Updated: Jan 18
Statements of Work (SOW) are the typical contracting vehicle in a services-based industry. I’ve spent a good portion of my career either managing to or directly authoring statements of work and wanted to share a few tips on what some key items would be to include in a statement of work that will help contribute to a healthy project.
Explicit Payment Milestone Criteria
The whole reason you are doing this work is to get paid, right? In reviewing some not-so-great statements of work I was appalled at how little or ambiguous the language was around how the vendor was going to be paid for the work being performed. Your statement of work needs to center around two things – what are you doing and how will you be paid. The latter needs to have very clear language around what will trigger the vendor to ask for payment (typically through invoicing). Depending on the pricing model that has been agreed to (ex. fixed price vs time and materials), your language to define invoicing triggers will vary. For fixed price billing models, the payments will most likely be centered around specific payment milestones (normally driven from completion of tangible project deliverables). It's critical that your payment milestones each have a specific clause indicating what serves as the ‘trigger’ to be able to invoice (and ultimately collect payment for) the work that you are doing.
Specific Project Deliverables w/Acceptance Criteria
The above point talks about how you get paid. This point discussed how you spell out what you’re doing to get paid. Regardless of how you plan to invoice your customer, your project & SOW need to have specific deliverables of what it is that you are going to be building/doing for your customer. Not only does this help you contractually stay in your lane but it also helps your project teams understand exactly what it is that they are scoped to perform with this project. The more work you put into clearly defining deliverables, the easier it is for your project manager and project team to plan the work. When itemizing your deliverables it is also critical to define what the customer agrees is the acceptance criteria for each deliverable. This language needs to be as objective as possible with a clear understanding from both vendor and customer what constitutes completion of the work.
Entry & Exit Criteria for Phases
Getting away from deliverables and payments, it’s also very important to define how you enter and exit specific phases of your project. While sometimes these phase entries and exits may be linked to payments, its also good to have this clear definition of phase entries and exits so that your project teams can plan accordingly. As with deliverables and payment milestones, it’s vital that the language that defines the entry and exit criteria for phases is as unambiguous as possible and that it leaves no room for misinterpretation.
Good quality SOW’s offer us the ability to ensure that our projects get off to the right start and provide the framework by which we will execute (and get paid for) our work. Spending the time up front to author a quality SOW will more than make up for itself in the way of a well-executed project.