Construction Projects: The Different Types and Their Importance
Construction projects can be classified in several different ways, and the way you categorize them is important to your business.
Building type. Fire safety. Type of owner. Occupancy. These are all ways that various builders might sort their projects. Why does this matter? Because the way you sort them has an impact on payments, accounting procedures, safety protocols, and more.
Classifying by Building Type
Many people outside of the construction industry, and even some with a little experience, categorize construction projects by the type of building or structure. It seems like the most logical way to look at things. The most common types of construction buildings include:
- Retail spaces and shopping malls
- Grocery stores
- Hospitals and medical facilities
- Office buildings
- Hotels and resorts
It’s easy to differentiate between these types of projects. Constructing residential and commercial buildings, for example, is obviously different from building huge warehouses and industrial buildings. And that’s not even getting into building roads and bridges.
While classifying projects this way makes sense logically, it’s not very helpful to construction companies. The type of equipment being used is different, yes. But it doesn’t tell you anything about the legal requirements and payment expectations. There are much better ways to categorize your projects.
Classifying by Type of Owner
Categorizing your construction jobs based on who owns the project or the property is much more effective than going by the building type. Federal and state laws governing the construction industry vary by project owner rather than by owner type. So sorting by owner helps determine important information about contracts, payments, and risk level.
Projects sorted by type of owner will typically fit into one of the following categories: private residential projects, private commercial projects, state construction jobs, or federal construction jobs.
The level of risk involved in a project is something construction companies always need to be aware of. Private residential projects carry fairly low risk because of the laws surrounding mechanics liens. Contracts have lien rights on residential projects to protect them from nonpayment.
Projects on public land, on the other hand, are not subject to mechanic’s liens. The Miller Act requires that these projects be secured by payment bonds, which are a totally different ball game. A bond claim can still be filed to recover money in the event of a payment dispute, but it’s a different process than filing a mechanic’s lien [Duke Law].
Payments and disputes aren’t the only variances between owner types. Contract laws and labor laws also vary depending on whether the project owner is private or public. Sorting your projects this way makes it much easier to keep track of the laws surrounding them.
Simplify Construction Projects with CoFi
Classifying your construction projects properly is important to managing the payment processes. At CoFi, our goal is to keep those processes as simple as possible. Our innovative construction payment software will keep your payments on track with automated draws, reduced inefficiencies, and streamlined communication. See how CoFi can help your business. Schedule your personalized demo today!