Third-party due diligence for contractors: a practical starting point

Clients increasingly expect contractors to know who works on their behalf. Subcontractors, agents and suppliers can all represent your company, so checking them is now a normal part of winning and keeping work. The aim is a process proportionate to the risk, not a file on every vendor.

Why it matters to your clients

When a subcontractor acts on a project, the client sees your company. A client reviewing your pre-qualification file may ask how you select and monitor the businesses you rely on, and a simple documented process gives a clear answer.

Start by sorting your third parties

Treat third parties according to what they do for you, not their size. Someone who deals with officials or clients on your behalf deserves a closer look than a supplier of office stationery.

• Higher attention: agents, intermediaries, and anyone who represents you to clients or public bodies
• Medium attention: subcontractors on site and suppliers of critical materials
• Lower attention: routine suppliers of low-value goods and services

What a basic check covers

• Who owns and controls the company
• Whether its registration and licences are valid for the work
• Whether it has its own conduct policies
• Any links to your employees, which should go through your conflict of interest process
• Public information that raises questions and deserves a follow-up conversation

Questions to ask a new third party

• Who are your owners and directors?
• Do you deal with public bodies or officials on this type of work?
• Do you use subcontractors or agents of your own?
• Do you have a code of conduct or an equivalent policy?
• Is anyone in your company related to one of our employees?

When something needs a closer look

A question raised by a check is not a finding against anyone. Common examples are unclear ownership, a request to pay an unrelated account, or fees that seem high for the service. Ask for an explanation, record the answer, and escalate if it is still unclear. These conversations are easier before you sign or pay.

Build it into procurement

Due diligence works best when it sits inside the steps people already follow. Add it to vendor onboarding, so that no new supplier is approved without it. Include your conduct expectations in contracts, and agree what happens if something changes.

A simple process for a small team

• A short onboarding form completed by each new third party
• An attention level assigned by procurement
• Checks matched to that level
• Approval from someone outside the buying team for higher-attention parties
• A review date set in the vendor record

Keep the record, and revisit it

A short record of what was checked, who reviewed it and what was decided is usually enough. Revisit it on a set cycle, more often for higher-attention parties, and whenever ownership or the scope of work changes.

Clear ownership matters too. Procurement can run the checks, but someone should be accountable for the decision and for following up any actions.

This article is general information and is not legal advice.