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What Is a Statement of Work in Project Management, and How Can You Come Up With One?

Regardless of the industry, you are in, throughout the life cycle of a project, paperwork is one constant thing that you must encounter. In any project, there is always a lot of paperwork to produce, get approved, file, and lastly, document.

Though every document in a project is essential, the statement of work document is of more importance. This is because it is created at the onset of a project and contains everything required to go into the project.

Incorporating the best project management tools and a well-written and in-depth statement of work can help you oversee a project successfully on time and within the budget.

In this guide, we will help you understand what a statement of work is, what it entails, and how to come up with one.

To make you understand clearly, it is best first to define what a statement of work is.

Let’s get started.

 What is the statement of work? 

Abbreviated as SOW, SoW or sow, a statement of work is a legally tying document and a critical element between a client and agency, contractor, or service provider that outlays what is included in a project and what is not.

The statement of work ensures that the project is run within the expectations and guidelines agreed upon. It also outlines what is within the scope to alleviate scope creep.

As a required project planning document, SOW, must cover points such as expected results, invoicing schedules, work schedules, work processes, etc.

Due to the considerable amount of details needed, writing an SOW can be a daunting task. It also requires utmost keenness because even a simple mistake or misunderstanding can lead to the project’s failure.

 What a statement of work is NOT

The term “statement of work” is always misunderstood mainly because of the many project-related documents available in the project development environment. Below are a few instances to understand and differentiate it from other project-related documents.

• Statement of work vs. contract

A statement of work is not a contract by itself but a fundamental part of the agreement, which includes all the simple details of the organization and the project.

A contract is a final stage in the process of negotiation that ties both parties together, while a statement of work document can be forwarded to the customer for approval, is negotiable, and can be easily changed.

• Statement of work vs. project charter

These documents are always confusing since both of them are approved during the starting stage of the project. However, SOW is just a part of the process of development of the project charter.

Additionally, the project charter allows the project manager to use the project budget and resources, while the statement of work does not. Compared to the project charter, SOW does not start a project.

• Statement of work vs. scope of work

Both phrases are always used similarly, but there is a small difference between the terms depending on the context each is used. Statement of work is a powerful project document that determines a project by setting its mission, success criteria, and output.

Scope of work is an element in the statement of work showing milestones and tasks to be accomplished by the project team.

 Who writes a statement of work document? 

Each time a company gets a new project, somebody is assigned the duty of writing the statement of work. According to the type of the project- internal or external, various roles are assigned to produce a work statement.

For the internal project, the documentation task is always given to the project management office, user groups, or the project stakeholders.

If you provide external services, this task can be assigned to project managers, project sponsors, customers, or an independent third party.

Ordinarily, the statement of work is written when the projects are to be taken to the external customer, with the project manager handling the necessary administrative tasks.

 Why is a statement of work important? 

Statement of work gives extra information about the project plans and cost estimates. It always include a layout of what should be done and implemented- and what should not.

A statement of work is a great way to orchestrate what a perfect business relationship could look like. Apart from personal contact, SOW is the first opportunity of displaying your competence to a client.

Statement of work entails a lot of work, but it is worth it as it enables you to refine your strategy of handling the project. By creating a SOW, you will likely be making adjustments on your estimates and timelines as you recall the elements you should have included but forgot to.

The number of details included in a statement of work reassures the client on what will be accomplished. It ensures a shared understanding of what the project will carry through and achieve.

Furthermore, the statement of work serves as the point of reference in deciding what to include in the project budget and what should not be included. A well-written statement of work can save a whole world of pain in the later stages of a project.

As a project manager, it is important to have something that will enable you to say, “but this is what we agreed on,” anytime there is a discussion with the client whether the approximation of a banner ad campaign should also include a campaign landing page.

Failing to write a statement of work correctly is always why agencies and clients end up in conflicts. Uncertainty or vagueness in project management leads to tension. It creates the potential for having a gap in comprehending whatever has been agreed. Ultimate idea of SOW is not to catch out on a client but to highlight precisely what needs to be done, how, when, and the cost.

 What makes a statement of work? 

Like the project itself, there are many parts in a statement of work document that needs to be understood. To clarify the statement of work, first, consider the major elements of a project it addresses. 

