What is a Statement of Work
A Statement of Work (SOW) is a companion document to the services agreement that consists of a narrative description of the products or services to be supplied. A statement of work is a necessity as it refines the understanding between the parties as to what must be delivered and the terms and conditions to be applied. A Statement of Work is in effect a contract between the parties for the service delivery or of a commercial understanding of how to work together in a joint activity with a client.
The typical objectives of the statement of work are to enable the contractor to clearly understand the requirements and needs of the customer organization. You wouldn’t enter into a contract with a builder to make over your house on a smile and a handshake (I hope) and neither should you enter into a commercial relations to delivery a multimillion dollar project for a website development contract either. To be clear on this don’t trust a handshake or a verbal promise always document your understanding – it is far better to spend time arguing about what must be done before the work has started. If you’ve taken the proper steps to write a thorough statement of work then no surprises should occur on delivery when what was ordered is actually seen for the first time.
The Statement of Work spells out the scope of work to be done, the deliverables, the responsibilities of each party, and any fees for services to be rendered. The SOW is created once a client feels comfortable and ready to proceed with the project or activity and documents the joint understanding of what must be achieved at each stage. The statement of work (SOW) is a management product that formally documents the products to be delivered and the associated work units to be performed under the contract.
Typical contents are:
- Aim and objectives of the activity
- The scope of the activity and any limitations
- Assumptions and constraints
- Project plan and approach
- Governance and review points including the project management process to be used to report progress
- Deliverables to be produced including any dependencies
- Due dates for deliverables
- How deliverables are approved and what quality procedures are in place.
- The commercial considerations
Requirement of a good Statement of Work
Normally a statement of work is employed when a simpler needs requirement document cannot be used and it must describe what must be accomplished in terms of the client’s requirements. Stakeholder needs, wants, and expectations are also analyzed and evaluated before being converted into requirements. There may be items such as, reporting requirements, commercial restrictions, market research, anti-competition agreements, geographic scope etc. that must be included. It must outline all applicable quality systems including quality review processes and acceptance procedures to be used, as well as the definition of the type and extent of control that is to be exercised on subcontractors should these prove necessary. On this latter point a sub-contractor must sign up to the overall conditions and the party concerned must warrant that this is the case. Overall a SOW identifies the requirements to be satisfied not the way they must be achieved leaving the parties free to use their own expertise and skill to achieve the desired result.
Creating a statement of work is not an easy task and can be time consuming but is well worth the effort. Do not trust to partner rhetoric that suggests leaving the difficult points to later never rely on such terms ‘spirit of agreement’ – it always ends in trouble. If a statement of work is too ambiguous, it can lead to misinterpretation and future problems and a major falling out. The failure write down expectations and then to properly execute a SOW is often the reason parties end up in a dispute and the major reason why this process must be well thought through and executed.