Getting Your SOW Right The First Time

The Statement of Work (SOW) is the heart of any contract – so ensure you get it right the first time, thanks to this expert guide by Lawrence Kane, COP-GOV, CSP, CSMP, CIAP

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The Statement of Work (SOW) is the heart of your contract. It defines requirements and success factors for your supplier, describing what services, tasks, and/or resources must be delivered along with metrics that govern whether or not those obligations have been met successfully (such as acceptance criteria, Service Level Agreements, and the like).

It is costly to change a SOW once set in place not only because your negotiating leverage is reduced after contract signing but also because any modifications can drive operational, financial, legal, and reputational risks for both parties. Unfortunately unresolved disputes harm the relationship and may even end up in court, so it is imperative to get your SOW right the first time.

A quality SOW will be distinctive for each type of contracting relationship (such as supplemental staffing, managed services, outsourcing, or Vested outsourcing) and will vary substantially depending on the type of work acquired (such as labor, hardware, software, services, etc.). The document itself tends to have some background information that levels the playing field for non-incumbents during the bid process along with your requirements for such things as request fulfilment, governance, implementation, transition, innovation, transformation, technology, operations, knowledge management, business continuity, incident management, security, performance management, information protection, change management, etc.

All SOWs should be aligned with your sourcing strategy so that you’re buying the right things (and retaining the appropriate functions). SLAs and other metrics must be reasoned, reasonable, and achievable so that you’re paying for a solution that meets your business need without costly over- or under-engineering.

Since the people who negotiate the deal often change roles and/or companies before the contract expires or is terminated it is important that the original intent is clear regardless of who reads the document. That means using clear, unambiguous language and enforceable terminology.

Choose your verbs carefully. “Shall” is a requirement the supplier must follow whereas “will” shows intent, “may” is optional, and “expect” is aspirational. I may expect to win the lottery, for instance, but that’s unlikely to happen unless I buy a ticket and probably not even then… As you can see, grammar matters in contracts. To reinforce that point, there’s a huge difference between the following three sentences:

• Lets eat grandma.
• Let’s eat, grandma.
• “Let’s eat,” Grandma.

To delve a little deeper, proven practices vary with the type work you need to buy. The following are some tips for assuring first time quality when writing your SOW for supplemental staffing, managed services, outsourcing, and Vested outsourcing deals:

Supplemental Staffing is used to acquire qualified workforce from a supplier. This is “pay-for-effort” work, so onboarding and off-boarding processes must be predetermined and followed, and integration with retained efforts well thought out. For supplemental staffing SOWs:

• Focus on job descriptions and daily management
• Normalise requirements with industry benchmarks, describing any certifications or bona fide occupational qualifications necessary
• Include badging, background checks, and other vetting requirements and processes that help assure the supplier employees will be capable, competent, and appropriate
• Clearly specify any non-labor elements provided by both parties (supplier and buyer)
• Describe how and where the work will be performed, establishing governance for daily management

Managed Services contracts are used to put a performance agreement in place with a supplier. This is “pay-for-unit-of-service” work, so clarity in service obligations and performance levels is essential. For managed services SOWs:

• Focus on transactions, business rules, measurable objectives, and acceptance criteria
• Levy only minimal requirements for interoperability or security to the extent feasible so that your supplier can do what they’re best at (which is why you hired them after all)
• Specify any export controls, legal, security, or badging requirements that apply to supplier’s on- or offsite personnel
• Describe the “what,” and also the “how” where necessary
• Develop clearly defined and measurable outcomes (but not too many) to set SLAs and other key metrics
• Optimize cost/service trade-offs
• Establish governance for oversight

Outsourcing is a long term, results-oriented business relationship with a supplier. This is “pay-for-result” work, so deliverables must be closely aligned with business needs. For outsourcing SOWs:

• Focus on business outcomes and most significant service levels
• Facilitate supplier’s ability to do what they’re best at by not over-prescribing obligations, levying only minimal requirements for interoperability or security
• Specify any export controls, legal, security, or badging requirements that apply to supplier’s on- or offsite personnel
• Describe outcomes, not transactions, focusing on the “what,” not the “how”
• Identify inputs, outputs, and interfaces, and develop clearly defined and measurable service levels (but not too many) to set SLAs
• Optimize cost/service trade-offs
• Establish governance for insight more than oversight

Vested Outsourcing is a long term business relationship with jointly designed solutions to a business imperative. This is “pay-for-outcome (solution)” work, so innovation is mandatory. For Vested outsourcing SOWs:

• Must be linked to a shared vision (often outlined in a statement of objectives instead of a traditional SOW)
• Focus on innovative solutions to your business imperatives
• Requires extensive “open-book” collaboration to design an affordable solution that simultaneously meets both buyer’s business needs and supplier’s objectives
• Solution taxonomy includes processes managed by both parties to show an end-to-end view
• Uses flexible Statements of Objectives rather than a traditional SOW and architect the details together
• Guard against constraining the scope too tightly, allowing supplier to accept all work scope (and risks) that are not core to the buyer’s business
• Develop clearly defined and measurable outcomes, focusing on the “what,” not the “how”
• Establish a governance for joint insight, not oversight

It can take 4 to 6 months to write a quality SOW (and associated SLAs and other key metrics), but the end result is worth it. For example, the US Air Force saved 50% by specifying that their floors must be clean, free of scuff marks and dirt, and have a uniformly glossy finish, rather than requiring that their contractor strip and re-wax their floors weekly. Seems obvious, perhaps, but this simple example shows why good, clear requirements matter.

Putting it into action… Let’s pretend, for a moment, that you are a busy professional and need someone to cut your lawn rather than doing it yourself. Here are three possible ways of writing the SOW to buy a lawn-cutting service:

• A bad SOW would be,
  “Cut my grass.”
• A better SOW would be,
  “Supplier shall cut my grass to a height of 1” and trim along the walkways once a week between the hours of 10:00 AM and 6:00 PM local time.”
• The best SOW would be,
  “Supplier shall provide care and maintenance for the lawn at [address], including all fertilization, weeding, trimming, edging, thatching, and debris removal necessary to keep it healthy per American Lawn Care Industry organic lawn care standards. Supplier shall assure that the height of the lawn remains between 1” and 2” at all times, there are no bare patches, and that it does not overlap curbs or walkways or spread into flowerbeds. Supplier shall perform all work that creates noise levels over 100 decibels between the hours of 10:00 AM and 6:00 PM local time. All Supplier employees shall pass a criminal background check and conform to OSHA safety standards while on the job site. Supplier shall provide all tools, equipment, and ingredients necessary to perform the work. Buyer will provide water, power, garden hose, and sprinklers.”

It takes time and effort to get it right, but the better the SOW you write the more likely you are to receive all the value you expect when engaging with a supplier. Ultimately an investment in first time quality leads to a better, more affordable outcome.

This article was originally published on LinkedIn and is reproduced here with kind permission.