4 Issues Standing in the Way of a Perfect Statement of Work

As the statement of work undergoes a radical transformation, we’ve identified some common issues that may be preventing you from perfecting yours.

As Guidant Global’s Mick Feild aptly put it in a recent article of ours, “Statement of Work is booming.” The SOW contract is re-emerging as the solution to increase spend and worker visibility, and to establish stronger, outcome-based engagements with suppliers.

But when it comes to the humble SOW, how well are we really doing? Some data is showing worrying signs: SAP Fieldglass research indicates that 1 in 4 projects are not completed on time or on budget, often due to a lack of rigour and control around compliance and supplier outputs, hiring managers’ ‘cosy’ relationships with existing suppliers, and too much risk without appropriate controls. 

But the issues standing between your team and a perfect statement of work are not as insolvable as you think. We’ve identified four that are not only fixable, but will send your contract management skyrocketing to success:

1. Your SOW doesn’t articulate performance requirements

Picture this: you need to hire a marketing agency to help launch a new product. Your internal marketing team adds their requirements and KPIs to the SOW, but then the product team jumps in to add their expected deliverables, and then finance also wants to add their say on rates … despite the fact that rates are surely not their area of expertise. 

The result? An SOW that seemingly meets three different definitions of success. In reality, no one has an overarching understanding of what success for this particular engagement will look like. 

Indeed, SOWs that lack informational ‘intelligence’ and clear performance requirements is something that Sally Guyer, the Global CEO of World Commerce and Contracting, sees often. Sally, who has led a successful career in contracts management, has seen huge challenges develop when it comes to SOWs, especially in the complex world of services. She says: 

“In the traditional product world, it was, ‘I’m buying ten chairs and I need them to be brown, have four legs, be delivered on a particular date, and I will pay you this much.’ 

But now, with complex services, there are real challenges around creating accurate definitions of requirements matched equally with the definition of supply capability. Unfortunately, today’s measurement systems often lead to a lack of complete openness and honesty in the production of statements of work.”

2. Your SOW infers obligations, which leads to confusing comparisons 

When writing an SOW, procurement teams understand, well, procurement-speak. But that doesn’t mean that suppliers will necessarily know what we mean. Consequently, a common issue with SOWs is that obligations are inferred, as opposed to being explicitly stated. 

Using the above example, say that in your SOW for hiring a marketing agency, you specified that the marketing agency needs to ‘test any new digital advertising they do prior to release.’

But what does that actually mean? 

To some agencies, this may simply mean giving their marketing material a proofread and hoping for the best. For others, this instruction would involve comprehensive user testing on everything they create. Naturally, the latter will be more expensive, but technically both meet your brief, so what have you actually said as opposed to what is inferred? 

With SOWs, procurement professionals need to test all assumptions about what may be inferred prior to sending things out. 

3. Your SOW is a contract for the divorce … not the marriage 

Throughout the pandemic, organisations everywhere were looking at how they could utilise their force majeure clauses. Everything was doom and gloom, and thousands of additional terms and clauses were added ‘just in case’ the worst-case scenario played out. 

But interestingly, says Sally Guyer, those force majeure clauses were only relevant for a few months. And in fact, that thinking highlights something that she believes is inherently wrong with the way we negotiate. 

“What we do is we focus our negotiations on assuming that everything is going to go wrong. We contract for the divorce, not for marriage.

And in fact, it’s so important for us to recognise in which order we need to address things.”

For this reason, an SOW doesn’t just need to include planning for the worst-case scenario. It also needs to include reasonable incentives and performance requirements that reflect a range of circumstances. 

4. You think the hard work is all done once the SOW is signed 

SOW’s all done and dusted, so you’re done here, right? 

Wrong. 

One of the biggest issues with SOWs, according to Sally Guyer, is that many procurement teams think that the hard work ends when the contract is signed. In fact, the opposite is true, she asserts: 

“When it comes to signing contracts, I often use the Tinkerbell terminology. That is, once the contract is signed, everyone goes out to celebrate and Tinkerbell’s running around and sprinkling fairy dust everywhere because it’s all going to be perfect.

But of course, the point is that the hard work starts when the contract is signed. 9.2% of issues from SOWs result from poor handover from the pre-award to the post-award team. It’s essential to create connection and consistency here.”

Sally has identified many other issues like this one in her benchmark report, The benefits of focus, the costs of neglect: the world’s largest comprehensive study of contract and commercial management. 

Want to hear more from Sally and a line-up of fantastic speakers? Register for our latest webcast Level Up Your Statement of Work today! And don’t forget to join the Level Up Your Procurement Group to have first exclusive access on a range of brand new procurement resources.