A statement of work is an integral part of contract and project management that guarantees completion of project work as per the set expectations and guidelines. It is a narrative description that defines timelines, deliverables as well as particular activities for a vendor that is offering his services to the client. It also includes a detailed description of pricing, requirements, governance terms and standard regulatory.
Meaning of statement of work
The statement of work is also known as SOW and is described as a working agreement between two involved parties. It can be a government entity, buyer or client and the contractor, vendor or agency. It includes
- Project objectives
- Scope of work
- Payment of the project
- Expected outcomes
- Specific conditions, terms, and requirements
There are numerous styles and formats of documents related to the statement of work. Companies are also creating their version, which is customized to accommodate their requirements related to specific proposals and requests they receive.
A statement of work must be correct so that it does not leave anything out. It is used for a wide variety of projects from a single visual design to large scale government building contract.
Purpose of a statement of work
A statement of work is used when an internal project team of an organization is working on a project with outside collaborators. It can also be used in connection with other documents like
- RFP or Request for Proposal – This document is used by companies to acquire goods and services from the contractors and vendors
- MSA or Master Services Agreement – It is a contract with detailed information outlining the terms and responsibilities of the two involved parties.
It is considered that a well-written statement of work serves as a good foundation for writing MSA or RFP. The SOW must be written after deciding on the guidelines, terms, and conditions so that it can adhere to the correct format and language. This avoids conflicts in the future, especially when the contract is negotiated. It is a fact that the statement of work is generally used when the conditions and tasks are understood by both the involved parties so that they can know what a successful project will look like and how will it be approved.
Types of a statement of work
The various types of a statement of works are as follows-
- Design/Detail statement of work – This is a type of statement of work where an entity assumes the risk, client or buyer because the contractor is obliged to follow the set standard that is laid out for him. The Design/Detail statement of work is mostly used in government contracts, where it is considered the preferred medium for construction and manufacturing projects. This category of the SOW tells the supplier, contractor or vendor what processes to follow and how to do the work. It describes the requirement of the entity, client and buyer related to quality control, measurements and materials.
- Performance-Based statement of work – This type of statement of work is used by government entities and includes the purpose of the project, equipment and resources that will be allotted and the results. The accountability is on the supplier or the contractor as he is responsible for delivering the results most effectively. Performance-Based statement of work provides the contractor flexibility and does not interfere with how he is working. The focus is actually on outcome over processes.
- Level of Effort/Unit Rate/ Time and Materials statement of work – This type of statement of work is considered flexible and is generally used for delivery order contracts or temporary and contract workers interested in hourly services. The concept of Level of Effort/Unit Rate/ Time and Materials statement of work is based on work hours and the materials that are required to perform the service.
Tips for writing an effective statement of work
Some essential tips for writing an effective statement of work are as follows-
- Brainstorm – Brainstorm before writing a statement of work as it will give you a fair idea about the choices that you will have to make later and the additional features that should be included without extra effort. Brainstorming tells you about the pieces that should be involved in the project and the details that should be negotiated at later phases of the project management process.
- Define success and failure – If you are looking for tips that will help you in writing an effective statement of work, then define success and failure. Sections of a statement of work like objectives/purpose and acceptance criteria must offer information about the goals of the project and the definition of an acceptable end product. It must also include rules that are deemed unacceptable.
- Include times for formal review – It is essential to keep track of the project lifecycle if you are looking for tips to write an effective statement of work. Set aside time for reviews throughout the lifecycle of the project to ensure that work is on schedule. This will provide the client with an opportunity to verify whether every requirement meets as per the set guidelines. It is also a viable opportunity to offer tips to the contractor on the things that still need to be done.
- Use specifics related to goals, requirements and project scope – An essential tip while writing the statement of work is to use precise language in the requirement and tasks, the scope of work and objectives/purpose section to avoid any misinterpretation once the work starts. You can include specific information with the help of supplementary documents like PWS or RFP, which can be attached in these sections. It now becomes easy to refer and find the necessary information. An important tip is to avoid listing alternatives or options as these can cause misinterpretation later on.
- Agree on the details beforehand – Remember the statement of work is not for negotiating project guidelines; hence it should document the specifications that have already been reached by both the parties in a clear and detailed manner.
- Define confusing terms – Make it a priority to use straightforward, simple and understandable language that cannot be misinterpreted at any cost.
- Involve the whole team – The statement of work should be a team effort to get input from all the members. Ask them to review at regular intervals and update whenever any new information comes to light.
- Keep it brief – The statement of work should have detailed information; at the same time, it should be kept as brief because a lengthy document can create confusion.
Benefits of writing a statement of work
The benefits of writing a statement of work are as follows-
- An essential advantage of the statement of work is that it offers an opportunity to show the client your competence via this document
- A statement of work is a document that allows you to stand out and prove yourself
- The statement of work offers a chance to clarify minute parts of the relationship
- A statement of work is a well-organized and well-defined document that saves lots of time
Challenges of writing a statement of work
Few challenges of writing a statement of work are as follows-
- Complexity – The statement of work is considered a complex document as it is modified to suit the needs of each new contract agreement
- Time commitment – Writing a statement of work is a time-consuming process, and if a person tries to take shortcuts, it can have serious repercussions.
