Schedule of Values in Construction Explained

A schedule of values (SOV) is an itemized list of each activity required to complete the scope of work on a construction project, along with the corresponding costs or values. The SOV serves as a complete representation of the project, detailing all the elements and activities from construction kickoff to closeout. The values in the SOV reflect the payment that the contractor is entitled to receive upon the completion of each work component, and when summed up, should match the total agreed-upon contract amount. 

A schedule of values is a valuable management tool that aids in financial control, payment management, project monitoring and documentation. A well-crafted SOV promotes effective communication, transparency and informed decision-making between all project stakeholders. At its core, the SOV serves as a roadmap that guides the financial management and progress of the entire construction project.

In this article, we break the schedule of values down, explaining how it is created, the different components, SOV templates, and practical application for cost and progress management. Whether you’re an experienced project owner or a general contractor or new to the industry, we’ll explore everything you need to know about the schedule of values and how to use it effectively for successful financial management and project delivery.

SOV Basics

The schedule of values (or SOV) offers a comprehensive breakdown of the various tasks or scopes associated with a construction project, along with their respective costs or values. When these individual amounts are summed up, they equate to the total contract value of the entire project. The SOV serves as a fundamental tool for progress billing and change orders and plays a crucial role in monitoring the progress of completed work in comparison to the planned work.

For project owners, the SOV provides transparency and accountability in regard to project costs and financials. It gives them insight into how the total contract amount is being allocated to different work items or scopes. 

A well-defined SOV fosters transparent payment practices as it explicitly states the assigned value for each work item. This clarity empowers owners to make payments to contractors in accordance with the percentage of completed work.

By referring to the SOV, owners can monitor the progress of work and compare it against the planned schedule. This allows them to identify potential delays or deviations and take proactive measures to mitigate risks and keep the project on track.

A well-crafted SOV also serves as a valuable tool for contractors to manage their projects efficiently and ensure financial stability. It is an overarching guide of the work to be completed and corresponding payment milestones. The SOV acts as the foundation for billing, outlining steady and consistent cash flow for the contractor throughout construction as the project progresses to subsequent stages. In addition, a well-organized SOV facilitates effective resource planning and allocation, promoting optimal utilization of labour, materials and equipment. 

Broadly speaking, the schedule of values serves as the foundation for budgeting a project. However, in the day-to-day operations of delivering a construction project, it provides framework for monitoring project progress and managing invoicing.

How to Create a Schedule of Values

Prior to construction kickoff, the general contractor is typically responsible for creating the schedule of values. This process lays the foundation for the project’s execution. By outlining all the steps involved, the general contractor develops a roadmap to reference and navigate the construction stage effectively and efficiently.

The contractor develops the SOV based on the total contract sum and the scope of work specified in the contract. The entire scope is broken down into individual tasks or deliverables and a corresponding value (i.e. scheduled value) is assigned. These values include both direct and indirect costs.

The contractor submits a “pencil draft” — or preliminary version of the SOV — to the project owner (and sometimes the architect and owner’s representative). The project owner reviews the SOV to ensure that there is a clear alignment on the cost breakdown between the owner and contractor. 

The owner provides feedback, requests adjustments, and asks for further clarification of the cost breakdown. Together, the contractor and owner finalize the schedule of values, creating the foundation for pay applications, change orders, and tracking project progress. This collaborative process creates transparency and mutual understanding between the project owner and contractor.

What to Include in a SOV

Here’s a breakdown of the components included in the schedule of values, typically seen as columns, from left to right.  

Schedule of Values Template

Many contractors use templates to generate their schedule of values on construction projects. Some of the most commonly used SOV templates are CCDC 2 (Stipulated Price Contract), CCDC 5A (Construction Management Contracts), and CCDC 17 (Stipulated Price Contract for Trade Contractors on Construction Management Projects). 

While the CCDC does not publish a standalone SOV template, these contracts include sections for detailed breakdowns of work and payment applications. Many construction firms in Canada create custom SOV templates in Excel or project management software, aligning them with the CCDC guidelines and specific project needs.

Free Download

Schedule of Values Template

Owners use a schedule of values to assist with payment management, project monitoring and financial documentation. Download and customize this free template to track projects costs and values throughout a project.

• Customizable to project needs
• Ready-to-use
• Made by and for construction professionals

Download Free Template

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How the Schedule of Values is Used

The schedule of values is a vital tool used on construction projects for a variety of reasons, including the following.

