Public/Private Construction Projects - Part I

For the 2010 ABA Forum on the Construction Industry MidWinter Meeting, held January 27-29, 2010 in San Francisco, Bob Carney and Lisa Sparks prepared a paper on hybrid public/private construction projects. The paper, Is It Public or Not?, was presented by Bob Carney at the MidWinter Meeting on Thursday, January 28. Over the course of three posts, Bob Carney and Lisa Sparks will review the hybrid public/private projects covered in their paper and discuss the relevance of such hybrids to BRAC initiatives.

Part I

The traditional view of construction projects conceives of these endeavors as falling into one of two mutually exclusive categories: (1) public construction – those projects for public works, paid by government funds, for which the government contracts with a construction contractor or contractors in accordance with acquisition regulations; or (2) private construction – those projects where a private entity develops the project, secures financing necessary to complete the project, and contracts for its construction.

The classification of a construction project as public or private dictates how a construction contract is let, as governmental entities typically have specific procedures for bidding and/or negotiating such contracts. It also impacts the remedies available to contractors and subcontractors. Public contracts generally involve a limited waiver of sovereign immunity on the part of the governmental entity, typically dependent on the contractor’s compliance with strict claim submission requirements and characterized, at least in the early stages, by resort to administrative rather than judicial proceedings. Public lands, as a general rule, are not subject to mechanic’s liens, though subcontractors are offered a rough substitute in the form of Miller Act (federal) or Little Miller Act (state and local) payment bonds.

But the strict dichotomy between public projects and private ones is breaking down. Increasingly, there are areas of gray where the two categories overlap – hybrid projects that feature some private funding, some public, and often sit on lands owned in whole or in part by a governmental unit. Many of the projects related to BRAC initiatives make use of such hybrids, most notably Enhanced Use Leasing (“EUL”), a program under which federal agencies lease federal property to private parties for development of the land.

In our next post, we will describe the hybrids most relevant to BRAC – EUL programs and the use of governmental lease of real property as a vehicle for new construction. In our third post, we will examine the effect of these hybrids on contractors’ rights upstream to get paid and to enforce such rights, and on contractors’ duties downstream to pay their subcontractors.

- Bob Carney and Lisa Sparks