Orbital Law Blog
Statement of Works ("SOW") are often used as part of master technology service agreements to describe the scope of services to be provided by a supplier and to fix the price for those services. However the parties to the contract often fail to clearly describe the services to be provided, or the timescales for service delivery. This often leads to delays and arguments during the service provision phase, which in the worst cases can lead to litigation.
Whether you are a supplier keen to avoid "scope creep", or a customer wishing to avoid the inadequate delivery of a critical project, the following issues should as a minimum always be addressed in an SOW:
Scope of Services
The work that the supplier is contracted to perform should be clearly and accurately described. Any gaps between the supplier’s services and the customer's business and technical requirements should be discussed and addressed.
Technical Requirements & Specifications
The SOW should clearly describe the customer's business and technical specifications and requirements. A clearly defined set of specifications will make it difficult for a supplier to avoid their obligations, whilst protecting the supplier from an increase in its budgeted project delivery costs due to a required increase in scope by the customer.
A project plan is essential for ensuring clarity with respect to the parties' obligations to perform certain activities by agreed timescales. The project plan should clearly describe the scope, timescales and framework for the project. A key issue about project plans that is often forgotten, particularly in the case complex projects, is that the SOW should contain an obligation on the parties to agree a project plan by a set deadline, for example, within six weeks of the contract signature date. Alternatively, the parties could agree that the delivery of the project plan itself becomes a deliverable to be achieved by a milestone in the "design" phase.
Deliverables and Acceptance Testing
All deliverables should be clearly described, with any "key" or critical deliverables identified and milestone dates for each deliverable allocated and agreed within the project plan. An agreed acceptance process should be detailed in the SOW (it could also be agreed at the MSA level to save time). However it is to be incorporated into the agreement it should be made clear that the method for determining the successful achievement by the supplier of a particular deliverable will be solely by the application of the acceptance procedure and associated acceptance criteria.
Customer's Obligations and Project Assumptions
A supplier will often require the inclusion in the SOW of a list of customer obligations and/or project assumptions. The supplier should carefully consider the list of customer obligations and/or project specific assumptions it wishes to include, to identify those obligations which if not performed, or assumptions which if proven to be invalid, could lead to changes to the project schedule, project deliverables and project costs. The Customer should also pay attention to the list of customer obligations and assumptions to ensure that they only contain obligations for which it is right and proper to assign responsibility for performance to the customer, and in the case of any assumptions, only those that are fundamental to the operational and commercial profile underpinning the deal.
This will not always be the case, but generally speaking a choice should be made between a "fixed fee arrangement" or for fees to be calculated on a "time and material" basis. If the services are to be performed for a fixed fee the SOW should include all expenses to be incurred and any applicable taxes. The Supplier will only be able to invoice the customer for the fixed fee amounts. In the case of a time and material arrangement the Supplier will perform the services on a time and materials basis at the rates agreed and detailed in a rate card set out in either the MSA or in an annex to the SOW.
The above list is not exhaustive by any means and there are many other issues to consider depending on the type, size and complexity of a particular technology services project. Nevertheless, if the above issues are addressed during the negotiation phase of a SOW this will increase the chances of the project not only being delivered on time and on budget, but also in accordance with the customer's requirements.