Payment Management

The SOV serves as the basis for contractors to request and receive payments for completed work, also known as progress billing or payment applications. It outlines the value assigned to each work item, enabling contractors to track their payment entitlements and ensure fair compensation for the work they have performed. This also enables owners to easily verify the accuracy of payment requests. 

Project Progress Tracking

The SOV aids in monitoring the progress of work against the planned schedule. By comparing the actual completion of work to the scheduled values specified in the SOV, contractors can evaluate their productivity, detect any delays, and implement corrective measures to keep the project on track. Simultaneously, the SOV empowers project owners to monitor project progress and assess contractor performance. It allows them to identify deficiencies, delays, or potential issues and take prompt actions to address them effectively.

Financial Planning and Cash Flow Management

The SOV serves as an important tool for both project owners and contractors in terms of financial planning. For project owners, it provides valuable insights into the expected billing for each period, aiding in budgeting and management of high-level finances. By referring to the SOV, the contractors are able to effectively manage their cash flow as it enables them to anticipate and plan around the predetermined payment timelines.

Resource and Manpower Management

Similar to the SOV providing an understanding of the project’s progress, the SOV allows contractors to estimate the resource requirements for each work item or phase. Contractors can use the SOV to determine the appropriate level of resources needed, including the number of workers, specific skills required, equipment specifications, and material quantities. The SOV also helps contractors create a detailed project schedule, so that resources are allocated at the right time and in the correct sequence to meet project milestones and deadlines.

Conflict Resolution and Contractual Compliance

Incorporated into the contract, the SOV provides a clear and transparent breakdown of the agreed-upon project scope and values, establishing an objective reference point for all project stakeholders. All parties then possess a shared understanding of the financial and other aspects of the project, which can help create constructive dialogue and aid in finding mutually acceptable resolutions.  

Change Order Management

The SOV establishes a structured framework for effectively evaluating and managing changes to the project scope. It serves as a comprehensive record of the project's original scope, enabling efficient tracking and communication of any modifications.

Cost Control

The SOV assists in cost control as it provides a detailed breakdown of the project's cost structure, including the anticipated costs for each work item or phase. This allows contractors to monitor and manage their expenses effectively. Contractors can identify potential budget overruns, make informed decisions, and implement cost-saving measures as needed. This, in turn, also provides owners with a comprehensive overview of costs and allows them to monitor the project and its budget progress.

Common SOV Mistakes

When creating a schedule of values, several common mistakes often occur. Here are a few of them to watch out for, and the negative impacts that often result.  

Frontloading

Contractors may “front-load” the SOV so that a disproportionate amount of the contract value and associated payments are allocated to the early work of the project. This is achieved by artificially inflating the value of the work in the beginning stages of the project while reducing the value of tasks that occur later on. 

While frontloading improves the contractor's cash flow, it may pose risks in the later stages of the project if the work is not delivered as expected. 

Lack of Specificity

The SOV should provide sufficient detail for each item to avoid any ambiguity. Vague or generalized descriptions can lead to misunderstandings, disputes, and potential change orders during later project stages. 

For example, simply labelling a task as “Electrical Work” does not specify what specific electrical tasks or components are included in that scope of work. By breaking down the category of "Electrical Work" into the specific requirements and deliverables, each component can be accurately measured and billed accordingly. 

This detailed itemization allows for precise tracking of the work performed, ensuring transparency and facilitating accurate invoicing.

Inaccurate & Inconsistent Cost Estimation

One of the primary purposes of the SOV is to assign prices or values to each item or task. Mistakes often occur when pricing items due to using outdated or incorrect rates, inconsistent pricing methods, or failing to account for all the costs or work associated with an item. This can result in budget overruns or shortfalls. 

Overlooking Indirect Costs

The SOV aims to encompass all costs related to a construction project, including both direct and indirect expenses. Failure to adequately consider or incorporate indirect costs in the SOV can result in an incomplete financial picture. 

This can lead to inaccurate representation of the project's total costs, potentially resulting in inadequate budgeting or underestimation of overall expenses. Such oversights not only impact cash flow management and the availability of funds for important project activities and expenses, but they can also have a significant effect on the project's profitability.

Not Incorporating Changes

Failing to update the schedule of values to include approved change orders can cause discrepancies in the payment schedule as well as misunderstandings regarding scope, which can lead to disputes over additional costs and work.

Insufficient Review and Negotiation

Failure to conduct a comprehensive review and negotiation of the SOV can result in disputes later on. It is essential that both the project owner and the general contractor reach a mutual agreement on the contents of the SOV before kicking off construction.

Disregarding Contractual Requirements

Not aligning the schedule of values with the specific contractual requirements can also result in cost overruns, non-compliance, and potential legal issues.

