Creating a Work Scope Document (SOW)

By Ron Scruggs

A good work scope puts you in control of the project and procurement process.

This is an overview of the items to be included in any work scope document (sometimes called an SOW or statement of work).  Note that before selection of a vendor, you should complete negotiations. Negotiation after selection reduces your negotiation leverage. Make sure you specify the results you are after and have the contract terms defined. If you have a need that is not defined in the contract documents, then it is not in the deal. Avoid side letters and verbal promises.

After you have the SOW team and consensus, the first step is determining whether the SOW is to be for results (the vendor is responsible) or resources (we are responsible).  For results SOWs, the language should state that the vendor is responsible for achieving the “following results”. You do not tell the vendor how to achieve the results or who to use.  For resources SOWs, you will be defining the steps, people and you determine their performance (when to be on the job, the type of engineer and other details).

If you are creating results work scope documents, call them statement of results (SOR) or another appropriate name not associated with time and expense resource documents.

Red-flag language to avoid in results SORs is unclear, ambiguous wording such as:

  • Joint efforts (This avoids vendor responsibility for results)
  • Customer will assist…” (This avoids vendor results)
  • Qualified technicians…” (How are they qualified?)
  • Best practices…?” (According to whom?)
  • Reasonable…?” (be precise in results SORs, reasonableness can vary)

Avoid the vendor totaling creating the SOW or SOR. If a customer fails to specify requirements, then the vendor has a license to propose anything, or to tailor its presentations to identify only the requirements that it can meet. The sales effort then subtly shifts to convincing you that the vendor’s strengths are your requirements.

The basic work scope must answer these six questions:

  1. What is the work to be performed?
  2.  How is it managed?
  3.  What are the benefits to our company?
  4.  Are there special requirements?
  5.  What are we supplying?
  6.  When is it finished?

What is the work to be performed? 

  1. Explain the background, where you are now and where you want to be.
  2. State the results you want to be achieved by the vendor.
  3. State the deliverables the vendor is to provide
  4. Define the schedule for the results, deliverables and acceptance.
  5. Define the service levels that you want and the measurements.

How is it managed?  How are you going to oversee the project?

  1. Daily, weekly, monthly, quarterly. Red-flag reporting
  2. Achievement to date, achievements planned
  3. Identification of problems to date (use a rolling estoppel process)
  4. On-site meetings, progress meetings, acceptance process meetings, etc.
  5. Project managers with authority to make decisions for the results.
  6. Milestone reviews
  7. Payment for performance.

What are the benefits to our company?

  1. When the results are achieved, what benefits do we expect?
  2. Vendor needs to know the benefits of results for full understanding.
  3. These were likely expressed to get internal buy-in of project.

What are some special requirements?

  1. Technical requirements (specifications)
  2. Government and legal requirements
  3. Contract requirements (SLAs if not specified elsewhere)
  4. Location of work and access requirements

What are we supplying?

  1. Define the customer-supplied items (data, hardware, etc.)
  2. Specify the dates
  3. Note that vendor has to report on issues with our items
  4. Any item not specified as contractor supplied, is vendor responsibility

When is the project completed?

  1. Define the acceptance criteria.
  2. Define who is responsible for acceptance.
  3. Define what happens for failure to meet acceptance.
  4. Is there initial acceptance and an operational acceptance?
  5. Are all deliverables completed and accepted?
  6. Use of an acceptance form to signify customer acceptance.


  • A good RFP and SOR puts you in control of the procurement process
  • Address “results” or “resources”
  • Answer the six basic questions
  • The right team is essential (sometimes it is only the buyer and PM)
  • There is no substitute for preparation
  • Negotiate before you select.
  • Use a clear and concise writing style; simplify wherever possible
  • Avoid ‘reasonable’, ‘best practices’, ‘joint efforts’ and other ambiguous language
  • Spell check and proofread all correspondence to potential vendors
  • Always include your form contract in your RFP and work scope document
  • Never underestimate the power of competition – it yields the best deal
  • If it is not in the contract (or Work Scope Document), it is not in the deal.

Forest First, Then the Trees

One of the most frustrating traps a negotiator can fall into is negotiating specifics before resolving the broad principles of the deal. For instance, if the supplier hasn’t agreed to the principle of sharing the risks of implementing a new system, discussing specific warranties and remedies for supplier nonperformance could be a significant waste of time. Yet most users, including some of the biggest and best in the business, fall into this trap time after time.

