When you need to outline the terms, work requirements, timelines, contractors, and expectations of a project, it’s time to draft a Statement of Work (SoW). This is a document that helps define the agreements, responsibilities, and liabilities between the signing parties. The Statement of Work is usually signed between a client and a service provider.
A Statement of Work is both a gift and a curse. It is a gift of protection from unnecessary consequences, and can be a good addition to your risk management strategy, being a single document saving you from any potential trouble with the project. It is a curse because it takes a massive amount of work to produce one, and even the slightest mistake can hit you hard.
In this blog post we have put together every piece of information about SoWs, when to use them, and how to construct a statement without missing anything of importance.
What is the purpose of a Statement of Work?
The Statement of Work is used when outside contractors or collaborators are working with your internal team. It is also a valuable tool for vendors and suppliers to estimate the delivery costs and offer you a bid. SoW is not a separate contract, but is often used in conjunction with the following documents:
- Request for proposal (RFP)
- Master Service Agreement (MSA)
The SoW is an additional layer of information for any contract. A well-constructed statement of work clearly shows what is—and what’s not—being delivered, and on what terms.
Being an outline of deliverables for the contractor, a statement of work can also be a good foundation for writing the RFP and MSA. But keep in mind that SoW can only be written after the general guidelines have been decided upon. And don’t forget to sign a non-disclosure agreement before sharing the SoW with any external parties.
A well-constructed statement of work clearly shows what is—and what’s not—being delivered, and on what terms.
Statement of Work is best used when:
- There is a specific work description
- There are definite requirements, instructions, and work conditions
- Expected workflow is clear to both parties and can be documented
SoW can be considered effective if it also provides the expected outcome of the project, along with evaluation standards and metrics. It is important that both parties have an understanding of what a ‘successful’ project is, and that ‘success’ is also defined in the SoW.
Scope of Work vs. Statement of Work
The difference between these SoWs is simple: scope of work is just a small part of the statement of work. A Statement of work is a complex document that defines:
- Required material
- And many more
The scope of work simply focuses on the process of achieving the desired goals. However, the project scope should not be neglected. Having a solid project scope will help avoid a so-called ‘scope creep’—a situation where the scope of work changes abruptly or grows uncontrollably.
This very important section of the Statement of Work clearly describes the end result of the project and lists the type of work that needs to be undertaken in order to achieve the defined results.
What should be included in the Statement of Work?
Regardless of the industry, Statements of Work share the common clauses and components. Aside from adhering to quality assurance tips, your SoW should include the following:
- Project objectives
- Project scope
- Key deliverables
- Parties responsible for task completion
- Allocation of resources, facilities, and equipment
- Project costs, payment milestones and ways of receiving payment
- Evaluation standards and guidelines
- Acceptance criteria and procedure
- Signatures by every involved party
Now that we have outlined the main components of the statement of work, let’s find out more details about how to construct a perfect SoW.
SoW structure & format
A properly structured Statement of Work might take you a while to draft. But in the end, you will be thankful for all the time your team spent on it. The format that we describe below is generic for every industry, and can be expanded to include any clauses that you may deem necessary. In fact, the more details you add to the SoW, the better.
The intro is where you define what type of work needs to be done and who’s involved in doing it. The type of work can be a service that needs to be performed, or a product that needs to be developed. There are usually two parties: the client (buyer, entity, vendor) and the contractor (provider, developer, supplier). It is also good to mention the type of formal agreement, according to which the SoW will be used. It can be a contract or a standing offer.
Here you can talk about why this work needs to be done. Define the purpose and the objectives, explain their importance. In the objectives section you can provide an overview of the project or emphasize the benefits the project is expected to create.
Scope of Work
We already know that the Scope of Work answers the ‘What’s going to be done’ question. This section needs to cover the expected result of the project, expected commitments in terms of time and resources, and phases of delivery as well as acceptance.
If any of the tools require a specific description of use, or are very technical, it is best to put them into a separate section.
Note that the scope of work section is just an outline. Don’t go into much detail here, as you will need to do that a bit further down the document (in the Requirements & tasks section). Create a nice bullet-list with every step that will be taken during every phase of the project. Each of these steps will then be broken down in detail in the Requirements & Tasks section of the SoW.
