Building a schedule of values that pays fairly
The consultant returns your schedule of values for a three-floor co-working office fit-out with one comment: mobilization at $165,000 is not acceptable; resubmit with backup. The first billing is due in nine days. Until the breakdown is accepted, there is nothing to bill against.
Break the price into lines that each match work a reviewer can see and measure, by area and trade, priced at estimated cost plus a proportional share of overhead and profit, so each progress billing follows the work in place. Loading money onto early lines gets you paid ahead of the work: reviewers cut it, and the late lines are left short when the finishing trades must still be paid. Owners can insist on true values. One US public owner's clause requires true costs that add up to the contract price, with insurance prorated across the branches of work, and lets its engineer ask for the original estimate sheets.
- Read the payment clause first: when the breakdown is due, its form and detail, and whether the owner wants lines by area, system or schedule activity.
- Build the lines from the estimate, by area and trade, small enough that a reviewer standing in the space can judge each percentage.
- Spread overhead, profit and insurance in proportion to cost, unless the contract lets you bill an item such as a bond premium when you pay it.
- Bill general conditions monthly, and keep mobilization and demobilization at real cost.
- Give testing, commissioning and closeout their own lines, so part of the price is earned only when systems work and documents are handed over.
- Match each subcontract's breakdown to your lines, so you can check a trade's claim against yours.
- Test it: the lines add up to the contract price, and the monthly billings it implies stay close to your expected costs.
Common mistakes
- Loading overhead and profit onto the first lines to fund the job.
- Lines too big to judge, such as one for all mechanical work.
- Lines that do not match how the subcontracts are split.
- Leaving nothing for closeout, so manuals, as-builts and deficiencies have no billing left to drive them.
Checklist
Before you submit the breakdown
- The contract's due date, form and detail
- Lines by area and trade a reviewer can judge
- Overhead and profit spread in proportion
- General conditions billed monthly
- Mobilization and demobilization at cost
- Separate lines for testing, commissioning and closeout
- A total equal to the contract price
Check your understanding
Why can a front-loaded schedule of values hurt the contractor who wrote it, even though it brings cash in early?
