What type of construction project are you working on? This is an important question for a whole host of construction payment-related issues. In fact, determining the project type is an essential question that is asked of you every time you enter a new project.
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Don’t Bother With Building Types
For many folks in the construction industry, the “type” of construction project refers to the actual facility being constructed. Their different construction types, therefore, are simply:
- Residential building construction
- Industrial construction
- Commercial building construction
- Heavy civil construction
Why the building type doesn’t matter
Breaking down construction projects by the type of facility is a good reference, but it’s not the most helpful framework. Instead, it’s much more important to categorize construction projects based on who owns it. Why? Because that’s what state and federal laws care about when it comes to protecting your right to get paid.
Laws aren’t concerned with the facility you’re working on, and whether it’s industrial or heavy civil. Instead, they set requirements based on who owns the project. Just look at prompt payment laws, mechanics lien and bond claim rights, and pretty much any other law that affects your right to payment on a job.
Types of Construction Projects: Look at the owner
Broadly speaking, you can separate construction project types into 3 categories:
- Private construction
- State construction
- Federal construction
1. Private Construction Projects
The first type of construction project is the Private Construction Project. Put simply, private projects are projects of every type that are owned, controlled or commissioned by a private party. Private parties include individuals, homeowners, corporations, other business entities, non-profit associations, privately funded schools, hospitals, publicly traded companies, etc. Anything, in other words, that is not the government.
Private construction projects come in all different shapes and sizes, and this is when it’s useful to look at the character of the work performed to segment private construction into different subcategories. These subcategories would include:
Whenever construction work is being performed to a single-family residence or a residential facility with (usually) less than 3 or 4 units. If you are working on an apartment complex this would more likely be considered a commercial project instead of a residential project. Similarly, if you are working at a condominium, the work would be residential if upon a single unit, but if on the entire complex or the common elements, the work would more likely be considered commercial.
Commercial construction is the construction of any buildings or similar structures for commercial purposes. Commercial construction includes a huge variety of projects including building restaurants, grocery stores, skyscrapers, shopping centers, sports facilities, hospitals, private schools and universities, etc.
This is a relatively small segment of the construction industry. These projects include power plants, manufacturing plants, solar wind farms, refineries, etc. While termed “industrial construction,” it is pretty interchangeable with “commercial construction.”
2. State Construction Projects
Some people get confused by the term “state” when talking about state construction projects because the term “state” can refer to projects commissioned by a county, city, municipality, government board, public school board or any other state-funded entity. The term “state construction” means, therefore, any government-funded construction that is not “federal” – which is discussed in the next section.
State construction projects can take a variety of forms.
They can be pretty traditional projects like the construction of a public school or government building (like a court room). These projects can also be pretty sophisticated, such as the construction of a bridge, sewer line, highways, etc.
3. Federal Construction Projects
Federal construction projects are very similar to state projects. Just like state projects they can take on a variety of forms: very simple and traditional, and very complex. And the stuff being constructed can be pretty similar to the stuff constructed by state authority: courthouses, government buildings, flood control projects, etc.
The difference between state and federal projects simply depends on who owns or controls the underlying project site. The difference is not which entity funds the project, because federal funds are all over state (and even private) projects. The difference is in who owns and controls the project.
If work is done on a state courthouse using federally provided funds, it is a state project. If work is done on a federal courthouse, however, it’s a federal project. Work done on a federally funded interstate is usually a state project because the states control the highways. Work done through the US Army Corps of Engineers, however, even on state land such as the levees, is always a federal project because it is federally controlled.
Infographic – What’s My Project Type?
Why It’s Important to Know the Different Construction Project Types
Why does this all matter? The differences are very important because the laws governing your construction project are significantly different depending on the type of construction project.
First of all, mechanics lien requirements and bond claim laws are drastically different depending on your project type. But, that is not the only laws that are different. Labor laws and contracting rules are different depending on your project type, and more.
These legal differences are why I disagree with the classification system – based on the building type – that so much of the construction industry uses. While the character of the underlying work is important to some degree, the big legal differences hinge on the private or public nature of the work.