When a US government authority or department procures services or goods, it is required to allow private contractors to bid on projects. This allows any interested company to submit an application to secure a project contract. The legislation ensures that there are no unfair competitive advantages and that state taxes for government projects are used economically. But what types of tenders exist...
Government-financed projects don’t just go out to the first best company. By the same token, federal, legal, and local authorities cannot just receive offers from companies that, in their opinion, are a good match. The Sherman Antitrust Act, passed by Congress in 1890, decided that all relevant and interested companies have equal opportunity to be awarded a contract. That’s why public procurement procedures exist, based on United States antitrust laws.
These laws state that every project advertised by the federal government must be accompanied by a written call for tenders, which is open to all interested companies. After they’ve familiarized themselves with the contents of the given tender, companies are able to apply for the tender with relevant documents. In this process, the statement of work is a key component of these files. It provides a detailed overview of what services are expected and under which circumstances they should be fulfilled.
Statement of work: Definition and meaning
What is a statement of work? The term is actually quite self-explanatory. Depending on from where you’re standing, it describes the specific services that are required. But it’s a little more complicated than that, as this key component of bidding for a public tender has very specific requirements.
A statement of work forms the basis for all incoming offers. In their offer documents, bidders are invited to go over the specific points in detail, by describing what services they can provide under which circumstances and at what prices. As such, a statement of work must be as detailed and precise as possible, so that the bidding companies clearly understand what the employer is asking of them and if or how they’re able to do this. At the same time, it shouldn’t include any details that might exclude certain companies right from the start, although their professional field might suggest that they are well suited for the project.
A statement of work details the service requirements of a (public) employer and how a project should be fulfilled. It should be formulated in an open way, as to not exclude any potential companies from the competition.
In practice, a statement of work comes in two different forms:
- Service specifications: Here, all requirements and details for the completion of the project are listed with partial services. The advantage of this is that the applicant can not only see the project’s goal but also the required partial services that feed into the goal. As such, they’re able to understand what resources are required and what kind of tasks they’ll be met with. The importance of the individual partial services are also included in detail, so that the contracting authority can not only see under what circumstances applicants will complete the project, but also what kind of instalments the total cost is made up of.
- Service program: This kind of statement of work only describes the end result (the goal of the project). There is no catalog of services; bidders need to define the partial services themselves, which contribute towards the project’s goal. The contracting authority then chooses which concept matches the requirements mapped out by the project leader, and which method is deemed as the most efficient.
What are the requirements for a statement of work?
A statement of work must fulfil specific requirements, which are outlined in a writing guide developed by DAS Procurement Services. In these paragraphs, not only is the formal structure described, but also what to bear in mind when formulating the service requirements:
- A statement of work must be described in as a much detail as possible and be clearly formulated (duration, amount, quality, circumstances)
- An exact description of function and service requirements must be included
- Competencies and/or technical specifications required to complete the project must be named
- National and international law and norms that are essential for the project’s completion must be named
For many of these points, a level playing field that provides all interested companies with equal opportunity is key. That’s why the project description emphasizes the importance of clear wording that can be understood in the same way by all interested parties. At the same time, the description of services can also not be too specific, as to disqualify certain companies from participating. As such, specifics like the names of tool and machine manufacturers cannot be mentioned, when the task could be completed just as well with other technical equipment. By the same token, the service description may not be tailored to the skills of a particular company and their method of working.
Why is a statement of work so important?
By reading the various requirements of a proper statement of work, it’s easy to understand why it plays such a central role in the award procedure. First of all, it makes sure that (often highly sought after) projects advertised by public entities are open to all companies within a given field of activity, as long as they meet the project’s requirements. Whether you’re an industry-leading mega brand or a medium-sized business doesn’t matter.
At the same time, a clearly written statement of work makes it easier to compare incoming offers. This will make the work significantly easier for the awarding entity. The ones responsible for this task don’t have to sift through a massive pile of offers with completely different structures, but can see at first glance to what extent an applicant meets the required criteria. This, in effect, permits a fast and fair award procedure.
After the award procedure, both the contractor and the client will continue to benefit from a clear statement of work, as it serves as the basis for the contract. As such, key points within the contract don’t have to be rewritten. Instead, only the missing details and the terms and conditions need to be ironed out. But after having run through such a detailed award procedure, both parties will already be on the same page about key points.