What is a Schedule of Values (SOV) and how do I write one?

A schedule of values (SOV) is a list that divides your whole contract price into lines of work, each with a dollar amount, adding up exactly to the contract sum. The general contractor and the owner use it to judge how much of the job is done each month, so it decides how fast you are paid. To write one, start from your estimate, group it the way the work will actually be built, and give every line a value that includes its share of overhead and profit.

What a good one looks like

Each line should be something a person can look at on site and judge as a percentage: "Second floor rough-in" works; "Labor" does not.

An example for a $180,000 plumbing subcontract:

1. Mobilization and submittals: $7,000
2. Underground rough-in: $28,000
3. First floor rough-in: $31,000
4. Second floor rough-in: $29,000
5. Water heaters and equipment: $24,000
6. Fixtures, furnish: $26,000
7. Fixtures, install and trim: $22,000
8. Testing and inspections: $6,000
9. Closeout, as-builts and warranty documents: $7,000

Total: $180,000.

How to write one from your estimate

1. Start from the estimate, not from the bid total. The detail is already there.
2. Group by how the work is built and inspected. By phase, by floor or area, by system. Follow the GC's format if they give you one.
3. Spread overhead and profit across every line in proportion. A separate "overhead and profit" line will be argued over or paid last.
4. Give early work its own lines. Mobilization, submittals, shop drawings and engineering are real costs that come before anything is installed.
5. Split material from labor where the material is large. Equipment delivered to site can then be billed when it arrives, if the contract allows billing for stored materials.
6. Keep closeout small but present. A line for punch list and closeout documents is expected. One that is too large holds your money hostage at the end.
7. Check the total against the contract sum to the cent.

How many lines?

Enough that no single line is more than about 10 to 15 percent of the contract, and few enough that you can assess each one in a few minutes every month. For most subcontracts that is somewhere between 8 and 40 lines.

Front-loading: where the line is

Putting the true cost of early work on early lines is fair. You pay for mobilization, submittals and material deposits long before the last fixture goes in. Inflating early lines beyond their cost is front-loading, and GCs look for it. If they find it they will reject the SOV or stop trusting your percentages. The honest version still helps your cash flow; the inflated one puts it at risk.

Get it approved before the first bill

Send the SOV as soon as the subcontract is signed. An SOV still being argued over on the first cutoff date means the first payment slips a month.

Change orders

Do not fold an approved change order into an existing line. Add each one as its own line below the original contract, with its number. The original lines keep adding up to the original contract, and everyone can see what was added.

The link to billing

Every month you will give each line a percent complete. The pay application multiplies it out. An SOV written with care makes that a ten minute walk. One written as three lump sums makes every month a negotiation.

Where ConstructStream fits

In ConstructStream the schedule of values is not typed a second time: it comes from the lines of the bid the client accepted, and each approved change order is added as its own line. Progress invoices and the pay application bill against those lines, each one carrying what was billed before and what is left.