What is a Schedule of Values?
A schedule of values (SOV) is a detailed construction document that lists a project’s scope and activities and divides them into individual work items. This breakdown assigns specific values to each item, helping to streamline payment applications and project tracking. The SOV is crucial for ensuring transparency and accuracy in billing, as it allows stakeholders to monitor the completion and costs of each part of the project.
Importance
SOVs are essential tools for project and financial oversight in construction management. To start, they enable clear financial tracking and accountability. By itemizing each project component with an assigned value, stakeholders, contractors, project managers, and clients see exactly where funds are allocated at any point in the process. This detailed breakdown ensures transparency, reduces disputes, and makes it easier to verify that each part of the project is completed before payments are issued, building trust and facilitating smoother communication among all parties.
On top of that, these lists simplify the payment process by aligning payments with project milestones. As each section of work is completed, the contractor can request payment based on the predetermined value of that portion, avoiding over- or under-payments and enabling accurate budgeting and forecasting. This structure helps avoid cash flow issues and serves as a record that can be audited later if any financial discrepancies arise.
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Components
Schedules of values can vary from project to project, as these lists aim to itemize each part of a contract and break them down into values. However, there are specific components that managers must include in their SOVs, which include the following:
Itemized Cost
Itemized costs break down the total contract amount into specific work items, assigning a value to each task or material needed for the project. This transparency allows stakeholders to see how each component contributes to the total cost. It also helps ensure payments are made in line with the project’s progress and budget.
Payment Schedule
Payment schedules outline when payments are due based on the project’s completion status or timeline, tying payment amounts to work completed. This structure helps to avoid cash flow issues by ensuring contractors receive timely compensation for finished work. It also reduces disputes by clearly defining expectations and timelines for each payment.
Change Orders
Change orders document any modifications to the original contract, including adjustments in costs, time, or scope. These orders allow for flexibility in responding to project changes while keeping all parties informed. They are crucial for maintaining budget accuracy, as they formally update the SOV to reflect new costs.
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Project Milestones
Project milestones are significant stages or completion points in the construction project timeline, such as the end of foundation work or structural completion. These checkpoints allow stakeholders to assess progress and release payments tied to major phases. They provide accountability by confirming that specific goals are met before funds are disbursed.
Best Practices for Creating an SOV
Having and following a schedule of values throughout a construction project brings many benefits to construction teams. That said, there are some things to keep in mind when creating SOVs to ensure that they are as effective as possible. So, here are a few best practices to follow when creating SOVs to simplify your workflow.
Work Closely with Key Stakeholders
Drafting a comprehensive schedule of values requires a holistic view of each area of the construction project. Managers should try to involve key stakeholders, such as contractors, clients, and project managers, to ensure all perspectives are considered in the SOV. It also helps to clarify roles and avoid misunderstandings related to the budget and timeline. This collaboration builds alignment and trust among parties, which is essential to better project outcomes.
Keep it Updated
Managers should regularly update SOVs to reflect any changes in scope, timeline, or costs, ensuring it remains an accurate tool throughout the project. This ongoing review prevents financial discrepancies and supports informed decision-making. Updated SOVs also maintain transparency for all stakeholders, improving trust and accountability.
Use Clear Language
Clear, concise language in an SOV reduces the risk of misinterpretation and confusion about project details and payments. Avoiding technical jargon and being specific about item descriptions ensures everyone understands the document. This clarity is especially helpful in resolving disputes and ensures all parties share a common understanding.
Leverage Technology
Using digital tools or construction management software for creating and managing SOVs enhances accuracy and accessibility. Technology can automate updates and allow easy tracking, reducing the likelihood of errors. Additionally, digital SOVs can be easily shared with stakeholders, fostering collaboration and real-time oversight.
Leon Altomonte
