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Free Policy Handbook for Contractors (without the Hazards of Co-employment)
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I have reviewed thousands of agreements. Still, to this day, it does not surprise me to see one item that often gets overlooked and can have a major impact on the overall agreement with respect to timing of events taking place, when a party is to deliver an item, when a party may be in breach or when payment is due ...
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I wrote this book to equip meeting planners and representatives of groups (such as third parties and intermediaries) with the information and tools necessary to negotiate a fair and reasonable hotel contract. Too often, the focus of a hotel contract negotiation is on "dates, rates, and space" and there's less attention paid to the contract terms and ... << MORE >>
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Worker Misclassification and Co-Employment
Meat and Taters: How to Minimize the Work in Writing Statements of Work
Often I find clients struggling to write their statement of work, not knowing really where to start. While I am a firm believer that writing a good statement of work does not happen overnight, through practice our skills become stronger. Simply put, writing a statement of work does not have to be as challenging as some believe it to be.
NRECA uses a parent-child relationship (as some call it) when it comes to contracting. There is the master agreement that is more or less an administrative document and that sets forth the terms and conditions of the relationship: how are the parties going to act over the life of the agreement when it comes to items such as terminating the contract, breaches and indemnification obligations. Then there is the statement of work that sits below the master agreement — this is what I like to call the meat and potatoes of the deal: what services is the vendor going to do or perform for the organization in a particular instance. A statement of work is the place where the business gets to document their story of why they are hiring a particular vendor and what the vendor is going to do. In other words, it is the formal way of documenting what the obligations are of the parties around a particular delivery of a product or service.
When broken down, a statement of work can be viewed no differently from writing a story consisting of the five Ws (who, what, when, where and why, and sometimes how) we all learned in school. A statement of work usually consists of the following pieces to make up the business story, which can essentially become a working template for any organization:
- Introduction/Project Description – What is this project about? Why is the organization doing this project now? While the drafters of the statement of work may be very familiar with the project, others may not; this first item in a statement of work does not have to be very long and should tell the reader what the project is about and why there is a need for the project to be outsourced to a vendor.
- Description of Vendor's Services/Scope Statement – Who is the vendor with which the organization is engaging? What is the vendor going to do for the organization in this particular statement of work? This should be a clearly written concise statement that tells the reader that vendor "x" is going to do "y" for the organization and nothing else.
- Vendor's Responsibilities – What are the ongoing responsibilities of the vendor over the term of the statement of work? This section of the statement of work may tell the reader if the vendor is to provide its own equipment, where the vendor will be completing its work, meetings the vendor is required to attend and status reports the vendor is expected to deliver.
- Description of Milestones and Deliverables – Tying back to number two above, what is the vendor going to do for the organization? In addition, this section should include when the vendor is expected to deliver the services/products to the organization. A reader of the statement of work should clearly be able to determine if there is one big deliverable or many deliverables. Do milestone need to be included to track the performance of the vendor along the way to ensure they are/will meet their deliverable(s) deadline(s)? The timeline as to when deliverables are due often reflects the overall project plan. (A note with respect to project plans — unless incorporated, the project plan does not become part of the statement of work contractually obligating the parties to each other, so writing a good milestone and deliverable section will become critical to the success of the project.)
- Payment Terms – How much is the organization going to pay the vendor? This section of the statement of work tells the reader how much the project cost and whether or not it is a fixed-price engagement or a time and materials engagement. Does the vendor get payment at the end of the statement of work, or does the vendor get paid over the term of the statement of work, as they deliver deliverable(s) or meet milestone(s)?
- Acceptance Criteria for Deliverables – What does the deliverable need to look like or do in order for the organization to say to the vendor, "yes, this is what we asked you to do and now we will pay you?" I have even heard some people ask, "How do we know when the vendor is done with the statement of work." This section of the statement of work, will tell a reader what the deliverable must look like or do to tell the vendor they have delivered successfully. Delivery of a product or services does not mean the statement of work is done. The buyer should always be given a chance to inspect a deliverable for conformance to the standards they have engaged and contracted for with the vendor.
- Buyer's Responsibilities – What are the buyer's responsibilities during the statement of work, if any? This section will tell the reader what the buyer is responsible for over the term of the statement of work (e.g. provide work space, laptops, access to systems, etc.).
- Key Assumptions – What are the key assumptions? In this section, the statement of work is telling the reader about any unknowns when the statement of work was drafted. Additionally, this section could alert the reader to potential issues known when the statement of work was drafted, add support to the scope statement or may contain any assumptions around the vendor or buyer responsibilities.
- Billing Contact and Address – Who and where should the invoice be sent to? This section of the statement of work will tell the reader who the invoice should be address to and where it should be sent. (The master agreement may contain a general clause as to payment address, but a statement of work can be more specific in the case where a particular business unit with the organization should be receiving the invoice.)
