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Project Statement of Work vs Business Case

Project Statement of Work vs Business Case

If you enjoyed reading this post, check out all of our post on PMP Concepts Learning Series.

Designed to help those that are preparing to take the PMP or CAPM Certification Exam, each post within this series presents a comparison of common concepts that appear on the PMP and CAPM exams.

Project Statement of Work vs Business Case

The project statement of work (SOW) and the business case are inputs to developing the project charter, but each contains different information. Both are important to determining the feasibility of the project.

Project Statement of Work

The project statement of work (SOW) is a narrative description of products or services to be delivered by the project and is provided by the project initiator or customer for external projects or the sponsor or requesting organization for internal projects. If the project is being done for an external customer, the SOW may be received from the customer as part of a bid document.

The SOW details the business need for the project, the product scope description, the strategic plan, and the characteristics of the product the project will create.

Business Case

The business case will confirm the business need and drivers for the project and will most likely include information on a cost benefit analysis, so as to justify the funding of the project, such as: net present value (NPV), internal rate of return (IRR), and/or return on investment (ROI).

The business case should also reference the driver behind the project, such as: market demand, organizational need, customer request, technological advance, legal requirement, or social need.

The business case is generally completed by the sponsor of the project.

Example

The Excelsior Corp requested that Passionate Project Management provide a customized onsite PMP exam preparation course. Excelsior provided PPM with a statement of work detailing the specifics of the course: number of attendees, industry-specific information to be included, target date, location, etc.

The PPM contract administrator evaluated the SOW and conducted a financial analysis to determine the feasibility of the project based on the projected revenue. The results of the financial analysis were documented in the project business case provided to the president of the company for contract authorization.

Summary

Both the project SOW and the business case are critical inputs to the development of the project charter (the authorization to commence the project). The SOW is generated by the requesting party, detailing what they are requesting, whereas the business case is developed internally, usually by the project sponsor, to provide a financial and feasibility analysis of the project.

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