What is a Statement of Work?
A Statement of Work, or SOW, is quite simply that – a statement of the work to be performed under a master agreement. An SOW is rarely a one-size-fits-all document and needs to be tailored to the needs of the parties and the work or services being performed.
Why is an SOW Important?
An SOW is important because it clearly defines and describes all the details of the specific work or services being performed under a master agreement. An SOW is typically a negotiated document that provides necessary information to those performing the work, and includes details on performance, work standards, deadlines, and deliverables.
What is Included in an SOW?
An SOW will include (among other things) some of all of the following:
- Scope of Work: A high level overview of the work or services to be performed.
- Detailed description of the services: A very detailed description of what work or services are to be performed.
- Specific requirements: A description of the specific requirements and tasks. This may also include any specific personnel and their role in the work. It is also common to break this out into phases if the work is to be performed into a longer period of time.
- Term of the SOW: A clause statement the period of time that the work or services will be performed.
- Location: A description of where the work or services will be performed.
- Timelines: A clear and detailed description of the project timeline(s).
- Deadlines: A clear and accurate provision indicating all project deadlines.
- Deliverables: A provision that outlines and describes all specific deliverables to be completed under the SOW.
- Assumptions: It is common to see an assumption section in an SOW which provides what assumptions both parties agree to in order for the work to be performed.
- Additional or Special Requirements: Be sure to include any additional or special requirements that are specific to the work being performed under the SOW.
- Precedent Clause: If there could be terms that conflict with the master agreement, make sure there is a precedence clause that states what order of precedence applies to the agreement and the SOW.
- Signature Block: Though not always necessary, it is a good idea to include a signature block, documenting that the authorized representatives of the parties agreed to and signed the SOW.
What are Things to Watch Out For?
- Acceptance Language: Watch for different or new acceptance terms in an SOW. It is important to understand acceptance criteria, including any acceptance period, and how that may affect payment, revenue recognition, warranties, and liability.
- Payment Terms: Beware of any payment terms that are different from negotiated terms in a master agreement.
- Intellectual Property (“IP”) Ownership: IP ownership rights are usually handled in a master agreement. Beware of any provision in which the ownership of deliverables is designated, especially if it varies from the master agreement.
- Indemnity Clauses: Indemnity is also typically handled in a master agreement. If an indemnity clause appears in an SOW, review with care.
- Limitation of Liability Clauses: Limitation of Liability is also usually found in a master agreement. Beware of any clause in an SOW that limits or expands liability, or has additional exclusions to a limitation of liability clause.
An SOW is an important and integral part of any business relationship. By ensuring that all details are carefully drafted, and the terms contained in the SOW are appropriate, the project at hand will be in good shape.