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”)
Two Senior Buyers Needed in Arlington, VA
One position will focus on IT and the other will focus on hospitality (primarily hotels). 5-years experience w/ indirect spend in excess of $10M and bachelor degree required. Candidate must have a procurement certification (e.g., CPSM, CCCM) or be able to obtain one within the first year of employment (as a condition of continued employment).
Vendor Gifts: Another One Bites the Dust (Hey, Hey)
As most procurement professionals know, vendor gifts have been on a steep decline since the heady days of our once over-heated economy. That's a good thing from the perspective of ethics—now I don't have to worry about refusing vendor gifts because they're just not offered that often anymore. Unfortunately, there have been some unexpected negative consequences from the downward vendor gift-giving trend—there are companies that depend on vendor gift-giving for a large part of their revenue. This week, another one bites the dust. Harry & David, I hope that you make it through Chapter 11 because I love your pears!
Speed Dating for Supply Management Pros?
So what am I missing out on? Expanding my professional network...
At my local ISM chapter meeting, I tend to congregate with the people I already know. When I'm at a conference, I'm busy running from session to session and I'm just not willing to make the effort to try and meet new people. Sure, there are the stuffy "networking" receptions at these events, but those require me to come up with something professionally witty and pithy to break the ice with so I don't come across like I'm trying to hit on someone. Sometimes, it's just too hard, so I tend to forgo receptions (plus I don't drink).
So, my professional network suffers...
I always thought that it would be great if there was some sort of "facilitated" networking session at these events, where my fellow attendees and I had some common objective to focus on and were sort-of forced (in a good way) out of our shells to network with other people who we don't know. About six-months ago, I heard about "speed networking ," which sounded interesting but was more oriented toward sales folks trying to meet new prospects. Speed networking is a lot like speed dating (in terms of the "speed" part).
After thinking more about it, it seemed to make sense to have a speed networking event for supply management pros. The concept is that attendees are paired together, introduce each other, and have only 5 minutes to discuss two interesting (and easy) supply management topics. When the 5 minutes are up, the attendees move on to meet someone new and to discuss other topics. I thought it would be a great and easy way to meet new people and learn something relevant to the supply management profession at the same time.
I put together a set of materials: a "Speed Networking for Supply Management Professionals" presentation containing instructions for speed networking (including the room set) as well as a list of speed networking topics specific to supply management. Here are two example topics:
- Topic #7. What’s worse and why—stock outs or too much safety stock?
- Topic #16. You have an old friend, Billie Jo, who works for vendor ABC, but you’ve lost touch with her. You recently issued an RFP and vendor ABC is a bidder. Out of the blue, you receive a call from Billie Jo, who says that her boss is giving her a trip for herself and one other person to Hawaii. She asks if you would like to join her. What do you say and why?
- The speed networking class was really good – enjoyed getting to know a lot more people, for sure.
- This was valuable. To meet people before I felt like I was being too forward. This made it easy to network.
- Loved the event.
- Excellent session!
- This was great—especially for new members!
- Very good session!
- Great concept.
- Good idea!
- Enjoyed the interaction and format.
- Met lots of people I didn't know before. Fun to discuss the topics / questions.
- Definitely do this again!
- The topics...provoked learning and thought.
If you're interested in doing the same thing for your next chapter meeting or other supply management event, my step-by-step materials are available to you for free. I'd love to hear feedback from anyone else who tries the speed networking concept for his / her event.
Upcoming: Gartner Supply Chain Executive Conference 2011
The Gartner Supply Chain Executive Conference provides a unique
opportunity to collaborate and connect with the world's leading supply
chain executives, all in one place at one time. We'll also acknowledge
the accomplishments of those organizations that have established a path
toward a successful supply chain future. The conference combines strategic and tactical
Gartner advice from industry analysts and thought leaders who
collectively have over 150 years of supply chain and end-user
experience. Plus, gain insight from peer exchanges and interactions with
leading solution providers at the forefront of the supply chain market. Also, you'll be able to
network with your peers to share insights on real-world strategies,
implementations and best practices. Gain access
to peers from leading global organizations at a variety of formal and
informal networking
opportunities, including end-user case
studies, workshops and hospitality suites.
Upcoming: Gartner Outsourcing & Vendor Management Summit
Gartner Outsourcing & Vendor Management Summit 2011 (9/12 - 14, Orlando) provides an in-depth exploration of the significant developments and trends shaping vendor and strategic sourcing management practices, as well as the sourcing marketplace.
The Summit provides CIOs, IT Directors, Sourcing Executives, Procurement Managers & Vendor Managers with a useful set of best practices, frameworks and tools to create long-term impact back at the office.
Economic, business and technology changes demand innovative actions from both buyers and providers of IT services in how they form long-term sourcing relationships. In an environment in which consolidation, mergers and acquisitions, and new entrants are the norm, sourcing strategies must become more agile and responsive to change.
At the summit, you'll learn how to:
- Navigate market forces and apply new approaches and objectives for successful outsourcing.
- Establish the governance and strategic management disciplines that bring needed order to the many moving parts of your sourcing ecosystem
- Uncover the disruptive trends that are reshaping the future of IT services
- Move beyond cost take out to business results oriented outcomes
- Learn how to improve control, reduce risk and drive more value from your vendors
- Uncover efficiencies at a time when every budget dollar counts
Vetting Your Vendors: EPLS Isn't Just for Government Procurements
In my procurement organization, we're required by the Code of Federal Regulations (e.g., 10 CFR 600) to use the Excluded Parties List System ("EPLS") whenever we do a procurement that is funded by the Federal Government. EPLS includes information on vendors and individuals debarred, suspended, proposed for debarment, excluded or disqualified, or otherwise declared ineligible from receiving Federal contracts, certain subcontracts, and certain Federal assistance and benefits. In other words, if a vendor has done something "bad" (like fraud), the Federal Government disqualifies the vendor for purposes of doing business with the Federal Government and for procurements conducted by others (like my organization) that involve Federal funds.
The cool thing about EPLS is that it's open for everyone—meaning that you can use it as a tool for your commercial procurements. If you're considering doing business with a new vendor, EPLS serves as an important resource for doing your due diligence and research. If a vendor shows up on the list, ask why.