the SOV is usually loosely tied to the Schedule, how do you handle Unit Price items to a lump sum SOV project?

Usually if bid quantity varies by more than 15% unit prices can be re-negotiated and changed via a change order.  This rule is common in LS Contracts with a few unit price items based on an estimated bid quantity similar to Unit Price Contracts.

Variation in Quantity Clauses for Unit Price Contracts

Variation in quantities clauses fairly assign the risk of any changes in the estimated quantity of unit priced items. Thus, large quantity variations will likely require some adjustment to the contract price to prevent severe losses or large profit margins and perhaps an adjustment in contract duration.

SOV and Schedule are usually setup together so you can manage the contract, monitor/track & forecast cost, report against EVM, status the project and keep the project manager up to date. Depending on the total duration of the project, reporting cycle and details of the schedule to setup the appropriate level of the schedule. You have to setup the work breakdown structure (WBS) to make sure all scopes are covered and setup the cost breakdown structure (CBS) as per SOV using account codes. All cost shall be defined in the activity including Preliminaries & expenses belong to the project with the use LOE activities and link to appropriate activities to automate the duration. Direct and Indirect labor shall be defined on labor resource and assigned to activities with appropriate account codes per SOV item. All plants & equipment (hired or owned) shall be defined on non-labor resource shall be assigned to activities with appropriate account codes per SOV item. Same with the purchased materials, equipment, instruments and other purchases belong to the project shall be defined as material resources and assigned to activities with appropriate account code per SOV. Method of measurement will determine the type of resources to be used per SOV item and the rules of credit or productivity steps can be determined whether define as an activity (depending on the duration of the activity) or define as step inside the activity to measure progress.

Ex: if the overall duration of activity for all production step is less than or equal to 1 reporting cycle then you don’t need the production step per activity and use activity steps instead. On this setup, you can report per reporting cycle the SOV status and WBS status of the Project.

In regard to P6 PM accounting tools, P6 Primavera has never been an PM accounting software. P6 never track and issue purchase order/ Job order, does not have function to received purchase materials/ goods and pay supplier or contractor. P6 can manage contract, schedule and forecast cost which totally different from accounting software functions.

Follow up question:

1) G703–1992, Continuation Sheet, provide convenient and complete forms on which the contractor can apply for payment and the architect can certify that payment is due.

2) Unit Cost/ Unit Rate should be agreed by both parties and have been predetermined in advance. The full value might not be fully defined and has no definite end.

Hi John,

Are you referring to Schedule Of Values (SOV) or in other terms Schedule Of Payment? In the contract, there should be a Method of Measurement tied up for each line items in SOV whether unit rates or lump sum.