Begin the intro by clarifying the work that is being done. State also, the parties involved in the project. This leads to a standing offer, which binds the prices for services or products acquired for the project, and a very formal contract leads to more significant details

• The purpose of the project.

Start this section by answering these two critical questions; why are you starting the project? What are the reasons for doing the project? Make a strong purpose statement to begin this section and give detailed answers to questions such as, what are the objectives, the deliverables, and return on investment.

This section explains the project’s boundaries, what is contained in the scope and what is not, and the requirements to realize the project’s objectives. Details in this section can include:

1. A top-level summary of the project management process.
2. A summary of the project process steps.
3. A thorough description of the methods to be applied.
4. Description of the project location, software and hardware systems, tools, equipment, and the skills and labor required to get things done.

These are the activities that produce results. Under this section, the procedures, deliverables, or achievements are outlined. It also specifies which party is responsible for the different tasks- the client or the service provider.

All the expectations of the project and when to produce them are listed under this section. It features details such as quantity, size, color, and so on.

The schedule gives an overview of what the project timetable looks like. It contains the forecast start and end dates of activities and events held within a project. The start date may be optional, depending on the type of project you are undertaking.

It helps to use project management software when creating a schedule of the project. The software can help arrange your tasks and resources and produce an accurate and realistic plan.

• Costs and payments.

All the associated charges of each task are described in this section; labor, supplies, travel, and other costs. This section also contains information on the payment method and the due dates of payment; such as after a milestone is completed or according to the schedule, whichever way is deemed right.

• Special terms and conditions.

This section describes terms and conditions and explains the features that make a milestone or a deliverable allowable. It includes the methods of submitting the deliverables, how they are reviewed, and the person in charge of accepting and signing them off.

Here is where all the other parts of the project that are not covered in the above categories will be added so that every detail is covered. For instance, what are the security issues, are there restrictions around software or hardware, post-project support, or travel pays?

Finally, the closure section outlines how the deliverables will be accepted and the person tasked with delivering, reviewing, and signing off. It also deals with final administration duties, ensuring that everything is signed and closed.

• Examples of the statement of work.

There are three major types of the statement of work that are more prevalent in the project management industry:

1.  Performance-based SOW

This is the most preferred statement of work for project managers in private and government entities. It entails the purpose of the project, resources, and equipment that will be needed, and realistic results.

Though it does not direct the contractor on how to do his work, this type of SOW provides more flexibility in how the project manager works and concentrates more on the results than the processes.

In this statement of work model, more responsibility is given to the contractor, supplier, or service provider because they are the ones responsible for providing results using all the available methods.

2.  Design/detail statement of work

This type of statement of work directs the contractor, vendor, or supplier on how to do the work and the procedures to be followed. It clearly describes the clients, buyers, or organization’s requirements.

This kind of SOW is always used in government contracts where there are set standards to be followed. It is also the ideal type for manufacturing and construction projects.

In this model of SOW, the client or entity assumes all the risk since the contractor is mandated to follow specific laid out standards.

3.  Level of effort/time and materials /unit rate SOW 

This type is mostly used by hourly service workers due to its flexibility. It is generally based on the materials needed to perform the service and the number of hours required to finish the task. It describes the task being completed within a given period.

This type of SOW is often used for casual or contract workers or delivery order contracts.

 How to write a statement of work

Choosing a process of creating a statement of work depends on the industry and the factors you want to document. Regardless of your industry, a typical statement of work format includes the following elements.

A statement of work always begins with an introduction. This section presents all the major stakeholders in the project, such as the agency, clients, and any other third party, if there are any.

It is in the introduction that you briefly explain the project and the tasks that need to be done. Being a legally binding document allows both parties to understand what they agree to when they sign the SOW.

• Define the vision.

A statement of work must contain the vision or the purpose of the project. Vision is a perfect way to help you create targets and a chance to develop attainable goals.

Vision can define the expectations to be delivered, the goal of the final result, and who is the final user? And the problems which the project may solve.

After the expectations are defined, the next step is to set out a mission or the methods applied to deliver on the vision successfully. Ensure everybody understood the mission and agreed on the type of deliverables and the problems to be solved.

• Set the project requirements and tasks.

