The schedule of values is one of the key documents in a construction project. All the stakeholders in a project are required to manage the cash flow in the project.
This is exactly what a schedule of values does. For a contractor, a schedule of value keeps track of the work as it progresses and makes sure that you will get paid on time. For project owners and architects, it verifies the work performed and the value to be paid against each completed task.
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Schedule of Values?
From general contractors to the owners, a schedule of values or SOV is a document that is used by all key stakeholders of a construction project. An SOV lists out the value and cost of every billable work item on a step-by-step project timeline and the percentage of the work that’s been completed to date.
It supports the contractor’s application for payment by tracking cash flow throughout the project and at the same time provides a comprehensive cost breakdown of the entire contract that property owners or construction managers can use to verify the work performed and to release payment.
An SOV is signed at the beginning of a construction project. The prime general contractor or sometimes a second-tier subcontractor (who’s hired directly by the general contractor) creates the Schedule of Values by assigning a dollar amount to every item of work they need to do, and in what phase of the project, in order to get the job done.
Then, all parties agree upon the details of the SOV as part of the signed contract before construction begins.
Why is a Schedule of Values Important to Cash Flow
Cash flow is the lifeblood of any contractor. The schedule of values elaborates the amount of work and the costs associated, simply containing every significant detail. Unscheduled overruns can spell disaster, even for contractors that are generally well-prepared to manage cash flow issues.
Contractors rely on a schedule of values to ensure the work is progressing as it should. Owners and architects use the SOV to justify the appropriate progress payments. Since cash flow is measured by the SOV, the timing of payments depends on how well the contractor puts the SOV together.
Structuring a Schedule of Values
American Institute of Architects (AIA) states that a schedule of values shall allocate the entire contract sum among the various portions of the work. Therefore, an SOV should be structured in such a way that it is easy to interpret and includes all the information the client may want. Here are the steps you can follow to create a schedule of values:
A Heading and Basic Information Section
This section appears at the top of your document. It contains the Project name, number, name of the contractor, name of liaison or contact person, client’s name, billing, and service address, name of architect, architect application date, and number.
A Project Spreadsheet
This section comes directly after the heading and basic information. Your spreadsheet is where you itemize each part of the job, outline the timeline and estimate costs. The table usually uses columns and rows to make it easier to read and interpret.
Rows
Rows run horizontally across a spreadsheet. Here are the things that you can represent in rows on your spreadsheet:
- Item number
- Description of work item
- Estimated cost or scheduled value
- Construction dates
- Percentage completion
- Retainer or deposit
- First payment
- Final balance due
Columns
The items represented in each column correspond to the title of each row. For example, if the construction job you’re planning has eleven itemized components, then you can include eleven unique item serial numbers in each cell within that column.
In addition, there will be eleven corresponding dollar amounts listed in the cells below the row representing the scheduled value.
Benefits of Using a Schedule of Values
The SOV is a great tool to avoid delays and confusion in complex construction projects. Here are some benefits of using a schedule of values for a construction job:
Serves as a Reference Sheet for All Stakeholders
A schedule of values creates a visual timeline for all stakeholders including the contractors, the architect, the owners, and the project managers. Whether you are remodeling someone’s home, developing a new structure, or designing and adding to a commercial building, a lot of planning and coordination will be needed to stay at par with all the stakeholders.
Completing some parts of a job is necessary before starting others, and doing these things in a specific order can save money. Hence, the SOV serves as a reference sheet and helps you organize and focus on your tasks.
Creates a Timeline to Follow
A schedule of values describes the proper order of job completion and details how much everything costs.
Providing this document to clients sets goals and creates a timeline for all the stakeholders including those who are working (project manager and the contractors) and to the clients who are awaiting results. Adhering to each step of the itemized list, being on time, and staying within the price estimates can help build trust amongst all the parties.
Better Communication
An SOV is a fundamental communication tool that informs everyone of all the expectations and responsibilities. Sharing the schedule of values with everyone on the construction site will ensure that every team member understands their goals and responsibilities.
It outlines a timeline of events and helps each member stay on track. You can also use an SOV as a reference sheet for giving constructive feedback.
A Formal Payment Plan
A multi-step construction project entails a multi-step payment plan. Ensuring that all the stakeholders agree to the schedule of values in advance will make collecting the payments easier.
The SOV includes the cost and values for each component of the job. It also specifies the estimated dates of service and client payment dates. When the client has an advance notice of the amount and due dates of the bill, they’re more likely to pay them on time.
A schedule of values is an essential document that should be prepared and signed at the beginning stage of a construction project.
Whether you are the client, a contractor, or any other stakeholder, SOV should contain a formal acknowledgement of all the stakeholders with their signatures and date of acknowledgment. When done properly, SOV can prove to be an effective management tool that can create order, encourage accountability and increase client trust.
