A Schedule of Values, or SOV, is an itemized breakdown of the work required to complete a construction project, with a value assigned to each major task, phase or deliverable. When all line items are added together, the total should match the full contract amount. In practical terms, the SOV becomes the financial map of the project.
It shows how the contract value is distributed, how progress will be measured and how payment applications will be reviewed. For owners, it creates transparency. For contractors, it supports billing, cash flow planning and documentation throughout the job.
A well-prepared Schedule of Values construction document usually includes project information, item numbers, descriptions of work, scheduled values, start and end dates, work completed, stored materials, total completed and stored to date, percent complete, balance to finish, retainage and total cost. The total cost should agree exactly to the contract sum. Retainage commonly ranges from 5% to 10%, which means a portion of each progress payment is withheld until the contractor satisfies contract obligations. These components help project teams track progress, manage cash flow and compare completed work against the original plan.
The SOV is the foundation for progress billing. As work is completed, the contractor submits a pay application showing the percentage complete for each line item. The owner, architect or owner’s representative can then compare billed amounts to actual progress. This creates a cleaner construction billing schedule because payment is tied to documented completion rather than broad estimates. The same structure also helps identify overbilling and underbilling. Overbilling may occur when amounts are billed before corresponding work has been completed, while underbilling may occur when completed work has not yet been reflected in the billing schedule.
Common mistakes include vague line items, inconsistent cost estimates, front loading, missing indirect costs, failing to update the SOV for change orders and ignoring contract requirements. Front loading is especially sensitive because it assigns too much value to early work, allowing a contractor to bill aggressively before equivalent work has been performed. A poor SOV can also create disputes over payment, retainage and project status. A reliable Schedule of Values template should be detailed enough to support review without becoming so granular that it slows routine billing. Construction teams should also compare the SOV to WIP reporting, especially when evaluating percent complete, earned revenue, billed to date, overbillings, underbillings and margin fade.
A cost estimate is usually prepared before or during contract negotiation to forecast what the project should cost. The SOV is prepared after the contract amount is established and allocates that contract value across the project’s work components. In other words, the estimate helps price the job, while the Schedule of Values contract framework helps administer the job. This distinction matters under ASC 606, where revenue recognition often depends on measuring progress toward completion. It also connects naturally to broader Construction Company Accounting Questions, including cash flow, job costing, retained amounts, change orders and whether reported progress matches economic reality. In periods shaped by the Causes of Delayed Construction Economic Recovery, accurate billing and project visibility become even more important.
Who is responsible for creating the Schedule of Values on a construction project?
The general contractor typically prepares the Schedule of Values before construction begins. The owner, architect or owner’s representative may review it, request clarification and negotiate revisions before it becomes the billing framework for pay applications, retainage and progress tracking.
Retainage is usually applied to each line item based on its scheduled value and completed work. If retainage is 10%, a portion of each progress payment is withheld until contract obligations are satisfied, helping protect the owner from incomplete or defective work.
Yes, but changes should be documented carefully. Approved change orders may add, remove or revise line items. Any modification should align with contract terms, owner approval procedures and the project’s billing documentation to avoid confusion during payment review.
Front loading places excessive value on early activities, allowing larger invoices before comparable work is completed. This can improve early contractor cash flow, but it may create owner concerns, distort progress reporting and increase dispute risk later in the project.
An approved change order should be incorporated into the Schedule of Values so the revised contract amount, line items and remaining balance stay accurate. This keeps billing, progress tracking, retainage and financial reporting aligned with the updated project scope.
For more than four decades, Bennett Thrasher has provided businesses and individuals with strategic business guidance and solutions through professional tax, audit, advisory, and business process outsourcing services. Contact Aaron Scale, partner in charge of Bennett Thrasher’s Construction practice, or call us at 770.396.2200.
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