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Blog post 14 Mar 2022

What is a Statement of Work and Why Do You Need One?

What is a Statement of Work and Why Do You Need One?

The role of project manager implies dealing with a lot of documents through the project's lifecycle. One of the most important is, undoubtfully, the statement of work. Statement of work (SOW) is a document that describes the purpose of the project. It contains a list of tasks explained in detail covering topics like timeline, resources, special requirements, expected outcomes, project team, etc. This article describes each of these elements, as well as provides tips and a template for you to create your own statement of work.

Illustration on what is statement of work (SOW)

What Is a Statement of Work (SOW)?

A Statement of Work is defined as a narrative description of products or services or results to be delivered by that project (PMBOK 6 guide).

In its current form, the definition of statement of work can be construed to indicate merely the products and services to be supplied to the customer. However, it should also include the contractor's needs and requirements in order to properly deliver the products and services.

All parties involved must have their obligations identified in the SOW. Many services and outsourcing providers become so preoccupied with identifying and defining the needs and requirements of their clients that they forget about their own. But, in order for the supplier to deliver a quality product or service, their demands and expectations must also be addressed.

What is the importance of a SOW?

The statement of work (SOW) creates the foundation for the delivery of services and products. Seeing as the majority of projects fail during the beginning and planning phases ( rather than during the implementation or execution phases), it is crucial to lay the groundwork that will eventually determine whether or not the project succeeds. This is why you need to create a statement that will have a precise description of the work that needs to be done so that you can have a baseline against which you can monitor and manage the progress of a project. This includes having a detailed plan of project scope, cost, schedule etc.

Infographics on Importance of SOW

If you have an unclear or unknown scope, you are essentially managing a project with no project objectives and because you do not have a baseline, it is doomed to fail. A project failure can also be tied to change - but it is important to note that change does not cause a project to fail, rather the failure is due to an organisation's inability to adequately manage change.

The importance of SOW is also reflected in its role as a contract's supporting document. It lists out exactly what services and products will be provided to the customer and what we, as the deliverer, will require from them in order to efficiently deliver those services and products. Statement of work essentially gives all parties an objective metric for determining when work is satisfactorily done and when payment is justified.

3 Common Types of Statement of Work (SOW)

There are a few different ways to write a statement of work. Which type suits your needs the most is usually dependent on the industry and type of service or project you are writing a statement for. Most commonly, there are three SOW types:

1. Design/Detail Statement of Work

This type of SOW instructs the vendor, contractor, or supplier on how to complete the task and what procedures to follow. It is focused on the special requirements of a project. In other words, this statement of work specifies the criteria of the customer, client, or business, whether they be for materials, measures, quality control, or something else. This is the recommended SOW for manufacturing or construction projects, as it is frequently used in government contracts where contractors are expected to meet strict standards. Because the contractor is expected to meet the standards given forth for them, the buyer, client, or entity bears the majority of the risk under this sort of SOW.

2. Level of Effort/Time and Materials/Unit Rate Statement of Work

This is a versatile SOW that is commonly used by hourly service providers. It's frequently used for temporary or contract personnel, as well as delivery orders. It is simply based on the number of hours a service provider worked and the materials required to complete said service. The SOW is a general description of the service that will be provided over a set period of time.

3. Performance-Based Statement of Work

Performance-based SOW is preferred by most government institutions. It includes information about the project's goal, the resources and equipment that will be provided, and the measurable end results. However, it does not instruct the contractor on how to complete the work. This type of SOW allows them maximum flexibility in terms of how they work and emphasises results over processes. This type of SOW places accountability on the contractor or supplier since they are responsible for providing outcomes using whichever tactics they believe are most effective.

How to Write a Statement of Work?

No matter which type of SOW you choose to use, an SOW needs to explain key elements like budget, timeline, scope, team, deliverables, etc. Here are some general things to keep in mind while creating a statement of work:

  • Brainstorm about what should be included and which details would be better negotiated during later phases of the project or contract management process before writing an official statement of work.
  • Start developing it in the early stages of a project when most projects are still taking shape. That can help you define and develop the project itself.
  • Clearly define what is the project's acceptance criteria. Defineboth the success and failure of a project. This defines not only what deliverables should look like but it should also include any criteria that would deem a project unacceptable.
  • Schedule times for formal reviews throughout the project lifecycle to ensure the work is on the right track. This allows the client to ensure that the contractor is adhering to their standards, as well as provide feedback to the contractor on what they're doing well and where they can improve.
  • It is very important that the objectives, scope of work, requirements and tasks sections are defined in a precise way so that nothing is misinterpreted after the work begins. Avoid listing options or alternatives since it can lead to misinterpretations.
  • One of key things to keep in mind is the the SOW should document an already reached agreement, not be used to negotiate project guidelines.
  • When writing an SOW make sure your whole project team is involved. It is best to have everyone involved in a project review and update statement of work as soon as there are new process or milestones progresses.
  • Do not make the statement of work too long. Yes, an SOW should capture all the necessary details, but try to keep it as brief as possible.

