From dealing with suppliers to handling mountains worth of documents, general contractors have many moving parts. With so much to deal with, it’s a wonder that anything gets built.
So, how do general contractors complete projects without getting overwhelmed? The answer is simple: develop a comprehensive schedule of values (SOV) to track progress for all jobs, big and small. In this article, we’ll explore everything you need to know about schedules of values. Let’s start with a quick overview of what they are and why they are critical to successfully completing construction projects.
What Are Schedules of Values in Construction?
A schedule of value is a legal document that lists all work items and pricings for the entire project, from the start to finish. By breaking down what needs to be done, and for how much, schedules of values enable contractors to track project progress for all jobs, both big and small.
Put in another way, an SOV is the Google Maps of your project. It gives you direction, tells you how far you’ve gone, and how much farther is left to go. Without a schedule of values, it’s easy to get lost.
Why Should General Contractors Use Schedules of Values?
Should all construction projects have a schedule of values? The answer is a definitive yes. By providing a step-by-step project timeline, schedules of values give you the oversight needed to ensure your projects stay on track and that everyone gets paid on time. They also empower you to:
- Accurately determine and control budgets — by breaking down the total cost of the project into smaller, more manageable items. You can also monitor expenses against the schedule of values to ensure that the project sticks to budget.
- Better manage cash flows — creating a payment schedule for each item enables you to manage cash flow and guarantee that payments are made on time. This helps to avoid delays and ensure that the project stays on track.
- Monitor project progress — comparing actual costs and payment schedules to the original budget enables you to monitor the progress, identify any issues or delays, and take corrective action as needed.
- Improve transparency and accountability — all stakeholders, including the owner, subcontractors, and suppliers, can refer to the agreed-upon schedule of values to understand the project’s budget, costs, and payment schedule. The schedule of values can also be used as a reference to resolve disputes or claims related to costs.
How Much Detail Should Go Into Your Schedule of Values?
The level of detail represented in a schedule of values can vary between projects. Meticulous project owners, for instance, might insist on creating line items for every task. Accounting for every lick of paint can lead to clutter, which is why some contractors list items under larger categories. This can mean the difference between listing every nail bought versus listing the cost of nails within a broader ‘tools and hardware’ bucket.
There isn’t an industry standard for creating schedules of values, so owners and contractors are free to create one that best suits their needs.
Avoid These Common Schedule of Values Challenges
Have you ever heard the military phrase that “no plan survives contact with the enemy?” It’s similar in construction. No plan — or schedules of values — will be completed to the letter. Deadlines will be missed. Cost predictions will be incorrect. And new strategies will be needed to complete tasks. To ensure your project can account for disruption, consider the following SOV challenges:
- The scope of the project changes — when the project scope changes, the schedule of values must be adjusted to reflect these changes. If changes result in the budget being too low for a specific task, then additional funds need to be acquired. If these adjustments aren’t made, then your stakeholders will be held hostage to an agreement that no longer reflects reality.
- Poor communication and documentation — with so much paperwork to reconcile, it can be difficult to quickly and efficiently adjust schedules of values — especially if you rely on old-school, paper processes. Payment automation apps can help by eliminating time-consuming paper processes and streamlining payment applications. Fortunately, many apps on the market are purpose-built for general contractors. At GCPay, for instance, we offer a payment application solution that helps general contractors efficiently handle paperwork and update their schedules of values.
Check out our cost-benefit calculator to see how much time and money GCPay could be saving you. - Inaccurate costings and overbilling — putting together a schedule of values can lead some to inflate the value of early project activities. This is done so that the majority of the payments are made early on in the project. While tempting, this is a form of overbilling that can cause long-term problems. One issue with overbilling is that it reduces the total amount of retainage you can withhold from subcontractors, limiting one of your most powerful tools for incentivizing good work.
Another issue is that overbilling can lead to payment issues, especially as the costs cited don’t directly correlate with the labor and materials provided. Overbilling is a surefire way to poison your relationship with the project owner.
Best Practices For Creating A Schedule of Values
As we’ve previously mentioned, there isn’t a set standard for creating a schedule of values. But there are best practices you can follow, such as:
- Start by identifying and defining the project scope.
Collaborate with your stakeholders to identify all the work items, materials, and labor required to complete the project. Then break the project into measurable milestones with dependencies. The more time and effort you put into this step, the more factors will be accounted for and the more issues you can predict.
- Tailor line items and your schedule of values template.
Communicate the schedule of values to all stakeholders, including subcontractors, suppliers, and the project owner. Ensure everyone understands the details, including the project’s budget, costs, and payment schedule. Use your stakeholders to vet everything before securing sign-off.
For line items, the amount of detail required varies from project to project. Cater to the level of detail needed by the owner or architect to track the project and process payments. Consider including the following details:
- The description of each item of work, as outlined in the contract
- Using industry codes and SKUs so items can be compared and precisely accounted for
- The total cost for each item
- What you’ve been paid to date on the work, from prior billing periods
- Your costs for the current billing period
- The percentage of the work that’s been completed
- The remaining cost for completion
- Retainage costs
- Confirm the values vs. the project budget.
From pre-construction to completion, assess all costs before they are entered into the schedule of values. Double-check the details for any accounting or quoting errors. A mistake can cascade, leading to missed deadlines and delayed payment.
- Determine the payment schedule.
Establish a timeline for payment for each work item and milestone, including the payment amount, due date, and the conditions for release.
- Monitor progress and update the schedule of values.
Your work isn’t done until the project is completed and everyone gets paid. Additionally,
you need to track when every job is done and accounted for or else you could pay for incomplete work. Regularly updating the SOV is also key to accounting for issues like material cost changes and delays. To do so, constantly monitor project progress against the schedule of values to ensure that the project stays on track and within budget. Updating your SOV is best managed with collaborative construction software that makes it quick and easy for all parties to make changes.
When updating documentation, consider implementing a date and naming scheme so relevant parties know that they are dealing with the latest version of the schedule of values.
Improve the Efficiency of Your Construction Projects
Schedules of values are a crucial tool for managing construction projects. However, your SOV is only as useful as your ability to act upon it. Inefficient, time-consuming processes can prevent you from keeping your project on budget and on track. This problem is compounded by the complex nature of managing a construction project. That’s where GCPay can help.
We offer a construction payment management platform that streamlines the payment process, reduces payment disputes, and improves cash flow management for general contractors. With GCPay, general contractors can easily manage their schedules of values and payment schedules, track progress against milestones, and ensure that subcontractors and suppliers are paid accurately and on time.
Ready to learn what GCPay can do for you?
