Master Service Agreement vs. Statement of Work: What’s the Difference?

You’ve probably heard of a service agreement, and you’ve probably used one personally or in your own business. But what’s a  master  service agreement? And on that note, what the heck is a statement of work?

What is a master service agreement?

A master service agreement, or MSA, is a type of contract that spells out most of the general terms and conditions between two parties. MSAs are used to make the contract process faster  and  future work easier for everyone involved.

Say you take on a new client for your business. With a master service agreement, you outline the expectations and details for both of you. An MSA lays out details like:

• Confidentiality and  whether an NDA is required
• Delivery requirements
• Disputes and how they might be resolved
• Indemnification
• Intellectual property rights and final ownership
• Payment terms
• Work standards

Sounds like information that every standard contract should include, right? 

Using a master service agreement to outline these terms, however, makes it easier to negotiate in the future. You can keep the details of the master service agreement the same and  only negotiate specific terms needed.

Imagine that you and your new client want to change the schedule for payment. Instead of writing an entirely new contract, making sure it’s legit, renegotiating, and signing  that, you only have to focus on the terms of your new payment schedule.

Since an MSA is agreed upon once at the beginning of the relationship, it saves time, money, and stress when renegotiating or renewing contracts.

What is a statement of work?

A statement of work, or SOW, is a formal document that defines the terms of your current project. It’s also commonly called a work authorization or work order. SOWs are shorter than MSAs and include more specific details about the project itself rather than the contract and working relationship as a whole.

An SOW lays out details like:

• Deadlines
• Deliverables schedule
• Location
• Payment schedule
• Pricing
• Project purpose
• Scope of work
• Timeline

You might be thinking that a lot of these details look pretty dang similar to what a master service agreement outlines, and you’re right. But think of it this way. While an MSA covers all the general terms and conditions of your professional relationship, an SOW is more individual and project-specific.

 

Do I need a master service agreement, statement of work, or both?

Still need a bit more clarification on MSAs vs. SOWs?

MSAs and SOWs are used a lot for software development. And software development can take months, even years, to complete a project. Here’s a common situation where an MSA and SOW would be used for two parties in a professional relationship.

An MSA would spell out the basic requirements for a years-long software development project. Like how a team and client would work together or who owns what at the very end. A statement of work, on the other hand, may be used for every stage of the process: design, development, beta testing, and so on.

Now, for the big question: Do you need an MSA, SOW, or both?

We’re not a law firm, and this isn’t legal advice.  But we think master service agreements and statements of work can come in handy. We are big fans of making expectations clear and known with clients from the get-go. Good communication ensures smooth sailing ahead. MSAs and SOWs outline and clarify those expectations. (Not to mention protect you legally.)

Are they required? No. Are they a good idea? We think so.

If this blog post helped you understand the difference between a master service agreement and statement of work, great! If it also reminded you to invest in a contract template for your biz, even better.  Find the perfect contract template in our shop now!