What Is a Schedule of Values and How Is It Used?

A Schedule of Values (SOV) is a structured financial document used in construction projects. It provides a detailed breakdown of the total contract sum into various work elements and cost categories. The SOV helps manage project finances from inception to completion, ensuring clarity and accountability regarding expenditures.

Core Concepts of a Schedule of Values

A Schedule of Values itemizes the contract sum into distinct work items or cost components, each assigned a specific monetary value. Its purpose is to establish a clear baseline for valuing work as it progresses, enabling accurate tracking of expenditures against the project budget.

The SOV facilitates precise progress payments by providing a transparent roadmap for project costs. It serves as a communication tool, ensuring all involved parties share a common understanding of how the total contract amount is allocated. Project owners, general contractors, subcontractors, lenders, and architects or engineers rely on the SOV for financial oversight and to monitor spending and manage resources.

Structuring a Schedule of Values

A Schedule of Values follows a hierarchical structure to organize project costs effectively. This organization begins with major work categories, such as those defined by the Construction Specifications Institute (CSI) MasterFormat divisions. Within these divisions, detailed line items represent specific tasks, materials, or services.

Each line item on the SOV includes specific information to facilitate tracking:

• An item number
• A clear description of the work
• The scheduled value or allocated cost for that item
• Columns to track the percentage of completion
• Amounts previously billed
• The current billing amount for the period
• The remaining balance to finish the work

The categorization can also align with project phases or specific trades involved, offering flexibility in how costs are presented.

The SOV incorporates both direct and indirect costs. Direct costs are expenses directly attributable to specific work activities, such as labor, materials, and equipment used on site. Indirect costs, often referred to as overhead, include expenses not tied to a single task but necessary for project operation, like administrative salaries, site security, and general project management fees. Including these costs within the SOV ensures a complete financial picture and helps manage project profitability.

Preparing the Schedule of Values

Preparation of the Schedule of Values begins with the general contractor breaking down the total contract sum into definable work items. This process involves a detailed analysis of the project scope, contract documents, and specifications to ensure every component of work is accounted for. The total of all line item values must equal the total agreed-upon contract price.

Costs are allocated to each line item based on estimates, subcontractor bids, and material quotes. This ensures accuracy during the project. For instance, the cost of mobilization and general conditions, which cover initial setup and ongoing site overhead, are often included as separate line items or allocated proportionally across other items.

Once drafted, the preliminary SOV is submitted for approval. This submission goes to the project owner, and often involves review by the lender and the architect or owner’s representative. Supporting documentation, such as detailed breakdowns of general conditions or specific material quotes, may be required to substantiate the allocated values. This initial approval establishes the financial baseline for all future payment applications and cost tracking throughout the project.

Using the Schedule of Values for Progress Payments

The approved Schedule of Values serves as the foundation for requesting progress payments throughout a construction project. Contractors submit monthly payment applications, often using standardized forms like AIA Document G702, “Application and Certificate for Payment,” paired with AIA Document G703, “Continuation Sheet.” The G703 form details the progress of each line item from the SOV.

On the G703 Continuation Sheet, the contractor reports the percentage of completion for each work item. This percentage is then multiplied by the scheduled value of that line item to calculate the amount earned for the current period. The form also lists amounts previously billed, allowing for a clear calculation of the current amount due.

The architect or the owner’s representative reviews the submitted payment application to verify the reported progress against the actual work completed on site. This verification ensures the requested payment aligns with the physical progress of the project and contract terms. Once certified by the architect, the application is forwarded to the owner and potentially the lender for approval and disbursement of funds. The process involves subtracting previously paid amounts and any applicable retainage to determine the net payment for the current period.

Adjustments and Special Considerations

The Schedule of Values is a dynamic document that requires adjustments throughout the project lifecycle. Change orders, which represent additions or deductions to the original contract scope, necessitate modifications to the SOV. These changes might involve adding new line items for additional work or adjusting the scheduled values of existing items to reflect revised scope or costs.

Another consideration is retainage, a percentage of each progress payment withheld by the owner until project completion. This amount serves as a financial incentive for the contractor to complete the project and address any deficiencies. The withheld retainage is accumulated over the course of the project and affects the net payment amount received by the contractor for each billing cycle.

The final payment process involves the release of the accumulated retainage, signaling the project’s successful completion. At this stage, the SOV is used to confirm that all work items are complete and all financial obligations have been met according to the contract. This final reconciliation ensures that the total disbursed funds match the final contract sum, accounting for any approved change orders and released retainage.