This section states the requirements and conditions the service provider or the contractor must meet, such as certifications, specific training, or security clearances. Ensure that all the essential project tasks are listed in this section.

Tasks can be broken out into lists of different stages. For instance, make a list of initiation stage, design stage, growth or build-up stage, and so on.

It is important to note that tasks and deliverables are two different things; a task is a process that must be followed to attain a particular target, while a deliverable is the end result or the final results of a task.

• Define the scope.

After setting out a vision statement and listing the requirements, defining the scope of the project is the next priority. Scope of work lists all the tasks that need to be done and the process of completing them.

It also contains project results in terms of products, services, or time dedication and defines an acceptable outcome.

Having a clear scope of work is the foundation of the rest of the planning stages. Set the scope in line with the previously outlined project requirements.

• Set the deadline for the project.

For reliable end dates, setting a start and due dates of a project may not be easy as it may look. Estimating the time of tasks, available capacity for the needed roles and the project’s cost is challenging, although very important to track time.

To improve accuracy and reliability, you can choose a platform to assist you with doing the estimations, such as auto-schedule software.

These platforms use the collective skills and learning from thousands of projects to approximate tasks and foretell a due date. They also accommodate all the company’s projects and link them to available resources.

In summary, the project start date and due dates are set based on the resources, time, and budget estimates. Using a business management platform can richly assist in this process.

• Allocate major resources.

Projects do not only require adequate resources, but they want enough of the right resources. Tasks, skills, and available capacity are always disregarded.

It is best to evaluate the types of resources required for a given project to ensure a possible delivery within the set timelines.

Working with your team to the fullest capacity can be a significant driving factor for customers to book your entity for their next project.

Without the right resources, you might fail to complete the project within the stipulated timelines in the statement of work.

• Create a schedule.

After assessing the available resources and agreed, you start setting up the time frame for the project. It is advisable to discuss the results and timeline with the client when making a SOW.

The timeline will enable you to know what milestones should be achieved when and in which order. Schedules should be managed based on the scope of work, start and due dates, and the abilities available for your project.

Remember, the schedule is different from the performance period, which contains only the time during which the contractor’s work is being done.

• Specify payment terms and due dates.

Under this section, you will underline the pricing of the tasks to be performed, terms and due dates for the payments.

Ensure that the total cost of the work, labor, and any extra expenses that will arise through the project are included.

The payment term can be set in two ways.

1. After completing milestones/deliverables

Under this model, payments are made upon completing a milestone or a deliverable. This type of payment term is advantageous to the client or the entity: they don’t get to pay if the project is delayed.

2. By schedule

Payments under this model are due under set dates or days of the week or month. This model is ideal for contractors or service providers because of the certainty of payment at a particular stage of the project regardless of whether the deliverable is achieved at that specific stage.

This section is where the clauses that include the delays on both parties are discussed. This is mainly important for SOWs of projects like the software development where the entire scope of work is not clear at the initial stages of the project.

• Special requirements/miscellaneous.

Anything that might have not been captured in the SOW body are outlined in this section. Factors that may be contained in this section include:

1. Security requirements. For instance, does the personnel require a certain level of clearance to access the job site?
2. Post project requirements.
3. Travel expenses and which side caters for these expenses.
4. Software or hardware access restrictions.
5. Assumptions and exclusions that might not have been outlined in the prior sections of the document.

• Acceptance formula and signatures.

This is the final section which will outline the conditions under which the client or entity accepts the deliverables. It also states which staffs are authorized to accept, review, and sign off the deliverables.

This section should also provide the guidelines for submission of work.

The document can then be signed after all the above sections are read and understood by both sides. Being a legally binding document, SOW ensures both parties share common ground and understanding of the project.

Conclusions

Having a well-written and clear statement of work is literally the first step in ensuring the running, execution, and delivery of a successful project. The project can be completed on time, according to the scope and within budget.

The statement of work document is a reference point throughout the project. It contains the principal purpose of the project and tasks that need to be done to ensure the expected outcome is realized.

It is important for project managers to follow good project management practices when writing a statement of work. Management principles such as feasibility studies help in assessing the viability of the intended project.

From advancements in technology and the constant changes in project management techniques, project managers should equip themselves with the necessary project management software to help them stay in the forefront of their work.