What is sov in construction?

A schedule of values in construction (SOV) is a breakdown of every billable task on a project providing an overview of the budget, a detailed timeline, and percentage of work completed for the entire job. In other words, it’s an itemized list of the entire budget of the project broken down by individual tasks and the costs associated for each of those tasks. The primary purpose of a schedule of values is to function as a start-to-finish document that outlines everything the project will entail. A well thought out schedule of values will serve as the backbone of a contractor’s billing process and becomes an invaluable management tool for any type of contractor. After all, it’s been said that a contractor does not get paid for the work they complete, they only get paid for the work they document.

The most important factor contributing to a successful project that is completed on time and within budget is starting from a plan that is efficient, realistic, and honest with its schedule and timelines. A schedule of values is a powerful document for ensuring that a solid plan of action is in place.  As stated by the American Institute of Architects, “A schedule of values is used as a basis for reviewing the Contractor’s monthly payment applications. It shows the percentage of completion for each of the Contractor’s activities… and allocates the entire contract sum to various portions of the contractor’s work that are detailed in the construction schedule.” SOVs are commonplace for projects with approved budgets, fixed prices and contracts featuring cost-plus guaranteed maximum price.

An estimated 70% of construction professionals blame inadequate job site coordination for most delays and cost overruns. Even more surprising, an estimated 40% of professionals state they have worked on a project that did not include a set budget or timeline. From these numbers, it’s clear that a focused and detailed plan and schedule are of paramount importance for ensuring contractors are paid on time and profitable by the end of the job.

With managing and coordinating payments involving a number of parties and detailed paperwork, a schedule of values is critical for keeping the process smooth and efficient.

In short, an SOV is significant for contractors and subcontractors because it is directly tied to cash flow. At least one in four contractors report that cash flow issues are holding back their business from growing. A schedule of values in construction, when used correctly, will help keep cash flow in check and ensure enough funds are available to keep the project moving forward on schedule. This also means that the document will change as the job progresses. For example, any change orders should be reflected and updated in the schedule of values.

Contractors engaging in commercial or extensive, multi-step residential jobs will use a schedule of values. However, subcontractors should not shy away from utilizing an SOV. One thing general contractors and subcontractors can agree on is that bad communication and coordination is the primary cause for costly delays and cost overruns. A lack of transparency and communication will cause a loss of time and money, and can damage relationships. Including a schedule of values can help mitigate against these risks. Jobs require constant communication and a well thought out SOV helps facilitate effective communication and ensures transparency. It shows that there is a commitment to honesty and efficiency.

A schedule of values in construction will vary in terms of its contents and how it’s structured based on the specifics of the project at hand and what has been negotiated between parties. However, there is a basic consensus on what should be included in most SOVs.

As a best practice, SOVs should include the following:

A well structured SOV will detail cost, level of completion, and percentage paid for each individual task, which helps contractors and subcontractors accurately monitor job progress and ensure work is progressing as planned. This helps contractors time payments so that invoices and proof of work can be submitted in a timely manner.

As mentioned earlier, subcontractors should be on the lookout for agreements that front-load the SOV which will result in majority upfront payments. If creating an SOV yourself, it can be tempting to front-load the contract for your own cash flow needs. However, this should be avoided if possible as it is considered a bad accounting practice and can result in serious issues as change orders and inevitable obstacles will arise throughout the project.

In addition, front-loading can cause values for all work completed that will not match up to what they should be. If a dispute arises this can cause serious issues. If change orders are put in place, a contractor may not be able to collect extra money as a result of the change order if they have already front-loaded the schedule of values. This is due to difficulties in explaining why a line item would cost more at the start of a project versus later in the project.

In any case a subcontractor should be very familiar with any schedule of values they are working with. Disputes and disagreements may result in costly payment issues that can be difficult to negotiate. In this case the SOV is a powerful document in terms of mitigating disputes and preserving subcontractor rights. Since a schedule of values in construction presents a clear record of work completed and amounts to be paid, it can be leaned on to support a mechanics lien and will serve as a catalyst for a claim for money owed if the need arises.

In today’s construction industry, projects are a vast interconnected web of documentation, communication, coordination, and yet even more contract documents. From invoices, to SOWs, to change orders, keeping track of it all can be overwhelming. Luckily Knowify is here to help. From job costing, bidding and budgeting to proposals, invoicing and progress payments, our project management workflow is built to help your team execute projects more efficiently and leave your customers more satisfied.

However, completing it on time and within budget takes a lot of hard work.

To achieve that, you need to come up with a solid plan that details how the project is going to unfold from start to finish. In other words, you need a schedule of values (SOV).

This article is going to guide you through everything you need to know about SOVs—what they are, why they are important, what to include in them and what to avoid.

In order to understand how having a schedule of values benefits you and what this document should look like, we must first explain what it is.

