Statement of work vs. scope of work

While the terms "scope of work" and "statement of work" are frequently interchanged, they are not interchangeable. In fact, they are two entirely different things, and understanding how they work will improve your project management skills and influence a positive project outcome.

A project's Statement of Work is a well-detailed legal document. The Statement of Work contains a section called Scope of Work. The Scope of Work is a part of the Statement of Work. Let's examine both agreements in further detail, beginning with the scope of work.

What is the scope of work?

“Scope of work” is a document that explains what a project includes and excludes. The scope of work usually includes project requirements, outlines how the project's objectives will be fulfilled, and establishes acceptance criteria.

This document will often define the work you'll accomplish during the project, as well as the deliverables, timetable, milestones, and reports. If your project did not necessarily require a statement of work, the scope of work might be used instead.

Decide whether you need to expand your scope of work into a statement of work with the help of your internal legal team.

When to use a scope of work?

Scope of work is the bedrock of a well-thought-out project and may make it operate more efficiently. This document can assist your team and project stakeholders in determining project needs and identifying potential hazards that could prevent the project from being completed successfully and on schedule.

For example, while writing the scope of work, your team may realize that a job's planned delivery clashes with another item that is currently in progress. You may then alter the scope of work and make adjustments to the timeframe.

Scope of work may help your team agree on project deliverables, allowing you to meet deadlines, prevent backlogs, and save money.

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Benefits of creating a scope of work

A scope of work is an important project management tool that keeps everyone on the same page from the early stages. Here are some of the benefits of creating a scope of work document for your next project:

It establishes a written record of the working agreement

It's not unheard of for misunderstandings to occur within a project team at some point down the road. Oftentimes, this is because the project goals and expectations were not properly established.

Creating a written scope of work gives all parties the opportunity to access important details related to the project and serves as a reference point for the project manager to keep everyone on the same page.

It encourages communication

A well-written scope of work will have multiple contributors from every unit or department.

This will create a dialogue with the express purpose of establishing project objectives, project schedule, and mutual expectations before the actual project begins.

This sets the tone for the project, ensuring transparency, effective communication, and most importantly, that all parties agree.

It promotes accountability

During the project planning process, it's important to not only set milestones but to establish detailed tasks for each member or subset of the project team.

This work document serves as a means to delegate tasks to promote efficiency by laying out the duties of the parties involved. If something goes wrong, the formal document will hold the responsible party accountable, and allow the project managers to figure out the next steps in getting the project back on track.

It saves time

Most projects that begin without a scope of work document will feel added pressure and experience more kinks on the road to a finished project. In many cases, this can occur for relatively simple reasons, for instance, not securing the necessary tools and equipment to finish the project or a lack of personnel.

A proper scope of work document crosses all I's and dots all T's in relation to the project and anticipates needs, saving time and reducing stress.

It helps to avoid scope creep

The dreaded scope creep, or 'feature creep,' is something every project manager aims to avoid. This is where a project's scope begins to change or continuously expand beyond expected outcomes.

For instance, where there were two deliverables, it becomes six. Or, in the middle of the project, requests for changes begin to pop up. This has a direct impact on the project schedule, resource allocation, morale, and project cost, which can grind the project to a halt.

The project scope of work document is there to protect your interest as part of project management.

What is the best way to write a project scope of work?

scope work

A solid scope of work may help you discover critical business factors and communicate project goals and specifics to project stakeholders. When considering a scope of work, many individuals keep the following in mind:

  • Be as precise as possible
  • Make use of visuals
  • Work with stakeholders to come up with a solution

This document contains:

Project Objectives

The objective describes the sort of challenge being confronted for which a solution is necessary. This is your problem statement.

Timeline & Milestones

There need to be clear terms for a project's completion schedule, including the date that the project will start and specific milestones throughout the project timeline. It's also crucial to identify key project phases against which real-time performance will be measured.

Deliverables

The purpose of starting a project is to produce deliverables. A deliverable is a project's desired outcome. It may be any new product, or it could be in the form of a particular service. 

To minimize confusion and misunderstanding, it is suggested that all intended deliverables be explicitly specified. A great way to do this is by creating a work breakdown structure which we will discuss later in this article.

