Introduction to Statement of Work (SoW): What it is, and isn't
This is a guest post from Stuart Juggins, founder of Aardent. You can find more information about who Aardent are and what they can do for recruiters at the bottom of this piece.
What is a Statement of Work?
A Statement of Work or SoW in basic terms is a contract setting out the commercial agreement between two parties, which is used to define and document a set of objectives, outcomes, tasks, terms and financial conditions to be measured against.
The SoW is legally binding and as such should always clearly state the specific activities required to be provided, namely the Deliverables and Milestones. Any engagement that utilises a SoW should also detail all of the relevant payment conditions for the respective deliverables and milestones, stating conditions for when payments will be triggered.
The SoW will document all of the activity in detail that the chosen supplier (a contractor, consultancy etc.) and procurer (the client) is responsible for completing, along with the duration of the project / engagement and specifying how and when payments will be made. All of this activity will be based against the completion of specific milestones and can be paid on a time & materials, capped T&M or fixed-price basis.
What are the key SoW components?
When utilising SoW's, there are several key components to include which define and set out the rules for engagement and performance conditions:
- Scope This outlines an overview of the whole project/engagement and the set of outcomes required, it will detail what the client is looking to achieve and expects to see upon completion. The scope sets the scene for the rest of the SoW and can be provided by the client in full or more commonly created as part of some preliminary consultation and fact-finding sessions.
- Deliverables Defines the actual output required to be provided by the supplier as part of the engagement. The Deliverables can be incremental (as the project progresses), total (at the end of the project) or preferably a mixture of both. Deliverables will often be a mixture of softer (creating a report) and harder (physically implementing or changing something)
- Milestones Details the measurement of progress against outcomes (the Deliverables) which often relates to the trigger of payments based on successful completion. Milestones can be set for regular or irregular occurrences depending on the engagement and Deliverables.
- Dependencies Defines and details what we expect and/or need the client to provide in order for the successful completion of an outcome/milestone/deliverable. Any dependency failure should ideally not impact the financial position of the SoW supplier. This is a complex part of the process and requires thorough assessment to ensure every aspect is documented.
- Caveat / Assumption These are a set of conditions we will likely include in the SoW in order to more accurately base our assessment and determination of the deliverables and milestones against. We define these conditions to mitigate any potential issues that could arise through lack of clarity or detail in the Scope, Deliverables and Milestones.
When and when not to use SoW?
Finally, let's understand when and where a SoW should and should not be used.
- When to use The SoW is a robust commercial delivery framework, ideally suited when there is a need to detail and define a particular set of outcomes for a finite period of time against which we want to measure performance and pay accordingly - rewarding success and penalising failures.
The obvious example is short to mid-term projects whereby the activity would need external expertise, scale or knowledge to complete and there is a need to hold that engagement at arm's length. Allowing freedom to operate and deliver the outcomes accordingly.
The resource makeup of SoW's is almost irrelevant and can be used for single person and multi-person (team) engagements the actual outcomes are what are relevant.
- When not to use Firstly, a SoW in itself is NOT the magic-bullet solution for IR35 that people initially think. The intricacies of IR35 legislation is beyond the scope of this guide, suffice to say a SoW can be used to ensure compliance for Outside IR35 but there are many more factors for consideration.
SoW's should really not be used to provide people as the outcome, in these engagements a traditional resourcing solution is still best and most effective.
Who are Aardent?
Aardent are a specialist consultancy who advise, guide and transform Recruitment, Staffing and Talent businesses to evolve from traditional resource provision into higher-value, outcomes based (SoW) services to meet the growing market demands.
We work with our clients on every aspect including strategy creation, sales proposition, sales coaching, solution design and project delivery - ensuring all elements are 100% aligned to their current business, market and sectors.