I once lost $45,000.
What makes it worse (or perhaps better?!) is that it wasn’t my money.
It was my previous employer’s.
I was managing a website build for a big client and was under huge pressure to meet a tight deadline. So, as many do, I decided to start the project before the Statement of Work (SoW) was signed by the client.
This was a big, expensive, mistake to make.
It cost an additional $45,000 to re-work parts of the build that the client had verbally approved, but hadn’t legally signed off.
(Despite what you might think, this isn’t the reason I don’t work there anymore!)
According to research, 37% of projects fail due to a lack of defined and approved project goals and objectives, which come with a Statement of Work (SoW). This causes around 80% of organizations to spend at least half their time on expensive rework.
“Not using a Statement of Work – SOW during the project initiation is a major cause of project failure” – 4PM, Statement of Work – SOW
But what is a Statement of Work (SoW) and how do you create one?
All will be revealed in this Process Street post, as we go through:
- What a Statement of Work (SoW) is
- Why bother with a Statement of Work (SoW)
- How to create a Statement of Work (SoW)
If you’re in a hurry, grab this free Statement of Work Process Template now, and catch up with the rest of the post when you can:
Click here to access the Statement of Work (SoW) Process Template!
Otherwise, keep reading and we’ll go through this template, in a little more detail, later.
Let’s get into it!
What a Statement of Work (SoW) is
“The main purpose of the SoW is to define the liabilities, responsibilities and work agreements between two parties, usually clients and service providers” – Villanova University, What is a Statement of Work?
A Statement of Work (SoW) is kinda like the holy bible for projects. Except not as long.
It’s an extremely detailed document that defines exactly what’s included within a project and what’s not. It describes, in meticulous detail, what’s going to be done and how, and includes specificities around when, where, and how much it will cost.
It determines what’s in scope and included within the original project cost, and what’s not in scope, and therefore needs to be paid for.
It’s one of the first documents you should create when you start a project, as it lays down the foundations of the project before you plan and execute it.
Not only is the Statement of Work (SoW) an informational document, it’s also a legally binding agreement, between two parties, that guarantees that the project will be completed in-line with certain standards, guidelines, and expectations.
Therefore, if it’s created properly and signed by both parties, a Statement of Work (SoW) can be used as a single source of truth for the whole project team and can be referred back to, over the course of the project.
If in doubt, check the Statement of Work; if it ain’t there, it ain’t happening.
Because of the level of detail that’s needed, a Statement of Work (SoW) can often take a long time to put together and maintain. So many project managers, 45% in fact, don’t believe it’s a necessity and don’t take the time to create one.
Why bother with a Statement of Work (SoW)
It’s tempting not to bother with a Statement of Work (SoW). Believe me, I get it; you know what your client wants, you have a great relationship with them, and they’ll never screw you over, so what’s the point?
Plus, the project is bound to change, they always do. So surely spending hours creating a document that’s destined to become outdated and irrelevant is a waste of time and money?
Well, if my earlier example didn’t convince you otherwise, this might.
The FBI and the case of the missing SoW
Back in 2000, the FBI contracted a team of developers to build a new case management platform.
They spent the next five years working on this platform.
After the fifth year of development, and after spending a whopping $170million, the FBI pulled the project.
They labeled the new, not yet finished, platform as “inadequate and so poorly designed that it would be entirely unusable under real-world conditions”
How can a team of developers spend five years and $170 million building something that was so ‘inadequate and poorly designed?’
Because there was nothing in place that stated the exact requirements for the platform. No Statement of Work (SoW). No legally binding document that detailed exactly what was expected.
There was no single source of truth.
During the five years of development, the FBI project stakeholders pushed the project scope so far and made so many ad-hoc changes that the platform became a muddled mess that bore no resemblance to the original concept.
The FBI spent five years and $170million on a piece of unusable unfinished software because they didn’t have a Statement of Work (SoW) that the development team could refer back to and keep the project on track.
Ok, so this makes me feel a little better about my $45,000 loss and I hope it makes you feel a little better about creating a Statement of Work (SoW) for your next project.
