s risk profile based on where they’re heading, not just where they’ve been.
Panels play an important part in procurement, but assessing whether a supplier can successfully deliver your specific project isn’t one of them. That’s where we come in.
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