What is a Statement of Work and What Does It Mean for My Business Contracts?

When delivering a commercial project, it is vital that both the supplier and customer know what to expect—for instance, what are the project deliverables and specific tasks, what are the customer’s project requirements and goals, and will there be any key milestones to meet? A Statement of Work (SoW) is typically a detailed document that you can use to set out a specific project’s tasks, deliverables, timelines, and supplier responsibilities. This document ensures that the client and the supplier are on the same page and agree on the project’s scope and objectives, thereby avoiding the possibility of disputes arising. This document generally forms part of a more comprehensive master services agreement or framework agreement to govern the broader legal aspects of the business relationship. This article explores why a Statement of Work is important and what key provisions it should contain.

Why is a Statement of Work Important?

A Statement of Work (SoW) can be vital in setting the project’s expectations, timelines, and deliverables. For suppliers, it can help safeguard against scope creep, where clients might request additional tasks without changing the payment terms or project deadlines. For clients, it can help clarify what the supplier will deliver, how long the project will take, and the associated costs. It gives them a chance to document their project expectations. 

By clearly setting out all key commercial aspects of the project, a robust SoW can help to minimise the risk of misunderstandings and disputes arising under your contracts. 

Typically, a SoW will work alongside a master services agreement, which governs the legal framework of the contract. The SoW will generally specify the commercial aspects of the relevant project, outlining specific deliverables, timelines, and costs. The purpose is to make sure the project proceeds smoothly and according to both parties’ expectations. This approach can help a business avoid the potential for misunderstandings and, in the worst case, disputes. By having a robust and well-detailed master services agreement and SoW, companies can create a solid foundation for managing both the legal and commercial risks of complex projects.

What Does a Statement of Work Cover?

A well-drafted SoW should include a range of crucial information that can help you to ensure smooth project execution and minimise the risk of disputes. 

Some key clauses you may see in this document include the following:

The Project Scope and Deliverables 

The project scope will define the tasks to complete and the overall goals of the project. This section should be as detailed as possible in order to prevent any ambiguity and room for disputes. A clearly defined scope helps ensure the project stays on course and prevents additional work from being requested without proper agreement on costs or timelines. This may also need to detail any technical or special requirements that the project needs to meet.

The deliverables section should set out what deliverables the supplier must provide, whether it is a product, service, or report or content etc. It may also need to include acceptance criteria to ensure that both parties agree on the quality standards that the deliverables must meet. This section is critical to make sure that both parties agree on the project outcomes and success measures.

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Project Plan and Timelines

A detailed project plan and clear timeline are essential for managing the project effectively. This section should include milestones, deadlines, and an overall project schedule. This can help everyone keep the project on track and allow both parties to monitor progress at various stages. 

Payment Terms

The payment terms should detail how and when the customer will pay the supplier. 

How Does a Business Typically Use a Statement of Work in Practice?

A SoW usually works in conjunction with a master services agreement (or framework agreement), forming a legally binding contract between commercial parties. The master services agreement will typically set out a wider range of legal terms to govern the business relationship, covering key aspects such as intellectual property rights, warranties, dispute resolution, liability and termination provisions.

Together, these documents can help streamline business-to-business transactions, allowing new projects to be initiated via Statements of Work without renegotiating the core legal terms each time.

Statements of Work can be detailed and often used in complex or long-term projects – they may not be appropriate for all business arrangements (such as simple, short projects). Statements of Work and master services of framework agreements can be difficult agreements to navigate, with various room for pitfalls. 

However, ensuring your business gets these documents right from the outset is vital. If you need support in understanding how to use these documents correctly in your business and if they are appropriate for your use, you should seek legal advice from a commercial contracts lawyer. A lawyer can also guide you on how best to incorporate a SoW into your wider commercial agreements. 

Key Takeaways

A SoW is a vital document for managing projects. It typically lays out the key tasks, deliverables, timelines, and payment terms in detail. The Statement of Work is usually used alongside a master services agreement, which is a contractual document that governs the broader legal relationship between the parties. 

If your business needs help with a Statement of Work, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to solicitors to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

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