What Is a Schedule of Values (SOV) in Construction?
Learn how a Schedule of Values (SOV) provides a financial roadmap for construction projects, ensuring transparent progress and payment.
Learn how a Schedule of Values (SOV) provides a financial roadmap for construction projects, ensuring transparent progress and payment.
A Schedule of Values (SOV) is a structured financial document used in construction to manage project costs and payments. It provides a detailed breakdown of the entire construction project, outlining the various components of work and their corresponding monetary values. This document serves as a fundamental tool for financial oversight and transparency, benefiting both project owners and contractors.
A Schedule of Values (SOV) is an itemized list that details every activity required to complete a construction project, alongside its assigned cost or value. When all individual amounts are combined, they equal the total contract value. This document functions as a financial blueprint, ensuring all parties understand how the project budget is allocated.
The SOV typically includes specific components that provide a comprehensive financial overview. Each distinct work category or phase is represented by a line item, such as site preparation, foundation work, or electrical installations. Each line item also features a detailed description outlining the scope of work involved. A specific monetary value is assigned to each line item, which reflects the portion of the total contract sum attributed to that particular work element.
Further columns within the SOV track progress and financial status. These often include fields for the percentage of work completed for each item, the value of materials stored on-site, and the amount of retainage. Retainage refers to a portion of the payment withheld until project completion to ensure satisfactory performance. This structured format allows for clear tracking of expenditures against the project budget and helps manage cash flow.
Creating the initial Schedule of Values is typically the responsibility of the general contractor. This process usually takes place after the contract is signed but before the first payment application is submitted. Input from subcontractors is also often integrated to ensure the values align with their specific scopes of work.
Developing an accurate SOV requires careful consideration. The total contract sum forms the overarching financial limit, which must be systematically broken down. A comprehensive understanding of the project scope and its work breakdown structure is essential, often aligning with Construction Specifications Institute (CSI) divisions to categorize tasks. Detailed cost estimates for each component, encompassing direct and indirect expenses like labor, materials, overhead, and profit, are then assigned to each line item.
Contractors may also consider cash flow needs and project phasing when structuring the SOV. This can involve “front-loading,” where higher values are assigned to earlier work items, though this practice can lead to overpayment if not properly managed. Once drafted, the proposed SOV is submitted to the owner or their representative, such as the architect or engineer, for review and approval. This step ensures alignment and agreement on the financial roadmap before payments are processed.
Once the Schedule of Values has been reviewed and approved, it becomes the basis for contractors to submit periodic payment applications, often monthly. The approved SOV allows for accurate and transparent billing, ensuring payments are directly tied to work accomplished.
To bill against the SOV, contractors report the percentage of completion for each line item, often determined through inspections or progress reports. The value of stored materials, purchased and delivered but not yet installed, can also be included in payment applications, referencing their SOV line items. This helps contractors manage cash flow by receiving payment for materials before they are fully incorporated.
The owner, architect, or a designated lender reviews and certifies payment applications. They compare reported progress against the approved SOV to confirm payment request accuracy. Upon certification, the owner processes payment to the contractor, ensuring funds are released in accordance with documented progress. This process helps minimize disputes and maintains financial transparency.
The Schedule of Values is not static; it is dynamic and can be adjusted throughout the project lifecycle. Changes to the scope of work, whether additions, deletions, or modifications, directly impact the SOV. These changes, documented through change orders, necessitate corresponding adjustments.
Incorporating these changes involves adding new line items for additional work, adjusting existing item values, or removing completed or deleted items. Regularly updating the SOV ensures it accurately reflects the project’s current state and financial commitments. This alignment helps maintain financial control and prevents discrepancies between work performed and payments.
At project closeout, the SOV tracks the remaining contract balance, providing a clear overview of outstanding financial obligations. It facilitates the final payment application, ensuring all completed work is accounted for. The SOV also plays a role in the release of retainage, ensuring all contractual obligations are met.