SOV Billing Guide Subcontractors (Copy)

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TL;DR: The schedule of values is the billing structure for a construction subcontract. Each line item represents a scope of work with a dollar value and a billing trigger. GC-drafted SOVs typically back-load billing by assigning small percentages to early high-cost phases and large percentages to later lower-cost phases. A negotiated SOV front-loads billing so each phase is billed at actual cost percentage when it occurs. The cash flow difference on a $500,000 subcontract can exceed $80,000 in the first 60 days.

Overview

What You Need to Know

The schedule of values is a payment plan for a construction project. Each line item is a scope of work with a dollar value. When that scope reaches a defined completion point you submit a pay app for that line item value. The sequence and weighting of those line items determines your cash flow for the entire project.

GC-Drafted vs Negotiated SOV

Why the SOV Structure Changes Everything

GC-Drafted SOV (Back-Loaded)

GCs draft SOVs that minimize their payment obligation in early project phases. Mobilization at 3-5%, early phases at 15-20% of contract value, final phase at 30-40%. When mobilization and early phases represent 40% of your actual cost but only 20% of your billing you fund the gap from operating cash for the first 60-90 days of every project.

Negotiated SOV (Front-Loaded)

A negotiated SOV assigns billing values to each phase at actual cost percentage. Mobilization at actual mobilization cost (typically 8-15% of contract). Early structural phases at actual early-phase cost. Each phase billed when it is complete. The cash flow timeline matches the cost timeline - you are not funding the GC with your working capital.

How to Build a Better SOV

Line Item Structure That Funds Your Work

Mobilization as a separate line item at actual cost. Equipment transport, site setup, temporary facilities, first week of crew staging. Actual cost as a percentage of contract value - typically 6-15% depending on trade. Billed at commencement. Not at 3-5% and not bundled into the first progress billing.

Each phase as a separate billing milestone. For framing: floor deck complete, exterior walls complete, interior walls complete, roof framing complete. Each milestone billed at actual labor cost percentage for that phase - not evenly distributed across the project. Floor 1 framing is the most labor-intensive floor. It should be the highest-value billing milestone.

Stored materials as a separate line item. For trades with significant material procurement deposits or stored materials - structural steel, electrical switchgear, mechanical equipment - negotiate a stored materials line that allows billing when materials are delivered to the site or fabricated to custom specifications.

Submit pay apps within 24 hours of milestone completion. The GC pay app cutoff determines when your invoice is included in the monthly billing cycle. A milestone completed Monday that is not billed until the following week may miss the cutoff and delay payment by 30 days. SPM maps every GC billing cutoff date and ensures pay apps are submitted within 24 hours of milestone completion.

FAQ

Frequently Asked Questions

What is a schedule of values in construction?

A schedule of values is a breakdown of a construction subcontract into individual line items representing specific scopes of work, each with an assigned dollar value. The SOV serves as the billing structure for the project - each line item is billed when the corresponding work reaches a defined completion percentage or milestone.

How should I negotiate a construction SOV as a subcontractor?

Three things to negotiate: mobilization at actual cost percentage (6-15% of contract value, not 3-5%), each major work phase as a separate line item billed at actual phase cost percentage, and stored materials as a separate billable line for trades with significant material deposits. SPM reviews every subcontract SOV before signing and recommends specific adjustments.

When should a subcontractor submit a pay app?

Within 24 hours of reaching the billing milestone or the GC billing cutoff - whichever comes first. Missing the GC billing cutoff means your invoice is not included in the monthly billing cycle and payment is delayed by 30 days. SPM maps every active GC billing cutoff date and ensures pay apps are submitted within 24 hours of milestone completion.

How does front-loading the SOV improve cash flow?

A front-loaded SOV assigns billing values to early project phases at actual cost percentage rather than at GC-preferred minimum percentages. On a $500,000 subcontract where mobilization and early phases represent 35% of actual cost: a GC SOV might bill 18% in the first 60 days while a negotiated SOV bills 33-35%. That 15-17% difference is $75,000-$85,000 in cash flow improvement in the first 60 days of the project.

Schedule of Values BillingGuide for Subcontractors.