A scope of services agreement is a contract that defines what services you can expect. The agreement is also called a scope of work or statement of work.

An Overview of the Scope of Services Agreement

A scope of services agreement is a formal document describing:

  • Timelines
  • Deliverables
  • Milestones
  • Work activities
  • Pricing
  • Governance terms and conditions
  • Quality requirements

Regardless of the nature of your business or your role within the company, you sometimes need to deal with external parties to complete projects, choose vendors, obtain support and customer service, and perform many other activities. The scope of services agreement gives both you and the vendor a complete picture of a project's requirements so you're on the same page.

In other words, the scope of services agreement is an official contract specifying all criteria in the said contract between you and a service provider. The contract helps avoid situations and ambiguities that can lead to disputes. As such, it's a mutually beneficial collaboration between you and another party.

A standard scope of services agreement or scope of work document will contain:

  • A purpose statement or objectives
  • The scope of work
  • Price
  • Schedule
  • Key assumptions
  • Acceptance

How to Write a Scope of Services Agreement

A scope of services agreement helps your business define what services are expected from another business, professional, or contractor. This agreement is the foundation of any strong service contract, so it must contain clear directions before any work begins.

The agreement should include the name of the business initiating the contract (in this case, your business name), as well as the name of the service provider. Be sure to include both business addresses.

Next, the agreement should detail payment amounts and terms. You can also include conditions affecting payments, along with a statement that the contractor is not an employee of your company, but a contractor with no conflicts of interest.

Identify terms of the agreement, such as the timeline of its fixed duration. Include both the start and end date for services, payment dates, and other milestones, including a termination of services date.

The scope of services agreement should also specify each work product, such as proposal responses, you should receive from the service provider. Include how you wish to receive responses, such as email, paper, or hard-copy delivery.

One drawback of hiring outside providers is the potential for misusing company information, which you should address in the contract. For example, you can include a clause stating that your company has sole rights to the use, trademark, and publication of products or works created for the business, even if those items are created by the service provider. Prevent confidential information from leaking out by including a nondisclosure clause in the agreement.

Depending on the nature of your business, you may also want to include a noncompete clause in the scope of services agreement, which protects you from service providers who would compromise trade secrets by working with your competitors.

Sometimes, you get involved in a project and realize its scope will change. That's why you should include a “change orders” section in your scope of services agreement. This section allows you to specify how to update timelines and pricing, which makes both parties more agreeable to changes.

Scope of Services Agreement Challenges

The last thing you want to deal with is an unexpected situation because the project's deliverables weren't clearly specified. Spending plenty of time crafting your scope of services agreement can help avoid these situations and keep all parties in agreement, no matter what updates are made to the contract.

In general, you may face the following challenges when writing your scope of services agreement:

  • Complexity: Every contract contains comprehensive and complex terminology that involves understanding the entire project from start to finish.
  • Risks: Common risks include financial implications, legal risks, penalties, agreement violations, and reputation risks that can stem from a poorly written agreement.
  • Expertise requirement: The scope of services agreement should be written by someone who understands its importance and has in-depth knowledge of the process.
  • Considerable time: Most companies want to jump into a project rather than spend time developing a solid agreement; failing to spend enough time writing the agreement is careless and could result in mishaps.

When in doubt, have your legal representative review your score of services agreement to ensure your business is covered.

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