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The essentials of an effective schedule of values in construction

Picture of a construction site with only the structure built | Schedule of values | Knowify

Every construction project comes with a unique set of challenges, site conditions, deliverables, and budget constraints. All combined these challenges make managing any construction project quite the daunting task.

However, you can navigate these challenges and come out the other side with flying colors by starting with a solid plan of action. And at the heart of every successful plan is a well-structured schedule of values (SOV).

In this guide, we’ll break down everything you need to know about a schedule of values in construction and why they’re essential for every contractor. From understanding its purpose to navigating common issues, we’ve got you covered.

What is a schedule of values (SOV)?

A schedule of values in construction (SOV) is a breakdown of every billable task on a project, providing an overview of the budget, a detailed timeline, and percentage of work completed for the entire job. In other words, it’s an itemized list of the entire budget of the project broken down by individual tasks and the costs associated for each of those tasks.

The primary purpose of a schedule of values is to function as a start-to-finish document that outlines everything the project will entail. After all, it’s been said that a contractor does not get paid for the work they complete but for the work they document.

Starting with a plan that is realistic, efficient, and honest is crucial for completing a project on time and within budget. A schedule of values is a powerful document for ensuring that such a plan of action is in place. 

As stated by the American Institute of Architects, “A schedule of values is used as a basis for reviewing the Contractor’s monthly payment applications. It shows the percentage of completion for each of the Contractor’s activities…and allocates the entire contract sum to various portions of the contractor’s work that are detailed in the construction schedule.”

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Why a schedule of values is important

Example of an application for payment | Schedule of values | Knowify

An estimated 70% of construction professionals blame inadequate job site coordination for most delays and cost overruns. Even more surprising, an estimated 40% of professionals state they have worked on a project that did not include a set budget or timeline.

From these numbers, it’s clear that a focused and detailed plan and project timeline are of paramount importance for ensuring contractors are paid on time and profitable by the end of the job.

With payment processing involving a number of key stakeholders and detailed paperwork, a schedule of values is critical for keeping the process smooth and efficient.

In short, an SOV is significant for contractors, subcontractors, and project owners alike because it is directly tied to cash flow. At least one in four contractors report that cash flow issues are holding back their business from growing.

A schedule of values in construction, when used correctly, will keep cash flow in check and ensure enough funds are available to keep projects moving forward on schedule. This also means that the document will change as the job progresses. For example, any change orders should be reflected and updated in the schedule of values. 

When to use a construction schedule of values

Contractors engaging in commercial or extensive, multi-step residential jobs will use a schedule of values. However, subcontractors should never shy away from utilizing a schedule of values.

One thing general contractors and subcontractors can agree on is that bad communication and coordination is the primary cause of costly delays and cost overruns. A lack of transparency and communication will cause a loss of time and money, and can damage relationships. Including a schedule of values can help mitigate against these risks.

Jobs require constant communication and a well thought out SOV helps facilitate effective communication and ensures transparency. It shows that there is a commitment to honesty and efficiency. 

Schedule of values example

A schedule of values in construction will vary in terms of its contents and how it’s structured based on the specifics of the project at hand and what has been negotiated between parties. However, there is a basic consensus on what should be included in most SOVs.

Abstraction of the process of progress billing inputting percentage of completion | Schedule of values | Knowify

As a best practice, SOVs should include the following:

  • Business information (i.e. project name and number, name of contractors, addresses, etc.)
  • Detailed description of each work item (breakdown of scope of work)
  • Cost for each work item 
  • Amount that has been paid to date 
  • Percentage of work completed
  • Current costs (from current billing period)
  • Remaining cost for completion 
  • Retainage costs, percentages, and amounts for each item
  • Consent and acknowledgement – It’s crucial to get signatures from all parties involved and include this section at the bottom of every SOV. 

A well structured SOV will detail cost, level of completion, and percentage paid for each individual task, which helps contractors and subcontractors accurately monitor job progress and ensure work is progressing as planned. This helps contractors time payments so that invoices and proof of work can be submitted in a timely manner.  

Common issues with schedule of values

As mentioned earlier, subcontractors should be on the lookout for agreements that front-load the SOV which will result in majority upfront payments. If creating an SOV yourself, it can be tempting to front-load the contract for your own cash flow needs.

However, this should be avoided if possible as it is considered a bad accounting practice and can result in serious issues as change orders and inevitable obstacles will arise throughout the project. 

In addition, front-loading can cause values for all work completed that will not match up to what they should be. If a dispute arises, this can cause serious issues. If change orders are put in place, a contractor may not be able to collect extra money as a result of the change order if they have already front-loaded the schedule of values. This is due to difficulties in explaining why a line item would cost more at the start of a project versus later in the project. 

In any case a subcontractor should be very familiar with any schedule of values they are working with. Disputes and disagreements may result in costly payment issues that can be difficult to negotiate.

In this case the SOV is a powerful document in terms of mitigating disputes and preserving subcontractor rights. Since a schedule of values in construction presents a clear record of work completed and amounts to be paid, it can be leaned on to support a mechanics lien and will serve as a catalyst for a claim for money owed if the need arises. 

Build your business with confidence with Knowify

In today’s construction industry, projects are a vast interconnected web of documentation, communication, coordination, and yet even more contract documents. From invoices, to SOWs, to change orders, keeping track of it all can be overwhelming. 

Luckily Knowify is here to help. From job costing, bidding and budgeting to proposals, invoicing and progress payments, our project management workflow is built to help your team execute projects more efficiently and leave your customers more satisfied.

Knowify makes it easy to create, share, and track professional-grade customer-facing documents, so you’ll always be in a position to over-deliver to your clients and win their business again and again. 

Schedule a free demo with a Knowify expert today to see how a paperless, digital future will transform your business.

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