January 17, 2022
Is the Private or Public Sector Right for You?
By Rachel Conceiao
Generally, the construction industry can be separated into two main segments: private sector and public sector. While the final product is ultimately the same, there are major differences that contractors should be aware of to make the best decisions on which projects to pursue.
What is Private Sector Construction?
Private sector construction encompasses all projects owned by a private business, person, or entity. Simply put, any project that is funded by a non-government entity can be considered part of the private sector. Let me give you an example; If a large tech company or residential developer decides to build a new office building or housing complex, those projects would be considered private sector.
What is Public Sector Construction?
Public sector construction consists exclusively of government funded projects at the municipal, provincial, or federal level. If the funding for a project comes from public tax revenue, it is deemed a public sector project. Public infrastructure such as dams, roads, bridges and railways, LRT, Subways, and Parks, as well as public facilities such as police stations, ambulance stations, hospitals, schools, and libraries are all considered public sector projects.
So, how do those differences affect you?
Private Sector Bids Are More Dependent on Relationships.
The most important factor to be aware of when bidding in the private sector is that the likelihood of winning projects is largely based on a prior relationship. Since owners aren’t directly using public funding to finance a project, they’re not obligated to have a fair bidding process, as mandated by procurement rules normally followed in government projects.
Oftentimes, the tendering process is even skipped as some project owners only negotiate with select contractors they have a relationship with. While cost is certainly a factor, a greater emphasis lies on the build quality, ability to deliver on schedule, previous experience with the project type, staff with relevant experience, and financial resources.
If you’re an established contractor with a proven track record and solid client relationships, you will likely have success within the private sector. Once project owners have trust in your firm’s ability to perform, there will likely be a steady stream of opportunities.
Unfortunately, if you’re just starting out or new to the community this will not be the case. Even if you’re objectively the better contractor, you will need experience to back your claims and build relationships to secure work. If you put in twice the work in ensuring a spotless record (always completing projects on time and delivering work as promised) as well as spending a lot of time networking, the job security of the private sector will be well worth the effort.
Public Sector Projects Are More Open and Competitive.
Unlike the private sector which favors the established contractor, the public sector is open to any qualified contractor. Essentially this is an open market where project opportunities are available for all to see and apply.
For a smaller contractor, this sector is a good source of opportunities as there are usually a few smaller projects with no specific qualifications required. That said, it is important to note that the public sector is by no means guaranteed work. As everyone has access to projects, the process of securing one is very competitive. The qualification process, should there be one, is strict and bids are very competitively priced. In this sector government’s focus is finding the cheapest contractors who can provide the highest quality work. While you may not have as much negotiating power due to the sheer number of contractors that can replace you, public sector construction is a great place to start and build your business.
So, now we understand the difference between public and private sector construction, but which is best for you?
At the end of the day there is no right answer.
While the public sector is generally easier to get into for new contractors that is not always the only route. Established contractors frequently take on large public sector projects and smaller contractors can succeed in the private sector if they have a clear strategy on who to network with and what they have to offer.
No matter which sector you go into, your primary focus should be to acquire as much experience as possible, maintain a positive track record, and develop a network of clients.
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