Schedule of Values in Construction Explained – A schedule of values (SOV) is a detailed list that itemizes the activities required to complete the scope of work in a construction project, along with their corresponding costs or values.
It provides a comprehensive overview of the project, covering all elements and activities from the start of construction to project completion.
The values assigned to each activity in the SOV represent the payment that the contractor is entitled to receive upon completing that specific work component.
When totaled, these values should match the agreed-upon contract amount.
Whether you are an experienced project owner, general contractor, or new to the industry, this article will cover everything you need to know about the schedule of values and how to effectively use it for successful financial management and project delivery.
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Schedule of Values in Construction Explained – SOV Basics
The schedule of values (SOV) is a comprehensive breakdown of the different tasks or scopes associated with a construction project, along with their respective costs or values. When these individual amounts are added together, they represent the total contract value for the entire project.
The SOV is an essential tool for progress billing and managing change orders, and it plays a crucial role in monitoring the completion of work in comparison to the planned schedule.
For project owners, the SOV provides transparency and accountability regarding project costs and finances. It allows them to understand how the total contract amount is allocated to different work items or scopes.
A well-defined SOV promotes transparent payment practices by clearly stating the assigned value for each work item.
This transparency enables owners to make payments to contractors based on the percentage of completed work, ensuring fairness in the payment process.
Additionally, an organized SOV facilitates effective resource planning and allocation, promoting optimal utilization of labor, materials, and equipment.
In general, the schedule of values serves as the basis for budgeting a project. However, in the day-to-day operations of project delivery, it provides the fundamental framework for monitoring project progress and managing invoicing.
How to Create a Schedule of Values
Schedule of Values in Construction Explained – The schedule of values (SOV) is typically created by the general contractor before the construction management project begins. This step is crucial for establishing a roadmap and ensuring smooth project execution.
To create the SOV, the contractor starts by considering the total contract amount and the specific scope of work outlined in the contract.
The entire scope is then broken down into individual tasks or deliverables, each assigned a corresponding value or scheduled value. These values encompass both direct and indirect costs associated with each task.
What to Include in a SOV – The Schedule of Values
The Schedule of Values (SOV) is a crucial document in construction projects, providing a detailed breakdown of the project’s financial aspects. Below is an organized breakdown of its components, typically presented in columns:
1. **Project Information:**
– Header section containing essential details such as project name, number, address, and contractor firm name.
2. **Item Number:**
– Sequentially assigned numbers to each line item, representing specific work activities or tasks in the project. Accompanied by a clear description of the scope of work.
3. **Description of the Work:**
– Detailed descriptions outlining the nature of each work item or task.
4. **Scheduled Value:**
– Estimated cost associated with each work item or task. The total reflects the payment amount due to the contractor upon successful completion.
5. **Start and End Date:**
– Dates indicating the scheduled start and end of each task, essential for project scheduling and progress tracking.
6. **Work Completed:**
– Two components:
– The total dollar amount of work completed in previous pay applications.
– The dollar amount of work completed in the current period, encompassing all new completed work not captured in previous pay applications.
7. **Stored Materials:**
– Cost of materials purchased but not yet utilized on the project. Functions as a cost recovery mechanism for the contractor.
8. **Total Completed + Stored-to-Date:**
– Combined dollar amount of completed work and the value of stored materials for each task.
9. **Percent Complete:**
– Represents the percentage of work completed for each line item, indicating progress on individual work activities.
10. **Balance to Finish:**
– Value of work remaining to complete each task.
11. **Retainage:**
– Withheld percentage (typically 5-10%) of each progress payment until project completion, ensuring contractual obligations are met. Applied to the scheduled value to determine the retainage amount.
12. **Total Cost:**
– Cumulative value of all individual tasks, providing an overview of the project’s overall financials. This should precisely match the total project cost.
How the Schedule of Values is Used
The schedule of values is an essential tool used in construction projects for various purposes, including:
Payment Management:
The SOV forms the basis for contractors to request and receive payments for completed work, also known as progress billing or payment applications.
It specifies the value assigned to each work item, allowing contractors to track their payment entitlements and ensure fair compensation.
It also enables owners to easily verify the accuracy of payment requests.
Project Progress Tracking:
The SOV helps monitor the progress of work against the planned schedule.
By comparing the actual completion of work to the scheduled values in the SOV, contractors can assess productivity, identify delays, and implement corrective measures.
Simultaneously, it allows project owners to monitor progress, evaluate contractor performance, and address any deficiencies or delays promptly.
Financial planning and cash flow management
The Schedule of Values (SOV) is an essential tool for financial planning for both project owners and contractors.
It provides project owners with valuable insights into expected billing for each period, assisting in budgeting and high-level financial management.
Contractors can effectively manage their cash flow by using the SOV to anticipate and plan around predetermined payment timelines.
Common Mistakes
The Schedule of Values (SOV) should provide clear and specific details for each item to avoid any ambiguity.
Generalized or vague descriptions can lead to misunderstandings, disputes, and potential change orders during later stages of the project.
For example, labeling a task as “Electrical Work” without specifying the specific electrical tasks or components included can result in confusion.
By breaking down the category of “Electrical Work” into specific requirements and deliverables, each component can be accurately measured and billed accordingly.
This level of detail allows for precise tracking of the work performed, ensuring transparency and facilitating accurate invoicing.
Aligning the schedule of values with the specific contractual requirements is crucial to avoid cost overruns, non-compliance, and potential legal issues.
Overall, a well-crafted and diligently maintained schedule of values provides transparency, facilitates financial control, and supports effective project management.
It helps track progress, manage resources, control costs, and ensure adherence to contractual obligations.
Using Technology to Create and Manage an SOV
The integration of technology into the construction industry has revolutionized various processes, including the creation and management of the Schedule of Values (SOV). Leveraging technology offers numerous advantages, such as:
Automation: Project management and estimating software can automate the creation of an SOV based on the project’s budget.
While the preliminary draft may need review and refinement, automation reduces administrative burden and the potential for errors.
Mobile applications: Mobile apps allow project teams to access and update the SOV on the go, even from remote job sites.
This accessibility enhances productivity and ensures that the SOV remains up to date.
Data analytics: Technology platforms can analyze data from completed projects to provide insights and benchmarks for future SOV creation.
These analytics help optimize cost estimation and resource allocation, improving accuracy and efficiency.
Overall, Schedule of Values in Construction Explained – leveraging technology for creating and managing the SOV streamlines processes, improves accuracy, enhances collaboration, and promotes transparency throughout the construction project.
