What is an SOW (Statement of Work)?
Statements of Work (SOWs) Can Make or Break Your Business
A Statement of Work, often known as an SOW, is a business agreement that outlines deliverables and project goals. It’s created to keep everyone on the same page about deadlines, scope of work, and project expectations. Creating an SOW helps clients and vendors to stay aligned and reach their project goals together.
A good SOW functions as both a contract agreement and a project management tool. For example, if your company is hiring a freelance writer to create blog posts for your website, you might include an SOW with their contract to communicate expectations for a project’s workflow, deadlines, and payment details. Having a detailed, written breakdown of these project aspects signed by all parties makes it easier to hold everyone accountable for their end of the deal.
An SOW can be similar to, but is not exactly the same as, a scope of work agreement. Scope of work agreements define the objectives of a project, including the ways that the completion of a goal is measured. An SOW may include a detailed scope of work section, but a good SOW will include more than that. While the statement of work and scope of work can be used interchangeably, it’s important to note that the Statement of Work usually refers to the SOW document. In contrast, the statement of scope sets out the parameters of the project and the documents related to it.
Related: learn about the other fundamental business agreements
An SOW is also not a Service-Level Agreement (SLA). An SLA defines the metrics of success for an ongoing service, and also lays out any potential consequences in the event those metrics aren’t met. (An example of a simplified SLA could be, “I’ll host your website and keep customer information encrypted. If you get hacked, I’ll give up my fee and reimburse you for professional losses.”)
Finally, an SOW is not a Master Service Agreement, also called an MSA. An MSA is for when you have an ongoing open-ended relationship with an independent contractor. Rather than creating a brand-new set of guidelines every time you start a new project, an MSA governs a business relationship going forward. You can see how this is different from an SOW, which gives a birds-eye view of a single project and creates an outline of what will get accomplished.
The purpose of an SOW
A strong SOW will align the goals of the project with your road map to achieving them. That starts with outlining clear project objectives that you can refer to throughout the course of your contract. These objectives should be measurable, objective, and stated in simple terms.
An SOW will also set the tone and expectations for your project. The SOW can do this by defining the structure of a project’s workflow, giving clarity on who will be providing feedback on deliverables and who will sign off on the project. SOWs define what each party will be assembling, creating, or delivering. They also define as well as the deadline expectations for each deliverable. This helps avoid uncertainty and establishes a structure for your projects.
When do I need an SOW?
You’ll typically need an SOW when you are assigning projects to non-employees. The SOW will be created after a client has selected a vendor to execute a project. The project’s goals may have already been verbally communicated between parties. The SOW is then used to formalize the agreement and provide greater detail on how those goals will be met.
Independent contractors and freelancers who are working on a per-project basis will need SOWs. So will vendors and suppliers who are offering an ongoing service or product. In some situations, you may even want to use SOWs internally with your own teams as a project management tool.
Types of SOWs
There are three main types of SOWs that you are likely to run into.
A design/detail SOW provides a detailed breakdown of project goals as well as the tasks and to-dos that will be required to achieve those goals. It will include step-by-step breakdowns of each project phase as well as best practices, style guides, or materials required to complete the job. You might see this type of SOW with anything from a construction project or a website redesign. Whenever a tangible “it” is being produced, a design/detail SOW is probably how it got made.
A level of effort SOW is a bit more flexible. This type of SOW is for contractors who work on an hourly basis, and it’s meant to outline expectations for a service being performed, such as a delivery or skilled labor. A level of effort SOW may also be more general.
A performance SOW focuses on what is required for a project to be complete and satisfactory. This type of SOW lays out the metrics for success, but doesn’t necessarily go into detail about the how of the work that’s being done. Performance SOWs give contractors more control over the process, provided that the end product lives up to what’s described in their contract.
Elements of an SOW
The elements of a good SOW may vary according to your specific industry needs. Legally, a basic SOW will need to include these elements:
- Summary: An overview that defines the project and lays out what will happen and how all expectations and goals will be fulfilled.
- Approval: Defining who will govern the project and provide final approvals.
- Work breakdown structure (WBS): Defining each task and phase and explaining how those tasks will be completed.
- Final product: Defining the deliverables (what will be produced or promised) along with what is and isn’t needed to complete the project.
- Timelines: Defining the period of performance and establishing the milestones, deadlines and other important dates.
- Cost: Defining both the project’s costs and how those costs will be reconciled and paid.
- Work requirements: Defining any additional needs or requirements, like tools or skills needed to complete the project.
How to write an SOW
To write a strong SOW, start by having a plan in place. Make SOW creation go smoothly by taking notes from the outset and note details you know must be in the final SOW. Flagged details can include specific costs, tools, staffing, complicated procedures that require special attention, and other significant elements.
As you plan your SOW, identify the flow of your project and break it down into phases. Identify what needs to happen first, what the project will accomplish, and what’s required at the end to ensure the project is complete.
Once you identify each project phase, you’ll be able to fill in details. What are the deliverables? The cost? The milestones? List these details for each phase.
When you review your proposed SOW, connect the dots between each task and the project’s ultimate goals. How does each task contribute to the final outcome? How will each action lay the foundation for the activities and processes that will follow? Does each step make sense and have a demonstrable impact or value add?
Most SOW issues arise due to ambiguous language or confusing structure. When creating an SOW, establish a hierarchy of information that includes the scope of the SOW, all the technical tasks and subtasks covered by the SOW, and any documents related to the SOW.
When writing an SOW, you’ll need to strike a balance between being specific without being inflexible. Using vague or generic language muddies the waters and makes it easy to misinterpret scope and expectations. On the flip side, if there are too many details in an SOW, the project becomes too rigid and constrained. Keep language simple where you can; writing an SOW is complex enough without trying to wax poetic.
Because of the risks involved—both legally and financially—assign a qualified writer who understands the ins-and-outs of the project operations, finances and contractual requirements. An expert can also handle those occasions when an SOW has to be put together in a hurry due to other business factors, like procurement processes.
There is no one way to write an SOW. While SOW goals are always the same—to cover the parameters of a project—the execution depends on the individual project.
Managing your SOWs
SOWs are critical to effective project management, but that doesn’t mean that they are easy to manage well. That’s because no one can be everywhere at once.
The isolated nature of crafting an SOW means that once the execution phase of a project starts, communication can become an issue. You may craft a pitch-perfect SOW that nails down project expectations, only for the project to go off the rails when you can’t oversee every piece of the process. Even if everyone sticks to their deadlines and deliverables, communicating between multiple individuals and organizations can create a tangled web of unnecessary emails. If there’s no transparency into the contract process, team members can end up surprised by a project’s scope or get caught off-guard when they are the point person for a big deadline.
Enter: Digital contracting. The perfect solution for streamlining the contract creation process, encouraging collaboration, and executing smarter agreements faster, contract management software takes the guesswork out of SOWs.There’s full transparency throughout the process of crafting and executing every contract, so there’s no need for anyone to have to micromanage. There’s also no surprises. An all-in-one digital contracting solution makes managing SOWs a breeze for the duration of every project.
Simplify your SOW process with Ironclad and focus on the tasks that require your expertise and attention. Sign up for a consultation here to be one step closer to creating your first statement of work.