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HCMWorks Insights

What Is a Statement of Work (SOW)?

Posted by HCM Works on 17 Aug 2015

Organizations that hire contingent workers should use statements of work (SOW) as part of their procurement process. A SOW is a formal document that provides direction to the vendor or contractor about how the work should be performed.

In the statement, you define the specific services that the contractor is expected to perform by detailing the work activities and deliverables. You detail the quality and level of service that you expect and outline a time schedule. Pricing and standard governance and regulatory terms and conditions are usually included as well. In some cases, you would outline the exact requirements of the job.

The statement of work allows you to have increased control over the work being done by the contractor. Furthermore, the contract is important if problems or conflicts arise.

There are Three Different Types of Statements of Work:

Design/Detail Statement of Work: This document tells the supplier how to do his job by defining the exact requirements that are needed, which can include precise measurements, materials to be used, necessary tolerances, or quality control requirements, among other specifications. With this type, you are the one bearing the risk of performance as you are asking a contractor to perform a task following your specific way of doing things.

Level of Effort/Time & Materials/Unit Rate Statement of Work: This contract is used for just about any type of service. The time spent on the work and the materials needed for the job are the highlights of this statement of work.

Performance-Based Statement of Work: When you do not provide details about how the work needs to be accomplished, you would use a performance-based SOW. This is the preferred type of document for many companies.

Writing a SOW

Many organizations create their own personalized SOWs that are either generalized or specialized to accommodate typical requests or use templates as a starting point.

It’s important to understand the project that needs to be completed and all of the requirements before writing the document to ensure that you do not miss a vital piece of information.

To write a statement of work, you should address certain areas, such as the purpose of the project, the scope of the work being done, the location of the work being performed, the time period of performance, expected deadlines for deliverables, timelines for reviews, industry standards that must be adhered to, acceptance criteria, special requirements if applicable, and finally, the payment schedule. If needed, you can also add what resources and testing will be required to complete the project and who will pay the costs associated with them and when. If you’re going to need post-production support of any kind after the job is done, make sure to add it to the statement of work to ensure the contractor doesn’t just deliver and walk away.

It may seem simple, but it’s no easy task to write a proper statement of work. If the writing is poor—if the SOW is too broad, generic, or vague—it could be misinterpreted by the contractor and your organization could have trouble down the road. When there are misunderstandings due to the way the statement of work was written, it may not be properly executed and disputes can arise.

To get the project completed correctly the first time around, it’s critical that you write an effective SOW. The more precise you can make it, the better. Be clear and unambiguous. Ensure that you use language that is understood by everyone involved—industry jargon and acronyms can lead to confusion and hinder performance, which will lead to poorer results.

Define Success

Detailing your specific needs and your precise expectations in writing in the beginning of your relationship with the vendor, before the work begins, enables your contractor to follow your directions, get the job done correctly, and provide results that are acceptable to your standards, because you’ve defined success.


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Tags: Contingent Workforce Management

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