Why Subs Must Front-Load Their SOVs (and How to Do It Responsibly)
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Subcontractors often have no choice but to frontload their schedules of value because the time between a sub's initial costs on a job vs. the time of first payment is significant. They pay their crews weekly but don’t get cash back for 30, 60, and sometimes 90+ days!
When I got my Master’s in Construction Management from Purdue, I learned that this is called “Subcontractor Financing”. Essentially, the subcontractor is the one actually financing the project through their cash or line of credit, rather than the owner or bank having to outlay the cash. Which is a massive problem because Sub’s are often fighting and clawing for every dollar of profit they can get—and financing the next project can genuinely put them out of business. In fact, it happens all the time.
I don't think general contractors or owners understand that the cash-timing gap for a sub is real:
Cash Outflows: labor paid weekly; POs and deposits for materials; submittals, shop drawings, and engineering time up front.
Cash Inflows: progress billing cut to the GC on day 30; GC bills Owner on day 30–35; funds released day 60–90; bank/Owner’s review can tack on more.
Result: unless the SOV places early cash needs in early pay periods (frontloading, stored materials, mobilization), the sub is financing the job.
Retention is its own problem
Retention already withholds a slice of every dollar to ensure completion quality and closeout. Back when I was a Project Manager for a Subcontractor, one of our GCs directed me to add a separate “punchlist” line to our SOV. I told my boss about it, and he said, “That’s why they hold retention. We’re not agreeing to that.” Good advice! Why would I add a line for punch out when 5-10% of our funds are already being held at the end of the project?
Fortunately for me, I had a boss who was savvy enough and able to give me that advice. Just think of all the unknowing PMs who do what the customer says but don’t realize the potential impact on their business.
Frontloading done right (and fairly)
“Frontloading” has a bad reputation because some teams abuse it. Done right, it’s really a fair transaction:
Capture your early costs: mobilization, submittals/engineering, permits, safety setup, temporary protection, supervision ramp-up, major equipment deposits, and long-lead materials. We used to add a “preconstruction project management” line in our SOV that we billed against to pay for our office time as well.
Use stored-materials billing with reasonable documentation and on-site/off-site insurance requirements.
Tie to schedule logic: I’ve seen way too many subs accidentally carry costs in their SOV that won’t be installed until late in the project. They will say things like “we’re out there working, but we can hardly bill because the rest of our SOV is tied up in Building 3, which starts next year.” When in doubt, shoot for capturing costs earlier.
Don’t be afraid to negotiate: If the GC/owner isn’t pushing back on your SOV, then you are probably not pushing your early billing opportunities hard enough.
Spark Notes:
Subcontractors are often forced to finance projects because they pay labor and materials weeks or months before seeing their first dollar back.
This cash-timing gap—weekly payroll out, 30–90+ day payments in—puts real pressure on margins and can push otherwise solid subs out of business.
Retention already withholds funds to ensure completion, so piling on extra “punchlist” or back-end billing only compounds the risk for subs who don’t know better.
Frontloading done right isn’t abuse—it’s fairly capturing early costs, tying billing to real schedule logic, and negotiating SOVs that reflect how the work (and cash) actually flows.
