From the perspective of the person physically doing construction, there isn’t a lot of difference between a private residential project and a state public works project. They’re still doing the same type of excavation, or electrical work, plumbing, etc. However, the methods and tools available to ensure that you get paid are quite different. But sometimes it can be difficult to tell what kind of project you’re actually working on. What exactly is a state project – and why does it matter?
Are you working on a state construction project?
Over the years, I’ve heard state projects referred to as “county,” “public,” or “government” projects. It’s all the same.
A state construction project is typically any project commissioned by a city, state, county, public board, or other governmental entity. This includes projects commissioned by public school boards, which is a popular type of public work.
This sounds simple, but it’s surprising how many folks are either confused – or wrong – about whether a project is a state or private work.
Types of construction: State project or not?
Public schools
Schools at every level (elementary, high school, university) can be either state or private, and you may sometimes be unsure. Go to the school’s website and read the about section.
If the school is operated by a school district or board of education, it’s likely a state project.
Government buildings
If the project is to build, renovate, or make any other improvements on a state government building, then it will generally be a state project. This includes courthouses, government offices, county buildings, etc.
Libraries
A public library is typically owned by the city, county, or state where it’s located, and open to the public. As such, a public library would typically be considered a state project. This includes libraries owned by a state university.
Construction on private libraries is generally considered a private project, including those owned by private universities.
State parks
State parks are typically state projects, because they are state owned. This is the case even when the parks are managed by private managing companies – which is common. So, while a contractor may be hired by a private property management company, it’s a state project, because it’s still state land and under state control.
Public works
Public works projects are some of the most common state construction projects. They include the construction of bridges, roads, sewers, highways, etc.
Native Land
Doing construction work on native land can be tricky, because native land has sovereignty rights, and it’s neither federal nor state nor private property. Many folks confuse native land projects for state projects, but they are not state projects. Learn more about your lien rights on Native American territory.
Hospitals, Community Centers, and Quasi-Public Places
A ‘quasi-public place’ is an establishment that provides public services, though it may be owned or controlled by a private entity. Hospitals, community centers, and other similar establishments are usually privately owned properties. A construction project on a privately-owned property is not a state project.
Why knowing the project type matters
Ultimately, you need to get paid for the work that you do, and in a timely manner. Properly identifying the type of construction project you’re working on as either private, federal, or state is a critical step. Understanding the type of project can help you decide what steps to take to preserve and enforce your lien or bond claim rights.
If you’re sending the notices and making the claims under one set of laws when you should be working under a different set, you will have sent and filed all the wrong documents. Unfortunately, the law has little to no tolerance for this type of mistake, and that can leave you without lien rights at all.
Prompt payment laws may apply
Nearly every state has prompt payment laws that set deadlines for payments on construction projects. Some states have prompt payment laws for both public and private projects, while others only cover public projects. Only New Hampshire doesn’t have any prompt payment laws at all.
Download the state-by-state guide to prompt payment laws across the country.
You need to know about payment bonds
Contractors and suppliers that typically work on projects for a private owner are likely familiar with mechanics liens. If a construction business doesn’t get paid on a private project, they can typically file a mechanics lien to secure an interest in the property. They can foreclose on the lien if they still don’t get their payment, potentially forcing the sale of the property.
On state construction projects, filing a mechanics lien generally isn’t an option. A contractor isn’t allowed to force the sale of a public property if they aren’t paid.
Instead, the GC on most state projects is required to post a payment bond, which takes the place of the property for the purpose of non-payment claims. If a subcontractor or supplier doesn’t receive their payment, they can make a bond claim against the payment bond. The process to actually make a claim is different from the mechanics lien claim process. However, the steps required to protect your right to make a claim – like sending preliminary notice – are often (though not always!) similar.
It’s important to understand whether you’re working on a state project, so you take the right steps to protect your payment rights.
You might have to claim a breach of contract
Every state has certain thresholds for public projects. If the contract is over a certain amount, a payment bond is typically required, along with other construction bonds. If a state project falls under the threshold, the GC may not be required to hold a payment bond.
If a contractor or supplier is working on a state project without a bond, they can’t file a mechanics lien or a bond claim. Generally, the only recourse in this case would be to file a breach of contract claim against the hiring party.
Stop Notices
A small handful of states have an additional layer of protection if a bond doesn’t exist. A stop notice is a document that freezes funds on a project, in an effort to intercept them and force payment. However, only 4 states include the stop notice option in their statute: Alaska, Arizona, California, and Washington.
Misidentifying a state construction project can be costly
While determining your project type may seem like a simple affair, there are layers of complexities here. Do some research into who is commissioning the project and who owns the property, and make sure you know what type of project you’re working on.
A mistake in your understanding of a project’s nature can send you down the wrong path of protection, which can leave you with no protection at all.