The entitlement process tests a developer’s patience. The construction phase tests everything else. From the moment a project breaks ground, the developer is managing a compressed, sequential series of decisions — contractor performance, subcontractor coordination, material procurement, schedule adherence, and cost control — while absorbing the variability that is inherent to building in the real world.
Construction risk is not a monolithic category. It is a collection of specific, identifiable exposures that can be anticipated, mitigated, and managed through deliberate process. The developer who treats construction as a phase to endure rather than a phase to actively manage is transferring control of their return profile to external parties who do not share the same financial stake in the outcome.
Contractor Selection and the Limits of Low Bids
The general contractor relationship is the single most consequential external relationship in a development project during the construction phase. The GC coordinates subcontractors, manages the construction schedule, administers the budget, and serves as the primary interface between the developer’s intent and the physical structure being built. Getting this relationship right matters more than almost any other pre-construction decision.
Bid price is a starting point, not a selection criterion. A general contractor who wins a project on a low bid and then recovers margin through change order volume is more expensive than a contractor who bids accurately and delivers within scope. The discipline of distinguishing between these outcomes requires more than comparing bid totals — it requires evaluating a contractor’s track record on similar project types, understanding their subcontractor relationships, assessing their project management depth, and scrutinizing the assumptions embedded in their bid.
For ground-up commercial development specifically, prior experience with comparable project types — in terms of asset class, construction methodology, and market conditions — is not a secondary consideration. A contractor who has built industrial product in a Midwest market may not have the subcontractor network or permitting familiarity to execute efficiently on a mixed-use project in a constrained West Coast urban environment. Fit between the contractor’s experience base and the project’s specific demands is a meaningful factor in predicting execution quality.
Change Orders: The Budget’s Largest Unmanaged Exposure
Change orders are the primary mechanism through which construction budgets expand beyond their original scope. They are also the area where developer discipline — or the absence of it — has the most direct and measurable impact on project economics.
Change orders originate from several sources. Design deficiencies in the construction documents produce field conflicts that require resolution mid-project. Site conditions that differ from what was anticipated during due diligence require scope modifications. Owner-directed changes to the program — new requirements or design refinements that emerge during construction — add cost and often consume schedule float. Each of these categories represents a different type of exposure with a different mitigation strategy.
Design deficiencies are largely avoidable through investment in thorough construction documentation before groundbreaking. The developer who pushes to break ground before design is fully coordinated saves weeks at the front end and spends months — and significantly more money — resolving conflicts in the field. The cost of comprehensive construction documents is predictable. The cost of resolving design conflicts mid-construction is not.
Owner-directed changes are a discipline problem as much as a process problem. Every program modification that occurs after construction has commenced carries a premium — disruption to work in progress, coordination costs, and often schedule impact that compounds through subsequent trades. Holding the program stable through construction requires making decisions during design that are firm enough to survive the pressure to revisit them once walls are up.
Schedule Compression and Its Consequences
Construction schedules are not arbitrary documents. They reflect the sequencing dependencies between trades, the procurement lead times for long-lead materials and equipment, and the inspection and approval milestones required by the authority having jurisdiction. When a schedule is compressed — whether by a late start, a subcontractor delay, or an external event — the downstream consequences cascade through every subsequent trade.
Schedule recovery in construction is expensive. Overtime premiums, accelerated procurement, and additional supervision all add cost. More significantly, work performed under schedule pressure carries elevated risk of quality deficiencies that require correction — either during construction, at the cost of rework, or after delivery, at the cost of warranty claims and tenant disputes.
The developer who monitors schedule performance weekly — not monthly — has early visibility into slippage when it is still recoverable at reasonable cost. A two-week delay identified at the four-week mark can often be recovered with modest intervention. The same two-week delay identified at the eight-week mark has already propagated through subsequent trades and is no longer a two-week problem.
At Bridge Capital Partners, construction monitoring is an active function, not a reporting function. Schedule and budget status are evaluated against the project baseline on a rolling basis, and variances are addressed when they are still manageable — not after they have accumulated into a material impact.
Managing the Lender Relationship Through Construction
Construction lenders and developers share an interest in project completion, but they do not share identical perspectives on how that completion is managed. The lender’s primary concern is collateral protection — ensuring that the asset being built will support the loan in the event of a default. The developer’s primary concern is delivering a project that performs as underwritten. These interests are generally aligned, but they can diverge at specific decision points during construction.
Draw requests require documentation that demonstrates work-in-place at the levels claimed. Inspections confirm that construction is proceeding in accordance with the approved plans. Lender-required contingency reserves may constrain the developer’s flexibility to deploy funds in response to unexpected conditions. Understanding these mechanics before construction begins — and maintaining a proactive relationship with the lender’s inspector throughout the project — eliminates friction at the draw stage and preserves the cooperative relationship that makes course corrections manageable when they are needed.
Delivery as a Development Event, Not a Conclusion
Project delivery — the point at which a building receives its certificate of occupancy and is physically available for occupancy — is frequently treated as the end of the construction phase. In practice, it is the transition point between two phases of active management, not the conclusion of one.
Punch list completion, systems commissioning, warranty period management, and tenant improvement coordination all continue after the certificate of occupancy is issued. The developer who has maintained direct engagement with the construction process through delivery is positioned to manage these final-mile items efficiently. The developer who has been at arm’s length discovers them through the reports of others, which is a slower and more costly way to resolve them.
For Bridge Capital Partners, the standards applied during construction are the same standards applied throughout the project lifecycle: active oversight, early identification of variance, and decisions made on the basis of complete information rather than assumptions. Construction is where the development thesis is physically realized. Managing it with the same rigor applied to underwriting and capital structuring is what gives that realization the best probability of matching what was projected.
About Alexander Shalavi
Alexander Shalavi is a Partner at Bridge Capital Partners, a commercial real estate investment and development firm operating across high-growth West Coast and Midwest markets. Shalavi leads development strategy for the firm, with expertise spanning ground-up construction, property repositioning, and full-cycle portfolio management. His work covers the complete project lifecycle — from site acquisition and capital structuring through entitlement, construction oversight, and asset stabilization. Bridge Capital Partners focuses on markets where supply constraints and demand fundamentals support durable long-term returns.