What are the advantages and disadvantages of schedule of values?

1 What is a schedule of rates?

A schedule of rates (SOR) is a list of unit prices for different types of work, such as excavation, concrete, plumbing, electrical, etc. An SOR is usually based on standard specifications and industry benchmarks, and it may be adjusted for location, inflation, or other factors. An SOR allows you to estimate the cost of a project by multiplying the unit prices by the quantities of work required. Unlike an SOV, an SOR does not include overhead and profit, which are negotiated separately.

2 Advantages of using an SOV

One of the main advantages of using an SOV is that it provides a clear and transparent basis for billing and payment. An SOV shows how much each component of the project contributes to the total contract price, and how much has been completed and paid for. This helps you avoid underbilling or overbilling, and ensures that you get paid for the work you do. An SOV also helps you manage changes and variations, as you can easily update the SOV to reflect the new scope and cost. Moreover, an SOV can help you improve your cash flow and budgeting, as you can plan ahead for the payment milestones and allocate your resources accordingly.

3 Disadvantages of using an SOV

However, using an SOV also has some drawbacks. One of them is that it can be time-consuming and complex to prepare and maintain. An SOV requires a lot of detail and accuracy, and it may need to be revised frequently to account for changes, errors, or disputes. An SOV can also create conflicts and misunderstandings, especially if the parties disagree on the value or completion of certain items. For example, the owner may withhold payment if they are not satisfied with the quality or progress of the work, or the contractor may inflate the value or percentage of some items to get paid more or sooner.

4 What is the difference between an SOV and an SOR?

The main difference between an SOV and an SOR is that an SOV is based on the contract price, while an SOR is based on the unit prices. An SOV reflects the agreed value of the project, while an SOR reflects the estimated cost of the project. An SOV includes overhead and profit, while an SOR does not. An SOV is used for billing and payment, while an SOR is used for estimating and bidding. An SOV is more suitable for fixed-price or lump-sum contracts, while an SOR is more suitable for cost-plus or measure-and-value contracts.

5 How to choose between an SOV and an SOR?

The choice between an SOV and an SOR depends on several factors, such as the type and size of the project, the level of detail and certainty required, the availability and reliability of data, and the preferences and expectations of the parties involved. Generally speaking, an SOV is more advantageous for projects that have a well-defined scope, budget, and schedule, and that require a high degree of transparency and accountability. An SOR is more advantageous for projects that have a vague or variable scope, cost, and duration, and that require a high degree of flexibility and adaptability.

6 How to create an effective SOV or SOR?

If you use an SOV or an SOR, it is important to follow some best practices to ensure your document is accurate, comprehensive, and consistent. To create an effective SOV or SOR, use a standard format and template that is easy to read and understand. Additionally, break down the project into logical and manageable categories and subcategories. Include clear and specific descriptions and definitions for each item, as well as reliable and realistic sources and methods for estimating the values or rates. Make sure to include all relevant costs and factors, such as contingencies, allowances, taxes, fees, etc. It is also important to update and revise the document regularly to reflect any changes or adjustments. Finally, communicate and coordinate with the other parties to avoid discrepancies or disputes.