Heine Associates, P.A.

Schedule of Values: The Undervalued Best Friend

Schedule Of Values: The Undervalued Best Friend

By I. Michael Heine, Esq.

My pappy always said that "the only thing we learn from experience is that we never learn from experience." Case by case studies of conflicts over payment requisitions between owner, design professional and contractor, with focus on the controlling Schedules of Values, sadly prove pappy true.

Typically, as the AIA General Conditions provide, (A201, 1987, paragraph 9.2.1): Before the first Application for Payment, the Contractor shall submit to the Architect a schedule of values allocated to various portions of the Work, prepared in such form and supported by such data to substantiate its accuracy as the Architect may require. This schedule, unless objected to by the Architect, shall be used as a basis for reviewing the Contractor's Applications for Payment.

In negotiated contracts, there is no reason why a Schedule of Values needs to wait for the first requisition. It can be negotiated and attached as a part of the contract documents at the time other basic issues are settled.

In squabble over requisitions, good faith disagreements commonly arise, not over the extent of work performed, but the value that work should be given in the requisition process. Here's an imaginative example: A contract for the erection of a three-story building at a price of $1 million. The submittals on this contract reveal a Schedule of Values providing for $75,000 in General Conditions, with balance ($925,000), divided equally at $308,333.33 per floor. Absurd? Not if you have seen some of the schedules we have seen in contract disputes.

Payment time arrives. Foundation have been excavated, footings poured and steel erected. No one floor has been completed, and there is structural work applicable to all three floors. From that point on, there is a "gloves off" free-for-all as to how that work should be evaluated. If the Schedule of Values is to serve well all parties to the construction contract, it must contain enough painfully detailed objectivity to avoid debate over contract price allocation.

Yes, we have seen that necessary attention to detail in the submittals of the large, well-known constructors. Unfortunately, on substantial size projects with values under $10, million, the detail is frequently lacking. We all know the reasons: the contractors are lazy, the owners don't know any better, and design professionals are not always comfortable with the estimating detail.

Fortunately, construction theater is drama with multiple choice endings: If, in your plot, the paramount importance of a well drawn Schedule of Values is disregarded, the parties can bet on friction and dead bodies before the curtain call. However, if the importance is heeded, the parties can bet their hard hats on one less area of friction.

Even the lawyers do not welcome payment disputes, which grow out of a vague Schedule of Values. After a while these disputes begin to sound like matrimonial quarrels over how low is low. The squabble over disputed requisitions is consuming by itself. Worse, yet are all of the other quarrels which follow-on this disharmony.

When owners believe they are paying too much, and contractors believe they are being paid too little, you can be sure that a battle over timeliness issues, scope of work, and compensations for changed and extra work will begin.

A successful project requires good faith, harmony and cooperation. And these little goddesses play their seductive music on the harps and flutes of objective, clearly written standards, which define expectations. Start with the Schedule of Values...It's a good and necessary beginning.

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