A schedule of values (SOV) is a key tool in construction that breaks the project cost into detailed, manageable parts. It can help you track work progress and payment schedules, which can in turn help you and your contractors stay aligned with the project budget and milestones. 

Each line item represents a specific task, material, or phase, making monitoring expenses easier and ensuring accurate billing. Using SOV can prevent disputes, streamline communication, and improve transparency. 

In today’s blog post, I will explain the benefits of an SOV in construction projects.

What is a Schedule of Value Construction?

A schedule of values (SOV) in construction is a document that breaks the total project cost into individual tasks or phases. It assigns a specific dollar amount to each part of the work, thus allowing for easy expense tracking as the project progresses. 

Contractors use the SOV to request payments based on completed work, while project owners can verify that each stage aligns with the budget. By detailing costs for each task, an SOV promotes transparency, improves communication, and helps keep the project on schedule and within budget.

A schedule of values can help you understand the following:

  • The tools, manpower, and supplies required to accomplish the job
  • The portion of the project that has been finished
  • The amount you gave to the contractors
  • The number of work items that have been completed
  • The present state of the project’s cash flow and progress payments

AN SOV helps keep projects moving forward and on schedule. The schedule of values organizes projects and emphasizes responsibility and openness.

Why Should You Use SOV?

Contractors who manage complex and large projects will need a schedule of values to handle payment applications, control costs, and stay within budget.

An SOV can help you align all stakeholders by providing a clear framework. You must create a schedule of values before investing in materials or labor. Without this document, you risk wasting money on unnecessary resources. A well-prepared SOV makes a positive first impression and provides valuable direction for your team.

An SOV can benefit projects with a fixed price or a contract specifying maximum cost. These agreements set the project budget, and the SOV’s cost breakdowns ensure that the project does not deviate from the cost baseline.

An SOV promotes transparency, which helps contractors and project managers communicate effectively and avoid misunderstandings and conflicts. It can help you identify cost issues, thus allowing for timely adjustments. It keeps the project organized, on budget, and aligned with agreed-upon milestones.

SOV Vs Cash-Flow Management

A schedule of values and cash-flow management serve different purposes in construction, but they can both help you track project finances. An SOV itemizes the total project cost into tasks or phases and links payments to completed work. This tool monitors progress and ensures fair payments, which can help contractors and owners stay aligned on project milestones and budgets.

Cash flow management focuses on tracking the money that comes in and goes out over time. It can help project managers ensure that there is enough cash to cover expenses when they arise. Cash flow management is vital for avoiding cash shortages, especially in large projects with extended timelines.

While an SOV outlines costs based on tasks, cash-flow management monitors the actual timing of financial resources. Together, they give a complete picture of project finances; one tracks costs by task, and the other balances cash needs over time.

Step-by-Step Process to Create an SOV

You can follow these processes to create an SOV:

  1. List All Tasks: Break the project into specific tasks, phases, or work categories. Be as detailed as possible. Use a work breakdown structure for this purpose.
  1. Assign Costs: Determine the cost for each task based on labor, materials, and other expenses. Ensure that the total cost matches the project budget.
  1. Order Tasks by Sequence: Arrange the tasks in the order they will be completed. This will make tracking progress easier.
  1. Assign Percentages: Convert each task cost into a percentage of the total budget. This will simplify billing and progress tracking.
  1. Review and Finalize: Review the SOV with all stakeholders to ensure accuracy and agreement. Adjust as needed.
  1. Use for Tracking and Billing: Use the SOV to track progress and issue payments according to the completed work.

Structure of a Schedule of Values

An SOV should be straightforward and provide all stakeholders with the required information. It consists of three main sections: heading, spreadsheet, and consent.

1. Heading and Basic Information

This section appears at the top of the document and may include the following details:

  • Project Name
  • Project Number
  • Contractor’s Name
  • Liaison or Contact Person’s Name
  • Client’s Name
  • Client’s Billing Address
  • Client’s Service Address
  • Architect’s Name
  • Architect’s Application Date
  • Architect’s Application Number

2. Spreadsheet

Following the heading, this section itemizes each job component, outlines the timeline, and estimates costs using a table of rows and columns.

The spreadsheet can include the following information:

  • Rows: These run horizontally and may represent:
    • Item Number
    • Work Description
    • Estimated Cost or Scheduled Value
    • Construction Dates
    • Percentage of Completion
    • Retainer or Deposit
    • First Payment
    • Final Balance Due
  • Columns: These run vertically and correspond to the information in each row. For example, if the construction job has six itemized components, each cell in the item number column should contain a unique serial number. The scheduled value row should also list the corresponding dollar amounts.

3. Consent and Acknowledgment

The final section includes spaces for the client and contractor to print their names and sign. There should also be a designated area for all parties to write the date of acknowledgment.

Schedule of Values Example

The following is an example of a simple schedule of values structure.

schedule of values example
An Example of a Schedule of Value
  • Item Number: Each task is assigned a unique number for easy tracking. This example uses numbers like 1000, 1001, 1002, and 1003.
  • Work Description: This column specifies the work for each phase (e.g., aluminum doors and windows, mechanical installations, and floor finishes).
  • Scheduled Value of Work Items: This shows the budgeted amount for each task over the project’s duration.
  • Completed Works: This includes the value of completed items, with separate columns for the prior phase and the current SOV cycle.
  • Percentage of Work Finished: This column shows the project’s completion percentage, which can help managers estimate the remaining work and time.
  • Amount Yet to Be Billed: This is calculated by subtracting the completed work value from the scheduled work value, which indicates whether funding is adequate or adjustments are needed.
  • Retention: Funds are held back until the contractor completes the work.
  • Totals: This is the final row that sums up each of these categories.

Schedule of Values Template

An SOV can take various forms, but contractors typically use a spreadsheet to record data and submit payment requests. Below is a sample SOV template for your reference.

schedule of value template
Schedule of Value Template

Advantages of Using a Schedule of Values

The following are a few advantages of using a schedule of values:

  • Creates and Maintains Order: An SOV is especially valuable for projects with a fixed budget or maximum contract price. It provides a detailed cost breakdown, which can help you ensure that the project remains within budget as it progresses.
  • Guides Team Members: Sharing the SOV with team members can help them understand their roles and individual objectives. The SOV includes a project timeline, which can help everyone stay aligned with their tasks. It can also be used as a reference for providing feedback and tracking progress.
  • Keeps the Team on Track: Distributing the SOV among team members can help you clarify goals and responsibilities. This management tool will keep the team focused on meeting the project’s objectives within set timelines. It also highlights current tasks and upcoming steps.
  • Simplifies Payment Collection: For larger projects, payments are made in stages. An agreed-upon SOV will make payment collection smoother. It details each job phase’s cost, payment deadlines, and anticipated completion dates, making it easier to coordinate client payments.

Summary

A schedule of values is important for maintaining transparency and accountability. It keeps projects on schedule and within budget, thus directly impacting performance and cash flow. Project managers can use an SOV to estimate material, labor, and financial needs accurately and set realistic timelines that foster client trust. 

This approach can help create agreements supporting a steady income flow and benefit contractors and clients. A well-managed SOV will enhance communication, ensure timely payments, and contribute to a smoother, more successful project outcome for all parties involved.

Further Readings:

References:

Fahad Usmani, PMP

I am Mohammad Fahad Usmani, B.E. PMP, PMI-RMP. I have been blogging on project management topics since 2011. To date, thousands of professionals have passed the PMP exam using my resources.