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Statement of Work (SOW): What it is. Why it’s essential. How monday.com helps.

DJ Waldow

    The Statement of Work (SOW) is quite possibly the single most important project document.

    Hard stop.

    A solid SOW details everything — EVERYTHING — related to a project: the purpose, resources, schedule, milestones, and costs (to name a few). The SOW is the “supporting contract,” the blueprint, the guide that ensures the project scope is on track and all deliverables are met on time and within budget.

    Sounds a bit intimidating, huh?

    It can be, yet doesn’t have to be … if you follow this guide.

    In this article, we’ll detail the ins and outs of a best-in-class Statement of Work as well as an example of what one might look like. Finally, we’ll share how monday.com makes it easy to create — and maintain — a Statement of Work.

    What is a Statement of Work?

    A Statement of Work (SOW), is a document that lays the groundwork for a project. It’s an agreement with an agency, subcontractor, or service provider that includes the details of the project — payment terms, deliverables, timelines, expected outcomes, and more.

    As a project manager, you could have one (or both) of the following:

    • A Statement of Work with a client for your part of a project: This states what you’ll deliver and how you’ll deliver it … for the overall project, the scope of work if you will. For larger companies, this would typically be handled by a project manager or a Contract Management Department (if they have one). Then a legal team would verify everything.
    • A Statement of Work with a subcontractor for their part of a project: Depending on the project, you might have a bunch of these documents — one for each subcontractor. Usually, subcontractor SOWs are handled by the purchasing department with input or final approval by the legal and the project manager.

    In short, you use a Statement of Work to get all the important details down in writing; this is not the time to be too general or simply give a high-level overview You might draft one if your company was contracted for a software development project or if you’re hiring a graphic designer to redesign your brand logo.

    Do you need an SOW? Yes. Yes. Yes.

    Having a solid SOW that all parties sign off on can mean a lot of dedication to details, but it prevents miscommunication and can even settle disputes about details of a project including payment terms, start date, or scope creep.

    A Statement of Work is also useful as a planning tool for more complex projects. As you put one together, you may find yourself adjusting the project schedule or shifting resources and even team members around.

    You can create a Statement of Work for an internal project as well. It doesn’t need to be as formal, but defining project work requirements and outlining deliverables are beneficial for the entire team.

    Alright. Now that you have a working understanding of what a Statement of Work is (you may even be calling it an SOW at this point), let’s dig into the various components of an SOW.

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    What’s included in a Statement of Work?

    A Statement of Work is one of the first documents that you’ll create for any project. It typically includes, but is not limited to the following:

    • Introduction
    • Purpose & Objective
    • Scope (Scope Statement or Scope of Work)
    • Location
    • Project deliverables
    • Milestones
    • Tasks
    • Schedule (Timeline)
    • Standards, testing, and compliance
    • Requirements
    • Success criteria (Expected outcomes)
    • Pricing and payment terms
    • Sign-off

    There’s a lot to unpack, so let’s look at each one in more detail.

    Introduction

    This is your statement of what the project/engagement is and what work will be done. It’s short. It’s brief. It’s meant to be a broad overview — a few paragraphs MAX. The introduction includes a brief backstory of the issues that led to the need for a solution.

    A few items to be sure you have:

    • Backstory: The need for the project, including a description of events leading to this need (the backstory)
    • Alignment: A brief description of how the work relates to the company’s mission and priorities (the alignment)
    • Glossary: Key terms and acronyms that will be used throughout the SOW
    • More details: Any additional background information that would be useful in clarifying the project

    Again, short and sweet. Think: Executive Summary.

    Purpose & Objective

    This statement is “the why” — why this project is necessary, why it’s being launched. The purpose statement should concisely clarify the problem(s) that need to be solved. You want to write well-defined statements of what is to be achieved in order to successfully fulfill the project’s purpose. A well-defined objective statement looks like this:

    The purpose of this project is to design, build, test, and launch a more comprehensive order management system. It will enhance the organization’s ability to track and process orders from different channels.

    Simple, right?

    Scope

    The Scope (or Scope of Work), generally prepared by a project manager, clarifies what the overall Statement of Work does (and does not << important!) include. It defines the limitations (“defines the scope”) of the work to be performed during the project.

    The scope explains the intent of the engagement. The scope does not explain how the work will be done.

    This section also prevents “scope creep” by serving as a reference when new tasks are introduced or requests are made.

    Your scope of work may include the following:

    • An overview of the specific project tasks and their corresponding phases
    • A description of the project methodology
    • Details about the physical location where work will be performed (if necessary)
    • The project timeline — phase completion and stop/go decisions. Bonus: include a process map
    • Any work not performed by the project team (out-of-scope)

    Example: If you’re hiring a design company for an office, the scope answers, “Will there be new flooring? What about desks? Open design?”

    Location (optional)

    This section is where you’ll note the location of the work, whether at a central facility or off-site. This section may not be necessary if the work is being done remotely … though it doesn’t hurt to include a phrase such as, “All work will be done remotely” as part of this section.

    Project deliverables

    Design a new website.
    Buy new office equipment.
    Write 10 new blog posts.

