21 Aug 2014

Is the Statement of Requirements or Statement of Work really that important?

by Alexandra Wedutenko, Lucinda Watson

An effective Statement of Work underpins the entire project or program and is critical for a Commonwealth entity's determination of best value for money in a procurement and for a project or program's overall success.

When planning and implementing a project or program, it is always very tempting to consider leaving the development of the Statement of Requirements / Statement of Work (referred to collectively as "Statement of Work") until last, or using a temporary place-marker setting out broad aspirations only, to allow more time to ponder the desired outcomes and in the hope that the development phase/procurement process will help to fine-tune the requirements.

Indeed, defining exactly what is to be achieved will likely be the hardest part of planning and implementing a project or program.

While it is often the forgotten part of a contract, an effective Statement of Work is the most critical step for ensuring that the project or program achieves what was intended and obtains best value for money.

Is the Statement of Work really that important?

The Statement of Work is fundamental in the planning of any project or program and eventually in the implementation of that project or program. Parties will often focus on issues considered high-risk to the business such as liability, performance frameworks and liquidated damages. However, without an effective Statement of Work as the foundations, the entire project or program will likely fail or at least face significant obstacles that impact both parties.

The Statement of Work should be developed at the initial stages of a new project or program, because this forces the business to thoroughly plan the project or program and fully consider what it wants to achieve. The Statement of Work will also likely guide development of effective evaluation criteria for the procurement.

It will also be invaluable throughout the entire procurement process, first to tenderers preparing responses to the request documentation, and then to the business in evaluating those tenders, through to contract implementation and management.

What should be included in a Statement of Work?

The Statement of Work should set out in clear, understandable and unambiguous terms the outcomes to be achieved in a project or program of work, the scope of that work and the requirements that must be met.

Unless the business has very specific requirements and/or constraints, and/or wants no change to the current way services/products are provided, it is preferable to avoid setting out the Statement of Work requirements by describing exactly what happens currently or telling the tenderer exactly how to do the work.

At the approach to market stage, you should focus on what is to be achieved, and the required outcomes, and allow the tenderer some flexibility to suggest options, the most efficient way to achieve the outcome and perhaps some innovative ways to do things that will meet the requirements and provide value for money. For evaluation purposes this will also better showcase the tenderer's understanding of the requirements.

An effective Statement of Work facilitates the tender process

Including a Statement of Work in any approach to market documentation (for example, a Request for Tender or Request for Quote) will:

  • help tenderers to respond to the request documentation;
  • give tenderers greater opportunity to compete;
  • enable tenderers to demonstrate their understanding of the requirements and offer options for achieving the outcomes;
  • allow entities to appropriately evaluate tenders; and
  • enable entities to determine if the tenderer can perform the required work.

When developing the requirements and considering what is truly required, it is useful to bear in mind the potential impact that a requirement may have on tender evaluation and price.

Similarly, you should remember that in a procurement the Statement of Work assists the potential tenderer as much as it does their tender. Potential tenderers may be dissuaded from tendering if the Statement of Work sets out requirements that cannot be technically achieved or are too ambitious in the circumstances (for example, due to resourcing, time restraints). A high-value contract may not be incentive enough if the project is considered to be at high risk of failure and may result in damage to a contractor's reputation.

A useful tendering approach is to ask tenderers to submit compliance responses against the Statement of Work as part of the tender response. This will assist with the evaluation of tenders and may alert the Commonwealth entity to any areas of the requirements that require further development or negotiation.

Once fully developed and possibly negotiated with the successful tenderer, the Statement of Work will form part of any resulting contract, detailing what the contractor must deliver or perform in order to receive payment under that contract, and will then be a critical aspect of project implementation and ongoing contract and project management.

Specific requirements for Commonwealth entities' Statements of Work

For Commonwealth entities running procurement processes, the Commonwealth Procurement Rules July 2014 (CPRs) require that all relevant information is included in the request documentation for procurements, which includes a complete description of the nature and scope of the procurement and, when known, the quantity of the goods and services to be procured and any requirements to be fulfilled, including any technical specifications, conformity certification, plans, drawings, or instructional Materials.

Early preparation of an effective Statement of Work will also assist the Commonwealth entity to ensure that the procurement "is commensurate with the scale and scope of the business requirement".

Under the CPRs, any specifications set out in the request documentation must:

  • not create an unnecessary obstacle to trade;
  • when possible, be set out in terms of performance and functional requirements; and
  • be based on international standards for technical specifications, when they exist and apply to the relevant procurement, except when the use of international standards would fail to meet the relevant entity’s requirements or would impose greater burdens than the use of recognised Australian standards.

Accordingly, properly planning the procurement and setting out clear objectives and requirements in the Statement of Work is not just critical for the success of the project or program but is also required under the CPRs.


The Statement of Work is often sidelined as the tricky technical bit to complete and slot into the contract once everyone has made up their mind as to what they want to achieve, or because entities consider other areas of the documentation to be higher risk and more important to get right.

However, development of the Statement of Work in the initial stages of a new project or program is fundamental and will drive the procurement process. An effective Statement of Work underpins the entire project or program in both the public and private sectors, and is critical for a Commonwealth entity's determination of best value for money in a procurement and for a project or program's overall success.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.