What is a Statement-of-Work?

Building SOW into your talent strategy

Definition

A Statement-of-Work (SOW) is a form of contract between a company and a staffing provider or individual that agrees to pay a contract worker for their efforts based on the achievement of pre-determined project outcomes. Typically, these outcomes are formed around project way-points (sometimes called ‘Milestones’).

SOW Benefits

SOW contracts are growing in popularity because they allow hirers of indirect workforce resources to pay for results, rather than hours worked. It means that departmental managers, with work to be performed, can look to hire specific skills for each competency or activity stream of projects they need to complete.  Use of contingent workers and ‘the gig economy’ means that companies can get their work done faster, with no employment risks. SOW turns requirements for workers into ‘jobs to be done’ that can be contracted out by purchasing departments.

Popularity

We’re seeing a dramatic increase in the fragmentation of jobs into tasks, ready-made service packages and Statements-of-Work (SoW) contracts. These alternative ways of procuring workforce resources mean that organizations are able to sugar-cube their resourcing needs and source best-fit, value-for-money solutions from a large addressable market of talent.

Features

Key attributes of a Statement of Work include:

• A description of the job to be done and of the skills and qualities needed to perform the task
• Qualification of the way-points against which the contracted worker will be paid
• Clarity over what qualifies the way-point as being complete (this is important because the hired contractor or agency needs to be clear on when they can bill for work done)
• Details of the resources provided, location of work and other meta-information related to the activity
• Confirmation of contract duration, payment terms (including how expenses will be covered), method of payment, currency etc.
• A summary of obligations of the contracted worker in terms of expected behaviors, hours of attendance etc.

Getting SOW right

SOW contracts are an effective hiring option for companies that have a long list of work to be done that are struggling to source the talent they need, but there are some ‘must-do-well’ aspects that companies considering SOW contracts need to get right.

Representing an exhaustive description of the requirement in your contract

When SOW contracts are poorly formed, they can lack the level of detail needed to protect both parties from mis-understandings and contract risks. That’s why we recommend organisations that have never used SOW contracts to source good impartial advice on how to design their scheme.

Being clear on way-point outcome measures

It’s vital that the SOW contract is clear what constitutes the completion of a way-point because any lack of clarity can result in upset should the contractor not be paid. It’s not common but occasionally disputes flair up when parties disagree on the quality of work produced. Being clear on what constitutes completion can help to avoid this.

Paying a reasonable price for work done

It’s no good thinking that the hourly rate you pay for a contractor will be anything similar to the hourly rate of a full-time employee. Contractors face a significant amount of downtime between jobs and they have to cover their ‘cost-of-sale.’ They may even have to cover their own expenses if these are not reimbursed. Bear in mind also that contractors are commonly more skilled and therefore expect to be paid for their knowledge and delivery capability. Fail to pay a reasonable market rate for your work and you’ll find your SOW ambitions will soon go awry.

Consider direct sourcing your SOW contracts

While organizations are used to working through agencies to source their talent, and might opt to do the same for SOW contract relationships, there’s a strong argument that businesses should explore publishing their SOW contract requirements through a serviced technology platform like Simplify TTM. This ready-to-use platform gives businesses. Everything they need to start publishing their SOW contract opportunities. It also includes helpful templates to make sure important aspects of SOW contracts are covered.

The role of technology in supporting SOW contract fulfilment

A talent portal like Simplify TTM goes beyond the traditional functionality of vendor management systems and on-premise recruiting software.  It incorporates Artificial Intelligence technology and offers a series of functional services that help to make SOW contract operations painless and low risk. These include to:

1. Formalize your offer in the form of a SOW contract – Use the features built into Simplify Portal to express your project in the form of a templated SOW agreement so you don’t need a lawyer to start using SOW contracts as a vehicle to get your work done!
2. Direct Source your talent –  Publish your SOW offerings directly to your target audience using the direct sourcing features of SimplifyPortal. It de-skills the task of publishing SOW contract opportunities, so you don’t need an expert recruiter to support your activities.
3. Promote your SOW offer on social media – Simplify Portal includes ‘gig economy app‘ features to integrate with popular job boards and social media platforms to enable you to get your vacancies and SOW projects filled quickly and at lower cost.
4. Test the skills of contractors (coding roles) – Optional integration with third-party skills qualification tools make it possible to vet the quality of candidates based on test scores.
5. Schedule interviews – Employ the built-in appointment scheduling tools to set windows when you’re available to perform interviews.
6. Set way-points and partial payment terms – Articulate your SOW contract terms in the form of a schedule of way-points against which you can a lot partial payments to weight the payment for work done against key stages or phased project deliverables.
7. Manage payments to supplier – Having set out your contract terms, automate the payment of monies to pre-agreed bank accounts (etc.) to automate scheduled payments once work has been approved and signed-off.
8. Maintain a record of all communications – All communications between parties can be discharged using the platform to avoid any communications getting lost in email and phone conversations. Having a complete record of any communications helps to minimize disputes or future litigation risks.

Here are some additional articles and resources on SOW contract operations that may be of interest. The WikiSuite SOW page An example of a Statement of Work contract Department of Defense Handbook on Preparation of Statement of Work (SOW).

About the Author

Ian Tomlin serves on the UK management team of SimplifyVMS and is regular writer on enterprise technology and workforce management topics. He can be contacted via his LinkedIn page or follow him on Twitter.