SOW Contracts: 7 Steps to Create One

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SOW Contracts: 7 Steps to Create One

An SOW (statement of work) is a contract between the contracting officer and the service provider. All the terms of the agreement are clearly stated in this contract. It is essential to both parties and helps protect and safeguard their rights. An SOW contract is often a part of the request proposal so that the exact terms of the agreement are highlighted and cleared out before starting the project. 


Three Benefits of an SOW Contract

  1. Legally Binding

    When both parties sign an SOW contract, they know all the terms and agree to them. When the contracting party signs the agreement, they approve the project terms and agree to the payment terms stated within the contract, which helps the service provider be sure that they will be paid as per the agreement.

     

  2. Conduct a Transparent Process

    An SOW contract can avoid the mistrust and complications that can arise when the service provider and the contractor don’t know one another. Before the project begins, both parties negotiate all the terms, such as project objectives, deliverables, due dates, payment structure, etc. These are then listed and pre-approved by both parties before they sign the contract. Since the agreement anticipates anything that might create future complications, it helps create a smooth and transparent process. It also helps build trust and healthy relationships for a more extended alliance.

     

  3. Streamline Complex Projects

    There are many aspects to consider while running a project. For example, some projects are so complex that they require more than one service provider to manage different aspects of the project. The contractor might also sign other contracts with different service providers.

    In a multi-party contract, service providers coordinate and work with one another. With an SOW contract signed beforehand, the roles and responsibilities of each service provider are clearly stated, thereby eliminating the scope of complications.

 

Seven Steps to Create an SOW Contract

  1. Project Background

    The first step in an SOW contract is to provide background information about the company, its principles, and its clients. Next, it lists the project goals and deliverables. For example, “Writing 10 SEO-friendly articles for the website that aligns with the brand per month.” Here, the SOW clearly states the target, requirements, and deadline.

     

  2. Purpose of the Project

    The service provider is often hired for their expertise. Clearly stating the project’s objective helps them to clarify the client’s expectations. An SOW contract can help the company get what they need.

     

  3. Scope of Work

    It is essential to list each job project, the distribution of jobs, and the expected duration of each. This is important, especially in the case of contracts where multiple parties are involved in completing the project. The division of work, its limitations, and its deliverables are clearly stated. This helps the service providers understand the working hours necessary to complete the task and plan better accordingly.

     

  4. Tasks and Deadlines

    A clear definition of each task is mentioned within the sow contract. It talks about the maximum and the minimum number of items to be covered. For example, “5-10 reels must be delivered within a week.” Moreover, the delivery date and maximum extension possible are also stated. This helps the service provider understand the time they need to dedicate to the project and its urgency. Priority work is often charged additionally to balance the service provider’s work.

     

  5. Quality of Work

    The quality of work is an important parameter that must be clearly defined within the contract. For example, “An increase in sales by 5% must be seen within one month.” By defining the quality of work, the service provider has clarity on it. It also helps avoid negotiations in the future. If the quality of work is not up to the mark, the contractor has the right to deduct the amount paid accordingly. However, this clause must be clearly mentioned in the contract.

     

  6. Testing the Product

    This is important if the service provider works on something that will be used by the client’s customers directly. For example, software or commodities such as skin care products. In such cases, product testing must be conducted by the service provider. The SOW should specify that the product will only be acceptable after testing that it is safe to use.

     

  7. Acceptance Criteria

    This is the summation of all the project parameters. The project is only complete and acceptable if the end result meets the criteria listed by the contractor in the SOW contract. The contract will be null and void if it doesn’t meet the requirements. A plan of action is necessary in such cases, also stated within the contract.


Key terms

  • Contract – An agreement or document signed by two or more parties that states that they adhere to all the terms and conditions stated within the contract and a promise to fulfill their responsibilities.
  • Contractor – The person responsible for managing the project and following the terms of the contract. 
  • Service Provider – A person who provides a particular type of help or service, such as software development, content writing, and graphic designing.


Conclusion 

An SOW contract plays a major role for contractors and service providers who deal with the exchange of services for money. These contracts are generally short-term until the end product is supplied to the contract. The service provider must meet the product’s standards as stated in the contract. If you wish to learn about more such contracts, check out Law Insider and get your hands on various online courses.

 

If you are interested in making it easy to search through your contracts, LawInsider’s contract repository makes it easy for you to upload your documents and find the hidden contracts among them. From 100 to 100,000 contracts, there are no limits and no hidden fees for the amount of documents that you can organize. With secure access and encryption for all files, you can be sure that your contracts stay safe and private.

 

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Tags: Contract, SOW

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