- Risk of an incorrect statement of work – The statement of work has legal weight, and if it is miswritten, then it has a direct impact on the organisation and causes operational, financial and legal risks.
- Expertise – Few qualified people actually are adept at writing a statement of work. It is hard to find people who have the necessary knowledge as well as experience to handle such a sensitive document.
Format of a statement of work
A statement of work is an essential document, and all the necessary sections or subheadings must be included as it has the information that is required by both the involved parties to ensure the completion of work as per the agreed instructions and specifications. The format includes the following elements –
Identifying the type of work that needs to be done is an essential step as is knowing whether it is creating a product or performing a service. In the introduction, part recognises the involved parties whether it is an entity, buyer, vendor or client and the agency, provider, supplier or contractor. This category also includes the type of formal agreement that the statement of work will be used for creating
- Contract – It is a legally binding agreement that is more formal because it includes the details that are agreed upon by both parties.
- Standing offer – It is an agreement where the vendor lets the buyer make a purchase of products or services for a specific period
This category offers reason and detail about why the work is being done. It also informs about the purpose and objectives of the project t and why they are essential in the scheme of things. The objectives/purpose section also tells and discusses the improvements or the advantages the project is expected to bring.
- Scope of work – This is one of the essential categories of the statement of work and offers details that should be done and the processes that are involved in completing that specific work. The scope of work includes a list of the steps that are required to complete the work and also covers project outcome in terms of time commitment, product or service.
- Requirements and tasks – The category of requirements and tasks section divide the scope of work into more workable tasks. It lists the various needs that a supplier or contractor must meet in terms of certifications or training or the software and hardware that should be used.
- Period of performance – This section of the statement of work is about the actual period needed to perform and complete the work. Time is one of the most important factors and should be decided upfront to know the actual cost of the project. The period of performance section in the statement of work is measured via any of these ways –
- A given time
- Predetermined dates
- An end date that is in sync with some other event
The period of performance describes the duration of the contractor’s work and one can also impose sanctions or constraints on the time a vendor or contractor can spend on the work. Both the parties can agree upon the maximum billable hours on a weekly or monthly basis as per the requirements. One of the advantages of this constraint is that in case of delays, it is easy to adjust the project cost and statement of work accordingly.
3. Place of performance
This section of the statement of work informs about the place or the location where the project will be based and performed along with the facilities that will be used during its working. Locations also include the places where the parties will meet, and regular meetings will be held. An important fact to remember is that the off and on-site work is dependent on a great deal on the industry and the type of job. Locations include
- The contractor chose a remote location
- On-site, at the contractor’s facilities
- On-site at the entity’s facilities
4. Resources and Testing
This category of a statement of work provides information about the significant people involved in the project from both contractor and client’s sides like the team leaders and project manager. It also lists resources or equipment that will be used to finish the work.
5. Deliverables and Schedule/Timeline
This category in the statement of work informs about the deliverables that will be delivered to the entity, buyer or client by the contractor, supplier or vendor. Deliverables and Schedule/Timeline section include a specific account of the deliverables like size, colour, quantity and number of designs or anything else that is needed.
An important fact to remember is that deliverables are quantifiable services or a product that is supplied by the contractor to the client. This category provides a schedule about the date and the time needed to complete every deliverable and project milestones like
- Project closure
- Reviews of products or service
- Period of performance
- Vendor selection
The start dates are optional whereas the end dates and deadlines for deliverables is a must and to a great extent are dependent upon the industry and the related project.
6. Payment terms and schedules
This category describes pricing for the work to be done and terns and schedules when the payments will be made. Payment terms and schedules section of the statement of work includes the total cost of the work, including outside expenses and labor costs that will occur during the project. The payment terms can be set up via
- By schedule – As the name suggests, the model of payment is fixed as per the scheduled days that have been already decided. It is best for the supplier as it implies guarantee payment even if the deliverables are nor delivered.
- By deliverable or milestone – This model of payment is paid after completing every deliverable or milestone. It is best for the client because, in case of delay, they are not liable to make payments until and unless the deliverables are delivered.
3. Special requirements
This section of the statement of work includes anything that might have escaped notice earlier on. It includes
- Industry-related particular standards if they have not been considered in other parts of the statement of work
- Security requirements for instance whether any person needs security clearance and passes that will be required to enter the site
- Software/hardware access requirements or restrictions
- Post-work requirements
- Travel requirements and which party will be liable to make travel payments
- Assumptions and exclusions that have not been covered in any other sections of the statement of work
4. Acceptance criteria /Signatures
This is the last section of the statement of work and includes how the entity, buyer or client is going to accept the project deliverables. It offers details about the staff members that are authorized to receive it, review it and sign off on deliverables.
It also tells about how the work is going to be submitted and determine the criteria for its suitability. It is imperative to agree upon the acceptance criteria before the start of a project to avoid any misunderstanding later on when the project comes to an end.