The schedule of values is created by the contractor and needs to be agreed upon by all key stakeholders prior to the beginning of the project.

In essence, it provides a list of the tasks that need to be completed, the materials the workers will need in order to complete them, and the cost of it all.

This document allows contractors to organize their work in chronological order, and it provides the client with a transparent overview of the cash flow for the project.

This way, everyone involved knows exactly what to expect.

A schedule of values should be standard practice if you’re a contractor taking on large residential and commercial construction projects.

A complex construction project is bound to have a large number of parties involved in it, and you need everyone to be on the same page.

Ethan Daniel James, a professional tradesman and writer, says that he has seen $250,000 construction jobs contracted without a written agreement.

It is essential that you have a written record of what you and the client have agreed upon in terms of the cost of materials and labor, as well as the project timeline.

This will protect both parties, allow the client to track your progress, and ensure that you get paid for your work.

But what if you’re working on a small-scale construction project?

Even then, it’s still recommended that you use a schedule of values.

Although such a project may have a fixed price or a guaranteed maximum price contract, you still need to communicate your progress to the client and stay within the set budget.

A construction project, whether big or small, relies on open communication and transparency among all parties for success.

That is why it’s advisable for you to create a schedule of values for each project you take on.

Making the effort to do so even for smaller projects will instill a sense of trust within your client, but also help you hone your ability to correctly estimate the budget when larger projects roll around.

According to the 2020 National Construction Payment Report, 70% of contractors that were surveyed claim that projects go over budget or exceed deadlines due to poor jobsite coordination.

This is where having a schedule of values can come in handy. It can serve as a great project management tool.

It allows both you and the client to see the bigger picture from the very beginning.

Because it requires you to provide a breakdown of all the tasks that need to be completed in the exact order, a schedule of values can help you and your crew remain focused and organize your time and resources in an optimal way.

Another reason why it’s important to have an SOV is that, when done well, it can help with a steady cash flow.

With a steady cash flow, you and your crew will be able to keep the project moving forward in accordance with the timeline and get paid for your work.

The results of a 2019 cash flow survey show that almost all construction companies have had to resort to threatening a mechanic’s lien in order to receive payment for their work.

These statistics go to show that getting paid on time is a serious issue in the construction industry.

Given that a schedule of values is going to contain information about each stage of the project that’s been completed, you can use it to calculate and track the amount you are owed and the funds you have already received.

Take a look at an example of an SOV below to see what this can look like in practice.

The column on the left-hand side outlined in red shows the status of purchase for the materials or the level of completion of a specific task.

In case the contractor encounters payment issues, this can serve as proof that they have completed their end of the deal and prompt the client to release payments.

Apart from promoting accountability of both the contractor and the client, a transparent and detailed schedule of values can help increase the trust between the two parties.

Ethan Daniel James, whom we’ve mentioned before, has spoken to Max Deholl and Justin Hall of Modern Mountain Builders about the importance of using a schedule of values for developing a trusting relationship with their clients.

Deholl and Hall firmly believe in transparency and open communication, which is why they diligently update the schedule of values in a Google Doc that the client can access.

So show your clients that they can trust you by openly sharing your progress, because this can help you form a strong and lasting business relationship.

We’ve explained what a schedule of values is and why you need one regardless of the size of your project. But what should it look like?

Such a document generally takes the form of a spreadsheet, with each column being dedicated to one type of project information.

Of course, no two projects are exactly the same, so it’s safe to say that the schedule of values is also going to vary from project to project, depending on the scope and complexity.

To make sure you don’t have to start from scratch with each project, we advise creating a template.

If you’re not sure where to start, these are some of the categories that frequently appear in SOV templates.

The schedule of values is a document that has to accurately reflect the status of the project, so you need to update it regularly throughout the duration of the project.

That way, the client will have the assurance that you’re following the project timeline and staying within budget, and you will have proof of how much work has been completed in order to get paid.

Here’s an example of what a filled-out schedule of values can look like.

This SOV is a simple spreadsheet that provides basic project information at the top before moving on to the table containing work items, their prices, amounts paid and amounts due, as well as the percentage of work that has been completed.

It is best practice to have a conversation about the contents of this document with the client before you actually create it.

That way, you’re making sure that the document is genuinely useful to the client, rather than cluttered with information they may not find relevant to the project.

Although there aren’t any firm rules about what a schedule of values should look like, there are certain practices you do want to avoid when creating it.

One such practice is front-loading the contract. A Quora user explains what front-loading is and why some contractors do it.

While increasing the cash flow at the beginning of the project may sound tempting, it is not recommended.

Front-loading can cause serious cash flow issues later on in the project, but also damage your relationship with the client.

To put it simply, when a contractor chooses to shift project costs to the beginning of the project, rather than evenly distributing them throughout the project, they are likely to end up overbilling the client.

The reality is that most projects, no matter how well planned, don’t always go as expected.

