Construction Schedule Of Values: What Is It And How Does It Work?

Construction projects are multi-faceted, with many parts working together. From procurement, budgeting, manpower management, and many other components, it becomes challenging to keep track of everything. General contractors also require progress payments, and they must show proof of work done for the project owner to clear the bill.

That’s where the schedule of values comes in. It helps verify the work done by the contractor and address any progress concerns by the client. 

In this guide, we will examine the schedule for values to see what it contains and how it works. We will also look at how you can build a schedule of values, even if it’s your first time. 

But first, let’s define a schedule of values. 

What is a Schedule of Values in a Construction Project?

A schedule of values (SOV) is a construction document containing all the tasks and their costs required to complete a project. 

Think of it as a breakdown of the total contract value into smaller, measurable, and traceable units. General contractors use it as proof of work done when requesting payment. Project owners also use it to verify the work completed and release payment. 

However, they can also use it to raise disputes in case they’re not satisfied with the work completed by the contractor. 

A schedule of values helps contractors trace and manage their cash flow to keep the project running smoothly. For clients, it’s the only tangible evidence of the project’s progress. 

How is the Schedule of Values Used in a Construction Project?

Although construction contracts vary with projects, they all have one similarity - the milestones set by project stakeholders.

Besides completing a certain percentage of the project, contractors use milestones to bill their clients. It’s how they’re able to pay their workers and subcontractors and have enough cash flow to continue the project. 

A schedule of values helps contractors show the completed tasks and their corresponding costs. Here is how the schedule of values works in many construction projects.

Construction Work Breakdown

Construction projects are vast, involving a lot of tasks. Due to this complex nature, project owners and contractors often have an estimate of the project timeline, budget, and labor needed to finish it. The schedule of values helps to simplify the project by breaking it down into smaller tasks. 

Let’s take a bridge construction as an example. On paper, the project involves a bridge construction at a specific location. It could also mention the expected timeline and a budget estimate. 

However, a schedule of values dives deeper than this. An SOV could include details like site preparation and geotechnical investigation to determine the soil’s strength. 

Demolition of pre-existing structures also helps to clear the site, making it ideal for construction. 

Breaking down the project helps contractors formulate a construction methodology that guarantees a successful project. It also helps project owners assign an accurate budget and timeline to complete the project. 

Financial Breakdown

Every listed item on the schedule of values has a price indicated next to it. The value represents the amount agreed upon between the contractor and the client. It also represents the timely payment schedule between the two parties, ensuring the contractor has enough cash flow to keep the project running. 

Before a contractor begins working on a project, they agree on the payment terms with the client. These terms include the amount payable and the time to pay. 

For instance, a project owner could agree to pay after every completed milestone. Any payment delays or failures create cash flow issues, causing the project to stall. 

Construction Progress Tracking

An entire construction project takes time to complete due to the many tasks involved. When submitting a schedule of values, a contractor must indicate the percentage of work done. Clients then use this information to track the project’s progress to determine whether the progress is aligning with the timeline. 

Progress tracking helps the contractor stay on schedule. Any minor delay could force the project owner to move the deadline. Besides affecting the delivery date, constant project delays also taint a contractor’s reputation, making it hard for the client to work with them again. 

What are the Values of Project Schedule?

An SOV has many values in a project, helping everyone involved be on the same page. Here are a few values you’d expect to find in a typical project schedule:

Effective Communication and Project Management

Communication is key to the success of any project. A schedule of values outlines teams and individual responsibilities to help improve collaboration and teamwork. 

Managing a huge project requires coordination. Different teams must work together to provide the vital information and resources to complete the project.

Let’s take a skyscraper construction as an example. A schedule of values could assign different responsibilities like cost control, resource allocation, project monitoring, or procurement to different teams. This way, if there any questions or a need for clarification, you’ll know who to approach. 

Progress Tracking

Clients often break down a project into phases which they outline in the construction contract. After completing each phase, a client must monitor it before allowing the contractor to continue to the next. 

A schedule of values highlights all the tasks completed in a particular phase. Clients then use this information to keep track of the project without needing to be constantly around a construction site. 

Quality Control

Project owners trust contractors to deliver the project per requirements. Even with this level of trust, the client still needs to monitor the project to ensure it stays on course. 

The schedule of values defines the required standards that everyone involved in the construction should aim to achieve. It references the local building codes to ensure safety and structural integrity. 

A schedule of values also outlines inspection dates for any work package to identify potential issues earlier on. 

Contractors then use the inspection documents and reports as proof of compliance in case of any reviews. 

Resource Management

A project is only as good as the resources allocated to it. Such resources include labor, materials, budget, construction equipment, and subcontractors. 

Managing and allocating these resources effectively helps to streamline the entire construction process, allowing an accurate project delivery. 

In terms of labor, an SOV highlights all the tasks involved in the project and the relevant workforce needed to complete them. This way, it prevents the issue of understaffing any construction section. 

