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The Schedule Of Values (SOV) is an in-depth, comprehensive and structured list of all tasks within a construction project, listed next to their payment values. SOV is a standard practice that many contractors follow to appropriately bill their clients.
As this document lists out all individual costs in the contract, it becomes an essential tool for managing cash flows from the beginning to the end of the project. This article will discuss SOV’s features and benefits in construction projects.
The SOV is a document that essentially has two columns. Where in the first, the activities conducted in the construction project are listed, and in the second column, they are aligned to their estimated cost. Hence, even when someone with less knowledge about the construction project goes through the document, they will understand how much each task costs.
Billing against a Schedule Of Values is a standard practice for commercial contractors and construction projects. However, it is common for smaller contracting groups or remodellers to misunderstand an SOV, as the tasks are almost always overlapping.
This is why it is vital to understand SOV’s importance, features and benefits so that it can be easily incorporated as a management tool to aid the complete sequence.
It is complicated to estimate at the very beginning of every construction project how it will end up. The most ingenious method to navigate any potential mishaps that a project can experience, in addition to staying on track, is to adhere to a Schedule Of Values.
Contractors never deviate from the Schedule Of Values as it can potentially hurt their reputation, and business owners are protected as the project is completed as expected.
The following are the standard features of an SOV:
• The SOV should list the value and cost of every billable work item in a sequential/chronological order aligned with the project timeline. This will help to track the progress percentage.
• As all stakeholders utilise the SOV in a construction project, including the general contractor, sub-contractor, property owner and construction manager, it should contain simple and uncomplicated language.
• Generally, the SOV is prepared by the contractor long before the beginning of the construction project. The construction project only commences when every party agrees upon the items listed in the SOV.
Hence, special attention should be given when writing the rates per work item and mentioning the duration assigned to perform the job. Ensure there is no misinterpretation of information, as it could lead to claims later.
• An SOV is also a document that helps to track the progress in the work and tick all the work that has been completed. Hence, space should be provided to write the status of each task. This is important, as the payment is usually released to the contractors based on the completion status of the SOV document.
Some items that an SOV must include are:
• Item number.
• Item descriptor to describe the type of work.
• Item value or scheduled value.
• Amount that was previously billed. Some contractors are paid by the percentage of work completed instead of a lump sum amount, which is an important addition.
• Amount billed this period, where the column specifies how much work the contractors have completed since the last payment.
• Amount of stored materials.
• Total value. This contains the sum of the previous three columns.
• Percentage completed.
• Amount remaining or balance to finish.
• Retention cost.
• SOV in large construction projects help contractors oversee the progress effectively and manage their contract payment applications efficiently.
• SOV allows project owners to accurately track the percentage of completion, which helps them calculate the balance amount they need to pay to the contractors.
• SOVs help describe the chronological order of work completed and their associated costs. This helps to improve accountability and trust amongst different stakeholders within the project. SOVs are shared with every individual in the project, helping them understand what their roles and responsibilities are and what are the organisational expectations.
• SOV creates more transparency in the completion of the project so that the client and contractors have access to the same schedule or values and no information is hidden or misunderstood.
• SOV provides opportunities to contractors to get funding released early and ensure that no one is underpaid.
Leveraging technology in your build processes is an easy alternative to managing and documenting SOV for all your projects.
Hence, when you digitally build your SOV as opposed to on paper, it makes it simpler for architects, contractors, and owners to easily access the actual progress reports on an SOV so that any minor changes can be added to the SOV. This ensures that there is little room for discrepancy or loss of value of work.
The Schedule Of Values (SOV) is a comprehensive and structured list of all construction project tasks next to their payment values. Benefits include better project tracking and greater transparency.
We suggest you also read the article ” What Is Financial Risk ?”.
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