Manage Project Scope & Payments With Workyard
An effective scope of work (SOW) sets construction projects up for success.
As the ultimate guidepost for each step of a construction project, a scope of work construction template establishes the work that needs to be covered in a clear, sharable format. Kicking off a project without one sets contractors up for failure, rework, and loss.
To help you better manage expectations and change on your next project, we’ve created this comprehensive guide on how to write a scope of work.
Let’s dive in!
A scope of work, or SOW, is a powerful anti-dispute tool for contractors. An SOW document clarifies a project’s outline to save you time and money. In a nutshell, it’s a blueprint itemizing the work that needs to be done in order for the project blueprint to be completed.
Ultimately, the “better process” created by a solid SOW document leads to better end results. When a project lacks a well-defined scope of work, there’s no way to establish the work that needs to be done, and this allows for a vacuum of responsibility.
The simplicity and obviousness of a scope of work are two things that cause this document to be forgotten during the planning stage. A contractor may feel that the information provided on a scope of work is redundant. However, a scope of work is a unified document that puts all tasks in one place. It is the ultimate “accountability” document.
A scope of work is a written document outlining all activities included in a construction project. In addition to itemizing objectives, anticipated milestones, deliverable items, and outcomes, the scope of work also itemizes the specific responsibilities of each project team and individual. The scope of work also outlines all terms, conditions, standards, and requirements attached to all activities and responsibilities. A scope of work is so valued by contractors that many actually include it as a section within a work contract. Others simply attach it as a separate document.
Contractors know the pain of verbal contracts. Disputes and delays become contentious when there’s no written basis for the timeline and protocols built into a project. Thankfully, the scope of work protects contractors against misunderstandings and client-driven changes during a project that materially impact cost.
Here are three ways that the scope of work sets contractors up for success against common scenarios:
The scope of work helps to prevent mistakes and misunderstandings. It also serves as armor against misunderstandings and accusations by allowing contractors to “show their work” when clients insist that a specific demand or expectation isn’t being met.
Some subcontractors won’t agree to begin work until a scope of work is submitted. Having been burned by verbal agreements and poorly defined job specs in the past, these subcontractors protect their labor, time, and resources by only agreeing to perform work as part of a signed scope of work. Being a contractor with the ability to deliver good SOW documents establishes good faith.
Five core points need to be hit in every construction scope of work. While contractors have flexibility regarding how they want to write a scope of work, these five points should make up the skeleton of the document.
Get the project definition down on paper. This starts with clearly stating the goal. Again, this is something that many contractors skip because it seems too simple and obvious. For example, the goal when building an addition on a home may be to create a 500-square-foot space that leaves the property owner with a turnkey, debris-free property. While it’s simple, this goal gives the contractor something to point to at the project’s end. Contractors constantly bump up against the problem of dealing with clients who hold expectations they never verbalized. Seeing the project summary on paper provides the client with an opportunity to confirm that what they’re seeing in their mind is the same as what’s on paper.
This portion of the scope of work includes specific deliverables tied to a project. The wrong way to do this is to simply name a deliverable as “updating the kitchen.” This larger objective should then be split into smaller deliverables that are assigned to specific subcontractors. For example, “updating the kitchen” should be split into measurable items such as ripping out the countertops, installing a sink, tiling the backsplash, installing energy-efficient under-cabinet lighting, and more.
Under this category, the contractor gets specific about how they will achieve scope. It offers a look “under the hood” that breaks down the specific techniques and methods that will be used to achieve project goals. Something that is often overlooked is the way that technique ultimately determines pricing. Different permits, tools, materials, and special contractors may be needed based on the technique chosen to achieve a specific goal within a project. This is why merely naming tasks instead of pairing “task with technique” as part of the scope of work is such a deadly mistake when it comes to profit margins.
For example, a contractor may define the scope for installing under-cabinet lighting based on the specific wattage and wiring that will be used because they know that this project has a wide cost range based on the quality of the materials used. Expect to write, rewrite, and continually expand on this section as client expectations get refined. Adding as much detail to each line as possible helps to create airtight definitions of scope that don’t leave room for creative interpretation by everyone from the subcontractor performing the work to the client writing the check. Good details also ensure that your subcontractors are calling in the right people for the job based on the specific skills and certifications needed.
This is the section of the scope of work that brings accountability home. A scope of work schedule has two purposes. The first is setting up expectations with the client for how long each step will take. The second is allowing subcontractors to plan their schedules to meet your deadlines. All scope of work schedules should include key dates for milestones that might cover demolition, framing, wiring, completion, and cleanup. Of course, scheduling also helps the contractor to properly book their own in-house team or regular labor pool for key dates.
Contractors must create plans for how the scope of work documents will be executed. Uniform administrative practices help to turn a scope of work document into a living document. Decide how your scope of work handles these issues:
Don’t forget the crucial final part of every scope of work document. Project scope isn’t useful if it doesn’t get past the scope of a contractor’s desk! Make sure that a finalized scope of work document gets signed and approved by the contractor, client, and all subcontractors. The important thing to remember is that creating a scope of work isn’t some esoteric, high-concept task. It often requires walking through the physical space of the project to jot down everything that will need to be addressed. This video by Tom Stephenson does a good job of demonstrating what that process looks like.