A schedule of values also takes account of all materials used to complete a specific construction phase. By doing so, contractors can accurately know the unused materials and whether they’ll be enough to complete the next phase. An SOV helps to identify issues like material theft, shortage, or wastage. 

An SOV also breaks down the construction budget and the responsible team. Doing so helps to identify potential issues earlier through the project and the people to ask questions in case of any issues. 

How to Build a Comprehensive Schedule of Values

Building a comprehensive schedule of values is done a contractor and verified by an engineer before the actual work begins. Since it serves as a roadmap to keep the project on track, it’s crucial to be thorough when building one. Here are a few steps and tips to help you out:

Confirm the Project Details and Cost

A project’s budget is crucial to its success, and that’s why you must be accurate with the figures. Start by confirming the project’s price. Then compare the price with the project details to get the accurate cost. Project details include the scope of work, materials, labor requirements, and timeline with the client.

Add the Project’s Work Items

Work items are all the tasks and activities required to complete the project. Every project has different work items depending on its size and complexity. 

If it’s a home construction, you should expect work items like site preparation, foundation, framing, and roofing. Be thorough with every task by listing all the materials and respective costs. 

Calculate Each Item’s Value

Every task has stages that require resources to complete. Break down each task to account for every construction step, from pre-construction to completion. 

Identify every resource required in every step, including labor and materials. Then match these resources to the actual cost to come up with a complete cost of completing that task.

Update the SOV as Work is Completed

Update an SOV to match the work completed throughout the project. Indicate the new percentage of work done, cost, and materials used. Don’t forget to update the remaining resources and expected costs to complete it. 

Submit an SOV with the Application for Payment

Use an SOV as proof of work done and progress when requesting payment. Always double-check the details in an SOV to ensure they match the actual work done. Any discrepancies could lead to disputes that delay payment., leading to cash flow issues. 

Give your client time to review the document and verify the information before releasing payments. 

What Should a Schedule of Values Include?

Every schedule of values has different details depending on the type of project. However, there are some common elements that make up a schedule of values, and they include:

List of Work Items

The list of work items is the core of any SOV, and it’s crucial to be very detailed when writing it. 

Start by breaking down major construction phases, like foundation or MEP installation, into smaller and manageable tasks. You should include a clear and concise description of every task and why it’s important to the project. 

Let’s take a foundation construction as an example. In this case, we would have tasks like clearing and leveling the site, digging trenches, and disposing of excavated materials as some task examples. 

Don’t forget to include the cost for each task. The costs could include material and labor expenses. If there are any consultation fees, include them as well. 

Percentage of Work Done

Every major project has milestones indicated in an SOV. They usually mark the completion of certain phases of the construction project. For instance, we could use a successful MEP installation as a milestone in a home construction project. 

Milestones are usually indicated as a percentage of work completed in relation to the entire project. Clients use this information to determine if a contractor is aligning with the project timeline. 

Balance Remaining for Line Items

When creating an SOV, the balance remaining for every line item is crucial in determining whether the project aligns with the pre-determined budget. 

The balance remaining includes items like the construction budget, labor, and materials. A contractor indicates the amount of the budget and material remaining to complete the project and the required labor for each line item. 

A line item could be a work package, materials, or subcontractor services as elements of a construction project. 

A positive balance means the project is aligned with the budget, with a negative one indicating cost overruns.

Understanding the balance remaining has benefits to a construction project. They include project forecasting, cost control, and resource allocations. An SOV also improves decision-making during the construction process. 

Retainage Percentages

A client often indicates the amount of money they withhold until the contractor completes specific tasks or corrections. It serves as security to ensure the contractor delivers the project as requested before receiving the full amount.

The retention value varies with projects based on their sizes and flexibility. The retention rate is applied uniformly throughout the project, although there are cases where there are different rates for every work item. 

Project Contingencies and Allowances

As a contractor, you should anticipate unforeseen obstacles, like material shortages, weather, and labor strikes. You are more likely to experience project delays if you run into any of these obstacles. Although there is no way of knowing which challenges will hinder your progress, it's best to set aside some funds to cater to them.

Contingencies and allowances are the best cash flow plans to help combat these problems when they occur.

Let’s take subcontractors’ fees as an example. Subcontractors have different fees depending on their skills, experience, and project’s complexity. 

Final Thoughts

Every project runs on a budget that requires constant monitoring to ensure it stays on course. A schedule of values helps in project management by breaking down the total contract value into manageable costs for easy monitoring.

Contractors use the schedule of values to request payment from clients after completing milestones to ensure a steady cash flow. Clients use it to verify work done, quality control, and that the project progresses as agreed before payment processing.

An SOV enhances collaboration, improves communication, and helps to identify any cost overruns or potential problems earlier on as the project progresses. When building an SOV, it's crucial to include all the items and their corresponding costs to ensure a timely and accurate payment.