What happens is relatively simple. The supplier, sensing our urgency and that we’re not doing any comparison shopping, is reluctant to engage in serious negotiations, while noting delays in its legal department. In the meantime, the supplier tells a needy end user of ours that we’re delaying the deal with contract mumbo jumbo, which doesn’t help the strength of our negotiation position.

Now we’re worried about whether the supplier will actually address our important issues in time to meet our deadline. After more delays — so the supplier can drive up our blood pressure some more — the supplier agrees to negotiate. Now comes the next ploy: When we sit down, the supplier’s negotiator suggests that things would go faster if we addressed the contract section by section and line by line. Then he asks us to justify each and every change we request, challenging us to “sell” the supplier on why it’s necessary. Any change we propose is likely to be countered by the supplier. A loud ticking sound permeates the atmosphere, reminding us of our deadline.

Any hope we had of controlling the negotiations is sacrificed to the scrutiny of details, and we’re running out of time to go to alternative sources. We’re trapped into negotiating specific changes to a form contract that has been carefully prepared and refined by the supplier over a period of years. The result? We get no substantial concessions, only meaningless fluff.

The tip? Pin down the major issues early in the negotiation when you still have negotiating power and can go to alternatives. That’s vastly more effective than haggling over details first. Negotiating principles first also speeds up the process because an agreement on a given principle is a precursor to agreement on all the embedded details. It helps us buyers control the negotiating agenda and timing and maximize our power and time.

Remember: We’re the customer, and we’ve got what they want — the money.

Beware of Software Upgrade Insurance, Part 1

By Joe Auer

Beware of software upgrade insurance. There’s an emerging trend I must warn you about. Software companies are excluding new releases of the software you’ve bought from the maintenance and support fee you already pay. They’re adding fees, only they’re often calling them “upgrade insurance.” There’s no better way to say it: We should resist paying for upgrade insurance. By using the term “insurance,” those vendors want us to feel we’re covered for some unforeseen or unusual event. Nonsense. It’s just a way for the supplier to charge a new fee for a service that has always been included.Traditionally, software maintenance included bug fixes, help-desk support, enhancements and new releases (a.k.a. major enhancements). Although most basic maintenance programs still include the first three, the inclusion of new releases is now becoming an open question with upgrade insurance. Just to be clear, new releases are usually indicated by a change in the number to the left of the decimal, such as 3.5 to 4.0. Enhancements are usually noted by changes to the right of the decimal, such as 3.4 to 3.5, and are sometimes called point releases.

Regardless of the names, it’s important for us to insist that software maintenance and support include everything. To fully realize the benefits of standardized software packages, we must be kept current. Software that remains static undermines the fundamental reason for moving away from in-house custom development. After all, the supplier is joining us with other users to collect common requirements and spread costs. Maintenance and support fees were originally designed to do just that — provide dynamic software that evolves with changing business conditions.

So how do we counter the upgrade insurance racket? We should include maintenance and support as part of the licensing negotiations. That raises the deal’s value and also ties the deal’s completion to resolving all maintenance and support issues at the time of licensing. That way, the supplier risks losing the entire deal over just a maintenance issue. It’s easier to get vendors to concede that maintenance and support include everything, even new releases of the software, when we have bargaining power. If we fail to get that concession, we’ll in essence be relicensing the software with each new release.

A Strategy for the Right Service Levels

by Joe Auer

Service levels are an important part of any results-oriented contract where specific supplier performance is required—and where it must be measured. Service levels are especially important in outsourcing and telecommunications deals in which the customer becomes vulnerable because he depends on the supplier. A results-oriented contract with meaningful service levels and remedies is an effective mechanism to help customers actually get what they’re paying for and minimize exploitation by opportunistic suppliers.

Establishing realistic service levels and remedies for supplier nonperformance can be very difficult. With some pressure from a prospective customer, suppliers are generally willing to contract for service levels and, sometimes, remedies to go along with them. But suppliers usually try to make service levels as broad and as loose as possible, which makes them easier to achieve—and tougher to measure. Meanwhile, customers want service levels to be as tight as possible to ensure maximum and measurable performance. The challenge manifests itself during contract negotiations.

