The Great Statement of Work Transformation is Underway. Why Now?
Procurement teams are adopting a centralised statement of work approach in droves. But why statement of work, and why now? Comensura’s Charles Austin investigates.
Statement of work (SOW) is undergoing a transformation. Procurement teams across the world are centralising their SOW activity, moving it from managers’ inboxes and personal folders into intelligent technology platforms.
But why? And why now?
Let’s start with the second question. Here are the three factors that make the here and now the age of centralised SOW.
Reliance on remote working and tech is here to stay
The mass migration to statement of work represents a mass acceptance: the very idea of the workplace has changed, and remote working is here to stay. For white-collar professions in particular, the days of full-time, office-based work appear to be over.
Even when full-scale national lockdowns are consigned to the history books, the adoption of hybrid working is likely to mean formerly office and site-based workers remain at home for half their working week – maybe more.
With this shift, a change in services procurement is both inevitable and essential. More remote contingent workers and suppliers means a greater compliance challenge, which poses a number of urgent questions:
● How clear a picture have you got of your total contingent workforce and supplier capability?
● Have all the required legal and compliance checks been carried out?
● What projects are people working on, and at what stage is each project?
● What access do individuals or suppliers have to your systems and sites?
Now, more than ever, it’s vital that PMO and procurement teams can answer these questions quickly and accurately. Any solution that gives full visibility and tighter compliance will be front of mind. Centralised statement of work has the proven ability to provide this confidence.
IR35 has changed the provision of services forever
Enforced remote working may have started the centralised SOW trend, but in the UK the IR35 private sector roll-out turbo-charged it. The long-awaited introduction of off-payroll rules in the private sector has fundamentally changed the provision of consulting and services support.
When these rules came into force in the UK public sector in April 2017, managers felt the effects quite quickly. Within a year, half said they’d lost skilled contractors or suppliers as a result of IR35 rules and around three quarters said it had been harder to recruit and retain them.
We don’t yet have a year’s worth of evidence to tell us whether private sector organisations are feeling the same IR35 impact. But the current surge in statement of work use and interest gives a pretty good indication of how things are going.
Since 6 April 2021, there has been a need to rapidly re-engage contractors in a compliant, controlled and visible way. Procurement leaders know this burden can’t be shouldered by managers alone, and centralised statement of work has emerged as an effective solution across the entire contingent and wider supplier communities.
Revenue challenges are shining a spotlight on cost
‘Unprecedented’ is a word you probably never want to read or hear again, and I’m already sorry I’ve used it. But the scale of the crisis we’re emerging from has been unlike anything we’ve ever experienced – socially, politically, psychologically.
Financially too, the Covid-19 pandemic has been an experience and a challenge almost without parallel. For businesses of all sizes and in all sectors, lockdowns and enforced closures have had a huge impact on revenue.
As a result, cost control has become an urgent and almost universal priority. Procurement teams are coming under increasing pressure to save their business money. In search of these vital cost-savings, they’re leaving no stone unturned.
Manual SOW engagements that have been sitting outside of centralised systems and processes, from employee training to facilities management, are being brought under procurement’s control as leaders go in pursuit of much-needed cost savings.
Which brings us nicely back to our first question…
Why is statement of work the solution?
Statement of work is nothing new. Most businesses have been procuring at least some of their services this way for years: the value of SOW as an outcome-based, value-for-money alternative to time and materials procurement is well known.
So, what is it about SOW that procurement leaders are using it to overcome the unique combination of challenges they’re facing right now?
Put simply, it’s the ability to drive value.
What we’re seeing now is the wide-scale recognition that only through a combination of intelligent vendor management system and seasoned advice is it possible to achieve true value from statement of work.
Businesses that have relied on manual processes are centralising their SOW activity now because it allows them to improve in four essential areas:
- Visibility: over the entire contingent workforce and wider supplier population, but also over any given service provider’s project aims, contributors, milestones, payment schedule, status and performance.
- Control: over managers’ spending behaviours, the payment approval process, the negotiation of suppliers’ commercial terms of engagement, rates and margins, performance recording – and more.
- Compliance: ensuring that the business isn’t engaging unapproved, unqualified, or misclassified suppliers – or those with a track record of poor performance.
- Governance: ensuring all suppliers are engaged with and managed according to agreed processes and principles, especially where legal issues are concerned.
When major improvements are made in these areas, higher value and lower risk are rarely far behind. Where some solutions cut costs but not risk, SOW does both by enabling enhanced data collection, better decision-making and improved supplier management.
After all, why bother to save on supplier margins and commercial terms of engagement, if regular misclassification of resources means that you’re subject to noncompliance with internal and external regulation of legislative requirements?
Has SOW moved up your agenda?
I’d love to know how you’re incorporating SOW into your strategic and tactical tasks and activities, and whether you’re enjoying some or all of the benefits I’ve described above. Leave a comment below the line.
Find out how Comensura are cutting through the complexity of procurement and recruitment and can help you improve how your business manages services and consulting spend in our upcoming webcast ‘Services and consulting spend: How procurement can gain control‘. Register here!
Charles Austin is Client Solutions Director at Comensura.
