5 min read
Statement of Work (SOW) contracts are immensely helpful for businesses, particularly those that deal with contingent workers. However, writing them can prove to be challenging. You might be unsure whether to invest in a solution that helps you produce effective and legally valid SOWs. Here’s what you should know.
What is a Statement of Work (SOW)?
A Statement of Work is a legally binding contract used to define project-specific activities, timelines, standards, and deliverables for a service provider (i.e., vendor, contractor, agency, freelancer). These are the crucial details about the who, what, where, when, and how much provisioning work into packets of activities.
SOW contracts are growing in popularity because they offer organizations a contractual instrument that frames contractor remuneration based on achieving one or more project outcomes; this is an alternative to paying for hours worked with no liability on the provider to achieve results.
The Importance of having a Statement of Work
Adopting SOW guarantees there are no misunderstandings between contractors/vendors and your company. Additionally, it protects your business from contractors/vendors changing their minds and asking for payment, having claimed they were enlisted for different deliverables, a different timeline, or other details that were perhaps discussed but not formalized. With a Statement of Work, all these details are set out in the contract terms to minimize the chance of miscommunication.
Types of Statement of Work
These 3 are the three most common types of SOW.
Design/Detail Statement of work
This type of SOW describes to the vendor, contractor, or supplier how to complete the job and what procedures to follow. It details the special requirements of a project. This could include identifying exact measurements, the material used, the required tolerances, or quality control requirements. This SOW is recommended for manufacturing or construction jobs, and for government contracts where strict standards are required.
Level of Effort/Time and Materials/Unit Rate Statement of work
These are commonly used by hourly service providers. It’s often viewed as a ‘one-size-fits-all’ SOW type because of its versatility. Simply put, it outlines the timeframe and materials required to complete the job. Overall, it gives a general description of the job to be completed, and what is required to complete the job.
Performance-based Statement of work
Performance-based SOWs set out contract conditions which are measured on a performance-based structure. This means that the equipment is already provided to the contractor, the project goal is supplied, and the desired end results are given. However, it does not tell the contractor how to complete the job. This provides the contractor with a lot of flexibility and autonomy on how to get the job done, emphasizing results over process.
Benefits of using a Statement of work
There are numerous compelling reasons why you should consider getting a tool to help you produce top-tier SOWs, here’s a few.
SOWs build trust between two parties, as everyone involved knows exactly what is expected of them. In case something goes wrong on either end, both parties are protected. It allows you to build a relationship with the contractor without worrying about breaches in agreement. A statement of work keeps you safe, prevents risk, and keeps each party accountable.
Having a good SOW contract in place allows negotiations to run more smoothly and stay on top of productivity. Writing it from scratch can prove to be a time-consuming, even risky, activity. Additionally, getting a solution that walks you through each step of creating a SOW saves you a significant amount of time and worry about missing out something important.
Having a tool that helps you with producing SOWs means your admin team can save valuable time and focus on other duties, such as managing other parts of your business.
Why should you invest in a SOW solution?
Purchasing a tool for streamlining the production of SOWs can be very beneficial for businesses that work with contingent workers (e.g. independent agencies and contractors, freelancers, vendors, etc.) to complete projects. Which is to say, this makes up a significant portion of modern businesses.
Writing up an effective SOW that meets all industry standards can be quite challenging. To prevent misunderstandings, it’s critical to include every project specific detail that could be relevant, such as timeframes, deadlines, deliverables, materials and software/hardware to be used.
It’s an effective way to ensure that the work done meets your expectations and is delivered within an expected timeframe, to your exact standard. A good SOW can assist in building a foundation of trust with your contractor, creating quality long-term business partnerships.