As a customer, remember that the supplier is always trying to minimize its risk by placing as much of the burden of proof on your shoulders as possible. Here’s a recent example:

During negotiations for a global telecom deal, a customer was faced with the service-level challenge. Several prospective suppliers proposed their standard service levels. The customer believed those levels were too broad for some critical components of its network. The suppliers stuck to their standard rhetoric, stating that their service levels were reasonable and consistent with industry practice.

The customer didn’t fold and argued that while the levels may be consistent with industry practice, they weren’t sufficient for the company and some parts of its network. The customer’s procurement team focused the prospective suppliers’ discussions and proposed solutions on the actual network. The team presented its network map and pointed out there were certain locations that were critical to operations. The supplier-proposed service levels weren’t adequate for these critical locations because they left the customer vulnerable to too much downtime in the event of a network failure. (But the proposed service levels were acceptable for some other noncritical locations.)

The customer then stressed the need for location-specific service levels to guarantee the robustness and serviceability of its network as well as the continuity of operations. This argument seemed to be new to the suppliers and was met with some initial skepticism.

The customer pulled an ace out of its sleeve by saying, “This is a way to distinguish yourself from your competitors. It’s an opportunity to excel and gain an edge. It’s an opportunity to win a global deal without assuming an inordinate amount of risk. We’re willing to accept your standard offering for most locations if you give us a display of confidence in your ability to perform for the critical ones. These locations are critical for us, and we need to more fairly allocate the risk of network failure.”

Two suppliers agreed and proposed their best location-based service levels. That’s just what the customer needed to be competitive and maintain negotiating power. Isn’t that what it’s all about? Suppliers with real confidence that they can do the job shouldn’t be afraid of performance guarantees. What’s more, having supplier competition on service levels helps both the evaluation and negotiations processes for the customer.

The difficult task ahead is actually agreeing on the specific metrics that ensure that all three critical service-level components—time, money and quality—exist and are meaningful. In other words, every performance factor must be measurable, including how long it will take, what the maximum cost is and how acceptable (to the customer) quality will be verified.



Developing an Effective Statement of Work

by Bill Kern – ICN Senior Consultant

There’s a saying among aviators that the best pilots aren’t the ones who rely on their superior flying skills to survive life-threatening situations—they’re the ones who use those superior skills to avoid life-threatening situations! In business, the best contracts aren’t the ones that rely on superior Terms and Conditions to survive costly disputes—they’re the ones that use a superior Statement of Work to avoid costly disputes in the first place!

Terms and Conditions
Without a doubt, Terms and Conditions (Ts & Cs) are a critical part of a well-written contract. They provide the framework within which the contract is written and the work is done. Without the structure and support they provide, the contract would be meaningless. In the real world of rushing to get the job done, most contracts’ Ts & Cs are barely considered, rarely used and almost never vigorously enforced. However, a major problem occurs when the Ts & Cs point to the statement of work for the description of the deliverables the supplier is to provided, and proper care was not been taken in drafting the statement of work. Resolving whether the supplier did or did not provide the deliverables under a poorly written statement of work, places the customer in a difficult position. This often leads the project manager to ignore all but the most blatant contract breaches and to accept delivery of less than optimal goods and services.

Statement of Work
A well-written statement of work (SOW) is just that—a clear, understandable statement of your needs, the primary means of communicating your requirements to a supplier. It can simplify and speed-up the procurement process. The SOW aids suppliers in preparing bids and assists you in evaluating those bids. It reduces the administration effort required after contract award, and it provides a basis for performance measurement. A good SOW resolves many conflicts before they arise. It’s one of the most vital components of an effective contract and a successful project.

In a large number of organizations, the SOW is the first, and often the only, contract document the Project Team (including your people and the supplier’s) use on a regular basis. For them, the SOW is used to plan daily work; to guide design decisions; and to settle the multitude of daily issues and “minor” disputes that arise during the life of the contract. Unfortunately, the SOW is all-too-often a poorly written, hurriedly reviewed document that defines only the bare minimum of work required—and is often ineffective at that! In many cases it is written by the supplier who’s self interest is not to provide clarity in the SOW.

