What is an SOV in Construction Finance?

February 29, 2024

The SOV is a crucial tool for construction project finance, providing a transparent means of monitoring the progress of work and tracking the percentage of progress billing to be applied for each month. As a result, it helps avoid potential risks such as mismanagement of funds, overspending in early project stages, exceeding the contract price, and delays in payment processing.

It's a detailed breakdown of every billable task on a construction project, listing the value and cost for each, along with a step-by-step project timeline and the percentage of the work completed to date. This is a critical document used by key stakeholders on construction projects - from the general contractors and subcontractors, to the property owners and construction managers.

While there are many different templates available online for SOVs, it's important to remember that each project has its own specific requirements and nuances, so the format for an SOV should be tailored to fit the needs of the individual project. Additionally, the details and numbers needed for an SOV are often already broken down in the job's estimate so preparing one is simply a matter of copying and pasting from the original estimate into the SOV template.

A successful SOV will facilitate clear communication and transparency between all parties, helping build trust between project administrators and subcontractors. In addition, SOVs are a great way to ensure adherence to contractual terms, which is especially important for larger projects using fixed budgeting or guaranteed maximum price contracts.

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