Make Me an Offer!
Jim Haining, CPSM, CPSD, C.P.M., A.P.P., MBA
September/October 2011, eSide Supply Management Vol. 4, No. 5
A detailed, effective scope of work (SOW) lays the groundwork for stellar supplier performance — not to mention greater competition and better pricing.
For many organizations, the focus on procuring goods and services has increased dramatically in recent years as supply management executives are enlisted to increase company savings and boost the bottom line. As a result, many supply management leaders are now at the C levels in their organizations. To ensure their continued success, it's important that organizations embrace strong sourcing processes and the use of competitive solicitations.
Supply management professionals who have solicited a bid or request for proposal (RFP) in the past know the importance of having a scope of work, or SOW, that clearly describes their organizations' needs and requirements. A clear, concise SOW is essential to ensure that suppliers understand the requirements of the goods or services being solicited. Additionally, this understanding levels the playing field for all participants in the solicitation and lends itself to superior supplier performance and overall success.
On the other hand, without a detailed SOW, suppliers will find it difficult to understand service-level expectations, submit an accurate proposal to the solicitation or perform the actual work to the organization's satisfaction. Any leeway for interpretation increases the potential for misunderstandings and dissatisfaction among all parties. As such, a detailed SOW is perhaps the single most important element of a successful solicitation or contract.
Purpose and Components, Defined
Stated simply, the SOW defines the services or products your organization needs to purchase. During the sourcing process, the SOW creates a baseline for the supplier's proposals and work efforts, levels the supplier playing field and generates a more accurate supplier proposal.
During the contract performance, the SOW creates a standard for defining performance. It ensures the organization's requirements are met and establishes a legally defensible position in a contract dispute. The SOW should encourage competition and enable the supplier to be successful in performance. It is used in the sourcing process and is attached to the final contract.
Given the criticality of the SOW to the sourcing process, several components should be included. Whereas every good and service is different — and, accordingly, some variation does exist in the components included in the SOW — a handful of elements are consistent across the board:
- Delivery/performance schedule
- Time line; milestones
- Packaging/packing/marking/shipping instructions
- Technical specifications
- Inspection/test/acceptance criteria
- Supplier resource requirements
- Identification of subcontractors
- Management tools
- Reporting/operations reviews
- Company's obligations and assumptions (Less is more.)
- Applicable Documents
- Pricing criteria (examples: fixed, time and material, per-unit rate, rate schedule.) Actual pricing detail will be documented in the contract.
Who's in Charge Here?
Development of an ideal SOW requires end user involvement. The collaboration must draw on expertise from the end user and, sometimes, from potential suppliers. Ideally, the internal customer (in other words, the subject matter expert) will write the SOW.
Sometimes, however, he or she will need a little help getting started; providing a sample SOW or template will expedite the process. Instead of reinventing the wheel, you can find sample SOWs in a variety of places, including the Institute for Supply Management™ website, which offers a specifications database.
A supplier might provide a basic SOW that can be used as a starting point. While it's not ideal to allow a supplier to develop your SOW, you can use its input to provide a good "sanity check." Without explicit knowledge of your product/service, you might include unnecessary tasking requirements or omit critical elements, which can make it too costly.
SOW Writing 101
When writing the SOW, be clear and understandable in your language. Avoid undefined capitalized terms, commonly used company acronyms/slang and industry jargon. If that proves impossible, be sure to offer definitions of any questionable terms.
Of course, what not to include in the SOW is an equally important consideration. Occasionally, supply management professionals and end users insert items and sections into the SOW that don't belong there. (Contract terms and conditions, for example, belong in the contract.)
Additionally, to ensure consistency with the contract, avoid changing legal terms in the SOW. In the end, it's best to only include items in the SOW that describe the work to be performed or the good(s) being purchased.
Admiring the Big Picture
To potential suppliers, a company's decision to use supply management in the sourcing of services commands attention because it demonstrates a commitment to professional procurement practices.
A structured sourcing process, combined with a detailed SOW, is a win-win combination. It enhances supplier performance and internal customer satisfaction, which, in turn, delivers greater savings and reduces expenses to an organization's bottom line.
Jim Haining, CPSM, CPSD, C.P.M., A.P.P., MBA is purchasing administrator for Clark County, Nevada. To reach this author, please send an e-mail to firstname.lastname@example.org.
For more contract-writing resources, visit the ISM articles database.
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