In the “get it done yesterday” world that too many contracts are written in, the most skilled negotiators in the group spend the majority of their time arguing the less important Ts & Cs. The critical SOW is left for the technical staff (whose members usually have no negotiation training or skills) to deal with the supplier’s marketing staff (who are usually highly trained, skilled negotiators). Should it come as a surprise then that contracts written under these conditions often result in confusion, disappointment and animosity on both sides?

The SOW is arguably the most important document in your contract. Give it the attention it deserves. Whether you’re buying or selling, regardless of whether you’re dealing with “results” or “resources,” it’s in your best interest to make sure the SOW accurately and clearly defines what needs to be done. For the buyer, the SOW lets the supplier know, in detail, exactly what goods/services are needed. For the seller, the SOW provides a better understanding of the customer’s needs. A clear, well-written SOW will help both sides avoid much of the confusion and conflict that arises during any project; and it will help you more quickly resolve those that can’t be avoided.

Getting Started
Before you even begin to write your SOW, call your team together and get agreement on three simple questions:
• What are we buying?
• Who do we want to be responsible for planning and managing day-to-day work… them or us?
• Who do we want to be responsible for the quality and timeliness of the final product/ service…them or us?

The importance of the first question is obvious. After all, if you and your team don’t know what you want, how can you correctly communicate it to a supplier? As obvious as that seems, you’d be surprised how difficult it can be to get a consensus in answering this question. To avoid future disagreements, take the time to identify the “team answer.” If you have a clear understanding, it will help as you write the SOW, negotiate the contract and, ultimately, manage the supplier after the award.

The second and third questions are just as critical as the first. However, the answers to these two should be the same. If you want them to be responsible to plan and manage day-to-day work (a “results deal”), then they also should have the responsibility and the authority to ensure the quality and timeliness of the work. On the other hand, if you want to be responsible for planning and managing the day-to-day work (a “resources deal”), then you need to retain responsibility and authority for the quality and timeliness of the final results.

If you do it right, the answers you come up with will become the theme of the entire SOW. Keeping a consistent theme throughout the SOW will go a long way in eliminating conflict throughout the life of the contract and will strengthen your hand in court if a serious dispute does arise. Everything we discuss in the rest of this article should be consistent with this theme. With these three seemingly simple questions answered to set the theme, we can now begin to write the SOW.

Formatting Your SOW
The first step in the SOW process is to decide on a format. There is no universally accepted structure for a Statement of Work. The “look and feel” of your SOW may differ a great deal from that of a competitor’s SOW…and that’s okay. The SOW is not a complex document…in fact, the more straight forward the format of your SOW, the better off you’ll be. How you structure your SOW is not as important as making sure it has a structure.

Having said that, there are certain characteristics that all well-written SOWs share. If you keep these common characteristics in mind as you write, you will have an effective tool for conveying your needs to prospective suppliers.
• Use a well-structured, common sense, “easy-to-navigate” format.
• Use easy-to-read, clear and unambiguous language.
• Provide a brief, informative overview of the project’s larger purpose, goals and objectives.
• Define the specific authority, duties and responsibilities of all involved parties. The key here is that to avoid finger-pointing, only one party (you or the supplier) should be responsible for any single task in the project
• Provide specific, meaningful, non-contradictory details relative to tasks to be accomplished, services to be performed and/or items to be delivered.
• Develop a project timeline that shows key milestone, completion and delivery dates.

These are not complex ideas, but they are important ones. Combined with our “who’s responsible” theme, they will help you develop a world-class document.

The SOW doesn’t need to be long nor does it need to give a detailed description of every nut, bolt or line of code you need. It does, however, need to include enough consistent detail about your expectations so that work plans, management plans, system designs and test plans can be developed and executed.

Although there is no universal SOW format, there are some items that are common to almost all well-written SOWs. These include:
• Cover page
• Table of contents
• Listing of other applicable documents
• Overview of the project
• Detailed description of work to be performed
• List of deliverables
• Project schedule.

While no specific item is required, these features are extremely helpful in providing the common-sense structure that is so critical to an effective document.

A Senior Consultant with ICN, Bill Kern has spent over 40 years in the computer industry. The majority of his experience has been in management positions with technology vendors specializing in computer hardware, systems development, outsourcing and third party leasing.