Statement of Work: What Is It?

A statement of work (SOW) is a document that lists all the work a supplier will do during a project. It will define the amount of work, the expected quality of the job performance, and the timeframe for completion.

A well-written SOW will help both parties understand the parameters of a successful project. A poorly worded SOW could lead to conflict. The parties may argue over unclear expectations and the definition of good work.

To avoid such arguments, a well-written SOW should include:

  • A list of expected products and services
  • A list of tasks leading to the product's creation
  • Specifics regarding who will handle each of the listed tasks
  • Due dates for deliverables
  • Payment schedule and deadlines
  • Determination of which party will helm the project and handle major responsibilities

Statement of Work in Project Management

You'll see a couple of other terms listed in SOW discussions. The two important ones are:

  • Project charter
  • Project objectives

The project charter is a SOW with a contract in place and an attached business case. A good project charter should:

  • List the important reasons for the project
  • Discuss the project objectives
  • Discuss the project's potential problems
  • Offer solutions to project problems
  • List the key people involved in the project

The project objectives are the reasons why the company believes the project is a good idea. They should have a business focus, but marketing potential is a factor, too. Think of the project objectives as an explanation for the why of the project.

Different Types of Statements of Work

The most popular types of SOWs are:

  • Design/detail
  • Level of effort/time and materials/unit rate
  • Performance-based

In a design/detail SOW, the contract defines work expectations for the supplier. The document will state how to handle issues as small as the proper way to handle measurements. It'll also list quality-control expectations to guarantee the supplier's deliverables are consistent and satisfactory.

The company hiring a contractor is at risk in a SOW. They're the ones asking another business to perform their tasks. The company pays someone else to do the work as they would. Should the contractor fail, it's a setback to the hiring company.

The level of effort/time and materials/unit rate SOW is easy to understand. This document specifies how much time a contractor will need to finish a project. It also lists expected materials to complete the assignment. With these two knowns, a contractor has little wiggle room if they fall behind schedule or exceed their materials budget.

Performance-based SOWs are the most popular version. In these agreements, the hiring company trusts the contractor to perform their duties in a satisfactory manner. The document will list the expected deliverable. It'll also show a measurable set of outcomes.

The contractor has incentive to perform the job at the highest level. Some companies offer bonuses for strong results in a performance-based SOW.

Is a Statement of Work Necessary?

Written agreements are always helpful in setting terms. When two parties agree on goals and criteria, less confusion exists during a project. SOWs are especially valuable when a business:

  • Agrees to a new part of a contract with an outside vendor
  • Needs to plan a large internal project

SOWs aren't useful for small projects. They're ideal for situations where a company hires an outside vendor to handle specific duties. The SOW will identify all the important aspects of a project. That way, the outside company understands the way their new employer handles projects. They can perform their new duties in a manner befitting the organization paying for their services.

SOWs also help when a company begins a huge project. Within the company, different teams may not interact often. The SOW tells each group what their employer expects from the project. Without a SOW, each group might perform their task differently, leading to one of two outcomes. The project will experience a delay at the end since the various deliverables don't match well. Alternately, the project will not turn out well since the deliverables are not consistent.

How to Write a Statement of Work

A good SOW avoids several mistakes. Broad wording and vague terms lead to incorrect interpretations. An employee will struggle to maintain company standards in the face of flawed directions. An outside contractor will have little chance of honoring a SOW with poor wording.

The best way to avoid these issues is to leave nothing open to interpretation. Specific terms are crucial. A SOW should contain the following sections:

  • Objectives: The purpose of the overall project includes several goals. Listing them guarantees expectations are met.
  • Scope: These are the tasks a worker will perform in order to meet the objectives.
  • Schedule: The worker must know the various deadlines for each part of the project. Falling behind schedule on any of them can delay the deliverables.
  • Price: All parties should know the payment plan and requirements needed to assure final payment.
  • Key assumptions: When one company works for another, the assumptions are the things one party might take for granted. For example, the contractor might assume they'll have access to the other company's computer system. Noting such access in the assumptions prevents later confusion.
  • Acceptance: These criteria are the standards the contractor has to meet before they receive final payment for their work.

General Guidelines to Consider

To write the best SOW possible, perform these steps:

  • Brainstorm before starting: A large project involves several components. Think about what you'll need and negotiate those terms. You'll also gain a better idea of what choices you'll have to make later in the project.
  • Write your SOW as early as possible: During your SOW, you'll focus on what your project needs. Writing the document will inform your choices on how the project will work best.
  • Set expectations: What will make the project a success or failure? Consider it in those terms. Then, spell out your expectations in the SOW. That way, the contractor will know if they're in danger of failure.
  • Schedule formal reviews: Once you start a project, a key mistake is to allow it to proceed without oversight. Your SOW should list key points when all parties get together to review performance.
  • Add specificity: As mentioned, a vague description in a few key areas will doom a project. Write a section of the document with a focus on important criteria like goals, scope, and requirements.
  • Settle details in advance: You should already have an agreement in place before writing the SOW. Negotiating while writing the document is a mistake. You'll want to know the terms before documenting them.
  • Define terms: Industry terms and acronyms are destructive to projects if one party doesn't understand them. If a company uses industry-specific language, they should add details about these terms.
  • Have internal discussions: By now, you know which team members will have a hand in the project. Speak with each of them to learn their goals and expectations. Have them read the SOW to see if they have any other input to add.
  • Don't overwrite it: Given the above, a long SOW sounds like a good idea. That's not true, though. If you provide a lengthy document to a contractor, they'll feel the need to have an attorney study it. You want a solid SOW that's still short enough that both parties can agree without speaking to an attorney.

If you need help with your SOW, you can post your question or concern on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.