The main difference between a private and public construction project is that, while the former is commissioned and paid by private institutions, businesses or building owners, a public construction job is closely associated with the rules that are determined by either the federal or state government. Public projects are defined as any project owned, controlled or commissioned by a government agency. This type of project is broken down into two categories, either state or federal. State projects are controlled by any part that is funded by the state and federal projects are either controlled or owned by the federal government. When the government is the United States or federal agency, the applicable rules are found within the “Miller Act.” When the government is the state or a state agency, the applicable rules are usually found within a “Little Miller Act” statute. Private project included any project that is owned or controlled by anyone other than a government agency. This includes anything from a homeowner to a publicly traded company. Below are some comparison between the public and private sectors from different prospective.
Wages: While doing construction for a commissioned by a private owner the employer is only required to pay federal or local minimum wage, whichever is higher. This means that is Colorado a company owner could pay everyone from the project manager to the laborers $12/hour without any legal repercussions. This could obviously not be done due to the supply and demand of workers; however, legally the company would not be under any obligations. If the same company conducts a job that was publicly funded, then things could be more complicated and in this case, all worker would need to be paid in accordance to the Davis-Bacon Act. While working on public projects, the company may need to maintain a certified payroll, which means every week the company must fill out a WH-347 form for every employee to include wages, benefits, hours worked and projects worked on.
Bidding: to put it simply, the major difference between bidding on a private project versus a public project is the wiliness of the bidder to comply with the requirements and bonding capacity. Depending on the type of project delivery method, private projects require an invitation to bid, Request for Qualification (RFQ), or Request for Proposal (RFP) with several stipulations and guidelines to follow to qualify for bidding. Public projects are more open to bidding for public with less requirements to meet because these projects are paid by the taxpayer. In other words, public projects are open bid, which means an open bid is advertised publicly and allows any contractor to submit a bid. The problem with that is there is no restrictions to the number of bidders. However, public projects enforced some reasonable stipulations represented by the preventive measures. Preventive measures help to safeguard the public from problems regarding contractor competency or financial capability, so three bonds are required such as bid bond, performance bond, and labor and material payment bond. Bonds are issued by a surety company and act like a form of credit, use their financial resources to back the obligations of the contractor. The prequalification weed out the contractors that are not qualified to bid on the project. For example, the bid bond assures the owner that if the contractor is the low bidder, the contract will indeed enter into a contract with the owner. If the low bidder cannot go forward with the contract, then the owner can award it to the next higher bidder with the surety stepping in to cover the difference between the two bids. The owner as a result is protected from paying higher price. If the contractor is unable to perform the work as promised or fails to pay suppliers and subcontractors, the performance and payment bonds kick in, and the suety for completion of the work done by another contractor. In the case of private projects, closed bid the mostly the option. The close bid senior includes an invitation to bid, which is a notification that sent to a selected list of contractors who are chosen to bid on the project. This approach benefits the owner in terms of limiting the number of contractors and have much more flexibility in selecting the right qualified contractor. As far as the qualifications, the preventive measures can be used in this type of projects as well.
Permitting: Privately-owned construction is defined as buildings owned or partially owned by a private company or individual at the time of the building permit is issued. This includes houses built by nonprofit organizations and “Turnkey” housing (i.e., housing owned privately during construction to be sold to a public housing authority when completed. Also, housing units built with private/public partnerships (such as military housing built by private developers) would be considered privately-owned construction.
The Construction Industry in Four Categories
The construction industry is divided into four categories (e.g., residential, commercial, infrastructure and heavy highway, and industrial). These different types of construction are what built the world we live in today, so just like everything else the different types of businesses have very different ways of building and going through projects. Also, construction professionals such as designers, government officials and inspectors, estimators, superintend are each specialized in construction category different than the others. Construction is big business in the United States, so according to the Bureau of Labor Statistics, the industry employs 7.2 million people and represents 5% of the workforce in 2019. Opportunities in construction have increased significantly in the last 10 years. Even with the economy recession back in 2008, the industry remained fairly steady and construction companies were able to maintain their employees while salaries were slightly affected. Also even with the current pandemic (COVID 19), the industry remains vital and companies remain hiring employees and developments remain expanding and increasing. The construction industry is very rewarding because professional put thoughts and ideas on papers and then convert them into projects. This industry is inspiring it is nature because every project is unique on its own even if the same project is built on similar land. It has been like that since the old ancients and until these days. That comes with price, and this price is risk factor that every project possess. This risk factor is much higher in construction than it is in other industries due to the unpredictable nature of the work itself. These risk factors vary from sector to another. While all the construction sectors share one common factor, which is construction takes place outside, these sectors have a large list of differences, which as a result encourages professionals to specialize in one sector not all.