To summarize what a Statement of Work (SoW) is and why you need one, I’ll share some of the conversations I remember having with one of my clients, Sue. Over the course of a website build project, the Statement of Work (once it had been signed) helped me to:
Provide clarity over objectives:
Me: “We’re planning to make this form a fixed feature, so it automatically appears on every page of the site”
Sue: “But, if you refer back to the SoW, we don’t want this form on every page!”
Me: “Ohhhh, yes, I see. Ok, not to worry! We will make the form CMS manageable so you can add it manually.”
Align expectations and resolve conflicts:
Sue: “I thought this bit was going to be blue?”
Me: “I thought we agreed green?”
Both: “Let’s check the SoW…”
Bridge the gap in understanding about what’s been agreed:
Sue: “Where’s the whizzy image thing on the homepage?”
Me (internally): The whizzy image thing?… What does she mean?! Let me check the Statement of Work. Ohhhh! She means an image carousel!
Me: “Sue, the image carousel can be found here…”
Stop scope creep & save money:
Sue: “I don’t like the way the navigation looks. Can we change it?”
Me (internally): I’m sure we agreed to build it this way, so if we change it, it will be classed as rework and we will need to charge for it. I’ll just check the SoW…
Me: “If you refer back to the SoW Sue, we only agreed to two rounds of revisions for this, so if we make this change, it will cost you extra…”
Sue was always lovely to work with, but had we not had a Statement of Work to keep us honest, she might not have been so lovely.
Anyway, hopefully, you’re now convinced about the importance of a Statement of Work (SoW).
Next on the agenda is how to create one.
How to create a Statement of Work (SoW)
This section will focus on how to structure a Statement of Work and how you can create one that puts meat on the bones of your project and keeps you on the right road.
The Statement of Work (SoW) structure
A Statement of Work (SoW) can be created in many ways, and how you structure it can depend on the type and size of the project you’re embarking on.
However, this legally binding document typically tends to include the following key sections:
- The overview: This section confirms the purpose of the project. It explains what the project is, why it’s happening, and what it will achieve.
- The scope of work: This section details what work will be done, how and where the work will be completed, and who has the final approval over it.
- The deliverables: This section clarifies what will be produced (key deliverables) and when it will be produced by (key milestones), and usually includes a project schedule or timeline.
- The standards: This section describes the standards that the project needs to meet, and confirms ‘what good looks like’. Quality management ISO standards such as ISO 9001 are common practices that most projects should aim to comply with.
- The testing: This section clarifies what, how, and when testing will be carried out, to make sure the project meets the standards set in the previous section.
- The assumptions: This section summarizes what is and isn’t included in the project.
- The payment: This section confirms what the project will cost and is usually accompanied by a budget or payment schedule.
- The closure: This section details how the deliverables will be accepted, and who will deliver, review, and sign them off. This section also makes sure all parties sign and date the document.
Don’t worry, we’ll go through this structure and what each section needs to include in more detail later.
For now, I want to show you how you can create a Statement of Work (SoW) that stands its own ground, can be referred back to over the duration of your project, and keeps you and your project on track and out of trouble.
To do this, I need to introduce you to Process Street.
What is Process Street?
Process Street is super-powered checklists.
It’s state-of-the-art business process management (BPM) software that allows you to create and manage all your business processes in one place.
Watch this video for a quick introduction:
You can create templates and run individual checklists from these templates each time you want to carry out your recurring tasks.
You can assign tasks, seek approval, and integrate your processes with daily life, by connecting them to thousands of apps like Microsoft Office, Google Docs, and Outlook through Zapier, webhooks, or API integration.
Yeah, yeah yeah, sounds great and all, but how are processes, templates, and checklists relevant to creating a Statement of Work?
Using Process Street to create a Statement of Work (SoW)
“You only have one chance to create this document, and you want it done right” – Project Manager, Statement of Work Definition & Examples
The task of writing a Statement of Work (SoW) can be a daunting one; the amount of detail required is huge and silly mistakes can be costly.
