Five Commercial Risks After Planning Permission (And How to Avoid Them)

7 min read

Introduction

Obtaining planning permission is a major milestone, but it’s often where the biggest commercial decisions begin.

Many residential developments exceed budget or experience delays not because of poor construction, but because key commercial decisions made after planning approval weren’t properly considered.

Commercial Risks to Consider

Whether you’re delivering a bespoke home, apartment scheme or small residential development, here are five of the most common commercial risks to consider before construction starts.

1. Choosing the Wrong Procurement Strategy

One of the earliest and most important decisions is how you procure your contractor.

Should you:

• complete the design before tendering?

• appoint a contractor early?

• use a two-stage tender?

• choose a Design & Build contract?

Each approach has advantages and disadvantages depending on your project’s complexity, programme and appetite for risk.

Choosing the wrong procurement route can affect:

• cost certainty

• programme

• design quality

• contractual risk

• flexibility during construction

Procurement strategy should be considered before contractors are invited to price the works.

2. Incomplete Design Information

Planning drawings are not construction drawings.

Developers sometimes underestimate the amount of technical design required before reliable contractor pricing can be obtained.

Incomplete information often results in:

• provisional sums

• contractor assumptions

• numerous tender queries

• inconsistent pricing

• higher contingency allowances

The more complete the design information, the greater the likelihood of achieving meaningful tender comparisons and improved cost certainty.

3. Poor Tender Evaluation

Selecting the lowest-priced contractor without understanding what has actually been priced is a common mistake.

A proper tender review should consider:

• exclusions

• qualifications

• programme

• provisional sums

• assumptions

• contractor experience

• financial stability

• value engineering proposals

A tender that initially appears more expensive may ultimately provide significantly better value once commercial risks are understood.

4. Unrealistic Project Budget

Construction costs represent only part of the overall development budget.

Developers should also allow for:

• consultant fees

• statutory charges

• utility connections

• planning conditions

• warranties

• insurance

• finance costs

• contingency

• VAT where applicable

Failing to account for these costs can create funding pressures later in the project.

A realistic development budget should be reviewed before construction contracts are signed.

5. Signing Contracts Too Quickly

After months of securing planning permission, it’s understandable to want construction to begin as soon as possible.

However, rushing into a building contract before resolving key commercial issues can create problems throughout the project.

Before signing, developers should be confident that:

• the scope is clearly defined

• contract documents are coordinated

• risks are understood

• pricing assumptions have been tested

• tender qualifications have been addressed

• procurement strategy remains appropriate

A few additional weeks of preparation can often prevent months of costly disputes later.

A Simple Commercial Health Check

Before construction starts, ask yourself:

• Is the procurement strategy appropriate for this project?

• Is the design sufficiently developed?

• Are contractor tenders genuinely comparable?

• Have major commercial risks been identified?

• Is the development budget robust?

• Am I confident I understand what I’m about to sign?

If any of these questions create uncertainty, it’s usually worth resolving them before committing significant expenditure.

Frequently Asked Questions

What happens after planning permission is granted?

Typically, the project progresses into technical design, consultant coordination, procurement planning, contractor tendering and contract preparation before construction begins.

Should I appoint a contractor immediately after planning permission?

Not necessarily. The appropriate timing depends on your procurement strategy, design maturity and project objectives. Appointing a contractor too early can reduce cost certainty, while waiting too long may affect programme.

Is planning permission the biggest project risk?

Planning is certainly an important milestone, but many of the most significant financial and contractual risks arise after planning permission, during design development, procurement and contract negotiation.

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Independent Commercial Advice Before Construction

Many developers have excellent architects, engineers and quantity surveyors supporting their projects.

However, there can still be value in obtaining an independent client-side commercial review before major commitments are made.

Mavora would be happy to undertake an independent review to help identify commercial risks, challenge procurement assumptions and provide confidence that key decisions have been properly evaluated before contracts are signed.

The cost of resolving a procurement or contractual issue before construction is often significantly lower than dealing with the consequences once work has started.