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HCMWorks Insights

The 3 Types of Statement of Work and How to Automate Them

Posted by Julia Fournier on 7 Jul 2021

When it comes to drafting contracts for contingent workers, you have to get it right the first time around. Any unidentified conditions or ill-described project specifications can lead to unmet quality standards by contractors and potential liability as a result of inadequate instruction. Every step of the managed service lifecycle involves paperwork to prevent this, and selecting the right statement of work (SOW) for the right service provided is vital. Once the type of SOW is identified, automation can streamline and expedite paperwork processes. 

Including automated SOWs in your workforce management process ensures compliance, reduces human error, and establishes consistency. Streamlining the process through automation solutions can help free up valuable time and give you peace of mind knowing that all critical aspects are covered by the agreement. 

This article discusses three types of SOWs and how to save time by automating them.

The Three Types of SOW

SOWs are project-based agreements that may include the actual scope of work, project description and objectives, materials provided (if any), timeline/project completion dates, fee for service, required experience, deliverables, performance specifications, evaluation factors, and more. While the differences between the agreement types are minimal, selecting one of the three types can provide clarity as to what the job entails and how to accomplish the objective. The preferred type will depend on the industry and task performed.

Design & Detail SOW

This type of agreement is frequently used in the government, construction, and manufacturing. A design/detail SOW is constructed to do just that - provide a detailed description of how the project is to be accomplished. The government entity, or individual/company requiring services, clearly defines how the work is to be done and what is required to do so. If an individual is contracted to perform a task, the SOW will precisely outline what materials to use, required dimensions, assembly instructions, and project deadlines. Because the contractor is instructed to follow detailed guidelines for operation, the buyer, client, or entity bears most of the risk. 

Design/detail SOW automation would allow hiring and procurement teams to auto-populate fields, reducing the time taken to fill in tedious information and form a detailed, thorough document.

Level of Effort SOW

A Level of Effort SOW, also known as a time and materials/unit rate statement of work, outlines the hourly service fee and materials required to perform a task. Because of its flexible guidelines and general task description, it is well-suited for short-term or temporary contracted services. Contracted individuals are required to accomplish an objective and are compensated by the hour or by the unit to do so, incentivizing timely and efficient service.

Automating a level of effort statement of work is especially efficient because the majority of the required information is standardized. In turn, minimal project-specific information needs to be added to the premade document and less time spent forming a detailed agreement for a short-term project.

Performance-Based SOW

This is a common type of SOW utilized by American and Canadian businesses in both the public and private sectors. Performance-based SOWs are aptly named as they focus on performance rather than “how” the service is completed. These SOWs detail the project’s purpose, resources, results expected, and quality. While a detail SOW specifies how a project is to be completed, performance-based SOWs focus on what is completed. For example, an individual will be required to perform a quantifiable task, such as providing X amount of deliverables without being told how. The defined lack of micromanagement places liability on the contractor as the objective is accomplished by their own means.

By automating performance-based SOWs, producing an agreement becomes streamlined. The user simply enters names, quantifiable KPIs, and other fields rather than drafting an entire document from scratch. 

How to Automate SOWs

Automating SOWs assists HR and procurement teams in several ways:

  • Establishes consistency
  • Reduces time taken to write out an entire contract
  • Ensures accurate and compliant structure
  • Lowers service procurement workload
  • Reduces human error associated with manual entry

Statement of work automation can be accomplished in a number of ways depending on the type of SOW necessary. Some companies utilize content libraries, templates, drop-down tabs, and select formatting with minor manual entries. While some information is standardized, other required fields can be filled with project-specific information via automation, manual entry, or limited selection options. In addition, there are different software solutions that are purpose-built for SOW automation. Investing in a software solution can be especially helpful for companies that frequently hire contingent workers for limited projects.

Implementing Statement of Work Automation

Engaging with a managed service provider (MSP) who specializes in SOW strategy for contingent workforces can simplify human capital management. HCMWorks has extensive experience helping HR and procurement teams in the public and private sectors streamline their processes. To learn more about how we can help you build the right SOW management strategy, contact our team of workforce experts.

Tags: Workforce Management, Independent Contractors

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