The obvious benefit of a scope of work is that it provides a clear written document of the assumptions and what’s included as part of the job that can be used to steer the project and assess change as it happens. Most importantly, the scope of work helps you get paid. In addition to covering steps and controlling change, the scope of work also helps you to track your costs against your budget. Too many contractors fall under their desired profit margins because of inaccurate construction job costing.The simple formula for construction job costing adds labor, materials, and equipment together to come up with an all-in cost. However, accurately assessing these costs without having a detailed, itemized scope of work in place is impossible. For instance, the labor category alone could consist of tear down, prep, installation, and cleanup. Being understaffed just one time can have a ripple effect that leads to unanticipated overtime that eats into your budget. The client won’t pay for that scheduling mistake. It will come out of your profit margin.
Here’s an example of what a scope of work for a residential construction project should look like:
Contractor Name: Ace 1 Construction
Project Address: 23 Lovely Lane, Miami, Florida
1. Job Summary: Kitchen renovation for a single-family home
A. Preparation and Demolition
Action #1 + Point Person + Duration (in days)
Action #2 + Point Person + Duration (in days)
Action #3 + Point Person + Duration (in days)
B. Framing, Drywall, Plumbing, Electrical, and HVAC
C. Interior Finishes
D. Install New Windows and Doors
F. Final Walk With Client
Download, customize, and print various scope of work construction templates for free here.
How do you get a scope of work on paper? Ideally, a contractor is using a methodology that can be replicated for every new project. Here’s a suggested checklist to go through when building your construction scope of work:
An effective, protective scope of work starts with your ability to grasp a client’s requirements and expectations. Take time for discussions with the client that will allow you to create a scope of work that reflects their expectations. If a client seems to lack an understanding of how expectations are built, show them a scope of work from a previous project to help realign the conversation.
What happens if the scope changes once you’ve already enacted your SOW document? First, contractors should come to expect change orders. A change order is used to either exchange or modify some aspect of the work, materials, or scope of a project. Using change order best practices, contractors can adjust their SOW documents to account for the tweaks being requested by clients with as little pain as possible.
When a change order comes through, the priority is to calculate how the requested changes will impact labor. Contractors should reschedule labor dates based on how the change order shifts work scope, priorities, and deadlines. A readjusted version of the SOW document that includes any changes in either task or duration should then be distributed to all subcontractors.
How do you know whether you are effectively managing project scope and your budget? The benchmark for project scope is the budget. If your scope is allowing you to “burn through” your budget at the expected pace that leaves you on target to meet your profit margin, this is a sign that your scope of work was accurate. If you’re finding that you’re much further along in your budget than you are in the project, this is a sign that your scope was not accurately assessed. It may be time to realign the scope for the remaining portion of the project to keep costs under control before the project turns into a loss. Keep in mind that a contractor profit margin of 15% is ideal.
Tracking costs is one of the most difficult aspects of managing project scope, this is very difficult to do accurately without using modern software solutions. While contractors have their hands tied when it comes to market-determined costs for materials and labor, the one thing they can control is how they manage resources. Labor tracking software like Workyard enables contractors to accurately track costs at a job and cost level with no manual data entry required.
Time tracking apps like Workyard also help contractors save on their payroll costs by more accurately tracking every hour and mile worked to reduce errors and over-reported hours.
Yes, materials should be included in scope of work. However, it’s important to note that materials are only included in relation to how they fit into the overall plan for the “who” and “how” of completing the work. Contractors can determine the amount of each material required by specifying the techniques used to complete specific tasks.
With a fixed-price model, the client pays a lump sum in exchange for completion of services by a specific date. Clients like the “no surprises” aspect of this pricing model. When creating a fixed price, a contractor factors in anticipated time and materials based on past jobs before adding profit margin. When choosing this route, it’s essential for a contractor to have a detailed scope of works and estimate given they are taking budget risk.. A T&M (time and material) model charges the client custom rates based on the time and materials needed to complete the project. Under this system, a client is typically charged per step within a larger job.
The T&M model is preferred by contractors when they cannot accurately estimate either how much a project will cost or how long a project will take. By contrast, the lump-sum model can be acceptable for clearly defined, easily repeatable tasks. Fixed pricing is generally used more by subcontractors offering “set” services compared to contractors offering custom services. For example, a plumber may feel comfortable charging a fixed rate for system inspections because they have gotten the time and materials involved in the service down to a science. This makes it unlikely that they will lose money by offering a fixed rate. By contrast, a general contractor building an addition simply has too many variables to work with to be able to guarantee flat pricing.
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Streamline your construction projects and achieve successful outcomes with our free scope of work construction templates, available in Word, Excel, and PDF formats.
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