All construction projects, whether large or small, involve several phases, complex milestones consisting of smaller tasks, and various combinations of stakeholders and contractors. They’re all geared toward one goal, but keeping these moving parts on track while ensuring fair payments can be challenging for project management teams.
That’s where a schedule of values comes in.
A schedule of values is essentially the yardstick by which construction progress is calculated, and payments are made. It’s critical to fair payment and the project’s success, and it helps architects and contractors manage projects more efficiently and accurately.
For instance, a general contractor on a large project can use a schedule of values to break large projects into specific phases. These may include site prep, structural work, roofing, and more. The SOV assigns a value to each and tracks their progress, allowing for fair payments while protecting the project’s progress and budget.
But what does that really mean? And what is a schedule of values? Let’s dive deeper into the topic so project managers can understand what it is and how it works.
What Is a Schedule of Values?
A schedule of values, or SOV, is a line-item breakdown of all the costs associated with the different phases of a construction project. It’s a list that divides the entire contract sum between the activities that bring the project to completion. For a schedule of values to be correct, the total amounts must add up to the total contract amount.
A schedule of values is important for several reasons. First, it breaks down the total contract cost into transparent line items that everyone on the project can understand. Second, architects use it to ensure pay applications and corresponding progress payments are accurate. Third, it can be used to measure project progress, as only items completed can be billed for and the percentage of the total value billed for each activity represents the completion percentage. This is why most contracts require them before the first payment application.
Key Components of an Effective Schedule of Values
While each project is different, schedules of values contain similar items. In fact, contractors use two popular templates to meet contract terms: the AIA G703-1992 Continuation Sheet or ConsensusDocs 293: Schedule of Values. Both contain similar information in each of the columns:
- Item number for each activity
- Description of the work for each activity
- Scheduled value or contracted amount
- Work completed
- Amount already billed against the scheduled value
- Amount billed for this period
- The value of materials presently stored, or those the contractor purchased but hasn't installed
- The value of work completed and the materials presently stored
- The percentage of completion relative to the scheduled value
- The balance to finish (the total completed and stored subtracted from the scheduled value)
- Any retainage withheld
All of those values are listed for each line item. At the bottom of each column is a space for the grand total.
Understanding how much each of these activities will cost, where they stand in terms of progress, and how much is left for completion allows architects to ensure the contractor is billing fairly. Knowing how much work is completed compared to how much is billed helps project management teams avoid financial surprises down the road and balance the budget effectively.
Best Practices for Creating and Managing Your SOV
A schedule of values must be comprehensive and intuitive for it to serve its purpose. Here are a few best practices to consider when creating and managing an SOV.
Prioritize Accuracy and Detail
Start with a thorough and realistic breakdown of costs. Frontloading the costs to generate more cash flow in the beginning can cause financial issues down the road. The more precise and detailed your SOV, the better and easier it will be to use throughout the project.
Update Your SOV Regularly
Just as construction projects are dynamic and ever-changing, an SOV should be too. Contract values can change due to scope, delays, or other issues. This often generates change orders, which adjust the contract price. Update the SOV accordingly so it stays reliable and accurate.
Encourage Communication
A schedule of values isn’t just for the project management, architecture, and accounting teams. It should be shared with all of the key stakeholders on the project. Sharing ensures everyone is aligned and pricing is fully transparent. Stakeholders can weigh in on their concerns and stay on top of the actual progress made, with easily understood progress percentages.
Leveraging Software for Efficiency
SOVs are important for payments and progress tracking, but they’re labor-intensive and boring to manage. Construction management software can make it easier, allowing teams to generate and update their schedule of values easily and efficiently.
For instance, project teams can:
- Create their own SOV templates with automated calculations.
- Increase their SOV accuracy by automating simple, repetitive tasks.
- Benefit from automatic updates to track project progress, adjust values based on change orders and scope changes, and track historical adjustments.
With these tools, teams can reduce the time and labor involved in generating comprehensive, accurate schedules of values without sacrificing quality or usefulness.
Streamline Your Approach to Project Management
An SOV is more than just an accounting document. It fosters communication, encourages transparency, facilitates payments, keeps projects on track, and helps teams balance their budgets for the best possible outcomes. Whether it’s a small project, a high-rise building, or anything in between, make SOV development a priority on your projects.
