What Is a Statement of Work? Definition & Examples
Paperwork. It can be the bane of any business. Yet it is a common truth that everything revolves around your ability to work through admin and paperwork. There are various rules and procedures that any paperwork has to go through, which can be tedious, to say the least.
However, paperwork is also important. It’s needed for you to keep a track of various things such as your sales, your taxes, your insurance, and many more.
One of the most important pieces of paperwork is a statement of work, or SOW for short.
But what is a statement of work? We’ll break it down for you and give you some examples to help you along the way.
Key Takeaways
- SOWs are formal documents that define and outline all aspects of the upcoming project scope.
- SOWs should include an introduction, define the project’s goals, and outline logistics, timetables, and milestones.
- There are four types of SOWs performance-based, design-based, time and materials, and fixed price.
- You should use an SOW to tie payment to milestones and achievements to keep the project running smoothly.
- Project managers use SOWs and SOW templates to help define the relationship between a client and vendor and what the end-user experience will be.
Here’s What We’ll Cover:
What Should be Included In an SOW?
How to Write an SOW (Statement of Work)
What Is a Statement of Work (SOW)?
When starting a project, one of the first and most important steps is to outline your statement of work.
An SOW is a formal document that displays the project scope and defines and outlines all aspects of your upcoming project. These documents are work agreements showing the project’s deliverables, activities, and overall timescale. This can be presented to an investor, a manager, or your project team.
An SOW document will need to be an extremely detailed document as it will lay the foundations for the project plans. This can make creating your statement of work seem like a daunting task for project managers. However, it’s actually easier than it may seem. Here’s a rough checklist of examples of what you should include when writing your SOW.
Statement of Work Example
What Should be Included In an SOW?
A well-written statement of work includes many parts to cover all aspects of a project’s scope. Start by focusing on each part individually, then work yourself up to a whole. The first step is to note the major aspects of the specific project the SOW addresses. Next, take these factors into consideration.
Introduction
Begin by introducing the work being done and addressing any general information about the project. State all parties involved in the project. A clear introduction will lead to a standing offer. This solidifies prices for products and services purchased for the project and a formal contract that includes more intricate details.
Defined Goals
Answer the big question—why are you starting this project? What is the purpose of the project? What will the project accomplish? Create a purpose statement and provide detailed definitions of the project objectives, deliverables, and return on investment.
You should clearly define your project objectives and what would constitute a successful project. You should also include what would be considered a failure. There should be no vague sentences involved and it should be very clear and easy to read. Essentially, the more detail – the better.
Outlined Logistics
This can include every logistical part of the project. For example, what work needs to be done in the project? Where the project will take place, at an office or offsite location? Will each of your project teams be working together or remotely?
Note these points in your scope of work, including what hardware and software will be necessary and what processes will be used to complete the work. This includes outcomes, the time involved, and general steps that will lead to achievement.
Timetables
The primary focus in your statement of work should be the quality of the work you intend to produce. This should be closely followed by the commitment to complete it in a timely manner. Each project phase should be clearly defined and detailed.
Most SOWs will include various basic terms and deadlines. These deadlines don’t have to be fully specified as they can include some flexibility which allows for any potential issues.
Project Milestones
As with any large, detailed project task, it’s important to break the project down into digestible bites or milestones. These more detailed tasks help clients understand the project’s scope and can influence and govern future transactions.
This will lay out a map of how you expect the project to be completed. It can also be used as a reasonable judgment of how the project is coming along throughout the process. Project stakeholders can use milestones to track progress along with key performance indicators.
Standards and Testing
Point out if there are any industry acceptance criteria or quality standards you’ll need to adhere to. Include if there will be project testing, who will be involved in the testing process, and what equipment and resources are needed for adequate testing conditions.
Financial Plan
Anyone taking the time to read your statement of work will likely want a breakdown of your project costs. This should include how you intend to use your financial resources and payment terms.
If you’ve created a financial plan or a budget, you can list the payments related to the project and how they will be delivered. This will also need to be a detailed part as the success of a project can often rely on the ability to adequately fund it.
Closure
Determine how all the deliverables will be accepted, who will deliver, who will review, and ultimately, who will sign off on the deliverables. Address final administrative duties to ensure there is a process in place to sign, close, and archive all project components.
Types of Statement of Work
Performance-based SOW
A performance-based statement of work is the preferred style of many project managers. They focus on the purpose of the project, the resources, and the quality level expected in deliverables. Performance-based SOWs don’t explain how the work is supposed to be achieved. This allows a high level of autonomy on how to get to an outcome without requiring a specific process.
Design-based SOW
For design-based SOWs, the buyer is held responsible for the performance as they’re directing the project course. Project requirements can run from quality acceptance criteria to payment terms to the measurement of materials needed. A design-based statement of work is good for a single project and answers the question of what the buyer’s requirements are that will control the supplier’s process.
