In the construction industry, navigating the bureaucratic processes of prequalification applications and license renewals is crucial for contractors to legally undertake projects. In Alabama, two key processes that contractors must be familiar with are the Alabama Department of Transportation (ALDOT) Prequalification Application and the Alabama General Contractors License Renewal. Here’s an exploration of the differences between the two:
The ALDOT Prequalification Application
A process that contractors must complete to be eligible to bid on state transportation projects. This involves submitting a Confidential Financial Statement and Equipment and Experience Questionnaire. The application assesses the contractor’s financial stability, equipment availability, and relevant experience. It’s a prerequisite for contractors aiming to work on transportation-related construction projects and is specific to the Alabama Department of Transportation.
The Confidential Financial Statement and Equipment and Experience Questionnaire must be submitted no more than 16 months after the date of the financial statements previously submitted (April 30th for calendar year-end entities). This deadline is firm, with no available provision for extension. A contractor will not be issued a bid proposal if the Company’s prequalification application has not been submitted.
The Alabama General Contractors (AGC) License Renewal
A broader requirement that applies to all contractors working in commercial and industrial construction within the state. This annual renewal process ensures that contractors maintain their eligibility to operate legally. It involves updating the licensing board with current financial information, proof of liability insurance, and evidence of continuing education where applicable. The renewal process is not project-specific but is a general requirement for all contractors to continue their practice in Alabama.
License renewals with the AGC operate on a unique schedule. Renewal due dates are based on the first letter of the company’s name published on the AGC website. License renewals may be extended up to 90 days upon written request.
License Requirements Comparison
Both licenses require the financial statements must be prepared by a certified public accountant under generally accepted accounting principles in the United States (US GAAP). ALDOT requires financial statements be audited or reviewed by a certified public accountant. The AGC will accept compiled, reviewed, or audited financial statements or ALDOT Prequalification Application in lieu of its own. Thereby consideration should be given to the time needed to perform these engagements to avoid disruption to operations.
Both also consider different criteria in determining an entity’s eligibility:
- ALDOT regulations state applications with negative net worth will be rejected.
- AGC regulations specify a minimum net worth and working capital requirement of $10,000. If either of the requirements are not met the AGC license renewal application will be rejected.
Additionally, bid limits are determined using different criteria:
- ALDOT bid limits are determined by considering working capital, total assets, and net worth. Determination of an entity’s bid limit may be subject to additional adjustments upon evaluation of the Prequalification Application.
- Bid limits are calculated by the AGC using the lesser of the Company’s net worth and working capital based upon the table below. Additional considerations to increase net worth or working capital one step are also available.
Bid Limit | Minimum Net Worth or Working Capital | Contracts Up To |
|---|---|---|
A | $10,000 | $100,000 |
B | $17,500 | $250,000 |
C | $37,500 | $500,000 |
D | $75,000 | $1,000,000 |
E | $200,000 | $3,000,000 |
U | > $300,000 | Unlimited |
Other financials elements can impact these limits. Given the unique nature of these criteria we advise discussing these options with your certified public accountant.
Understanding these differences is essential for contractors to ensure compliance with state regulations and to secure and maintain the ability to bid on and execute construction projects in Alabama. Failure to comply with application regulations can result in the inability to secure new contracts or the suspension of ongoing operations. It’s imperative for businesses to stay informed and proactive in managing their license renewals.
Kirsten Sokom, CPA
Principal
Audit services for construction, manufacturing, and distribution companies; engagement quality control and best practices.
