Why Procurement’s Statement of Work/ Requirements is Essential for Effective Contract Negotiations

statement of work requirements

By The Procurement School

A Statement of Work (SOW), also referred to as Statement of Requirements (SOR), is a detailed description of the goods and/or services to be supplied under a contract. The job of the document is to clearly stipulate all services and deliverables required to fulfill a contract by defining the tasks or services to be completed in clear, concise and unambiguous terms.

As the SOW is the underpinning of contracts and is used to resolve disputes between purchaser and vendor, all details and requirements must be explicitly defined, leaving no assumptions or uncertainty.

A good SOW will clearly define the scope, nature, and quality of the good or service required. A good Statement of Work should:

  • Be written in the imperative mood. What’s an “imperative mood”? In English grammar, imperative mood is a verb form that inflects a direct command or request and can include orders, instructions, warnings, and advice.
  • Adhere to any regulations, policies, rules or legal framework regulating the specific goods and services to be procured.
  • Be clear and complete.
  • Be drafted in a manner that allows for fair and free competition between vendors.

Is the SOW really that important?

As establishing an SOW can be arduous and time-consuming, it is tempting to leave it until the very end to buy you more time to consider desired outcomes and inclusions, expecting that requirements will “come out in the wash” during the procurement or project development phase. While it’s true that defining exact goals and detailed requirements may be the most difficult part of a project, a solid SOW is crucial for a project’s overall success.

Instead of being thought of as an evil necessity, SOWs should be prioritized and valued, presenting an opportunity for risk mitigation. In addition, by providing potential tenderers with ALL the information they need to determine if they can perform the required work and estimate costs, vendors are empowered to create value.

While it is often undervalued and maybe even be altogether forgotten, an effective SOW is more than just paperwork. The SOW represents an opportunity to remove obstacles by providing parties with the chance to thoroughly decipher, plan and communicate needs. It is fundamental to effective project execution and implementation, achieving objectives, and ultimately, extracting maximum value from the contract. Simply stated, a project lacking a clear and effective SOW is much more likely to fail, or at the very least, achieve more limited outcomes for both parties.

Therefore, rather than being left to the tail end and rushed through, the SOW should be developed during the initial project stages, allotting the time necessary to give careful consideration to everything you want to ensure to achieve. If designed correctly, the SOW can be leveraged for more effective contract negotiations. 

The SOW should be considered the framework that guides procurement throughout the procurement lifecycle. During the vendor selection process, the SOW should be used to assist in preparing tenders and evaluating responses. Once negotiated with the selected vendor, the SOW should also play a central role in contract creation, implementation, and management, stating what the contractor must deliver to receive payment and critical evaluation criteria tracking progress and, ultimately, evaluating project success.

How to Create an Effective Statement of Work for Optimized Outcomes

To optimize outcomes, you’ll want to elevate your statement of work from simply good to highly effective. 

So, what should be included in an effective SOW?

As we previously mentioned, the SOW should intelligibly state the outcomes you’re looking to achieve, the breadth of the work and all requirements that must be satisfied. But what is just as imperative for optimizing success is what is not to be included.

Unless your project has very specific constraints or requirements required by internal or external policies or regulations, instead of explaining exactly what is currently happening, you’ll want to leave room for vendors to think “outside the box” in how they can deliver value.

Vendors are experts in what they do and should have esoteric knowledge that allows them to innovate and advocate the most effective and efficient way to meet outcomes while providing you with the best value for your money.

To do this, ensure your tender avoids telling bidders exactly how they are to perform the work. Instead, focus on final objectives and requisite outcomes when approaching the market. This will enable tenderers to suggest different, perhaps more advantageous, options.

The High Costs of Over-Specifying

Yes, a high-value contract may garner the attention of potential vendors. But suppose you overplay your cards by overspecifying or overstating your requirements or listing overly ambitious or technically unachievable demands. In that case, you may not only be inadvertently adding unnecessary costs but dissuading potential tenderers from participating in the tendering process at all.

The tendering process can be a high-resource time-constraining endeavour filled with potential risk. If the project itself is deemed to have a high risk of failure, potential tenderers may opt to simply mitigate the risk of any resulting damage to their reputation and opt out of the process.

To attract tenders and maximize outcomes, you’ll want to avoid creating unnecessary obstacles. Therefore, when determining what is truly essential, ensure you take time to separate the “nice-to-haves” from the “must-haves,” giving careful consideration to potential impacts on costs.

That being said, you still need to ensure all relevant information, functional requirements, and documentation are included, along with a full description of the nature and scope of what is to be procured. This should include quantity of goods, requirements to be fulfilled, technical specifications to be adhered to, plans, drawings, instructional materials, certifications of conformity, etc.

Although you may want to sideline it, a robust, carefully planned and executed SOW created at project kickoff can set you on the path to success and is critical to effective tendering and optimized contract outcomes. It is the essential framework for getting the best value for every dollar, and it’s important to get them just right.
For your training and consulting needs on public sector procurement, we welcome you to explore our offerings at https://theprocurementschool.com/public-sector-procurement-program-pspp-trainingforme/

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