Having a process to follow when creating one will make your life easier:
- You won’t have to think about the structure and what should go into the document
- You won’t need to worry about missing any key information
- You can catch silly mistakes
- You can make sure you include the right level of detailed information
“It can help to use a template because of all the various aspects of the project that it must capture” – Project Manager, Statement of Work Definition & Examples
And what better way to create a templated process than with Process Street?
All you need to do is log in (or sign up for a free trial), hit ‘New’, select ‘Blank Template’, and start constructing your Statement of Work (SoW) process template.
If you’re a little unsure, read this article, it’ll show you how to build a template from scratch.
It’s worth using the below extra features too, they can automate your processes and save you precious time and effort:
- Stop tasks
- Dynamic due dates
- Task permissions
- Conditional logic
- Approval tasks
- Embed widget
- Role assignments
If saving time and effort appeals to you, watch this webinar on automating your workflows. You’ll free up so much time, you won’t know what to do with yourself:
However, if creating a brand new template is a little too much (for now!), you can use our pre-made Statement of Work Process Template, for free.
Statement of Work (SoW) Process Template
This template takes you through the process of creating a Statement of Work (SoW), based on the standard structure we went through earlier.
Click here to access the Statement of Work (SoW) Process Template!
You can either use this template as it comes, or customize it using the above features and your new-found knowledge on automation!
Talking of pre-made templates, below are some pre-made project management templates that you can use to help you manage your projects, once the Statement of Work (SoW) has been signed.
Statement of Work (SoW) related templates
To get these templates, sign in and add them to your checklist dashboard.
Project Management Process
This easy-to-use template has been designed to suit any and every project. Use this basic framework to help you keep your projects on track and on budget.
Click here to access the Project Management Process!
Scrum Project Management Template
If you follow a scrum methodology, this template is for you. Use it to ensure that your development, user story grooming, sprint planning, and testing all go smoothly.
Click here to access the Scrum Project Management Template!
Standard Operating Procedure (SOP) Template Structure
Use this template to write a Standard Operating Procedure for the creation of a Statement of Work, or how projects should be run, or how to report on projects progress.
Click here to access the Standard Operating Procedure (SOP) Template Structure!
Plenty more pre-made templates, like the ones above, can be found in our template library. Feel free to check them out!
Statement of Work (SoW) related articles
To top it all off, I’ve added a little light reading for you below. Get stuck into topics about project management and the art of creating a smashing Statement of Work (SoW):
- How to Use a Project Tracker to Keep Projects Profitable
- How LA Creative Technologies Uses Process Street to Streamline Client Onboarding, Offboarding and Project Management
- The 21 Best Free Project Management Software (And Why They’re Great)
- 8 Smartsheet Alternatives for Superb Project Management in 2019
- Airtable vs Trello: The Best of Task and Project Management
- The 5 Project Management Steps To Run Every Project Perfectly
- Are Your Useless Tools to Blame for Bad Project Management?
- Stop Switching Between Project Management Apps — Just Integrate Them
- Project vs Process: What’s the Best Form of Management for Me?
- The 5 Project Management Steps To Run Every Project Perfectly
- Use this Interactive Project Proposal Template (and Ditch Microsoft Word)
- Why SEO Project Management is Crucial for Enterprise SEO Success
- 7 project management issues + 7 tools to solve them!
- Top 10 tools and resources for systems and project management
- The 10 Important Laws Of a Good Project Management
- 10 Workflow and Project Management Apps You Need
And there we have it; how you can prevent project failure with a Statement of Work (SoW).
Make sure you get it signed before you start though! On that note, I’ll leave you with this final summation:
“By having the SoW, you have the boundaries in which the work can be done, how it will be done, and the duration of that work. If there’s a dispute, you can show the signed document to support your actions” Project Manager, Statement of Work Definition & Examples
We’d love to hear about your experiences with creating a Statement of Work in the comments. Do you create them? Have you experienced project failures without them? Who knows? You may even get featured in an upcoming article!
Amanda is a content writer for Process Street. Her main mission in life is to write content that makes business processes fun, interesting, and easy to understand. Her background is in marketing and project management, so she has a wealth of experience to draw from, which adds a touch of reality and a whole heap of depth to the content she writes.