Key Elements of a Procurement Statement of Work

As already mentioned, a document like SOW may have some differences across different organisations that depend on project requirements. However, each statement of work document has all of the following key elements.

12 key elements included in the statement of work

Introduction

Begin to write a statement of work with the general information about the project and an explanation of the work that needs to be done and who is involved in which parts. Introduction needs to address the purpose of the project. This element will then lead to a standing offer, fixing the prices for products or services purchased for the project. After that comes a more formal contract that goes into greater detail.

Project Objectives

Creating a purpose statement provides a more thorough answer to the question of why this project is initiated in the first place. It defines the project's objectives, deliverables and returns on investment.

Scope of Work

This element of the statement of work focuses on what work needs to be done in the project. It includes information about both hardware and software necessary and a more detailed explanation of the process, including outcomes, time involved and steps to achieve success. This element also requires you to create a project scope statement to capture all the information about your project scope.

Location of Work

This part of the document notes if the team members will work remotely on the project or if the project is site-specific, contains details about where is it, and where the equipment and software used will be located.

Tasks

Tasks are created from the general steps that are outlined in the scope of work. By breaking down each step further, you can make sure you didn't leave out any action necessary to produce deliverables and fulfil project objectives. Tasks can also be broken down into milestones of phases, depending on how specific you want to be.

Project Deliverables

Deliverables should be listed down and they should define what is due and when. Besides that, deliverables should also contain details regarding the quality, size, color and other relevant information about them.

Schedule

This element of SOW includes a detailed list of when the project deliverables need to be done. Timeline begins with which vendor will be selected to achieve this goal, the kickoff, what the period of performance is, the review stage, development, implementation, testing, close of the project, etc.

Testing and Standards

Tesing and standards contain information about industry acceptance criteria or quality standards that need to be adhered to. It also contains a list of who will be involved in the testing process as well as what equipment and resources are needed.

Definition of Success

This element of the statement of work notes on what what the sponsor and/or project stakeholders expect as successful project completion.

Project Requirements

Contains a list of any other equipment that is needed in order for project to be completed. This element also concerns with the skills, education or certifications team members are required to possess.

Payment Terms

For payment terms, you already need to have created project budget. Then, you can start listing the payments related to the project and the way they will be delivered.

Sign off

This element of SOW establishes how the deliverables will be accepted and who will deliver them as well as who will review and sign off on them. It also details other admin duties.

Statement of Work Template

The process of creating a statement of work can be overwhelming. That is why we are providing you with a statement of work template as an example of how this document could look.

statement of work (SOW) Template
statement of work (SOW) example

A statement of work is one of many documents needed for managing a project. Other than SOW, there are a few other documents that are necessary for every project manager to create. They are all closely related and used for referencing one another.

1. Master Service Agreement

A master service agreement is a contract that defines the terms that will apply to all future transactions and agreements between two parties. Basic terms and conditions are included in the master service agreement, which can be waived in future legal agreements. You can start a relationship with a customer or vendor with a master service agreement, and then utilise a SOW for each project.

2. Project Charter

The project charter is a document that contains the main project goals and the designation of roles and responsibilities. The purpose of the project charter helps the involved project managers and the stakeholders understand what the given project is supposed to accomplish. It defines the project's scope, offers deadlines and milestones, and provides information on identified risks and the budget. Because of all this, it is often confused with the statement of work.

3. Work Breakdown Structure

A Work breakdown structure (WBS) is a project management method used on a complex, multi-step projects. It divides them into smaller ones that are easier to conquer. This method allows for tasks to get done faster and more efficiently which leads to better productivity and easier management.

4. Request for Proposal

A request for proposal (RFP) is used to seek out vendors and contractors that can supply a project with products and services. It provides an overview of project so that the bidding parties have a clear description of what is needed from them. Once the client chooses a vendor, the next step is to give them a statement of work with more detailed information about the scope of work.

If you want to boost your project management skills and write these documents with ease, we recommend checking out our PMP Passport course.