A developer’s construction director protects the owner’s budget, schedule and loan by managing the contractor, the contingency and the monthly draw. The seat is commercial and contractual. Contractor-side leaders can do it well once they stop directing the work and start managing the agreement. Test for that shift before making an offer.
Developers hiring their first construction director nearly always go to the same place: the best project executive at a general contractor they have used. The logic is reasonable. Eighteen months later a fair number of those hires are gone, and the cause is rarely competence. The new director kept solving the contractor’s problems, in the field, at seven in the morning, while the draw request that the lender’s inspector was about to question sat unread on a desk downtown.
What does a developer’s construction director control?
The owner’s side of the construction contract. The director selects and negotiates with the contractor, approves pay applications and change orders, manages the owner’s contingency, reports to lenders and investors, and decides when to spend money to protect the schedule. The contractor controls means and methods.
The scope starts earlier and ends later than a builder’s. Before closing, the director tests the budget, reviews the contractor’s GMP and qualifications, and negotiates allowances and contingency terms. During construction the job is information and decisions: is the contractor’s schedule real, is the change order entitled, is the requisition supported. After completion the director handles turnover to property management, warranty and the final accounting investors will read.
One structural feature of the work catches newcomers. The person accountable for the owner’s money is rarely on site. They see the project through pay applications, schedule updates and a monthly walk, while the people creating cost are in the field making decisions that look purely practical. Two teams end up running one project on different information. A construction director’s real craft is closing that gap from the owner’s side, with questions, before it appears as a change order.
Which is exactly where a career on the contractor’s side can work against the candidate.
Why do contractor-side leaders struggle as an owner-side construction director?
Because the instincts that made them good builders point the wrong way. A project executive is trained to take control of a problem and fix it. An owner who directs the work takes on responsibility for the result, and weakens the contract that was meant to place that risk with the contractor.
The habits are easy to recognize:
- Directing subcontractors. Telling a framing foreman how to resequence is a favor on site and an owner-directed change on paper.
- Verbal approvals. “Go ahead, we will sort it out” moves risk to whoever later has to prove what was agreed, and on the owner’s side that is the director.
- Sympathy for the contractor’s margin. Useful for a working relationship. Dangerous when reviewing a change order.
- Discomfort with capital partners. Lender and investor reporting is a core duty of the seat, and many builders have never prepared it.
None of this argues against hiring from contractors. Most good construction directors came from one. It argues for testing the transition. Ask a candidate to describe a change order they rejected and the clause they relied on. Ask what they would do on learning that the superintendent on their project is weak. The builder says “I would get out there.” The owner’s representative says “I would put the concern in writing to the contractor’s executive and ask for their plan,” and then goes out there anyway, to watch.
Our note on an owner’s rep team in trouble describes what the failure looks like from outside. The other party watching from outside is the bank.
What does the construction lender expect from the construction director?
A budget that holds, draws that match the work in place, and early warning. Lenders fund construction in monthly advances against verified progress, and they watch contingency and cost-to-complete closely. The director is the person whose reporting they rely on.
Bank regulators set the tone. The Comptroller of the Currency’s lending handbook expects banks to control disbursements, inspect progress and confirm that remaining funds are sufficient to finish, and the Federal Reserve’s guidance on real estate concentrations puts construction loans under particular scrutiny. Capital rules reward borrower equity as well: a loan can avoid the higher-risk construction category when, among other conditions, the borrower has contributed capital of at least 15 percent of the project’s completed value (12 CFR 3.2). The practical result is that the bank’s inspector reads every draw, and any imbalance between money spent and work done becomes a meeting.
Contingency is the number they read first. Take a $60 million hard cost budget with an owner’s contingency of 5 percent, or $3 million. At month 9 of a 20-month schedule, the work is 40 percent in place, and approved and pending change orders have already committed 70 percent of the contingency, or $2.1 million.
A construction director who reports those two figures side by side every month, with a forecast, keeps the lender calm and the partners informed. One who reports only the dollars remaining gets through a few more draws before the same conversation happens under worse conditions, possibly with a request for more equity attached. The contractor has its own version of this seat, the construction controller, whose cost-to-complete figures a surety and a bank read. Where that contractor self-performs its structure, the earliest warning often comes from a concrete operations manager whose weekly unit rates show an overrun before any draw does. When people cross between the two sides, budget discipline travels well and the contractor’s month-end does not, as our note on hiring an owner-side cost manager into a contractor sets out.
Good candidates bring their own reporting format to the interview. Ask to see it, with project names removed.
How should a developer structure the construction director seat?
Match the structure to the pipeline. A developer with continuous starts needs an in-house director with authority. One with occasional projects is better served by an outside owner’s representative. The mistake is a hybrid where a development manager covers construction in spare hours.
| Structure | Fits | Watch for |
|---|---|---|
| In-house construction director | Two or more projects under construction most years | Needs real authority over contractor selection and change orders |
| Owner’s representative firm | One project at a time, or a new product type | Continuity between projects, and fees that track duration |
| Development manager covering construction | Small, simple projects with a trusted contractor | Draw review and change orders done late or on trust |
Pay follows the developer’s model more than the contractor market. Base salaries are usually at or somewhat above what the candidate earned as a project executive, and the meaningful difference is participation in project profit, which contractors rarely offer. Census construction spending and permit data show where the activity is. Dallas-Fort Worth has been among the country’s busiest apartment permitting markets for years, and Nashville and Charlotte have large development pipelines relative to their size, so developers in all three compete with general contractors for the same experienced people. Our note on the cost consultant in an owner’s rep practice covers the advisory version of the role. A builder of for-sale homes at volume needs a different seat again, the homebuilder vice president of construction, who runs a production line.
Who this hire is not for
- A developer with one project and no second site. Engage an owner’s representative for the job and revisit when the pipeline is real.
- A principal who intends to keep every construction decision. A director without authority is an expensive note-taker, and the good ones will not stay.
- A developer hoping the hire will act as the general contractor. Self-performing construction management is a different business, with licensing, insurance and risk the seat does not cover.
Hire the person who reads the draw first
Site walks are the enjoyable half of the job and the half a contractor-trained candidate already does well. The half that protects a developer happens at a desk, with a pay application, a schedule update and a contingency log, on the three days a month when the draw is assembled.
The people who do both are usually sitting at another developer or at a contractor that would rather not lose them. Post the opening and the market, and sometimes the lender, learns that a developer’s construction oversight is in flux. What the situation calls for is confidential executive search for mandates that cannot be publicly posted, and our note on confidential search covers how one runs. Selah Talent Partners does this work for developers across the United States. If a closing is ahead and nobody on staff can review the GMP, talk to us before the term sheet hardens.
Sources and further reading
- Lending handbook, Office of the Comptroller of the Currency, Comptroller’s Handbook: Commercial Real Estate Lending
- Real estate concentrations, Federal Reserve, SR 07-1, concentrations in commercial real estate lending
- 12 CFR 3.2, capital adequacy definitions, high volatility commercial real estate exposure
- Construction spending, US Census Bureau, value of construction put in place
- Permit data, US Census Bureau, Building Permits Survey