Billions of dollars are spent annually on Statement of Work (SOW) projects. Yet, despite this considerable financial investment, many organizations are attempting to manage this area through overburdened internal resources and/or ill-fitting ERP, SMS or HRM systems – if they’re capturing the details of SOW spend at all. 

 

As a result, many stakeholders and influencers across the contingent workforce management ecosystem are faced with the daunting challenge of not only trying to centralize SOW management, but also to capitalize on benefits such as enhanced visibility and reporting, risk mitigation, rate benchmarking, improved cost control, etc. 

In many cases, the best solution is to partner with a Managed Services Program (MSP) and Vendor Management Software (VMS) provider that can help organizations take a methodical, results-driven approach to SOW management. In part 1 of this 2-part series, we will examine the following: 

What is SOW Management? 

A SOW is a formal document used to detail the expectations, work activities, deliverables, timelines and payments for the work that is to be performed by an external labor provider. The SOW is a legal contract that details the scope of work to be performed. These are the three separate types of SOW:

  1. Design or detail SOW: This formal document defines the exact requirements that are needed, and includes the precise measurements, materials to be used, necessary tolerances, quality control requirements and any other specifications that a worker might need to perform his/her role.
  1. Level of effort, time and materials or unit rate SOW: This SOW document, which is used for almost any kind of service, highlights the type of resource needed to complete the work, number of hours allowable by each resource, and the materials needed for the role.
  1. Performance-based SOW: A performance-based SOW does not provide details about how the work needs to be accomplished. However, it clearly describes the performance objectives and standards that are expected of the service provider, as well as the dates for delivery of each objective. This is the preferred SOW for most companies; more commonly known as a milestone or deliverable SOW. 

 

What are the current challenges of SOW management for organizations?  

SOW Services Procurement remains an area of significant pain due to the high volume of projects and vendors. Those pain points include: 

 

In part 2 of this series, we will consider the benefits of outsourcing SOW management from an organization-wide perspective and from the point of view of the many involved stakeholder groups.