Corralling Your SOW

SOW is an acronym for Scope of Work. From my perspective, properly stating a SOW, describing products being sold and any work or services that are not included in your bid or contract, is crucial for every component manufacturer (CM). A properly worded SOW, for example, may determine if a CM gets fully paid. If not correctly stated, or if not stated at all, a SOW may also provide fertile ground for a back charge dispute or significantly increased liability in the event of a product-related accident or construction defect lawsuit. 

To illustrate, I will walk you through a sample SOW provision, which if contained in whole or in part in a customer contract you choose to sign, should give you some real concern. Similarly, I will explain how not stating a SOW can also subject a CM to the prospect of increased claims and liability. Last, I will discuss alternative SOW provisions a manufacturer ought to consider. I am certainly not suggesting a manufacturer is restricted from expanding its scope of work or design responsibilities if it so chooses. The important thing is to know that doing so means added risk, and hopefully in return for this added risk the manufacturer can arrange to be compensated fairly for it.

SOW provisions contained in builder and contractor form contracts are generally not specific, may be quite long, and are routinely scattered throughout the agreement form and set out in schedule and exhibit attachments. Thus, to help you more easily understand the concepts, I will break out a sample SOW provision into sections. However, when reviewing an actual customer contract form, keep in mind that the builder or contractor will not make it so easy on the reviewer.

The first part of our sample customer contract form SOW provision reads:

From this language, we know the customer, a general contractor, is working for a project owner. With this provision, the customer is attempting to take all the contract obligations it has to the owner, and pass them on to the CM. This “flow-through” or “conduit” provision can be quite dangerous in terms of the risks that may be assumed.

DANGER: This acceptance of responsibility exists regardless of whether or not the contractor provided the manufacturer with a contract or all of the relevant drawings and specifications.

Here is the second part of our SOW provision:

This provision greatly expands a manufacturer’s typical scope of work or design responsibilities. For example, the following requirements are outside the manufacturer’s typical scope of work: truss-to-beam connection designs, all truss system requirements, and field measuring. The following requirements also add confusion: sealed engineering, all other truss system requirements, and all required repair details.

The issue regarding sealed engineering is whether or not placement plans need to be sealed. From this language, the manufacturer should assume that the individual truss design drawings must be sealed. The statement “all other truss system requirements” is vague; no one can be sure of exactly what it means, which is an unsettling situation from a liability standpoint.

DANGER: Left unclarified, the phrase “all required truss repairs” might mean providing repair details for all required truss repairs, regardless of why a repair is needed.  Even if a number of trusses were damaged by the customer or one of its subcontractors, the manufacturer would arguably be responsible for providing the repair details necessary to fix the trusses. Read literally, a manufacturer might further have responsibility for physically undertaking the repairs at the project site.

Here is the next requirement from our sample SOW provision:

The requirement that trusses ought to be grade-stamped and truss designs should meet a minimum species and grade of lumber is also troubling. For example, the grade stamp may be cut off from the chord or web that is used in the trusses that are provided. And, some truss designs engineer out correctly even when they contain lumber of a grade or species other than what is stipulated in the provision. 

Let’s continue with the next part of our sample SOW provision:

This provision is only problematic if the manufacturer does not follow a building code-approved, third-party inspected quality control program. A quality control program, such as the WTCA In-Plant QC program would meet this requirement.

The next part of the SOW provision reads:

This provision significantly expands the manufacturer’s SOW from what is indicated in Chapter 2 of TPI-1, the National Design Standard for Metal Plate Connected Wood Truss Construction. TPI-1 states, with respect to permanent bracing, that the manufacturer is only responsible for depicting the approximate location for continuous lateral permanent bracing of truss members subject to buckling due to compression forces. DANGER: Having to specify other permanent bracing responsibilities can add significantly to the amount of work the CM must do, as well as increase their exposure to risk.

Here is the final part of the sample scope of work provision:

This provision ABSOLUTELY expands the manufacturer’s standard SOW. DANGER: Agreeing to inspect installation and bracing can be a very high-risk proposition and, furthermore, mistakes made in this regard may not be covered by your commercial general liability insurance.

Based on the dangerous and vague language in our sample SOW provision, I would assign this provision as having a very high-risk rating. It is also important to note that similar types of risk could exist if no SOW provision is set out in the bid of a CM, if the bid becomes the contract with the customer, or in an executed customer contract. If a SOW doesn’t exist in these initial documents, the customer and its paid consultants will likely seek to have the SOW and design responsibilities of the manufacturer be quite expansive.

A manufacturer should strongly consider developing a SOW template that can be used in its bids or proposals and as an addendum or attachment to the customer contracts it signs, making sure to clearly incorporate the SOW template as part of the signed contract. Chapter 2 of TPI-1 is an excellent resource to consult when drafting such a template. To read more about alternate SOW provisions and strategies to incorporate them into customer contracts, go to
sbcindustry.com/pubs/ttbdresp-d.

A template SOW should cover: 

TO DO: Describe in some detail the types of products (with dimensioning) being furnished, also list explicitly what products or services are not being provided.

WHY: The contractor’s contract form will often be very vague about what is being sold, and may even state items the manufacturer does not intend to include. So, it is very important for the manufacturer to clearly state what products are being sold. To make this abundantly clear, sometimes it makes sense to also state what is not being sold.

TO DO: Clearly identify what provisions of the project Contract Documents, including plan notes and specifications, the manufacturer does not agree to comply with. 

WHY: This statement is intended to overcome the “flow-through” provision referenced in the first sample SOW provision discussed. 

TO DO: Clearly identify what design and engineering service and drawings are being provided. 

WHY: It is important to clearly state that the only design work being done by the CM is with respect to the design of those products being fabricated. Setting forth which submittals will be required by the manufacturer, and which of the submittals are engineering documents, is also very important. For example, the manufacturer should consider stating the intended purpose of the truss placement diagram is to indicate the location of trusses assumed by the manufacturer and that such diagrams will not be sealed as they are not engineering documents.

TO DO: Clearly state what bracing responsibilities the manufacturer is assuming. This can be done with a provision that specifies the bracing design and bracing materials, if any, the manufacturer will provide. 

WHY: This will eliminate confusion, which is especially important because inadequate or improperly installed bracing is a common reason for truss collapse and construction defect complaints directed at component manufacturers.

TO DO: Accurately describe the activities the manufacturer will perform at the jobsite. In addition, state the Contractor’s responsibilities concerning the products the CM is designing, manufacturing and/or selling. 

WHY: Accurately describing what, if any, activities the manufacturer will perform at the jobsite is also very important. This eliminates any doubt, for example, whether the manufacturer will or will not verify dimensions before trusses are installed, or inspect truss installation or bracing. Furthermore, it is important for the manufacturer to address what, if any, handling, storing, erecting or bracing guidelines the manufacturer will provide with the products delivered to the customer’s jobsite.