- Term - When should this work be done? This section will tell the reader the start and end for the overall project. While not mandatory, some drafters of a statement of work choose to capture the start and end date of the project in the milestone and deliverable table.
So the next time you are tasked with assisting in drafting a statement of work or take on the task by yourself, do not feel overwhelmed — take a deep breath and ask yourself, "what is this business story all about?"
NRECA's Tim Davis Finalizes $13.7M in Smart Grid Procurements
NRECA’s Smart Grid Demo Project Finalizes $13.7 Million in Contracts
Contact:
Tracy Warren , NRECA
Phone: (703) 907-5746
Mobile: (703) 517-3411
WASHINGTON, DC; July 7, 2011 – By the end of July, 2011, the National Rural Electric Cooperative Association will close on contracts worth $13.7 million for smart grid components to be deployed at 23 cooperatives participating in the cooperatives’ regional Smart Grid Demonstration Project (SGDP).
Supported by a matching grant from the U.S. Department of Energy, over the course of the project, participating cooperatives will deploy more than 75 technologies and kinds of equipment in twelve states.
NRECA has made these purchases for research and evaluation of the following smart grid features:
Communications
AMI systems and digital communications software and infrastructure to
enable smart grid features including demand response over AMI, load
management, prepaid metering and in-home energy displays.
Efficiency and Demand Response
Software and equipment to improve efficiency both at the operational and
end-user level, and enable automated demand response and load control.
Components include load control switches, in-home displays, advanced
Volt-Var control, demand response over AMI, meter disconnect collar
sealing kits.
Reliability and power quality
Software and equipment to improve reliability by implementing SCADA,
self-healing capability, power quality monitoring and regulation and
improved conservation voltage regulation.
Distributed generation and renewable energy
Equipment to assist the integration of renewable energy and distributed generation resources.
NRECA has executed contracts with the following vendors: Cooper Power Systems, Inc., HD Supply Utilities, Ltd., Stuart C. Irby Company, Larson Communications, Inc., RFIP, Inc., Ruggedcom, Inc., and VFP, Inc.
Check Your Indemnification Provisions: Innovatio Asserts Patent Rights for WiFi and WLAN
It might be a good time to check the indemnification provisions in your purchase agreements relating to WiFi and WLAN technologies. Here's an article that describes about how to contractually protect against patent trolls.
You Might Just Be a Fixed-Price Contract If...
My internal customers sometimes get confused with the major differences between a fixed-price contract type and a cost-reimbursement contract. For example, a customer may come to me with a contract that specifies a named resources, named skills, no truly tangible deliverables, and a monthly "fixed" fee (which is, in reality, the named resource's hourly rate multiplied by 160 hours)—and the customer argues that the contract is a fixed-price contract. Here's a chart I drafted to help eliminate confusion between what constitutes a fixed-price contract and what constitutes a cost-reimbursement contract.
|
Contract Type |
Fixed-Price
(Using Firm-Fixed-Price Example) |
Cost-Reimbursement
(Using Time and Material Example) |
|
Basic Description |
A firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the seller’s cost experience (other than buyer-initiated modifications such as change orders) in performing the contract. This contract type places upon the seller maximum risk and full responsibility for all costs and resulting profit or loss. It provides maximum incentive for the seller to control costs and perform effectively and imposes a minimum administrative burden upon the contracting parties. |
A cost-reimbursement contract type provide for payment of allowable incurred costs, to the extent prescribed in the contract. |
|
Application |
Use when requirements and acceptance criteria are known with sufficient accuracy. |
Use when uncertainties involved in contract performance do not permit requirements, acceptance criteria, costs, etc. to be estimated with sufficient accuracy. |
|
Performance |
Deliverable |
Effort |
|
Level of Requirements Detail |
Well-Defined |
Unknown or Broad |
|
Level of Acceptance Detail |
Well-Defined |
Unstated or Vague |
|
Payments |
On Delivery |
As Incurred |
|
Buyer-Specified Type of Resources (e.g., Skills) |
No |
Yes |
|
Buyer-Specified Quantity of Resources (e.g., Headcount, Hours) |
No |
Yes |
|
Contract Administration Effort |
Low |
High |
|
Change Controls |
As Needed |
Primarily for Extensions |
|
Risk to Buyer |
Low |
High |
|
Risk to Seller |
High |
Low |
And even if you say you're a "fixed-price" contract, you might just be a cost-reimbursement contract if...
- The substance of work is research or investigatory
- You don't contain tangible, detailed requirements
- You don't contain tangible, detailed deliverables
- You state quantity of resources
- You state resource names
- You describe resource skill sets (such as skills required or years of experience required)
- You don't contain a deliverables schedule
- You contain a milestone schedule (that is not deliverables-based)
- You contain a payment schedule (such as a monthly “fixed-fee”)
- You describe a “fixed-fee” that is in reality a resource hourly rate aggregated over the contract term and then is divided by some time period (such as a monthly “fixed-fee”)