What is a Schedule of Values?
A schedule of values (SOV) is a detailed statement that breaks down the total contract amount for a construction project into individual line items. Each line item corresponds to a portion of the work or a project milestone, allowing payments to be made as work progresses. Typically used in progress billing, the SOV provides transparency between contractors, owners, and other stakeholders. Industry standards, such as the American Institute of Architects (AIA) G702 and G703 forms, are commonly used to format schedules of values.
The main purpose of a schedule of values is to ensure that payments align with completed work. Without it, tracking project finances can become disorganized, leading to misunderstandings, disputes, or even delayed payments. For example, a general contractor may submit a schedule of values at the start of a project to outline how the contract sum will be billed over time. This document acts as a reference throughout the construction process, creating a clear link between progress and payment.
Why a Schedule of Values is Important
The schedule of values plays a vital role in maintaining financial clarity and accountability in construction projects. Here are some key reasons it is indispensable:
- Transparency: It provides all parties with a clear breakdown of project costs, reducing the risk of disputes.
- Progress Tracking: The SOV allows stakeholders to monitor how much work has been completed and how much remains.
- Financial Planning: Owners can plan cash flow and ensure funds are available when payments are due.
- Dispute Prevention: Clear documentation prevents misunderstandings about payment amounts or project milestones.
- Compliance: Many contracts and lenders require a schedule of values to approve progress payments.
In large-scale projects, where budgets can run into millions of dollars, a detailed schedule of values ensures that every dollar is accounted for, creating trust between contractors and clients.
Components of a Schedule of Values
A well-prepared schedule of values typically includes the following components:
- Line Items: Each major component of the work is listed separately—such as site preparation, foundation, framing, plumbing, electrical, roofing, and finishing work.
- Descriptions: A short description clarifies what each line item covers.
- Allocated Costs or Percentages: Each line item is assigned a portion of the total contract value.
- Completed Work Values: Indicates how much work has been completed for each line item.
- Remaining Balances: Shows how much value remains unpaid.
- Change Orders: Any adjustments to the original contract value due to project changes.
Including all these elements ensures that the schedule of values is clear and comprehensive, leaving no room for ambiguity.
How to Create a Schedule of Values
Creating a SOV involves careful planning and collaboration. Here’s a step-by-step process:
Step 1: Review the Contract
Start by reviewing the construction contract to understand the scope of work and total contract value. This ensures that your SOV aligns with the contractual requirements.
Step 2: Break Down the Work
Divide the total project into logical line items based on major tasks or milestones. For example, separate sections for site work, structural elements, mechanical systems, and finishes.
Step 3: Assign Values
Allocate a portion of the total contract sum to each line item. The allocation should reflect the actual cost or effort involved in completing that component.
Step 4: Use Standard Forms
Consider using AIA G702 and G703 forms or other industry-approved templates. These formats are widely recognized and accepted by owners, lenders, and architects.
Step 5: Review and Approve
Submit the draft schedule of values to the project owner or architect for review. Make revisions as needed to ensure everyone agrees with the breakdown before work begins.
Best Practices for Managing a Schedule of Values
Managing a schedule of values effectively ensures accurate billing and prevents disputes. Follow these best practices:
- Regular Updates: Update the schedule of values as work progresses to reflect completed percentages accurately.
- Clear Communication: Discuss changes and progress openly with all stakeholders.
- Use Construction Management Software: Tools like Procore or Buildertrend can automate updates and track progress efficiently.
- Document Change Orders: Any changes to the original plan should be promptly recorded in the SOV.
- Audit Periodically: Review the SOV regularly to ensure accuracy and compliance with the contract.
Common Challenges and Solutions
Even with the best preparation, managing a schedule of values can present challenges:
- Disputes Over Line Items: Solution: Provide detailed descriptions and get prior approval for all allocations.
- Inaccurate Progress Reporting: Solution: Use on-site inspections and photos to verify progress.
- Handling Change Orders: Solution: Update the SOV immediately to reflect changes, ensuring that everyone stays informed.
- Delayed Approvals: Solution: Submit drafts early and follow up with stakeholders to keep the process moving.
Schedule of Values vs. Other Construction Documents
It’s easy to confuse a schedule of values with other financial or project tracking documents. Here’s how it differs:
- Payment Applications: The SOV serves as the basis for payment applications but is not the same thing.
- Project Budgets: Budgets are broader, covering overall financial planning, while the SOV focuses on billing.
- Cost Breakdowns: A cost breakdown may be more detailed but does not always align with billing schedules.
Digital Tools and Software for Schedule of Values
Modern construction management software can make handling a schedule of values much more efficient. Tools like Procore, Builder trend, and CoConstruct offer features such as automated progress tracking, integrated billing, and cloud-based access for team members. These tools reduce errors, save time, and improve collaboration among stakeholders.
By adopting digital solutions, contractors can ensure their schedules of values remain accurate and accessible throughout the project lifecycle. Software platforms often include templates and reporting features that simplify audits and compliance with industry standards.
Conclusion
A schedule of values is far more than a simple billing tool—it’s a cornerstone of financial transparency and accountability in construction projects. By breaking down the contract value into clear, manageable components, the SOV ensures that everyone involved in a project understands how costs are allocated and payments are processed. Whether you’re working on a small renovation or a multimillion-dollar commercial build, taking the time to create and maintain an accurate schedule of values will pay dividends in reduced disputes, smoother cash flow, and successful project delivery. Embracing digital tools and following best practices can further streamline the process, ensuring your projects stay on track and within budget.
Frequently Asked Questions about Schedule of Values
What is a schedule of values in construction?
A schedule of values is a detailed breakdown of a project’s total contract amount into specific line items, making billing and payment tracking transparent.
Why is a schedule of values important?
A schedule of values ensures accurate progress billing, prevents disputes, and keeps contractors and owners on the same page about payments.
Who prepares a SOV?
Typically, the general contractor prepares the SOV and submits it to the project owner or architect for approval before billing begins.
How does a SOV help in project management?
A schedule of values helps track completed work, manage cash flow, and align payments with project milestones for effective project management.
Can a schedule of values be adjusted after approval?
Yes, a SOV can be updated to reflect change orders or adjustments in project scope, ensuring billing remains accurate.
Is a schedule of values required for all construction projects?
While not always legally required, many contracts, lenders, and large projects mandate a schedule of values for financial clarity.
What forms are commonly used for a SOV?
Industry-standard forms like the AIA G702 and G703 are widely used for creating and managing a SOV in construction billing.
How often should a SOV be updated?
A SOV should be updated regularly as work progresses or when changes occur to ensure payments match completed work.
What software can help manage a SOV?
Construction management tools like Procore, Buildertrend, and CoConstruct simplify creating, updating, and tracking a schedule of values.
Does a schedule of values reduce billing disputes?
Yes, a clear and accurate schedule of values significantly reduces misunderstandings and billing disputes between contractors and clients.