Reporting

Any reports you'll be producing throughout the project are usually included in the scope of work. This can include a recent update to the client, progress updates from the vendor, or a financial statement to assess the gap between budgets and results.

Your reports should provide specifics about all of these documents, including who will create them and when they're expected to be delivered. These reports will serve as a means of communication for all involved parties throughout the project, providing them with the data and information they require to stay informed about the project's progress.

What is a statement of work?

The project statement of work (SOW) is a formal declaration of a project's goods, services, or outcomes between a service provider and client. Or, to put it another way, it's the statement that outlines the project's deliverables. This might be an internal or external document to the company.

• For internal projects: The project initiator or sponsor creates a statement of work based on the business requirements, product, or service requirements. A company's CEO might be the project sponsor.

• For external projects: In the case of external projects, they should originate from a client/customer.

NB: You should only move forward with a project after having the statement of work signed off. Unclear guidelines are a recipe for disaster.

When to use a statement of work?

A well-written (SOW) statement of work paired with efficient project management techniques and other work documents will help you complete a project successfully. This document aids in the management and documentation of expectations for your team and the party you hired.

The SOW is a story about the project that can help avoid misunderstandings and disagreements. The outcomes will be recorded on this document after the project to ensure that the final performance meets the SOW. This may have further implications, such as whether your company will be paid in whole, get incentives, or face penalties, depending on your contract and the advice of your legal team.

Types of SOWs

There are a few different types of SOWs that project managers use to dictate working agreements that have their advantages in different settings. These include:

Performance-Based

statement of work

This is the preferred SOW of project managers because its focus is on the purpose of the project, the resources and equipment that will be used, and the quality of the deliverables. It, however, fails to establish how the work is to be done.

This SOW is often used by governments and gives the contractor flexibility and more accountability.

Level of Effort/Time and Materials/Unit Rate

This type of SOW is used primarily by hourly service providers and is based on the hours and materials used to carry out the project. This type of SOW can be applied to most projects but is best used for short-term or temporary contracts.

Design/Detail

The Design/Detail SOW establishes how and when the work is to be carried out. It is very specific, outlining the requirements of all parties, along with materials, measurements, quality control requirements, etc.

This type of SOW is most effective in construction and manufacturing projects. Here, the risk is absorbed by the client/buyer since the contractor is required to follow the outline of the SOW.

How to Write a Statement of Work?

writing a statement of work

For greater accountability with external partners, you may turn your scope of work into a statement of work to serve as a formal work agreement. A complete, precise, and accurate statement of work helps bring teams together and ensure that all project specifics are covered.

When a statement of work is imprecise, it might cause conflict between the two parties involved. That's why it's critical to have all of the duties and information written down.

It's easy to become overwhelmed with a large list of tasks. You may relieve some of the burdens on your team and stakeholders by dividing the project down into specific phases.

  • Use brief, easy-to-understand phrases
  • Describe the project's objective
  • Determine the project's aim and how to achieve it
  • Work collaboratively to define project milestones and success
  • Create limits that are obvious, straightforward, and quantifiable
  • Always have your legal team review your SOW
  • Educate your staff and follow up regularly
  • Use a proper statement of work template, like this statement of work example provided by Indy here

In most cases, an SOW document is divided into 13 pieces. Each section focuses on a different component of the project and the many parties involved. The statement of work may have more or fewer elements depending on your sector and the extent of your project.

The following sections may be included in a statement of work:

1.Provide a project overview

A brief introduction is usually included at the start of a statement of work so that anybody reading it understands what the project is about and who is participating.

2.The goal of the project/purpose statement

The project's purpose is defined in the second section. This section usually contains an explanation of the project's aims and purpose to help the reader understand why this project is important.

3.The scope of the project

The statement of work's scope of work will most likely be the most extensive part. This section discusses how you intend to achieve the project's objectives.

4.Work location

The project's location is generally defined in the fourth section. Will the project, for example, be carried out in a distant location, or will you need to meet on-site for your team members to finish the project?

