Tense?

Your sentence is like indirect discourse, in which what is said is reported rather than quoted.  For example:

Direct discourse:  Members had said, "We are prepared to impose testing."

Indirect discourse:  Members had said that they were prepared to impose testing.

If the verb in the main clause is in the present tense, the verb in the indirect discourse has its natural tense.  But if the main verb is in the past or past perfect tense, the indirect discourse verb is in the past tense.  I quote the following from Paul Roberts' Understanding Grammar.

In indirect discourse we use natural sequence of tenses, and so also in indirect discourse when the verb of the main clasue is in the present tense:

Barnwell says he was ill.
Barnwell says he is ill.
Barnwell says he will be ill.
Barnwell says he has been ill.

But when the verb of the main clause is in the past tense or the past perfect tense, the verb of  the subordinate clasue is attracted into the past, even though the notional time is present or future:

Barwell said he was ill. (He may still be.)
Barwell said he would be ill. (He will be)
Barnwell said he had been ill. (He has been.)

In your sentence, had made it clear acts like had said, and were prepared is "attracted into the past." This convention is an imperfect compromise.  In direct discourse ("We are prepared to impose testing.") the present tense works.  But if the main clause is in the past or past perfect, the present tense in the subordinate clause would be confusing:

*Members had said that they are prepared to impose testing.*

They are prepared now or were prepared then?

The verb is question is some form of to be.  Prepared is not part of the verb; it is a past participle used as an adjective.  It's like:

Members of Congress are energetic.

 versus

Members of Congress were energetic.

It's not the passive voice.

Hello StephanLai

As RVW said, you had better understand that the "be prepared to" is an adjectival predicate to mean "have already prepared to".  

English still retains a few relics of the old perfective construct of the form <be V-ed> where V is an intransitive verb. This construct was relatively often used to express the perfect tense up to 18 century. I call this construct as "be perfect" against normal "have perfect". You can see some examples of "be perfect".  

The winter has gone. "The winter is gone".
All the leaves have fallen.  "All the leaves are fallen".
The sun has risen.  "The sun is risen".
My son has grown up. "My son is grown up".
My father has retired. "My father is retired".
She has arrived in Israel.  "She is arrived in Israel".
She has married. "She is married".

As you can see, <is V-ed> is an expression to emphasize subject's current state resulting from the intransitive action that the subject has done in the past, namely <has V-ed>. So your "they were prepared to impose …" is almost the same as "they had prepared to impose …"

paco

Please excuse my curiosity. Is "She is arrived in Israel" an acceptable construct?