Residential sector: this sector refers to single home family, condominiums, and apartment complexes. The lead designer on these projects are architects and not engineers. Three common factors among these types of residential, first they all house people, and second they are funding by either individuals or developers, and third they mostly owned privately. They may get designed by architects or based on presets of drawings they are used multiple times over and over. Those type of housing are mostly built on site, but sometimes developers tend to build by using prefabricated homes. The type of technologies used in the construction are fairly low advanced because these type of housings are not too complicated to build and most of the technologies as building tools are available in the market (Alshareef et al. 2020). Therefore, the capital to set up for projects and start projects are fairly low comparing with the other sectors. The residential sector is risker than other in a sense of financial resources. Because most of the residential projects are funded privately, if a company is not controlling and monitoring closely, they may go out of business quickly. Also, when working on this types of housing, developers are expected to have a high level of customer service because they may work directly with homeowners, which make building these buildings are their biggest investments.
Commercial sector: this sector includes office buildings, large apartment complexes, shopping malls, theaters, schools, universities, and hospitals. The lead designer on these projects are architects and not engineers. This sector has somewhat similarities in terms of funding, so some of these projects can be funded by private, public or both sectors. The projects may get designed by architects, engineers, and other professionals as needed. The technologies required for building commercial buildings are more sophisticated then the residential buildings. Also, the capital to set up and start projects are much more and the logistical and safety plans are more complex, therefore, professional companies are less than the residential projects. Within this sector, specializations are required. For example, schools and high education buildings typically have their own professionals who are specialized in constructing these types of buildings. Similarly, professionals who usually work on hospitals like to continue working on healthcare projects because those professionals understand the demand and level of criticality needed to meet expectations. This sector requires construction companies to hire more specialized professionals with up-to-date technologies and licenses to be able to meet the demand set forth by the owners and also be on the same level of communications with designers and government officials.
Infrastructure and Heavy Highway sector: This sector includes highways, bridges, canals, dams, and tunnels. The lead designer on these projects are engineers and not architects. Heavy construction professionals are mostly to be involved in the construction because the construction is a horizontal construction. The construction companies involved are larger than residential or commercial projects and they mostly tend to own heavy machine equipment that are used. Projects under this sector are publicly funded and designed, bided, and built by either public, private, or public private partnership. Department of Transportation and Federal Highway Administration are mostly the organizations that are involved besides some other governable agencies. While budgets of these projects are higher than the residential and commercial projects, schedule activities are less. The reason for that is on horizontal projects tasks and activities take longer to complete and the tasks are minimal. For example, to build a bridge and to put simply, 1) break ground 2) compaction of soil 3) pour abutments 4) girder placement 5) decking plan 6) railing installed 7) paint and décor 8) testing. While in building a hospital building for instance, the work between the design and construction involves significant number of tasks that take some critical thinking to for general schedule, which may need sub-schedule depends on the complexity of the project.
Industrial sector: This sector includes pharmaceutical, steel mill, petroleum refineries, chemical processing plant, and automobile production facilities. The lead designer on these projects are engineers and not architects. These projects are defined by the production activities within the facility rather than the facility itself. The design and construction of the building itself depend on the needs of the process and production equipment. These types of projects are privately funded and owned. Because the high level of complexity and sophistication of these projects, fewer designers and construction professionals have specialty in industrial sector. Therefore, it is common to people to travel and/or relocate domestically or internationally to be able to work on such projects. People are paid higher wages with higher benefits if they would like to purse specialty in this field. Since the process technology is critical, designs and builders collaborate closely throughout the project. As a result, construction companies and designers usually deliver services as a single company. The most common delivery method on industrial projects (depends on the size and complexity of the project) is the Integrated Project Delivery. Also, the most common contract type (depends on the size and complexity of the project) is cost-plus.
Construction is a very important industry and will never die out. As long as humans are on this earth there will always be some sort of construction in process. All four industries of construction are very crucial in society. Residential construction will never go away because people need homes to live in. Roads will always need updated and paved so heavy highway construction will always be needed. Construction is very important to the human society and will never go away.