    Project deliverables detail what products or services need to be completed (delivered) for the project to be considered finished. 

    Deliverables are the project outputs … the evidence contract work requirements were met. They should be written in clear and simple language (more on language later) — yet also very specific about how deliverables should be submitted with direct instructions for how each deliverable will be evaluated for approval.

    If possible, also be sure to do the following:

    • Link the deliverable to other objectives and deliverables (possible dependencies)
    • Distinguish the deliverable from anything related (technical writing vs. training development)
    • Details the testing that will be used to confirm deliverables have been met
    • Provide a means to measure the quality of the deliverable throughout the project lifecycle
    • Describe the evaluation and acceptance process

    Project deliverables should be concise, consistent, credible, clear, correct, and complete (the 6 c’s!):

    EXAMPLE: [CLIENT NAME] will develop and deliver [PRODUCT OR SERVICE] by [DATE]. Reviews must be conducted within [TIMEFRAME] of delivery.

    You can add an additional section that includes due dates for project deliverables. For more complex projects, you might set milestones along a project’s timeline to make sure things are on the right track.

    To maximize efficiency, we highly recommend project management software to manage schedules and keep track of individual tasks and their owner.

    After all, without deliverables, you don’t really have a project.

    Milestones

    Milestone (old school): a stone used to mark the distance in miles to different locations.

    Milestone (common speech): a step, small or large, that you take towards achieving a goal of some sort.

    Milestone (in the business context):

    Key points in a project timeline that generally mark the completion of major tasks or critical decision points. Monitoring milestones lets project managers know how a project is progressing and whether they need to make any changes.

    Examples of milestones include:

    • Project kickoff
    • Obtaining funding
    • Important client meetings
    • Stakeholder approvals
    • Key testing phases

    Milestones keep all those involved in the project accountable.

    Tasks

    These are the activities and milestones that need to be completed to meet the larger deliverables. You’ll describe the work to be performed, recording them as processes with specific milestones. Clearly written tasks are also important for reducing scope creep.

    You should include:

    • A detailed description of each task, with specifics on how one task relates to another (e.g., how does testing relate to development?)
    • Specific start and finish dates
    • The timeline and deadline requirements for each task
    • An estimate of hours required to complete the task
    • Detailed information on each resource including staff, software, equipment, and contractors
    • Any internal or external project dependencies
    • Every project task in sequential order
    • A clear delineation of what each team member is responsible for

    If your deliverable is a new customer interface on your website, one of the tasks may be designing a new contact form. A related task could include writing the copy for the form.

    Each of those tasks will have a specific resource assigned to them, a period of time to be completed, and criteria for approval. Those are the details you’ll need to spell out.

    PRO TIP: If possible, include a Work Breakdown Structure — useful for breaking down larger projects into more manageable tasks. Consider using project management software to manage and organize your tasks and their respective sub-tasks (in monday.com, we call “sub-tasks” sub-items).

    team tasks board

    ^^ This is what it looks like in monday.com ^^

    P.S. We always recommend using task management software.

    Schedule (Timeline)

    The schedule shows the amount of time allocated to complete the entire project from beginning to end. Ideally, you estimate a break down of …

    • How long each deliverable should take to complete
    • How many hours to allocate per week, month, or sprint

    If you want to show this visually, consider adding a timeline view or Gantt chart (pictured below) —a great way to support the schedule.

    Standards, testing, and compliance

    This section outlines any industry-specific standards that are imposed on the project deliverables.

    Is the product or service regulated? Will it require testing to meet thresholds and industry standards?

    EXAMPLE: If you’re contracting a construction project, the subcontractors you hire will need to meet the necessary licensing and safety regulations before they can proceed.

    Be sure to outline the required compliance.

    Requirements

    This section includes the list of anticipated hardware or software that will be used during the life of the project. For example, maybe you will need access to internal company files or documents. Maybe you require Google Docs. Perhaps your project will need you to use (cough cough) monday.com!

    Success criteria (Expected outcomes)

    What determines the success of the project? How do your stakeholders define project success and what are they expecting from the product or services?

    Gather their detailed input and define it here.

    It’s also important to specify who’s responsible for reviewing and approving the work, and what happens if it doesn’t quite meet your standards (or vice versa).

    EXAMPLE: You hire an agency to build a mobile app. One of the (many) acceptance criteria is that this app is compatible with recent versions of iOS and Android devices.

    For more details on success criteria, read this post.

    Pricing and payment terms

    What are the costs associated with each component of the project?

    This section outlines the payment terms and schedules for the work delivered. For larger projects, you may opt to have payments delivered at certain milestones (e.g., 15% of the total cost is due upon completion of the first milestone), or according to a fixed schedule (e.g., end of every month).

    Be sure to detail the frequency of billing and payments, and how payments are issued. Include how invoices will be received, requirements for purchase orders, and payment approvals.

    Sign-off

    The final step before you release the SOW is to get approval and sign off. You don’t want to execute a process without the authority to do so. Getting sign-off also ensures that stakeholders have the same expectations and understanding as the project team.

