Legal 101: Understanding Statements of Work
Statements of Work (SOWs) are a common tool used across industries to provide service providers and clients with a clear understanding of what will be delivered, when and how. A well-drafted SOW prevents ambiguity, reduces legal exposure, and ensures services remain within scope, on budget, and on time.
There’s a lot of confusion about how a SOWs fit into the broader contract, what information they should contain and how to avoid common pitfalls in SOWs.
How to SOWs fit into the agreement?
Generally, parties to a SOW first enter into a Master Services Agreement (MSA) or another framework agreement. The MSA is the overarching agreement that governs the relationship and contains the more “legal” terms of the arrangement.
The SOW is a more commercially focussed document that sets out the details of what will be provided: services, deliverables, timeframes, fees, etc.
Often the MSA continues indefinitely or for a long term with many, shorter SOWs sitting underneath it, sometimes independently or sometimes overlapping.
For example, a graphic designer might enter into an MSA with a client and then enter into a new SOW for every individual project or engagement that the client needs.
This framework streamlines the relationship, meaning that the parties don’t have to negotiate or enter into a new contract every time they want to work together.
When should MSAs and SOWs be used?
There are generally 2 scenarios that work ideally for an MSA and a series of SOWs:
1. Long, multi-phase projects.
If you have a project that is likely to go on for a long time, and to have many distinct phases, a MSA and SOW is likely to be well-suited. You can negotiate and agree the MSA once at the start of the project, and then enter into a new SOW for each phase of the project.
This is particularly useful where you’re not able to scope out the entire project in advance. For example, if the outcome of the earlier phases of the project impact on what the scope of the later phases, separate SOWs allow you to manage each phase as the project progresses.
This means shorter contract negotiations and a more streamlined contracting process, while still ensure that both parties are legally protected.
2. Many, short-term engagements
Similarly, if you are engaging with a client or service provider for lots of smaller pieces of work, it’s often time-consuming and impractical to negotiate and sign a separate services agreement for each engagement. Negotiating and agreeing a single MSA at the start of your relationship, and then signing separate SOWs for each separate engagement is more cost and time effective, while still providing appropriate legal protection for each engagement (as with the graphic designer example above).
Key Legal Components of a SOW
SOWs primarily set out the commercial terms of the project or engagement - the details of the services, deliverables, timeframes, fees, etc. It’s important that the SOW be clear, precise, and detailed.
Below are some of the common elements in a SOW:
1. Scope of Work & Deliverables
Defines exactly what services will be provided.
Should use specific, measurable language to avoid disputes over interpretation.
Includes expected deliverables, formats, and quality standards.
2. Timeline, Milestones & Deadlines
Clearly establishes start and end dates.
Outlines progress checkpoints to track compliance with deadlines.
Includes contingency planning for delays and unforeseen issues.
3. Roles & Responsibilities
Specifies which party is responsible for each aspect of the project or engagement.
Clarifies client obligations, such as providing access to necessary resources.
Reduces liability risks by ensuring mutual understanding of responsibilities.
4. Fees & Payment Terms
Defines the total cost, payment schedule, and penalties for late payments.
Establishes invoice and reimbursement procedures.
May include retainer clauses, milestone-based payments, or contingency fees.
5. Change Management & Scope Adjustments
Includes a process for modifying the SOW to accommodate changes.
Defines how additional work, new deliverables, or timeline extensions will be handled.
Helps prevent scope creep, a common issue in IT and marketing projects.
Why a Strong SOW Matters
A well-drafted SOW defines the expectations, responsibilities, and protections for both parties. By integrating using SOW under an MSA, businesses can streamline long-term relationships while ensuring clarity on each project phase or engagement.
SOWs help mitigate risks such as scope creep, payment disputes, and unclear deliverables, all of which can lead to costly misunderstandings. Ensuring your SOWs are detailed, precise, and legally enforceable is crucial to maintaining smooth business operations.
At Hemisphere Consultants, we specialise in drafting legally sound and commercially effective SOWs to protect businesses and optimise project workflows. Whether you’re setting up an MSA structure or need a review of your current contracts, we can help.