You could, for example, unexpectedly need to go over budget mid-project.

In that case, you’ll have no choice but to request additional funding from the client, who has already paid a large sum of money at the very beginning of the project.

Ending up in this situation can harm your reputation and client relationship.

It is a well-known fact that many construction companies struggle with receiving payment for their work on time, so front-loading can sound like a good workaround.

The truth is, it tends to cause more harm than good.

So, instead of trying to mitigate cash flow issues on your own, be upfront with the client.

Honestly communicating your needs is likely to lead to more understanding and a solution that works for both parties.

A schedule of values is an important document for any construction project, big or small.

It can help you develop a trusting relationship with your clients, and it promotes accountability when it comes to staying on schedule and within budget.

We recommend you create a solid template for a schedule of values, as this can help you make sure that you’re providing the client with relevant and up-to-date information about the progress of your project.

A schedule of values in construction (SOV) is a breakdown of every billable task on a project providing an overview of the budget, a detailed timeline, and percentage of work completed for the entire job. In other words, it’s an itemized list of the entire budget of the project broken down by individual tasks and the costs associated for each of those tasks. The primary purpose of a schedule of values is to function as a start-to-finish document that outlines everything the project will entail. A well thought out schedule of values will serve as the backbone of a contractor’s billing process and becomes an invaluable management tool for any type of contractor. After all, it’s been said that a contractor does not get paid for the work they complete, they only get paid for the work they document.

The most important factor contributing to a successful project that is completed on time and within budget is starting from a plan that is efficient, realistic, and honest with its schedule and timelines. A schedule of values is a powerful document for ensuring that a solid plan of action is in place.  As stated by the American Institute of Architects, “A schedule of values is used as a basis for reviewing the Contractor’s monthly payment applications. It shows the percentage of completion for each of the Contractor’s activities… and allocates the entire contract sum to various portions of the contractor’s work that are detailed in the construction schedule.” SOVs are commonplace for projects with approved budgets, fixed prices and contracts featuring cost-plus guaranteed maximum price.

An estimated 70% of construction professionals blame inadequate job site coordination for most delays and cost overruns. Even more surprising, an estimated 40% of professionals state they have worked on a project that did not include a set budget or timeline. From these numbers, it’s clear that a focused and detailed plan and schedule are of paramount importance for ensuring contractors are paid on time and profitable by the end of the job.

With managing and coordinating payments involving a number of parties and detailed paperwork, a schedule of values is critical for keeping the process smooth and efficient.

In short, an SOV is significant for contractors and subcontractors because it is directly tied to cash flow. At least one in four contractors report that cash flow issues are holding back their business from growing. A schedule of values in construction, when used correctly, will help keep cash flow in check and ensure enough funds are available to keep the project moving forward on schedule. This also means that the document will change as the job progresses. For example, any change orders should be reflected and updated in the schedule of values.

Contractors engaging in commercial or extensive, multi-step residential jobs will use a schedule of values. However, subcontractors should not shy away from utilizing an SOV. One thing general contractors and subcontractors can agree on is that bad communication and coordination is the primary cause for costly delays and cost overruns. A lack of transparency and communication will cause a loss of time and money, and can damage relationships. Including a schedule of values can help mitigate against these risks. Jobs require constant communication and a well thought out SOV helps facilitate effective communication and ensures transparency. It shows that there is a commitment to honesty and efficiency.

A schedule of values in construction will vary in terms of its contents and how it’s structured based on the specifics of the project at hand and what has been negotiated between parties. However, there is a basic consensus on what should be included in most SOVs.

As a best practice, SOVs should include the following:

A well structured SOV will detail cost, level of completion, and percentage paid for each individual task, which helps contractors and subcontractors accurately monitor job progress and ensure work is progressing as planned. This helps contractors time payments so that invoices and proof of work can be submitted in a timely manner.

As mentioned earlier, subcontractors should be on the lookout for agreements that front-load the SOV which will result in majority upfront payments. If creating an SOV yourself, it can be tempting to front-load the contract for your own cash flow needs. However, this should be avoided if possible as it is considered a bad accounting practice and can result in serious issues as change orders and inevitable obstacles will arise throughout the project.

In addition, front-loading can cause values for all work completed that will not match up to what they should be. If a dispute arises this can cause serious issues. If change orders are put in place, a contractor may not be able to collect extra money as a result of the change order if they have already front-loaded the schedule of values. This is due to difficulties in explaining why a line item would cost more at the start of a project versus later in the project.

In any case a subcontractor should be very familiar with any schedule of values they are working with. Disputes and disagreements may result in costly payment issues that can be difficult to negotiate. In this case the SOV is a powerful document in terms of mitigating disputes and preserving subcontractor rights. Since a schedule of values in construction presents a clear record of work completed and amounts to be paid, it can be leaned on to support a mechanics lien and will serve as a catalyst for a claim for money owed if the need arises.