Statement of Work: here’s what to know.
A statement of work (SOW) is an agreed-upon document that outlines the total responsibilities, requirements, and tasks of a project or contract between two or more parties.
Learn about statement of work management.
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What to know
What is statement of work (SOW) management?
Statement of work (SOW) management is the process of ensuring that a project stays on track based on the use of an SOW—a document that outlines pre-agreed-upon terms between two parties for completing a scope of work. Though the exact details included in an SOW can vary based on the project and hiring organization, it generally covers information that clarifies the objective of the assignment and how it should be completed. These details typically include:
- Project size
- Roles and responsibilities for both parties—generally a contractor or vendor and hiring organization
- Deliverables to be completed
- Timeline, including relevant milestones and deadlines
- Performance expectations, including criteria for project completion
Finalizing and agreeing upon these details in advance can help ensure that a project is completed on time and on budget.
As project complexities increase, organizations may find that it becomes difficult to effectively map and adhere to SOW requirements. As a result, effective SOW management is important for:
- Strengthening project oversight
- Maintaining budget control
- Meeting deadlines
- Efficiently managing change orders
- Mitigating project risk
Are you managing complex projects related to contract workers? A vendor management system (VMS) can provide the tools you need to effectively manage SOW requirements related to contingent labor in a single place.
Why and when is it important to have a statement of work?
An SOW is your chance to clarify expectations and ensure that all parties are aligned before any work begins, which is why it is often included as part of a formal contract—although it is not a contract or otherwise legally binding document on its own. However, an SOW is an important tool for:
Establishing clear guidelines for how the work should be completed and delivered
Expediting the approval process by ensuring stakeholder buy-in and alignment before work begins
Avoiding errors due to miscommunication or unclear expectations
In addition, a common challenge faced in project management—particularly when an assignment is large in scale or is complex—is “scope creep,” in which the requirements of the work gradually grow with time beyond the original agreement. A clear SOW can help your organization ensure that the project is fully scoped up-front, which can help prevent unnecessary delays and extra expenses.
However, even with a clear SOW, post-contract amendments may still need to be added to the original agreement due to unforeseen circumstances. But with a strong SOW management system in place, you’ll have the tracking and reporting capabilities you need to enable business leaders to make any necessary changes. A VMS can be invaluable in this area.
So when is it important to have a statement of work? An SOW can be a helpful tool any time you work on a project with a vendor or individual contractor who is not a full-time member of your own organization. However, the necessity of an SOW increases with project scale and complexity—as does the importance of effectively managing these documents and associated processes.
This is particularly true in the context of contingent labor management, in which robust reporting and detailed cost breakdowns of SOW projects can provide executives with a holistic view of your organization’s extended workforce needs. As a result, you’ll be better positioned to account for extended workers from the start of your talent planning process—enabling more strategic decision-making and financial planning.
Did you know?
Workday VNDLY Statement of Work is your key to SOW success. Strengthen project oversight. Maintain budget control. Efficiently manage change orders.
What’s the difference between a statement of work and scope of work?
Although the terms “statement of work” and “scope of work” are often used interchangeably, they do differ in their exact definition. A scope of work is more limited. In most contexts, the phrase refers to the tasks and other milestones that must be finished in order for a project to be considered complete.
A scope of work can be—and usually is—an integral component of an SOW. However, an SOW generally includes additional high-level information, such as the project’s mission and success criteria. A scope of work, on the other hand, focuses more narrowly on establishing the parameters for completing the assignment.
A “master service agreement” is another common term in this context. While related to an SOW, a master service agreement is used to more broadly establish and define the terms and conditions for a relationship between a client and vendor or other service provider. These parties may then create an SOW for any subsequent projects once the master service agreement is in place.
What are the different types of SOWs?
While you and your organization have the freedom to create an SOW that best meets your unique needs, these types of documents typically fall into three major categories: level of effort SOW, design SOW, and performance SOW. Each of these options offers its own unique advantages. The category most suited to your project will depend largely on your objectives.
Level of effort SOW: A level of effort SOW—sometimes also referred to as a “time and materials” SOW—is a fairly general form of the document, which largely focuses on the hours and materials required for the project, as well as cost information. It’s extremely versatile and can be used across a wide variety of contexts, including short-term assignments. A level of effort SOW can be particularly helpful if you’re not entirely sure what time or resources will be required to successfully complete your project.
- Design SOW: A design SOW—sometimes referred to as a “design and detail SOW”—is the most specific of the three categories. It generally includes very detailed instructions and requirements around not only the desired outcomes, but also on how the work should be completed and what materials/resources should be used. This level of specificity can be particularly helpful if the project involves important industry regulations or other compliance conditions.
- Performance SOW: A performance SOW—or “performance-based SOW”—focuses primarily on the outcomes of the project, with few specific instructions provided around how the work should be completed. Instead, the contractor or vendor is able to decide how to best execute the tasks on time and within budget. This type of SOW is best-suited for projects in which the hiring organization is most concerned with the outcome of the project, and does not care to be involved in the day-to-day operations that lead to that result.
How to write a statement of work and best practices.
Writing a statement of work can be the responsibility of numerous people within your organization, but is often completed by someone in project management. Project stakeholders or even user groups can also be involved.
There are no technical requirements for how to write an SOW. The exact information you include will vary based on your organization and project’s unique needs. However, following these steps can give you a place to start:
- Create an overview of your mission or objective, including a high-level description of the project scope.
- Outline specific tasks and/or deliverables that must be completed, with any relevant requirements for each.
- Put together a timeline that includes start and end dates, as well as other milestones or deadlines.
- List required resources, including staffing and who is responsible for providing each component.
- Consider adding financial information, such as project costs or payment terms. Depending on the details included in your full contract, this may or may not be necessary.
- Lay out any additional terms, such as success metrics or acceptance criteria.
It may also be helpful to add a glossary or appendix of phrases or acronyms used by your organization that might be unfamiliar to the contractor.