The obvious benefit of a scope of work is that it provides a clear written document of the assumptions and what’s included as part of the job that can be used to steer the project and assess change as it happens. Scope of work helps you get paid. In addition to covering steps and controlling change, scope of work also helps you to track your costs against your budget. Too many contractors fall under their desired profit margins because of inaccurate construction job costing.
The simple formula for construction job costing adds labor, materials, and equipment together to come up with an all-in cost. However, accurately assessing these costs without having a detailed, itemized scope of work in place is impossible. For instance, the labor category alone could consist of tear down, prep, installation, and cleanup. Being understaffed just one time can have a ripple effect that leads to unanticipated overtime that eats into your budget. The client won’t pay for that scheduling mistake. It will come out of your profit margin.
Scope of Work Example for a Residential Project
Here’s a look at what a scope of work construction example for a residential project should cover:
Contractor Name: Ace 1 Construction
Project Address: 23 Lovely Lane, Miami, Florida
1. Job Summary: Kitchen renovation for a single-family home
A. Preparation and Demolition
Action #1 + Point Person + Duration (in days)
Action #2 + Point Person + Duration (in days)
Action #3 + Point Person + Duration (in days)
B. Framing, Drywall, Plumbing, Electrical, and HVAC
Action #1 + Point Person + Duration (in days)
Action #2 + Point Person + Duration (in days)
Action #3 + Point Person + Duration (in days)
C. Interior Finishes
Action #1 + Point Person + Duration (in days)
Action #2 + Point Person + Duration (in days)
Action #3 + Point Person + Duration (in days)
D. Install New Windows and Doors
Action #1 + Point Person + Duration (in days)
Action #2 + Point Person + Duration (in days)
Action #3 + Point Person + Duration (in days)
E. Inspection
Action #1 + Point Person + Duration (in days)
Action #2 + Point Person + Duration (in days)
Action #2 + Point Person + Duration (in days)
F. Final Walk With Client
Action #1 + Point Person + Duration (in days)
Action #2 + Point Person + Duration (in days)
Action #3 + Point Person + Duration (in days)
Checklist for Creating a Construction Scope of Work
How do you get a scope of work on paper? Ideally, a contractor is using a methodology that can be replicated for every new project. Here’s a suggested checklist to go through when building your construction scope of work:
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- Define Terms With Simple, Universal Language: Use recognized industry terms and codes when defining tasks. A good SOW is readable for both insiders (your subcontractors) and outsiders (your client).
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- Use Chunking: Use as many subcategories as necessary when breaking down scope. Always start with broad tasks before breaking tasks down into smaller tasks. Never assume that smaller tasks are simply lumped in with larger tasks. Name them all.
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- Take Time to Set Deadlines: Never guesstimate duration on tasks. This can leave you with everything from worker shortages to out-of-control overtime. If you’re using construction management software that allows you to reference timesheets and billed hours for previous jobs, use that data to make informed timeline projections.
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- Use Pictures: Pictures, maps, models, plans, blueprints, and other visuals bring scope of work documents to life. Visuals are great for universally clarifying any vague terms that might be stumbling blocks. Visuals protect contractors from accusations of vagueness or ambiguity.
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- Always End With Approval: A scope of work is just a contractor’s draft until it’s signed by stakeholders. Your scope of work is only a verbal agreement until the document has been signed by the contractor, clients, and all participating subcontractors. Would you ever hinge your profit margin on a verbal contract?
An effective, protective scope of work starts with your ability to grasp a client’s requirements and expectations. Take time for discussions with the client that will allow you to create a scope of work that reflects their expectations. If a client seems to lack an understanding of how expectations are built, show them a scope of work from a previous project to help realign the conversation.
Dealing With Scope Changes During a Construction Project
What happens if scope changes once you’ve already enacted your SOW document? First, contractors should come to expect change orders. A change order is used to either exchange or modify some aspect of the work, materials, or scope of a project. Using change order best practices, contractors can adjust their SOW documents to account for the tweaks being requested by clients with as little pain as possible.
When a change order comes through, the priority is to calculate how the requested changes will impact labor. Contractors should reschedule labor dates based on how the change order shifts work scope, priorities, and deadlines. A readjusted version of the SOW document that includes any changes in either task or duration in highlighted text should then be distributed to all subcontractors.
Tracking Your Performance
How do you know whether you are effectively managing project scope and your budget? The benchmark for project scope is the budget. If your scope is allowing you to “burn through” your budget at the expected pace that leaves you on target to meet your profit margin, this is a sign that your scope of work was accurate. If you’re finding that you’re much further along in your budget than you are in the project, this is a sign that your scope was not accurately assessed. It may be time to realign scope for the remaining portion of the project to keep costs under control before the project turns into a loss. Keep in mind that a contractor profit margin of 15% is ideal.
Tracking costs is one of the most difficult aspects of managing project scope, this is very difficult to do accurately without using modern software solutions.While contractors have their hands tied when it comes to market-determined costs for materials and labor, the one thing they can control is how they manage resources. Time & Job Tracking software like Workyard enables contractors to accurately track their labor costs at a job and cost level with no manual data entry required..
Time tracking apps like Workyard also help contractors save on their payroll costs by more accurately tracking every hour and mile worked reducing errors and over-reported hours.