5.Detailed tasks

The SOW will next break down the project's scope into subtasks that must be performed. This section contains information to assist all parties engaged in the project in understanding the precise actions they must follow to finish the project effectively.

This part may incorporate a work breakdown structure (WBS) to illustrate the various activities and make this section simpler to absorb for the reader, depending on the scale of work.

6.Milestones

The statement of work may include a section that defines any quantifiable project milestones in addition to job specifics. This section can assist in breaking down the project into more manageable portions and giving all parties the opportunity to meet their deadlines.

7.Project Deliverables

This section contains a list of all expected deliverables, as well as their deadlines. This part will often include clear, quantifiable deliverables that leave no opportunity for misunderstanding.

8.Schedule

This section of the schedule may include the project deliverables' due dates, the amount of time spent on each activity, and any billable hours. This section usually contains pertinent timeframes, such as the start and finish dates for each job.

9.Testing and standards

Any project-specific industry-specific standards will be discussed and placed here. The scope of work will relate to all testing phases that must be achieved for the project to be completed successfully. Each testing step should contain details on who is participating in the project, the resources and equipment needed, and when the testing will occur.

10.The measure of success

This section contains the acceptance criteria or information that explains what stakeholders consider to be a successful project. Typically, project stakeholders are included in the writing of this section to ensure that everyone understands what the project's aim is.

11.Needs

The statement of work may now include any particular or unique project and job needs. This might include project-specific equipment, certifications that your staff must obtain, or security clearances that contractors must obtain.

12.Payment terms

Costs related to the project are included in the payments.

Outside expenses that accumulate during the project stages, as well as labor costs, are generally included here. This section might also clarify the payment schedule and how payments will be made. Payment terms are usually established according to a timetable or a deliverable milestone. You can specify whether you want to pay upfront, after each milestone, or after the delivery is completed successfully. 


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13. Other

Include anything else important to this specific project that hasn't been included yet in this area, such as post-project support, security concerns, software and hardware restrictions, and travel pay.

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Closely related documents

Project management cannot be summed up in one single document. An SOW document is just one of many necessary project management documents. Here are a few closely work documents you may need to familiarize yourself with:

Master service agreement

A master service agreement, or MSA, is a contract project managers use to establish the terms and conditions which dictate or govern future transactions and agreements with clients. In other words, it creates a foundation for the work to be done and dispute resolution.

This document is ideal for long-term business relationships. From here, you can create various SOW documents to meet different project requirements.

Work breakdown structure

A work breakdown structure is a visual representation of the project scope. While a narrative description is an effective tool, a picture can say a thousand words.

It lays out everything the project should accomplish, including all the tasks, deliverables, milestones, major phases, payment terms, and so forth.

Project charter

This document serves as the groundwork for your SOW. It is a short document outlining project objectives and constraints, stakeholders, project scope, goals, general budget overview, risks, and so on.

Request for proposal (RFP)

A request for proposal, or RFP document is a business document made with the purpose of soliciting bids from vendors and contractors. It describes the project objectives and needs, after which a formal SOW is issued.

Statement of objectives (SOO)

This document typically accompanies a request for proposal (RFP) document. It is often used by government agencies and outlines high-performance outcomes without specifying how the work is to be done.

This is similar to another document, the Performance Work Statement (PWS), which outlines measurable results and performance objectives.

Project management software

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A good project manager utilizes various tools and strategies to accomplish a common goal.

Using project management software will simplify the route to accomplishing all project goals by organizing resources, ensuring the project is on track, and giving access to the latest tools in the industry.

In summary

The statement of work includes a part called the “scope of work.” The scope of work specifies the specific procedure to accomplish those goals, whereas the statement of work is a very comprehensive, legal document that describes the objectives and goals of a project.

The scope of the project must be regarded seriously. Following it will ensure a successful project that stays on track from start to finish. Ignoring it will almost definitely result in a work backlog, missed deadlines, and more costs. Your statement of work may be thought of as a descriptive narrative that explains your objectives in great detail, whereas your scope statement provides a detailed explanation of the deliverables included in the project.

It's always a good idea to start writing your statement of work and other work documents related to your project as soon as possible. Use the statement of work examples we provided as a guide, then have your legal team take a look before sharing.