Schedule of Values Example

Let’s examine how a SOV works in the case of a hypothetical construction project.

Project Background

West Coast Builders, a national commercial general contractor, was awarded a contract for the new Harbourview Port, a CAD 200 million project. The project was complex with multiple phases and different buildings and structures as well as a large number of specialty contractors needed to complete the work. The client relied on West Coast Builder’s depth of experience and construction expertise to create the schedule of values in order to track the project's billing and progress as well as effectively manage all financial aspects. 

Creating the Schedule of Values

As West Coast Builders is a larger general contractor, the creation of the schedule of values was a combined effort of the project manager and the estimating team. In practice, this collaboration was vital to the creation of a well-crafted SOV. The project manager provides the necessary project-specific information, oversees the SOV's development and ensures that it aligns with the overall project strategy and requirements. The estimating team provides the technical expertise in cost estimation and precise breakdown of the project's expenses.

Design and Specification Review

West Coast’s team reviewed the architectural drawings and project specs and analyzed the scope of work involved in constructing the new airport. With a clear and detailed understanding of the project's scope, the team began the process of itemizing the tasks into separate line items for the SOV, while ensuring that the breakdown aligned with CSC divisions.

Next, the team estimated the required quantities and costs for each line item based on their expertise and historical data from similar projects. The estimating team consulted market rates, supplier and specialty contractor quotes and recent cost data to determine the unit prices for the materials and services involved. The unit prices were then multiplied by the estimated quantities to calculate the total value of each line item. 

Confirm SOV Accuracy

Once the team completed the breakdown and calculations, they reviewed and verified the SOV's accuracy and completeness. They cross-checked their estimates and scrutinized the descriptions of work to ensure clarity and consistency. The project manager consulted with the site superintendent to create the start and end dates of each line item or task. The project manager also ensured that the SOV adheres to the project's contractual requirements and is aligned with the client's expectations.

West Coast Builders represented the initial or preliminary version before formal approval and finalization. The owner carefully examined each line item, sought clarifications when items were unclear, and discussed any necessary revisions with the contractor. Together, they reached an agreement on the final SOV, including the breakdown of costs and quantities, making any adjustments or additions as needed.  

Benefits Realized During the Project

Throughout construction, the SOV benefits West Coast Builders and the project owner in several ways.

• Progress Billing

  The SOV allowed West Coast Builders to easily bill for completed work items or tasks. This allowed the general contractor to manage their cash flow, track pay applications and pay their subcontractors for the work they completed in a timely manner. 

• Progress Tracking

  The SOV played a vital role in monitoring the project’s progress. When scopes of work were delayed or behind schedule, the SOV clearly highlighted the disparity between the planned and actual completion of the work. With this clarity, West Coast Builders were promptly able to take necessary measures to rectify the situation and bring the project back on schedule.

• Change Order Management

  In the event that the project owner opts to add additional scope to the project, West Coast Builders efficiently computes the additional costs, presents the change order to the owner and subsequently updates the SOV to accurately reflect the modifications made.

West Coast Builders effectively utilized the schedule of values to manage their cash flow, allocate resources efficiently, and monitor project progress.   

By leveraging the schedule of values throughout the project, West Coast Builders successfully delivered this large-scale construction project — Harbourview Port. The owner valued the transparency and financial control enabled by the meticulously crafted and diligently maintained schedule of values, which further cultivated trust and respect between both parties. 

Using Technology to Create and Manage an SOV

The integration of technology into construction processes continues to streamline tasks, improve accuracy, and facilitate enhanced collaboration.

In regards to creating and managing the schedule of values, utilizing technology provides several advantages, including:

• Automation

  Several project management and estimating software are able to automatically create an SOV based on the project’s budget. These preliminary SOV drafts can be reviewed and refined but overall reduce administrative burden and possibility of error. 

• Real-time Updates

  Cloud-based systems allow project owners, general contractors and specialty contractors to access the same document simultaneously, so all parties are up-to-date on the most current version. This helps facilitate greater collaboration and communication and increases operational efficiency. 

• Progress Tracking

  With different project management software, it is easier to track the progress of each line item in the SOV, automatically updating completion percentages and facilitating accurate progress billings. 

• Integration with Billing Software

  Linking the SOV to billing and payment digital progress can help streamline these processes. The integration streamlines the entire procedure, expediting payment release for completed work milestones.

• Better Communication and Transparency

  Creating a digital SOV enables all project stakeholders to easily access and exchange current information, creating a shared understanding of the project's financial status and progress.

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