Time and Materials SOW
A time and Materials statement of work is the closest to a universal version of an SOW. They can be applied to most projects, making it easy to create Time and Materials statement of work templates that can be quickly and easily adjusted to the specifics of each project.
They define the level of effort, materials, and cost per unit. Time and Materials SOWs are typically short-term contracts.
Fixed-Price SOW
A fixed-price statement of work includes clearly specified budgets, a fixed schedule, and deliverables. They show the vendor is committing to deliver everything that’s written in the SOW within the allocated time and for the specified budget.
How to Choose the Right Type of SOW for Your Project
Determine the most important aspects of your project and see how they align with the above definitions. What are the project requirements? Do you have multiple similar projects running simultaneously? A performance-based statement of work may be the best option. For cut-and-dry SOWs with clearly defined expectations, turn to a fixed-price style.
Regardless of the statement of work style you choose for your project, project management tools and software streamline the process. FreshBooks helps to streamline the project management process, ensuring your project achievements, timelines, and project deliverables run smoothly as an efficient and accessible project management tool. Learn more about FreshBooks project management tools and click here to start your free trial today.
How to Write an SOW (Statement of Work)
A well-written project statement of work ensures nothing is left out and provides helpful information for both the client and service provider to be able to refer to during the scope of the project. Follow these tips to build a professional, reliable, and well-defined SOW.
Include an Overview
In your introduction, include what the project is, what it will accomplish, who will be involved, and how it will benefit the client. Use the introduction to build excitement and interest. A detailed overview lets the client know you’ve thought of all the little components.
Define the Vision and Project Objectives
Include the vision or purpose of the project. The vision is a smart way to create goals and is an opportunity to set achievable expectations. Think about what is expected to be delivered, the final deliverable’s goal, who the end-user is, and how they want to use it. Answer what problem this project solves.
Make It Easily Readable
Although you’ll want to show that you are an expert in your field, you also don’t want to fill your scope statement of work with business-related jargon.
There should be a balance between showcasing that you have confidence in your ability and making it readable. Especially for someone who may not have the same level of understanding.
Include Special Requirements for the Project Scope
Are there any special requirements needed to be considered for this project? This could be security measures, extra software, or clearance levels for information. For example, who has access to the project and can access trade secret information databases?
Extra Tips and Tricks for Project Managers
When you write a statement of work, keep these tips at the forefront of your mind:
- Stay focused on what an SOW is, and don’t step outside of those parameters. Only include what must be included and leave extra details for other documentation.
- Clearly define what success looks like and how it benefits the end user.
- Tie payment to milestones, encouraging deadlines to be met so that payment can be received for extra incentivization
- Use language everyone can understand. Make your statement of work clear and universally accessible.
- Don’t forget about post-production needs. Ensure your SOW sees your project through to its very end point.
Once your statement of work is complete and your project management process is in place, managing your client relationships and expectations is the next vital step.
Conclusion
A well-defined statement of work is a key document that is needed before the entire project can be started. It’s a helpful tool as the structure it provides can guide you throughout the whole process and helps you tackle any big-picture issues.
They also help to avoid conflicts within the project. You have an agreed-upon scope, and you must stick to this plan. The key takeaway from this should be to include as much information and detail as possible. After all, there is no such thing as being too prepared.
FAQs on Statement of Work
What is the purpose of an SOW?
A statement of work is a business agreement that outlines deliverables and project goals, the work breakdown structure if you will. It’s created to keep all parties on the same page about deadlines, the scope of work, expectations, and desired service outcomes.
Who prepares SOW?
SOWs are most often written by the client or project manager. Authors can vary based on the type of project, and occasionally more than one writer may participate. This can include project managers, third-party contractors, or Chief Information Officers.
How do I get a statement of work for project management?
You can write a scope statement of work from scratch, including all the details in this article. Or, you can use a template or project management software to streamline the process.
What is an SOW template?
An SOW template is a pre-formatted document that includes universally-used information in a typical SOW. You then fill in the specifics for your project.
Is an SOW the same as a contract?
No. A statement of work is a legally binding agreement, but it isn’t the final format contract signed at the end of the contracting process. Think of it as the formal foundation of a final contract.
Key Takeaways
A well-defined statement of work is a key document that is needed before the entire project can be started.
It’s a helpful tool as the structure it provides can guide you throughout the whole process and helps you tackle any big-picture issues.
They also help to avoid conflicts within the project. You have an agreed-upon scope, and you must stick to this plan.
The key takeaway from this should be to include as much information and detail as possible. After all, there is no such thing as being too prepared.
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About the author
"Michelle Alexander is a CPA and implementation consultant for Artificial Intelligence-powered financial risk discovery technology. She has worked in external audit compliance and various finance roles in Government and Big 4 environments. In her spare time you’ll find her traveling the world, shopping for antique jewelry, and painting watercolour floral arrangements. Catch up with her on linkedin: www.linkedin.com/in/michelletongalexander"
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