Why is a Schedule of Values Essential for Accurate Project Payments?
The fundamental function of a Schedule of Values is to link contract money to payments. These payments are directly based on project progress. Without a detailed SoV, it is difficult to assess payments for completed work, leading to disputes. The granular breakdown of an SoV makes milestone payment requests proportional to the work completed, creating clarity and promoting transparency.
The process also simplifies the management of changes in project scope. Clear definitions of how these changes affect the contract help to resolve issues. It also helps identify budget issues early with cost contingency items. Plus, with an SoV, project management software provides detailed and relevant reports.
A detailed Schedule of Values offers several advantages for accurate payments:
- Payment requests that are precise, auditable, and tied to the project contract.
- A way to monitor a project’s performance by seeing actual costs against work completed.
- Control over project costs to stay within budget.
- Early identification of scope changes that impact the budget to make proactive adjustments.
- A baseline to assist with forecasting expenses and getting a high-level overview of project finances.
A good Schedule of Values boosts financial transparency by showing clearly how money is spent on labor, materials, and subcontractors. Project accounting, particularly on complex jobs, becomes easier with a good SoV. This gives everyone greater confidence in project cost management.
An SoV directly links the scope of work (SoW) with financial planning. This alignment of work and spending ensures project cohesion.
Key Components of a Schedule of Values
A high-quality Schedule of Values contains key elements. Each line should be clear, measurable, and detailed.
All team members must understand the included costs and related tasks. Instead of using vague costs, line items should be specific, such as "install 10 fire-rated doors, including frames and hardware," or “build 20 linear meters of interior wall, using x type of materials."
Every cost needs a clear connection to actual work completed. To ensure maximum accuracy, a Schedule of Values should always include:
- Tasks described precisely, with verifiable work against the project scope.
- Accurate costs for each line, with all materials, labor, equipment, and subcontracted services included.
- Costs divided into project phases and work types, matching the project plan.
- Separate line items for materials, labor, subcontracts, and equipment, plus project-specific overhead costs.
- A total SoV value that matches the contract, with all extras or exclusions noted.
Specific detail is important in a Schedule of Values. All items should be directly tied to a scope of work. All line items should come from carefully estimated costs. These costs must reflect proportional values for all tasks.
A schedule should reflect the scope of a project and be clear for all stakeholders. This makes a schedule auditable. It also provides clarity and transparency. It provides a key link with the project plan.
How Should a Schedule of Values be Created and Used on a Project?
Typically, a main contractor develops a Schedule of Values during project bidding or pre-construction, especially with lump-sum contracts. The project owner, client, manager, or lender receives this for review. The SoV should cover all financial aspects and be fair.
The SoV should also support the best outcome for a project. The process begins early and needs to compare planned with actual costs and, if required, to make changes. To correctly create and use a SoV on a project:
- Create the document early, for team collaboration from the start and to ensure that all money is being spent correctly.
- Price all tasks correctly. Real project costs will help ensure financial transparency.
- Use this document as your framework for all payment requests. Tie payment requests to work completed.
- Maintain your Schedule of Values and record changes to the project or timeline.
- Use your SoV with project management software to simplify reporting, financial control, and tracking.
Changes in a project must be recorded in the SoV. This ensures that everyone stays informed about a project budget. It also reduces disputes and increases success. The Schedule of Values guides the project budget, but is not a separate budget document.
