The Importance and Composition of a Construction Schedule of Values

As construction projects expand in size and complexity, breaking the contract value into smaller, more manageable pieces has helped to streamline monitoring and payment processes while improving transparency. The schedule of values has emerged as a pivotal tool for tracking progress and completion percentages while ensuring contractors and their employees are paid for their work in a timely manner.

What Is a Construction Schedule of Values?

A schedule of values (SOV) is an itemized list of activities required to complete a construction project, along with the corresponding cost or value of items completed in each phase. The contract sum is allocated to the portions of work detailed in the schedule. 

While a statement of work (SOW) defines the project scope along with the timelines, deliverables, and responsibilities for specific tasks, a schedule of values in construction focuses specifically on the costs associated with each element. The values listed in the SOV correspond to the payment a contractor is expected to receive when each item is completed.

Purpose of Using a Schedule of Values in Construction Projects

A schedule of values establishes a baseline to help contractors manage their progress while providing a transparent resource for the client’s billing and payment processes. The financial visibility offered by the SOV also allows clients and project owners to proactively identify delays, overruns, and other deviations to help them stay on track. Additional purposes served by a schedule of values include:  

• Assessing costs associated with change orders and other scope changes
• Ensuring agreed-upon contract terms align with billing and payment activities
• Providing a historical record for audits and future reference

Who Prepares the Schedule of Values?

In most cases, the general contractor is responsible for creating the schedule of values based on the total contract dollar amount and the work elements detailed in the SOW. The contractor will assign values to each individual task and deliverable, then submit a draft of the initial SOV to the project owner for review, along with other stakeholders like the architect, building designer, or subcontractors, as applicable.  

This feedback loop and stakeholder collaboration ensure that questions and discrepancies are resolved during the preparation process and that all parties are aligned with the values assigned to each phase and category of work. The contractor who prepared the schedule of values might also request formal written approval from the client.

Importance of Schedule of Values in Construction Projects

By creating a framework for cost and value data, the SOV becomes a living document that provides many important benefits for all parties involved in the construction process.

Project tracking

The information in the schedule of values makes it a convenient resource for project and progress-tracking purposes. With cost information segmented by task and phase, construction project managers, contractors, and clients can track expenditures and compare progress to the scheduled values. This helps to assess whether the project is ahead or behind so that adjustments to the plan and budget can be made accordingly.

Risk mitigation

A schedule of values reduces the financial risks associated with a project by identifying sources of overspending or payment errors early on. The SOV also mitigates risks from legal and contractual issues by setting clear expectations for deliverables. The collaboration and improved communication fostered by an up-to-date construction schedule of values also reduce the likelihood of counterproductive disputes and misunderstandings, allowing for more effective construction risk management strategies.  

Timely billing and payment

The existence of the SOV makes it easier for contractors to justify and collect payments in a timely manner. Since the client has already agreed to a payment schedule based on estimated resources and requirements, invoicing that aligns with this agreement can easily clear construction billing and payment approvals. To track the completion percentage, contractors can compare completed payments to the overall project value.

Resource management

The SOV includes all costs and values in a simplified format, making it easier to understand the material, labor, equipment, and other resources required to complete each task. This helps to determine how resources and their associated costs will be categorized, tracked, and paid to ensure tasks are completed on time. Discrepancies in the SOV also reveal when additional or unplanned resources might be needed.

What Is Included in a Schedule of Values?

The SOV is usually completed using a table or spreadsheet that allows a large amount of information to be captured in a compact format. The complete list of work items, value for each item, and work completed (to date) are the most important details to include in the schedule. This basic information allows reviewers to compare the budget to the actual spend for each phase, task, or category. Additional information that is frequently captured includes:

• Projected and actual start and end dates for each task
• The value of work remaining to complete each task (balance to finish)
• Dollar amounts withheld in retainage until the project is completed
• General project information such as the name, number, address, and contractor

Electronic formats allow important SOV values, totals, and percentages to be calculated or updated automatically. Construction software solutions also make the construction schedule of values searchable and provide customizable options for report generation.

How to Create a Schedule of Values

Creating the SOV is a step-by-step process that begins with detailed work breakdowns and accurate cost estimations. No matter what format or template is used, SOV creation always includes a few basic steps:

1. Confirm project details and costs

The first and most essential step in creating the SOV is confirming the overall contract price or value, followed by a high-level review of the scope of work, labor requirements, materials, and timeline. As you create a basic outline for the SOV, remember that the total cost of all line items must remain balanced with the contract value. If discrepancies are observed, it is important for the client and contractor to work together to resolve these issues before moving forward.  

2. Add the relevant work items

Each individual line item in the SOV is known as a work item. These elements define measurable tasks that can be easily broken out for payment and tracking purposes. Examples of work items include framing a basement, installing bathroom fixtures, or sealing a roof. Most work items include labor, materials, and equipment. Task completion status for all items should be clearly defined to support payment milestones.

3. Calculate item values

Item values are at the core of the schedule of value creation process, so the costs associated with labor, materials, and related expenses should be researched carefully. Advanced construction estimating software, like RIB CostX,  helps to automate material cost calculations based on reliable quantities and current market prices. Any overhead expenses or administrative costs associated with each work item should also be factored in.

4. Complete updates

The SOV is a living document, so it is important to complete updates continuously to ensure the calculated percentages of work completed and the cost remaining for each item are as accurate as possible. Maintaining the schedule of values also prevents payment processing delays when submitting invoices. When material or equipment costs change based on shortages or other supply chain issues, the SOV should reflect this. 

5. Review and confirm

While remaining current is essential, the accuracy of the SOV must also be maintained throughout the project. This means double-checking all costs and calculations, verifying work completion is allocated to the correct items and categories, and reviewing the documents, records, and receipts referenced in the schedule to ensure the information is complete and organized.

6. Submit the payment application

The benefits of timeliness and accuracy become apparent when the schedule of values and supporting documents are submitted to facilitate an application for payment. Clients and project owners rely on the SOV to verify completed work so that invoice processing runs smoothly. Even when information is up-to-date and error-free, contractors should submit payment applications as early as possible to allow ample time for review, questions, and processing. 

Conclusion 

The schedule of values is a pivotal tool in the construction industry. It captures real-time information on project task completion status and contractor payment in a concise electronic format. Software tools support the creation, organization, and sharing of the SOV while allowing this valuable resource to feed into meaningful status reports.

At RIB Software, we have developed a state-of-the-art toolkit of solutions designed to drive quality, collaboration, and on-time delivery of construction projects. If you want to experience the power of innovative construction technology, get your free demo today and discover how RIB can move your business to the next level!