Why Panel Pre-Qualification Is Not Financial Due Diligence (And It Was Never Meant To Be)

We talk to councils all the time about supplier financial risk. At least once a week, we hear some version of this:

“We don’t really need supplier risk assessments, we only use suppliers from Local Buy.”

Or WALGA. Or LGP. Or whichever panel serves their region.

Most panels go to great lengths to stress that this is not accurate. And that councils have clear obligations to undertake their own financial due diligence. That treating panels as the sole safeguard against supplier insolvency is inaccurate and creates unrealistic expectations.

But for one reason or another, an uncomfortable number of councils still believe procurement panels manage their supplier financial risk on their behalf.

Panel pre-qualification and financial due diligence are two entirely different things. And understanding that distinction matters.

What do panels actually do?

Panels like Local Buy, WALGA, LGP and MAV Procurement exist to make procurement more efficient.

Running a tender is expensive and time-consuming. Panels centralise that work so councils don’t have to repeat it for every purchase. They confirm suppliers have the right insurances, relevant licences and meet the criteria for the category they’re listed in.

They save councils time, money and a lot of back and forth.

But panel representatives are the first to tell you that assessing a supplier’s financial capacity to deliver a given project, at this point in time, for a specific contract value, sits outside their scope.

Why don’t panels do financial due diligence?

A few reasons.

• Financial positions change constantly
  A supplier who was healthy when they joined the panel might be stretched thin six months later after winning a few big contracts. No point-in-time assessment can account for what happens after that snapshot.
  
• Financial capacity is project-specific
  A supplier might be fine for a $200,000 job but dangerously overcommitted on a $2 million project. Panels don’t know what contract you’re about to award. They can’t assess fit for something they don’t know about.
  
• Work in progress is invisible at admission
  What other contracts has this supplier taken on since joining the panel? How much capacity do they actually have left? Panels have no way of knowing.

This is why panel terms and conditions consistently say the same thing: councils remain responsible for their own due diligence, including financial viability.

We know this because we’re on these panels

CreditSource is listed as a pre-qualified supplier on multiple government procurement panels across Australia.

We assess supplier financial viability for a living.

And in joining these panels, we’ve never been asked to provide financial statements. Sure, we provided insurance certificates, ABN verification, capability statements. But nothing that would allow anyone to determine our financial position.

That’s not a criticism. Just as your optometrist doesn’t ask your shoe size, panels simply request the information they need to deliver on their part of the bargain.

So what should councils actually be asking?

If you’re procuring from a panel, you’re starting in a good place. The compliance and capability checks have been done.

But for any contract where supplier failure would cause material problems, you still need to answer these questions:

• Does this supplier have the working capital to deliver this project?
• Can they manage cash flow over this timeframe?
• Are they already overcommitted elsewhere?
• Are there warning signs in their recent financial performance?

These questions require current financial information, context about your specific project, and analysis of where the supplier is heading.

That’s where we fit in

We do supplier financial risk assessments for councils and government agencies across Australia.

Our job is to give you a forward-looking view of a supplier’s financial trajectory. We analyse actual financial statements to help you understand whether a supplier is likely to be around for the duration of your project:

• Year-on-year trends
• Revenue, profitability and liquidity
• Working capital and cash flow
• How they compare to others in their industry
• Warning signs that might not be obvious from their credit history

We hold verified financials on over 50,000 private Australian and New Zealand companies. When you request an assessment, one of our analysts reviews the data and writes a report with specific risk mitigation recommendations. Not just a score or a rating. Practical guidance on what to watch for and how to structure your engagement if you decide to proceed.

Councils use us when they’re:

• Assessing suppliers for major procurements
• Verifying a local or smaller supplier has the capacity for a bigger contract
• Comparing the financial health of shortlisted tenderers

Where the panel’s job is to ensure compliance and capability, our job is to help you avoid supplier collapse.

The bottom line

Panels do important work. They reduce costs, ensure compliance and give councils access to capable suppliers.

But there’s still a perception among many council procurement teams that panel membership takes care of their financial due diligence requirements.

It doesn’t. That’s a different job. And it’s where we come in.