Statement-of-work (SOW) arrangements have been getting quite a bit of attention in recent months, not just in terms of bringing such arrangements under the umbrella of contingent workforce program management, but also as to whether such arrangements are appropriately established or whether time-and-materials (T&M) arrangements should instead be converted to SOW.
Having contingent workers engaged on a T&M basis has its benefits in terms of flexibility, urgency of meeting demand and of course the ability of the engaging organization to closely manage and monitor the daily workload and outputs. For many situations, given the choice between T&M and SOW, T&M contingent workers are by far the best option. This is especially true in situations where the deliverable is somewhat vague or if the contingent workers are delivering ongoing service where an SOW is not easy to define. But sometimes an SOW is more fitting.
A true SOW is a written description of any task to be performed under a particular purchase order. It contains concise and accurate descriptions of the services, outputs and deliverables to be provided. This means that you need to look at your T&M assignments very carefully to assess whether they can genuinely be converted to an SOW.
You should consider the drivers —why you are looking to convert to SOW in the first place. These are most likely to be cost-and output related. Maybe the SOW does not necessarily have to deliver at a lower total cost, but the fact that you can transfer some of the liability for a confirmed delivery date to the provider, this may tip the balance in favor of an SOW.
Here are some key considerations you might want to think about:
- Are you able to document the exact tasks to be performed, the precise deliverables and their timeframe?
- Are you able to document the detailed completion and acceptance criteria, both for the end deliverable and any milestones along the way?
- Are you able to quantify and document such things as the liquidated damages that would be appropriate should deliverables and timescales not be met?
The SOW you eventually put out for tender will vary in its complexity depending upon the end deliverable, and it is important that you do not rely on verbal agreements or assumptions but that everything is documented thoroughly so that neither party is in any doubt as to what is expected for the price being paid.
When considering converting a T&M assignment to an SOW (or maybe even a number of T&M assignments to a single SOW), be sure to:
- Liaise with the people who will receive and use the product or service and solicit their input and advice.
- Document the SOW comprehensively regarding the outputs that are required and the performance/milestones that will need to be met along the way.
- Be specific in terms of timescales for both milestones and the end deliverable.
- Structure the SOW in a way that the bidder is clear on the exact requirements and in a position to estimate its risk, work effort and costs.
- Not be prescriptive in terms of how the end product is delivered. It is the end deliverable that you are concerned with and you should leave it to the bidder to propose how this might be achieved, while adhering to any guidelines you may set out.
- Be clear in terms of specifying the “must haves” and decide how the “nice to haves” will be evaluated if they are proposed.
- Write each SOW from scratch (or at least edit a similar SOW with the new detail), rather than simply use a previous template, as the latter often leads to complacency when specifying details of the unique SOW with inevitable consequences.
While the cost and guaranteed delivery of an SOW may seem very attractive, it is important that you resolve to pay the price of both the investigation of the conversions validity along with the creation of a comprehensive SOW and tender process.
