The Statement of Work (SOW) is an important tool used internally or externally to govern project activities performed by vendors or by departments within the organization. It is also legally binding and must be approved by the project’s client before work can commence.
Coming up with a well-planned statement of work turns out to be quite meaningful as a project enters the development stage. It not only gives detailed specifications for completed work but also defines responsibilities and liabilities. To fully understand what a Statement of Work is, we need to take a closer look at the elements it consists of.
What Does a Statement of Work Include?
The primary function of the SOW is to specify the deliverable or deliverables that a vendor or internal department is responsible for. It must also specify timelines and define reporting responsibilities.
When you use a Statement of Work as a task specification document for an external vendor, it forms part of the contractual obligation the vendor must fulfill. To make any chances, you’d have to do a formal change request. Internally, the SOW doesn’t have the same legal implications, but it nevertheless helps teams to plan their resource allocation so that they can fulfill its specifications.
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As a project manager, you are primarily interested in the deliverable. For smaller projects, the SOW can be very detailed, describing the methods that the contractor or team will employ in great detail. But for larger projects, digging down into the finer details is both unnecessary and (very often) impossible. However, the specifications for the deliverable are vitally important.
The SOW begins with the Scope Statement that describes the completed project. The SOW then goes on to provide detailed information on the deliverables. It will consist of several types of information when applicable:
- Purpose and scope of work – the reason why you are taking up this project and the resources involved to get the work done.
- Deliverables and due dates
- Location of work – the physical location where the work will take place. This may not be necessary, but if the work is to be performed offshore, for example, it would be necessary to include this information.
- Tasks that make up the deliverables
- Task responsibility distribution – who each task is assigned to
- Deliverables timeline – indicates when the work will begin, and when the team or organization must complete the task. Here, the project manager would consider specifying the maximum number of hours the organization is willing to pay for.
- Criteria for acceptance – using objective criteria, the buyer can determine whether the product or service provided to them is acceptable.
- Payment schedule – includes a break down of costs and payment deadlines that must be met
The SOW as Part of Project Planning
Every SOW forms part of the project planning process and the project charter. Thus, you begin by capturing the project scope. This indicates what you are planning to achieve and must include sufficient detail to guide your planning. The project scope is essentially the “what” portion of the project planning process.
Now that you know what you are planning to do, you can start looking at how your company and its contractors will get it done. This is the time to start formulating the Statement of Work for each of the activities that contribute to project completion.
The project manager won’t have all the technical skills to do this properly across a wide range of disciplines. For example, a project manager in charge of a construction project won’t necessarily understand all the technical details of the electrical works or how to specify the deliverables for an HVAC contractor. To formulate the SOW, he or she will consult with experts who specialize in these fields.
Statement of Work vs Project Charter
Many people feel like the statement of work and the project charter are the same thing. It’s hard to distinguish the two because essentially, a statement of work is always present within the contents of the project charter.
However, the main difference between the two is that the SoW is mainly used externally by a company. Whenever a company takes up a new project that consists of providing a product or service, the SoW includes all details required for the client and service provider to be on the same page. The project charter, on the other hand, finds optimal uses in internal project management.
Project charters are important for initiating and managing internal project development because they include useful information regarding decision-making authority for the project (i.e: who is responsible for the development of the project). For example, the name of the appointed project manager is usually information that is internal to the company and would not be included in a statement of work. However, it is an essential component of the project charter.
At the end, the two are both very similar to one the other. It all boils down to the fact that the project charter specifies who is managing the project and has decision-making authority, whereas the statement of work does not.
For example, if you are the project manager of a software development project and a colleague of yours argues that you need to buy a software package in order to continue developing the project but you know it’s too expensive and not necessary, what would you do? You would probably show him the project charter specifying that you are the manager for the project. You would not, however, show him the statement of work.
Statement of Work vs Work Breakdown Structure
You may have heard the term “Work Breakdown Structure,” and if you’re familiar with it, you might be wondering whether it’s the same as a Statement of Work. Indeed, the two are very similar. However, you would use a Work Breakdown Structure on relatively simple projects and those where external vendors aren’t part of the picture.
A Statement of Work is used in two scenarios:
- When you are planning to contract external vendors.
- When the internal activities that contribute to a project are numerous and complex.
In the case of external vendors, the SOW is useful before you award the contract. It indicates the scope of your project requirements, and the budget allocated. Meaning, it’s significantly easier to pick the right contractor.
A Statement of Work Shows Your Project Stakeholders Your Methods
Although the SOW documents you prepare are primarily there to show contractors and internal teams what you require from them, they have another essential function. They show the project managers’ clients and stakeholders how the work will be tackled. Once they have evaluated the SOW, they will approve it if they are satisfied, and the document then binds the project manager to fulfill the project as described in the SOW.