Creating or adjusting a contingent workforce program can be a time-consuming and frustrating endeavor. But when so much of your organization’s procurement spend is going to this type of labor, it’s important to have an effective program in place.

If your program doesn’t currently include statement of work (SOW), it’s time to incorporate it. Sure, you’ll be hit with some pushback. After all, organizations rarely want to put in the time investment into a big program change, especially when they don’t see the value of doing so. But today’s on-demand economy comes with unique risks, and including SOW into your contingent workforce program can help you reduce liabilities, increase security, optimize productivity, and protect your organization now and in the future.

What Is a SOW?

A statement of work is a formal document used for contingent work. The buyer provides this document to the contractor to detail the expectations, work activities, deliverables, timelines, and payments for the work that is to be performed. Though not a legal contract, the statement of work is used to ensure the contractor understands the needs and expectations of the buyer so there are no miscommunications or misunderstandings.

There are three separate types of statements of work. The design/detail SOW defines the exact requirements that are needed to do the job. The level of effort/unit rate statement of work highlights the required time spent on the work or the materials needed. And the performance-based statement of work only details how the work needs to be accomplished, without precise requirements.

To be effective, a statement of work must be detailed, precise, and use easily understandable language. A vague, broad, or generic SOW can be misinterpreted and cause problems down the road.

Mitigating Risks

The most valuable reason to incorporate SOW into your contingent workforce program is to mitigate risks. When you work with contractors, your organization is at an increased risk of legal and compliance liabilities.

The contractor may leak your company secrets and intellectual property to your competitor if you do not have a sound confidentiality agreement in place. Additionally, you could face greater risks when it comes to health and safety around your buildings and systems, and you could be hurt by errors and omissions. Plus, the liabilities surrounding worker misclassification can be especially damaging to your company’s reputation and bottom line. All of these problems can affect your ability to get insurance and cost you in fines, penalties, and lawsuits.

When you include all of these aspects into a statement of work, you are protecting your company from serious liability and you now have the necessary documentation to support any audit that you may face in the future.

Data Analysis

The more you know about your contingent workforce and the work your contractors perform, the more visibility you’ll have into their performance as well as your spend by department, service category, and supplier.

With a statement of work, you get to collect all of the necessary information about your contingent workers, such as hours worked, material costs, certificates and background checks, and quality of results through a formal process. With this valuable data in your vendor management system, you can analyze performance to make informed decisions in the future that can help you maximize productivity and reduce spend. Transparency is the key to greater efficiency. It will afford you greater control and allow you to influence positive change.

It’s Worth It

Although incorporating SOW into your contingent workforce program will add an extra layer of complexity to the process, it’s worth the effort. It can significantly reduce your organization’s risks associated with hiring a contingent workforce and it can also provide you with the data you need to increase visibility. This will allow you to track and measure performance in order to maximize productivity, make informed hiring decisions, and see performance issues ahead of time before they affect your bottom line.