Recent Staffing Industry Analysts (SIA) buyer research indicates that some 51% of buyer organizations (with more than 1,000 employees) have some degree of statement-of-work (SOW) spend management incorporated in their contingent workforce (CW) program. Further research indicates SOW — project-based — workers will be one of the fastest-growing worker classifications across the entire workforce.
Hence, it is not surprising that an additional 39% of buyer organizations plan to explore managing SOW spend in the next two years. The business management opportunities are fairly apparent in terms of professionally capturing engagement quality improvements, cost savings and implementing risk mitigation in this active area of the contingent workforce. Even just simply streamlining and standardizing the SOW engagement process will deliver important benefits to many of those involved.
Discovery. The first critical step to incorporating SOW spend management in a CW program is discovery. The core reason for this is SOW spend is not a monolithic category of spend in terms of structure, content, purpose and ownership. Rather, it presents itself in multiple types, structure and sizes with some content management expertise requirements that can quickly outstrip the everyday CW program manager. So gaining some visibility of the type of SOW engagements within your organization is an important point. Definitions matter during the discovery process.
So how does one define the SOW category of spend and its segmentation. SIA’s definition of SOW is a potential start:
“A document that captures the work products and services, including, but not limited to: the work activities and deliverables to be supplied under a contract or as part of a project timeline.
In contrast to a typical temp or contingent work arrangement which is billed based on time worked, SOW agreements are usually billed based on a fixed price deliverable or for hitting specific milestones. Like typical contingent arrangements, they may also be billed based on time, including arrangements where there is a time-based billing that is capped at some “not to exceed” level for time and materials.”
Segment descriptions. The segmentation descriptions used for the different types of SOW engagement activity taking place throughout the organization come next. These can range from a fairly common: fixed-bid SOW worker (where the worker is paid and covered under terms of a SOW contract, does not track/report time, and work direction may or may not be provided by client) to a time and materials SOW worker (who is paid and governed under terms of a SOW contract, tracks his or her own time and work direction may or may not be provided by the client). Segmentation descriptions could also include event (milestone)-based SOWs, team-based SOWs, fee-only-based SOWs and schedule-based SOW engagements, among others. Some SOW engagements will not only procure the skilled labor required but also include a hardware/software deliverable. “Out-of-pocket” expenses may be included at some point with many of these SOW examples.
Understanding the complexity of one’s SOW spend landscape is key to designing an appropriate strategy for adding SOW spend management to your CW program’s portfolio. This becomes rapidly apparent because not all SOW engagements are the same and the spent is but one minor detail that describes the engagement’s management requirements.
A well-run discovery event will help you answer some key SOW project design questions: How to phase in the management of the SOW engagement spend types in terms of what might be captured first and what to bring in later, if ever. What threshold of spend will be managed by the organization’s professional sourcing group and the rest left to the CW program’s oversight? Another question answered will be obvious misclassification opportunities to mitigate. Finally, a self-assessment, requirement perspective will take place on what CW program capabilities will need to be established or built in order to take on these type of contingent workforce engagements under the management purview of the CW program.
Ninety percent of SIA buyer research respondents claim to either manage SOW spend in their CW program now or plan to in the next two years. But how comprehensive is the SOW management capability they are referring to? It would not be surprising if many are just tracking and providing some reporting while providing limited engagement management. While that is a viable option, it is highly advisable to conduct a comprehensive SOW management requirements discovery event to position your program for success.