A well-written Statement of Work (SOW) protects all parties in a relationship in which one or more parties are rendering services. It should set clear expectations as to deliverables and timelines, outline roles and responsibilities, and establish terms for pricing and payment. An effective SOW provides a roadmap for a project management team, helping to avoid misunderstandings as an initiative unfolds.
A solid SOW can smooth the way for a successful project. To write an effective one, it’s important to understand its various components, what should be included, and what is better expressed in other documents. In this article, we’ll cover all the fundamentals that define a good SOW, helping you lay a foundation for successful project engagements.
What is a statement of work (and what is it not)?
A Statement of Work, or “SOW” for short, is a type of document commonly used to define clear expectations around working relationships. It is frequently used with independent contractors, agencies, and other organizations that provide B2B services. For project managers, the SOW is a critical document for defining and managing relationships with project participants from outside the organization.
A good SOW includes a high-level description of the project, including its objectives, timeline, and expected outcomes. It outlines the work to be performed including specific deliverables, tasks to be completed, and assignment of primary responsibility for each of those tasks to specific parties. It also defines the criteria that will define whether or not the work is acceptable, and how acceptance will be communicated.
A statement of work may also incorporate guidelines for the location(s) where work is to be performed, what kind of equipment or facilities may be required, and who will provide those.
Finally, the SOW will include pricing, payment terms, and the signatures of the parties to the agreement. This document therefore serves as an important legal agreement to which all signatories must adhere.
An SOW may sometimes be referred to as a “scope of work” document. The terms may be used interchangeably, although the latter is typically less comprehensive. A scope of work description is often included as a subsection within the SOW.
An SOW is focused on the work to be performed, but it doesn’t necessarily address all of the terms and conditions of the business relationship in their entirety. Confidentiality, intellectual property protections, limits on liability, and arbitration provisions, for example, are typically included in other contracts such as nondisclosure agreements rather than in an SOW.
The SOW does not serve as a Master Service Agreement (MSA), either. Both an SOW and MSA are drafted and finalized in the early stages of an initiative, – yet the SOW typically focuses on a single working relationship. An MSA, in contrast, is an umbrella document that outlines the parameters of an entire project, including overall budget, timelines, and responsibilities. The MSA serves as a kickoff document that authorizes parties internally to proceed with the initiative.
Why you need a statement of work
First and foremost, a good SOW exists to provide clarity. By outlining roles, responsibilities, deliverables, and timelines clearly, a well-written statement of work protects both the service provider and their client. It safeguards both parties against the problem of “selective amnesia”, in which one or another project participant seems to remember prior conversations differently. Oral agreements can easily lead to misaligned expectations. For complex projects, that kind of problem is almost certain to arise at one point or another.
An SOW also guards against one of the most common pitfalls in project management – scope creep. A good statement of work will carefully define the deliverables that are “in scope” versus those that fall outside of the specified project parameters. In other words, a good SOW will make it clear which work will not be performed. That helps organizations avoid an ever-expanding definition of what is to be accomplished. After all, when the target keeps moving, it’s much harder for the project team to reach its objectives.
What’s included in the statement of work?
The key elements of an SOW can vary, depending on the industry, the nature of the project, external regulatory requirements, and the nature of the services to be provided. Nevertheless, there are some common elements that play a role in virtually every well-written statement of work:
- Project objectives : This provides a big-picture perspective on the overall purpose and goals of the project. It usually offers some context for the role this project will play in achieving the client’s strategic objectives, as well as the tactical steps needed to achieve success. Ideally, it should articulate how success will be measured.
- Scope of work : This section defines the exact work to be performed, including timelines and deliverables. Very often, this will include key milestones and interim deliverables, rather than a single all-encompassing project description with a single date of completion. If it’s useful, the parties may also choose to define a more specific list of tasks to be performed, as well as the detailed business processes to be followed.
- Deliverables : Whereas the scope of work describes the work to be performed in slightly broader terms, the list of deliverables outlines the actual products of that work. This may include documents, drawings, or other intellectual property. It may also describe the successful completion of certain events such as presentations, focus groups, or meetings.
