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What Is a Statement of Work?
A statement of work, or SOW, seeks to define liabilities, responsibilities, and work agreements between two parties, usually between a client and parties such as:
- An agency
- A contractor
- A service provider
You will usually use a statement of work when you can describe work according to specific instructions or directions. Likewise, you should have tasks, conditions, and requirements that both parties can easily understand when creating an SOW. All in all, the statement of work defines what is — and what is not — included within a project.
Why Should You Use a Statement of Work?
The SOW should describe the following aspects of a specific project:
- Work requirements
- Performance expectations
- Design expectations
Businesses often use SOWs when working on a project with collaborators or contractors from outside the organization. You can also use an SOW to inform contractors or vendors bidding on your project.
Creating a statement of work has several additional benefits for project managers, including:
- Setting appropriate expectations: A statement of work allows you to manage and document expectations for your project. Statement of work documents go beyond what is usually included in cost estimates and/or project plans to add a layer of detail about what the project should accomplish and deliver and what the project will not cover. An SOW gives you the chance to flesh out details about what you will deliver.
- Refining the approach to the project: While you create the SOW, you will have the opportunity to refine your approach. For example, you may realize you need to adjust your cost estimate and/or timeline as you think of details you will need to add to the document.
- Stating clear deliverables: The level of detail included in a statement of work gives assurances to a client about what will be delivered.
- Clarifying in scope vs. out of scope: The SOW ensures there is a shared understanding of the project's goals and objectives. Overall, the SOW becomes the frame of reference for what is considered "in scope" or "out of scope" for a given project.
You may also use a statement of work in conjunction with related documents such as a master services agreement (MSA) and/or request for proposal (RFP). A well-written statement of work outlines deliverables and tasks for a contractor or vendor, so it provides a good foundation for these kinds of documents. That said, you should only write your SOW after you have agreed-upon guidelines and terms of the project. This will help prevent conflicts when negotiating a contract later on.
What Should a Statement of Work Include?
While the format of a statement of work will vary depending on the industry of your business, successful SOWs follow some key guidelines.
You should ensure your SOW includes precise language relevant to the field of your business to avoid misinterpretations of requirements and terms. Although the SOW is a detailed document, it is only a general description of work and should reference supplementary documentation to specify particular tasks further.
A good statement of work will define the scope of a project as well as key performance indicators, or KPIs, of the agreement. You can then use these indicators to assess whether the conditions of the SOW are met.
Common sections found in a statement of work include:
Start by explaining the work being done as well as who will be involved in the project. You can then lead into additional documentation such as a standing offer to set prices for services of products purchased and a formal contract that goes into additional detail beyond the information included in your SOW.
Purpose of the Project
Explain why you are initiating the project and the purpose of completing the project. You can do this by starting the section with a purpose statement followed by thoughtful answers to:
- Return on investment
Scope of Work
Note the work that will need to be done to complete the project in this section. Include details such as the software and/or hardware needed and the process used to complete the work, including:
- Time involved
- General steps to achieve the outcomes
Location of Work
The team working on the project may work at a central facility. Alternately, you may need site-specific work done, or team members could work remotely. Detail this information as well as where any necessary software and/or equipment will be located.
Break down the general steps you have outlined already in the scope of work section into more detailed tasks. Make sure this section is as specific as possible, including any action that would be required to produce the project's deliverables. You might want to break tasks down into phases or milestones as well.
List all deliverables of your project, explaining what is due as well as when each deliverable is due. Include specific details that are relevant to your type of project, such as:
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Create a list detailing when deliverables must be completed. Details to cover may include:
- The vendor you are selecting to achieve each goal
- Period of performance
- Review stage
- Close of project
This section should define the amount of time scheduled in order to complete your project, including the project's start date and proposed end date. Make sure to include information about billable hours per week and/or month, as well as any other details that relate to your project's schedule. Specificity is key here. For instance, you should note information about the maximum amount of billable hours for contracts or vendors.
Testing and Standards
List any industry standards the project must adhere to. You should also include information about testing of your product if applicable, listing:
- Who is involved in the testing process
- Equipment needed for testing
- Other resources
Definition of Success
Your statement of work should note what the stakeholder and/or sponsor will consider the successful completion of your project.
If your project includes any other requirements, you should list those as well. Examples include:
- Other equipment needed to complete your project
- If team members must hold any required degrees and/or certifications
- Travel requirements
You can include payments relevant to your project if you have already created a budget. You should also state how payment will be delivered, for instance, upfront, after completion, or over the course of the project's duration. Some projects include payments after each milestone is completed, while others have payments on a fixed schedule.
You may have other important information to include that does not fit into the above categories. You can list them in this section. Here is some additional information you might list:
- Travel pay
- Security issues
- Software and/or hardware restrictions
- Post-project support
Conclude your statement of work with information about how deliverables will be accepted as well as who will be in charge of delivering, reviewing, and signing off on deliverables. Your conclusion should also include final administration duties, such as ensuring everything is signed, closed, and archived.
When creating a document like a statement of work, it's important to work with an experienced lawyer who can help ensure you use specific language to appropriately describe your project in a way that all parties understand.
Meet some of our Statement of Work Lawyers
Jay Pink is an attorney who works with businesses and families on estate planning, and business law matters. Having his CPA license, and working in multiple family businesses over his career has positioned him to provide valuable insight on successful business operations. He has formed many entities - LLC's, Corps Partnerships and non-profit organizations.
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