In some cases, you can list the tools that will be used during the project: machinery, inventory, hardware, software, etc. However, if any of the tools require a specific description of use, or are very technical, it is best to put them into a separate section.
Requirements & tasks
This is the section of the Statement of Work where you go into as much detail as you can. Remember that this part is Requirements & tasks. Start with describing the standards that a contractor must meet in order to do the work. These can include, but not be limited to:
- Training & certification
- Background clearance
- Specific tools (hardware & software)
- Contractor location
- Safety procedures
After that, define and describe the tasks that need to be performed in order to create the deliverables. Break this part into milestones for easier comprehension.
Also, keep in mind that in this section you are defining the process of getting to the end result, not the completed project itself. You will have time for that in the ‘Deliverables’ section.
In this section you will define the period of completion for the project’s milestones, and for the project in general. Here you can specify the dates or give a certain period of time to complete the milestones.
QUOTE: Based on the project’s timeline, you can plan the schedule of delivery/acceptance and estimate the date of project completion.
This is a good place to define the maximum amount of billable hours, or time frames in which the project has to be delivered.
Project location describes the place where the work will be performed. Here you can also list the facilities that will be used, and places where the parties will meet, if needed. There are 3 main types of locations to be used:
- On-site at the client’s location
- On-site at the contractor’s location
- At a remote specific location
You may add several locations to this section, as various types of work may require a different location to be performed.
Project Deliverables & schedule
This is where you define the deliverables that the contractor has to deliver to the client, and specify the schedule of deliveries. Be as specific as possible when describing the deliverables. Use key performance indicators (KPI), like we do for document automation software. Include the volume, size, color, state, amount of pages, location—everything that the client expects to receive as the result of performed tasks.
Be as specific as possible when describing the deliverables.
In this section include the schedule & dates of every significant project milestone as well. While it is important to include the end dates for every milestone and deliverable, start dates are not necessary, as they may depend on several factors, such as previous deliveries, seasons, important dates & milestones, contractor availability, and others among them.
Payment terms & schedule
This part of the SoW includes the pricing of work, the schedule of payment, and the way the payment will be performed. Be careful to include the entire cost of work:
- Labor costs
- Purchase tools
- Location rentals
- Possible additional expenses
There are usually two main ways of schedule payments:
- By date
- By milestone/deliverable
It is also good to include the consequences of late deliveries & delayed payments in this section.
This is the final section of the statement of work. Here you specify the criteria of acceptance, methods of testing deliverables, and standards, to which the project should adhere in order to be accepted by the client. Also, you should define here the people responsible for acceptance, and the procedure of signing off the delivery.
Don’t miss a thing in your SoWs with document automation software
- You will spend about 80% less time drafting the SoW
- If there is a clause that has to be there, it will be there
- Any repeating data will be correctly pasted where applicable
- Every team member will have clear visibility of each milestone and deliverable
All of this, in turn, will give you more free time to focus on the details, and less legal headache to drain anyone working on that complex document. Don’t let your non-legal team members find out what a legal burnout is, let document automation software take care of your routine legal processes.
Even though it might take you some time to create a Statement of Work, it is incomparable to the amount of time, money, and resources that you may waste on trying to redo the project that did not meet the requirements simply because they were not defined clearly.
There are 5 key points that you should keep in mind when drafting the SoW:
- Always define success
- Specify the timeline
- Be clear and understandable
- Be specific and detail-oriented
- Break it into milestones
Before starting to write the statement of work, brainstorm with your team. Define every part of the project, take note of specific language, build a roadmap that shows the dependencies of each milestone from another. Once again, define ‘success’ together with your team and make sure that your definition is clear and can be understood by others.
A well-structured statement of work will help you get a better evaluation of the project and will let you find a contractor that will best suit your needs. It is a piece of documentation that will help you ensure the success and timely delivery of your project.
If you would like to see a workflow of drafting a statement of work with the help of document automation software, book a demo with us. You can also learn more about our self-service contract automation engine, QuickDocs, and find out how to start spending 0 time on processing simple contracts – axdraft.com/quickdocs.