Common Connect - August 2009

Is This a Pig or What?

By Randy Dufault

I was pondering a SOW the other day…

The Computing of Business

Now I suspect many of you, particularly if you reside in the prime pork production region of the USA as I do, may well be assuming (more on assumptions in a bit) that I speak of a domesticated boar that has borne piglets, but alas, I do not.

I speak instead of an ess oh doubleyew, the often-used acronym for a Statement of Work.

To get the computing of our businesses done we all need to use contractors in some fashion and the contractual vehicle most often used to finalize a relationship between said contractor and you, for a given set of things to be done, is an SOW. The contractor prepares one, ships it to you, you sign it and the project is a screaming success. Simple, eh?

If only it were.

Have you ever read one of those things in detail? In my time I’ve had the opportunity to see some really good ones and some really not so good (e.g. bad) ones. I’ve also had the opportunity, sitting on the contractor side of a transaction as I most often do, to write some really good ones and the occasional bad one.

An SOW is intended to describe a reasonably well-defined, fixed set of things to be done. If done properly it should protect both the contractor and the contractee, and give both parties confidence that what is desired to be done, gets done in a controlled and satisfactory fashion.

So what should you be looking for in that SOW?

The first thing is some sort of discussion on the part of the vendor of what he or she believes you want to accomplish. Sometimes such a section is titled as a Statement of Requirements, or it may be a simple introduction describing the business challenge/ problem. Regardless of what it is called, after reading it make darn sure you are convinced the vendor fully understands what you are trying to accomplish.

Typically next is a list of work tasks, or Statement of Tasks, the vendor is proposing to execute, in order to solve the described challenge.

If your requirement is for a complete new warehouse management system and the vendor proposes a single task reading: “create, test and deliver a warehouse management system,” you best start looking for a different partner. Tasks need to be reasonably granular—not too specific, yet not too broad. I’m not sure I can describe what is a well-defined task, but I think you can typically

get a feel for the right and reasonable depth, in the broader context of the whole project.

Included with a task should some sort of completion criteria. Completion criteria should describe how both you and the vendor know when the task is done. A statement like “This task is complete when the contractor departs the premise” likely is a bit high-level.

A task may or may not have estimates (dollars or hours) associated with it. If you have asked for a fixed price proposal, don’t expect the vendor to provide estimate detail on each task—he doesn’t have to. On the flip side, a time and material contract absolutely must include detailed estimates.

Somewhere in the SOW there needs to be a set of assumptions (see I told you there would be more). In any transaction there always are assumptions and any supposition falling outside the realm of normal common sense and is not explicitly recorded, has the potential for making a good business relationship go bad.

Much as with tasks, it is hard to say what is an appropriate and complete set of assumptions. If the list looks like a canned set the vendor throws in every SOW, there may be an indication that not quite enough thought was put in to what may or may not happen on the project.

If the list is very detailed—maybe too detailed—it may be an indication the vendor is not completely comfortable with what the are being asked to do. A little more discussion may well be in order.

Then there is the price section or Statement of Costs. Of course there is going to be a number, maybe many numbers. Does it all make sense? What about travel and living expenses? Who is responsible for those? What about taxes? Who pays those? Are there controls and protections in the pricing both for you and for the vendor? In the end, are you confident after reading the SOW and understanding the pricing, that you know what the project is going to cost you? If not, maybe it’s time again for more discussion.

More negotiation and a revised SOW are always an option. Don’t rush the process.

Contracting relationships are a fact of business life and that means that we all need to deal with these SOW things. Just make sure the next one you deal with truly makes sense both to you and to your vendor.