    Try out monday.com

    The 3 Statement of Work types

    There are three main types of SOWs. Which one you use will depend on your project’s details and the industry you work in:

    1. Design/Detail

    This type of SOW outlines exactly how you want the vendor or subcontractor to do the job. It defines all requirements, including any processes that must be followed along with required materials and necessary tolerances.

    This Statement of Work is widely used for manufacturing and construction projects.

    2. Level of Effort/Time and Materials/Unit Rate

    This type of SOW describes the services that are performed and includes details about each.

    This Statement of Work is widely used for service-based agreements.

    3. Performance-Based

    This type of SOW is more flexible. It covers the purpose of the project along with any resources and equipment that will be provided.

    This Statement of Work is quite broad and therefore used often across various industries. It states project outcomes but doesn’t define or dictate how a subcontractor should reach them.

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    Statement of Work example for professional services

    We’ve provided a few examples above of various sections of the SOW, but here’s one for a fairly common, real-life situation.

    Let’s say that surveys reveal customers are complaining about poor service at a high rate — it takes a looooooong time to get a simple response. To address this, you might work with a web development company to build an online ticketing system for customer support.

    Here’s what a simple (very pared down) Statement of Work may look like:

    This statement of work is between ABC Corporation [ABC] and Web Developers, Inc., [WEB] effective December 16, 2021.

    • Project scope: WEB will build an online support ticketing system for website visitors and customers.
    • Project objectives: The objective of this project, as outlined by ABC, is to increase customer satisfaction and reduce response times to less than an hour. This will be achieved by implementing a new online ticketing system.
    • Location: WEB will perform work in their office as well as remotely.
    • Project deliverables: WEB will develop and implement the solution on the ABC website by February 16, 2021.
    • Tasks: Tasks include developing a customer support system, testing it in a sandbox environment, and implementing it into a customer service page on the ABC website.
    • Schedules: Deliver a beta solution by January 16, 2022, and the final product by February 16, 2022.
    • Standards and testing: There are no industry or compliance standards for this project. The ABC IT team will run tests on the ticketing system before it is deployed.
    • Requirements: WEB will use its own hardware to build the ticketing system.
    • Acceptance criteria: The ticketing system must be built into the ABC website and allow customers to submit a ticket.
    • Payments: A payment of $10,000 USD will be wired upon the final delivery of the project. WEB must have a W-9 on file before a payment is made.

    Again, this is a pretty basic example but can serve as a good starting point, adaptable to fit your needs.

    Want to see an actual Statement of Work? Here’s a 26-pager for “external affairs outreach” for The Department of Homeland Security’s (DHS) Office of Emergency Communications (OEC).

    Now THAT is detailed!

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    How monday.com helps you prepare a Statement of Work

    monday.com can help take you through the entire SOW process. Here’s how.

    First, start with our Project Proposal template to bring all your work together in one visual place and keep everyone on the same page. Use the template “as is” or customize it to fit your workflow.

    Project Proposal template from monday.com

    Next, once you get the go-ahead for the proposal, start planning your deliverables with our Project Deliverables template.

    Project Deliverables template from monday.com

    Next, add budget columns to your boards to keep track of ongoing expenses.

    Budget tracking in monday.com

    Keep going by planning schedules for a project. You can set milestones and view timelines at a glance.

    Here’s how teams use monday.com to plan their projects:

    Project scheduling in monday.com

    monday.com makes it easy for you to add action items, assign tasks to your team, and even invite subcontractors to get their feedback. Getting all this information in one place will prove invaluable as you create a Statement of Work for your next project.

    The monday.com templates let you quickly get started and centralize your work. You can also customize your boards with different column choices and rearrange them in any order.

    Try out monday.com

    Sidebar: A few language tips

    Before you go, here are a few tips we suggest when it comes to SOW language:

    1. Keep all of your terms consistent. Don’t confuse the reader by using “vendor” in the first paragraph and “supplier” in the third to describe the same party.

    2. Make sure to spell out acronyms. Don’t make assumptions about what the reader knows. Be sure to write out the name of the expression the first time you use it, followed by the acronym in parenthesis … like we’ve done with Statement of Work (SOW) in this article!

    3. Use direct language to describe the responsibilities of your resources. Words like “must” and “shall” and “will” are important distinctions from words like “may” and “should” which are too ambiguous for the SOW’s purpose.

    The Statement of Work is no small task, but it is your best tool for maintaining control over your many project management responsibilities and keeping your team operating at the highest possible standard.

    It will help you set expectations, avoid conflict and resolve issues, and deliver world-class results every time.

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    You are ready. Create your SOW today.

    A Statement of Work establishes project objectives, deliverables, and schedules before any actual work begins. Creating one is absolutely worth your time, as it serves as an agreement between you and an agency, subcontractor, or service provider.

    Using monday.com helps you manage everything in one place. Get a feel for how our project management software works by using our free Project Deliverables template. The template is fully customizable, so you can personalize it to make it yours.

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    DJ is a freelance writer specializing in all things words. He's a father of 4 (including twins), husband to one, and an alum of the University of Michigan. DJ is a self-proclaimed giphy master and #HashtagAddict.
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