- Location and time of execution : Many SOWs provide details as to the time and location where work will take place. If remote work is to be permitted, it is useful to include that detail here, including the specific conditions under which such remote work may occur. If on-site work is required, and especially if travel may be necessary – then the SOW should specify that requirement.
- Milestones and dependencies : For anything but the simplest projects, it’s likely that there will be milestones along the way. These serve several different purposes. First, they provide some assurance that the project is on track, giving the client ample opportunity to review work during all stages of the engagement. Second, milestones provide important information to ensure that wherever dependencies exist, predecessor tasks are performed on time so that things keep moving according to schedule. Finally, milestones may serve as key dates for acceptance and billing. When a working proof-of-concept has been successfully completed, for example, the service provider may be entitled to a certain percentage payment.
- Project schedule : A vital element of any good SOW is a clear timeline that includes the milestones, tasks, and resources necessary to make the project a success. In complex projects with multiple dependencies, it is especially important to outline vitally important dates and specify the consequences for missed deadlines.
- Testing : The SOW should also describe any proposed testing parameters. This is especially relevant if the SOW relates to product development or software technology, for example. Testing should be covered in enough detail to ensure that all parties will have confidence in the product once the test plan has been completed successfully.
- Expected outcomes, measures for success, and acceptance : What does success look like? This section should outline the overall outcomes that are expected, along with the specific means for measuring success. The SOW should also include information about acceptance of completed work. This often takes the form of a signoff document in which a party designated by the client formally acknowledges that the work has been completed to their satisfaction.
- Pricing, payment, and miscellaneous terms & conditions : This section covers the fees to be paid, criteria for reimbursement of expenses, and any exclusions that may require clarification. If there are any special terms & conditions that will apply which aren’t already covered elsewhere, they should be included here as well.
7 steps to a solid statement of work
Although creating a statement of work may sound like a complex undertaking, it doesn’t necessarily need to be. Here is a seven step process to get you started:
1. Write the introduction : Begin with a simple statement outlining the project’s overall with a brief description of work performed. This section should give your audience a high-level understanding of what the project is about.
2. List the key activities and requirements : Start with the biggest, most important activities, and add as much detail as you find necessary. This section should include a list of activities to be completed, criteria for acceptance, and any particular methods or constraints for completing the work.
3. Create your project timeline : Begin mapping out the overall timeline, including the project starting and ending dates, plus the most important milestones along the way. This should include key milestones for specific tasks to be performed by the service provider. If the project involves a direct mail campaign, for example, a key milestone for a creative agency might include signoff on final proofs prior to sending the job to print.
4. List required resources : If the project requires that internal client personnel be available to the service provider, specify that in this section. Also outline any equipment or materials that may be necessary to complete the job. It may also be useful to clarify the role that third parties will play in the process.
5. List project deliverables : Get specific about the work products that will be provided to the client, including quality, quantity, and timing. Describe expectations and deadlines as clearly as possible.
6. Highlight dependencies : Some milestones are especially sensitive because successor tasks depend on them. If a task lies on the critical path for project completion, that should be highlighted in this section. If such deadlines are missed, it can put the entire project at risk.
7. Define project tracking and communication : Clients appreciate frequent status reports. A good SOW will outline the timing of such updates, as well as the form they will take.
Although writing a statement of work may seem like a daunting task, – it doesn’t necessarily need to be that way. By following the steps listed above, along with the guidelines we covered earlier in this article, you can ensure that your SOW covers all the essentials, helping you achieve success with your projects.
If your organization develops statements of work in the routine course of doing business, it may be beneficial to deploy technology to help you streamline and automate these kinds of processes. Icertis Contract Intelligence is a contract lifecycle management (CLM) solution for companies of all sizes. We help organizations manage their agreements and optimize the business value they get from their relationships with customers, vendors, and business partners. To learn more about Icertis Contract Intelligence, contact us today for a free no-obligation demo.