The Schedule of Values deserves close attention

On public building construction projects (and, possibly, on most private building projects) the contractor develops a Schedule of Values that forms the basis for monthly applications for payment (also known as "requisitions") that will be submitted as construction proceeds. The Schedule of Values is typically submitted for architect and owner review at the beginning of the construction project and well before the first regular application for payment will be submitted. When reviewing the contractor's proposed Schedule of Values, it is important to consider the meaning of the specific line item descriptions on the schedule and to also consider the architect's and owner's ability to assess progress on those discrete parts of the project as applications for payment are submitted by the contractor.

The meanings of the line items may seem simple enough at first glance, but they have been known to be interpreted differently by subcontractors, contractors, architects, engineers, and owners as construction proceeds. Site work items seem to be uniquely subject to varying interpretation. The intent of terms like "Excavation", "Cuts and Fills", "Fill", and others are good agenda items for a meeting to discuss a proposed Schedule of Values. For the architect and owner who will be assessing the value of periodic progress on a given item, it is especially important to understand what is included in the line item and what is not included - in part to avoid a possible disagreement as construction proceeds. "I think the owner already paid for that in this item," says the architect. "Oh, no," says the contractor or the sub. "That was never in that item. It was in this other item."

The architect's and owner's ability to assess progress on the listed work items also depends on the monetary amount of the particular item. It is common to require a contractor to break down items that are too large (e.g., Site Work $2,000,000) into smaller items (e.g., Rough Grade south yard: $15,000, Fine Grade west field: $7,500, etc.) that are more easily assessed and add up to the total value of site work. For some, the rule has been to break down the schedule into items no greater than $20,000 in value. That may not be a practical rule to follow in every case, but it is important to consider the ability of the observer to assess progress that is claimed on a given application for payment while avoiding confusion with other work that may be similar or within the same trade. Contractors and subcontractors are usually quite interested in receiving prompt payment for completed work, so it follows that they should be willing to invest time in the beginning of a project to establish a common understanding of the items in the Schedule of Values.

Another rule, sometimes challenged, is that once the Schedule of Values is established, it should not be changed. That's a good rule (with a notable exception that sometimes a more detailed breakdown of an established item may become necessary in order to assess progress and determine appropriate payment). And there are other rules....