Prequalification financial level refers to a contractor’s financial stability, solvency, and capacity to manage cash flow requirements throughout a nominal contract period of 12 months assuming a relatively even spread of cash flow over that period. Financial levels are identified by the letter ‘F’ (F0.25, F1, F2, F5, F10, F15, F20, F25, F50, F75, F100, F150 and F150 PLUS) and are summarised in the table below.

Three new Financial Levels (F15, F20 and F75) were added in 2011 as a result of feedback from Participating Authorities and contractors. The Austroads National Prequalification System Management Committee made the new levels effective as of 1 July 2011. The purpose of new levels was to bridge the gap between levels F10 and F25, and F50 and F100.

Financial level

Maximum values


$250 000


$1 million


$2 million


$5 million


$10 million


$15 million


$20 million


$25 million


$50 million


$75 million


$100 million


$150 million



* These financial levels are optional and may not be used in every jurisdiction.

Assessment methodology

Preliminary contract capacity

  • The preliminary contract capacity is assessed as five times the assessed working capital. This is based on the core working capital determined from the entity's balance sheet (current assets less current liabilities).
  • Satisfactory evidence of the collectability of related entity loans should be provided.

Application of additional risk overlays that may potentially reduce the assessed contract capacity limit

  • Limit the preliminary contract capacity to be no greater than 12.5 times net tangible assets.
  • Application of key financial indicators as minimum requirements for prequalification: Quick Ratio of 0.8 or greater.

Qualitative adjustment

In assessing the qualitative adjustment, assessors will be required to refer to detailed guidelines.

Based on the assessing consultant's experience, a comprehensive qualitative assessment may influence a further upward or downward adjustment after calculation of the preliminary contract capacity and the application of the risk overlays.

The qualitative adjustment will consider matters such as:

  1. Governance, including details of accounting policies and controls, budget preparation processes, risk management practices, internal financial skills and qualifications, internal financial management reporting and review processes
  2. Application of Accounting Standards
  3. Age of business, management experience, balance sheet management, etc
  4. Aging of debtors and creditors as at the latest reporting date
  5. Value, number and nature of registered charges
  6. Age of banking relationship
  7. Value and number of current contracts in progress, and the nature of each client
  8. Budgets and cashflow projections
  9. Consideration of the Debt-to-Equity Ratio.  If better or worse than a benchmark of 60/40
  10. The revenue or average of previous three years, whichever is the greater
  11. Consideration of recent profit (after income tax) performance over the past three years
  12. Management Accounts vs. Compilation Statement vs. Audited Financial Statements
  13. Audit qualifications
  14. Extent of adoption of accounting standards and their transparency
  15. Details gleaned from credit reports, credit references from suppliers and subcontractors and other publicly available information
  16. Availability of credit lines or demonstrated capacity to obtain additional debt or equity.
    1. Availability of credit lines may be determined by a reasonably conclusive means by way of:
      1. existing undrawn credit lines which should be evidenced by way of a facility approval letter
      2. proposed or committed credit lines which should be evidenced by way of an unconditional (or reasonable limited conditions) indication that a loan would be provided if applied for.
    2. Alternatively, capacity to borrow may be considered based on:
      1. availability of funds in a related entity and assessment of the likely availability of those funds to support the entity being assessed
      2. the consultant's assessed strength of the balance sheet and trading history and an indication from the entity that they would be willing to borrow to meet working capital requirements, in need.
    3. For smaller entities, capacity to obtain additional equity will require assessment of the shareholders' or directors' capacity to contribute funds following their indication of a willingness to do so.
    4. For larger entities, direct input from the entity concerned in relation to any proposed new equity would need to be assessed.
    5. In each of the above cases, the effect of the new/ increased debt or equity on the financial standing of the entity would need to be considered.
  17. Upward adjustments to the preliminary contract capacity, while not limited, must be flagged with an asterisk when the adjustment is more than one level.  For example, if contractor is assessed at F5 after the preliminary assessment and overlays, it may be adjusted to an F10* or F25* etc.
  18. Downward adjustment to the preliminary maximum contract limit calculation are not limited and may decline to zero where unfavourable assessments prevail.

The result-an assessed contract capacity

The assessed contract capacity is the recommended Financial Level, and reflects the maximum additional aggregate contract cash flow commitment over a 12-month period, assuming a relatively even spread of cash flow over that period.