Many supply chains, from local Government work through to Major Projects like Gas or Mining need to ensure the Contractors and Suppliers they engage have the capability to supply the services or products in-line with the job or contract requirements. The more you can prove to the buyers you have the capability then the more chance you have of winning the work.
Capability is more than just being able to physically do the work or supply a product, it means much more than that. When a business is capable to do the work, it means that the business is well structured, has competent well trained people, has good management systems in place, knows what they are good at and what their limitations are, has suitable insurances and financial controls and has the capacity and capability to complete the work to a high standard and on time.
It takes work and expertise to build your capability to a level acceptable to the major supply chains, and it makes sense. The bigger the supply chain or project the stronger your capability needs to be.