What is a schedule of values in construction?
There are so many documents that are part of construction projects, but one of the documents that most people are not aware of is the schedule of values. However, general contractors are very familiar with this type of document, as it is the one that can determine the difference between a successful or a failed project.
An easy explanation of a schedule of values is that it is a list of all the work items for the project. This includes the very first item as well as the very last item, plus all the component parts of each one and the values of each. At the very bottom of this document, there will be the entire contract price, and the costs of all the items must be equal to or under that price.
The way that the prices and items are broken down are done differently from project to project, as well as by owners and architects. Some people prefer to look at larger numbers, and don’t care about how the larger numbers came about. However, some people prefer to know where each penny of their budget is going, and their schedule of values will be itemized accordingly.
The cash flow of a construction project is determined by the schedule of values, which is why it is the main document used for monthly payments. The schedule of values also evaluates how the project is progressing according to plan and whether the percentage is on point to where everything should be with the amount of money that has been spent at that time.
Some contractors want to collect as much of their money upfront as possible, which is why they are always tempted to front-load the schedule of values. However, this is a bad idea, the values for all the work will not match up to what they should be, which will cause problems if anything is ever contested.
Of course, problems are always arising on construction sites, and those problems always require change orders to be completed. It may not be easy for a contractor to collect the extra money for the change order if they have already front-loaded their schedule of values. The reason for this is that they will have a difficult time proving why something cost more on a line item in the beginning and the same thing is costing less towards the end.
Before beginning a schedule of values, contractors need to be aware of their costs for everything, because those are the numbers that need to be inputted into the table. The first line is normally pre-construction requirements, although this could be different for many people, and there will be a total cost for that item. After the total cost, there will be the cost to date and the remaining cost, followed by the percent completed for that specific line.
Further reading: Construction inspection: The pillar to your construction quality management
Creating this schedule of values prior to the beginning of a project is beneficial to everyone, because it then becomes part of the signed construction agreement. Contractors benefit the most, especially financially and legally, since there is no hidden information, and nothing can be misconstrued.
While a general contractor will use the schedule of values continuously through the project, it is always also available to architects and owners. That means that they can see how well the construction project is progressing, if everything is on schedule and on budget, and see if there are any changes that they can make to improve their results.
The schedule of values also makes it easy to send bills out at the end of each month, or at the designated times, so that payment can be received in a timely manner. Since everyone agreed on the schedule of values, there should be no discrepancies as to whether or not the amount of the bill is accurate. Therefore, the bills should be paid for within the agreed upon time frame and not ignored or disputed.
This ensures that there is enough cash flow for the contractor to complete everything on schedule, instead of needing to stop their work because they ran out of money. To keep the cash coming in, contractors will want to bill consistently and make sure that those dates are clearly stated in the initial contract.
Of course, the schedule of values can also be helpful to the client, as they will know exactly how much money they will need to pay each month and exactly when it is all due. They will never have the excuse that they didn’t know that a bill was coming or that they didn’t know what amount it would be for.
The schedule of values is something that can never be ignored in construction, because the cash flow and success of the project can be affected immensely. This vital document might seem like it takes a lot of work in the beginning, but the time and money that it saves in the end will be worthwhile.