Construction Schedule of Values: The Complete Guide

The Schedule of Values (SOV) is more than a supporting document. It is the financial backbone of a construction project. For project managers, billing administrators, and finance teams, understanding how an SOV works is essential for accurate billing, predictable cash flow, and timely payments. This guide walks through the fundamentals of the SOV and shows how it can be used strategically across the life of a project.

Understanding the Schedule of Values (SOV)

At its core, a Schedule of Values is a detailed breakdown of the total contract amount into individual, billable components of work. It establishes how the contractor will earn and collect payment as the project progresses. Each line item represents a defined portion of the scope with an assigned dollar value that rolls up to the total contract sum.

The SOV turns a broad contract scope into measurable billing units. It creates a shared framework that allows owners, general contractors, and subcontractors to track progress, validate work completed, and process payments consistently throughout the project.

Key Components of an SOV

• Line Items: Individual portions of work or materials that can be tracked and billed separately.
• Description: A clear explanation of what is included in each line item.
• Scheduled Value: The dollar amount assigned to each line item.
• Total Contract Value: The sum of all line items that make up the full contract amount.
• Retainage: A percentage withheld from each payment until contractual milestones or project completion.

A well-structured SOV aligns closely with the contract and scope of work. When done correctly, it acts as a transparent financial ledger that clearly ties payment to progress.

Creating an Effective SOV

The quality of your SOV directly impacts project cash flow and billing efficiency. A clear and accurate SOV reduces disputes, simplifies billing reviews, and improves visibility into job performance.

Step-by-Step SOV Creation

1. Review the Contract Thoroughly: Understand the full scope of work, deliverables, and payment terms before building the SOV.
2. Break the Scope into Billable Segments: Divide the work into logical, measurable line items that reflect how the project will be executed.
3. Assign Accurate Values: Allocate realistic dollar values based on labor, materials, overhead, and margin.
4. Be Thoughtful About Cash Flow: While some contractors structure values to support early project costs, this should be reasonable and defensible.
5. Get Early Approval: Submit the SOV for review and approval as early as possible to avoid billing delays later.

Practical Tip: Involve estimating, project management, and accounting during SOV creation. Alignment across teams prevents rework and billing issues down the road.

Common Pitfalls to Avoid

• Vague Line Items: Broad or unclear descriptions invite disputes and slow approvals.
• Poor Value Allocation: Mispriced items distort progress tracking and cash flow.
• Out-of-Sequence Work: An SOV that does not reflect how the project is built makes progress billing harder.
• Insufficient Detail: Especially for general contractors, weak subcontractor SOVs increase review time and risk.

Avoiding these issues keeps billing predictable and reduces friction throughout the project.

Using the SOV for Progress Billing and Tracking

Once approved, the SOV becomes the foundation for all progress billing. Every payment request is tied back to this document.

The Monthly Billing Process

1. Evaluate Progress: Determine the percent complete for each SOV line item.
2. Calculate Earned Value: Apply percent complete to each scheduled value and subtract prior billings.
3. Prepare the Payment Request: Compile current progress, prior payments, and retainage.
4. Submit for Review: Provide supporting documentation as required.
5. Receive Payment: Payment is issued based on approved progress, with retainage held per the contract.

Accurate progress tracking against the SOV is critical. It supports every dollar billed and helps prevent payment delays.

Managing Change Orders

Change orders are unavoidable. When scope or pricing changes, the SOV must be updated to reflect the new reality of the project. This typically includes:

• Adding new line items for added scope
• Adjusting values on existing items
• Updating the total contract value

Keeping the SOV current ensures that all approved work is billable and properly tracked.

Advanced SOV Practices

When used intentionally, the SOV becomes more than a billing tool. It becomes a control mechanism for managing risk, performance, and profitability.

For General Contractors

• Subcontractor Review: Require detailed, well-structured SOVs that align with the prime contract.
• Early Risk Identification: Use SOV detail to spot scope gaps, front-loading, or potential disputes.
• Cash Flow Planning: Structure values to support procurement and execution without creating approval risk.

For Subcontractors

• Clear, Defensible SOVs: Detail reduces questions and speeds up approvals.
• Strong Documentation: Track labor, materials, and progress to support every billing.
• Proactive Communication: Address issues early before they delay payment.

Using Technology to Manage SOVs

Managing SOVs in spreadsheets creates unnecessary risk and inefficiency. Modern construction billing tools streamline the process by:

• Automating calculations
• Providing real-time visibility into billing and remaining values
• Improving collaboration and approvals
• Maintaining a full audit history of changes and billings

Technology turns the SOV from an administrative burden into a financial control system.

Conclusion

The Schedule of Values is not a formality. It is a living financial framework that drives billing accuracy, cash flow, and project success. Teams that invest time in building and maintaining strong SOVs experience fewer disputes, faster payments, and better financial outcomes. Mastering the SOV is one of the most impactful steps you can take to improve construction billing performance.