A number of industry experts believe tail spend statement of work engagements are the future of work: more control, lower risk and cost savings are all benefits waiting for the organisations who embrace this exciting work delivery model.
But what exactly is a tail spend statement of work (SoW) engagement? In this guide, find out:
- What does a tail spend SoW look like?
- Who creates tail spend SoW engagements?
- Who services or delivers the work?
- What are the benefits of using SoW?
- How are, versus how should, SoW engagements be managed?
What does a tail spend SoW look like?
In reality, the actual statement of work is simply a document, which defines the scope of the work involved for a supplier for any given engagement.
There are a number of traits that many tail spend SoW engagements share:
Budget/value of project
The first commonality is the value of the project will usually fall beneath the threshold at which extensive procurement oversight begins. This threshold could be any value up to £1,000,000 or more depending on the size of the organisation.
Number of suppliers
In large projects, it's very common to have multiple suppliers collaborating and working together. For example, in large construction projects, there are often multiple specialist suppliers working together on separate components of the same project. In the average tail spend SoW engagement, you are more frequently working with one supplier per project due to the relative size/complexity.
Type of buy
Tailspend SoW engagements are typically classed as one of two types of buy:
Custom buys - regular projects awarded to suppliers outside of the strategically managed vendors for a specific requirement outside of the normal day-to-day
Tactical buys -for a specific, one-off, requirement not available from the strategically managed vendors
Interestingly, due to their nature, one of the attributes shared by tail spend SoW engagements is their uniqueness - it is very unlikely you'll find two exactly the same.
Who creates tail spend SoW engagements?
tail spend SoW as being "spread across multiple spend categories and via a large number of low value transactions with numerous suppliers, many of which are used very infrequently. In fact, tail spend often accounts for 80% of all an organisation’s suppliers".
This statement gives you a good idea of who is creating tail spend SoW engagements – it could be any business unit or any department, and as the spend is too small or too infrequent to pass through the procurement systems, it becomes invisible without a proper tail spend SoW management platform in place.
Who services or delivers the work?
As mentioned above, the tail spend can account for 80% of an organisation's suppliers but the 'low value' or 'infrequent' characteristics can create a misconception about who these suppliers are.
There is a natural assumption for 'low value' and 'infrequent' to mean the suppliers are small or the relationship isn't important in the long-term.
Whilst there are bound to be some small or one-off suppliers in the tail spend, it is equally likely there could be very large suppliers (in terms of company size) being engaged for regular small specific statements of work. Equally, there could be tail spend suppliers who provide a niche, strategically important service who are engaged occasionally over a long period of time.
What are the benefits of using SoW?
The benefits of having SoW engagements as a work delivery model are:
Improved project scoping & delivery
Using SoWs forces project teams to be very clear on their vision for a successful project, along with clear timelines, deliverables and costs. This vision ensures projects have a very clear outcome before being approved and resourced. In addition, where required suppliers can help shape the project's scope as part of the bid.
More predictable resourcing costs
The defined nature of an SoW engagement gives clarity on total cost, cost timelines/milestones and removes the associated unpredictability of an ongoing time + materials contracts.
Increased short term productivity
In addition to these longer term, strategic benefits, SoW engagements provide a short-term productivity solution to resourcing projects for businesses who are struggling to find the skills they need through other recruitment channels.
How are, versus how should, SoW engagements be managed?
As described above, tail spend statement of work engagements could be created anywhere in the business and the cost/impact is often invisible. In most real-world scenarios, these engagements are being managed using rudimentary tools (think: spreadsheets!) with wildly different processes and levels of associated compliance or governance.
To effectively manage tail spend SoW engagements, an organisation absolutely must use a dedicated tail spend SoW management platform.
- Accessibility and ease of use
- Data privacy and control
- Ability to source and engage new suppliers
- Support for milestones and variation orders
On top of these must-haves, are other important considerations are:
- Configurability of reporting and management information
- Integration into the organisation's wider technology stack
- The technology vendor's product roadmap
A tail spend of SoW engagement, whilst usually small or infrequent, forms part of an essential, agile and highly effective work delivery model. However, realising the benefits of improved productivity, better cost control and reduced risk require an organisation to use a modern, dedicated tail spend statement of work management platform.