The Question: Should You Use Drop Down MSAs and/or SOWs?
Here is an example of a company using a drop-down term sheet as a Master Service Agreement, or MSA, and a fill-in-the-blank form to create the Statement of Work, or SOW.
A current client provides content creation (websites, logos. etc.). The firm also provides ongoing marketing services (SEO, social media work, ads, etc.)
The client was well on its way to providing the marketing services via a click-on license. The customer could choose various types of services and the amount of help it needed from drop down menus. There was a click-on terms sheet that came up once the decisions were made.
The question that came up was whether the client could provide the creative services – the creation of creative content – on the same, click-on basis. The master service agreement would be the drop-down term sheet, and the process might require a statement of work at the end, but the customer would be inputting its needs and wants.
This article is merely an opinion piece, not a lecture. I have no idea if my arguments are correct, persuasive or based on correct assumptions. All legal aspects of the question are ignored entirely. This is no more than my opinion.
Observations and Opinions
My reasons for landing on the side of the written statement of work (SOW) and Master Services Agreement (MSA) signed by both parties include:
Statement of Work
- If the customer inputs its needs and wants into a system, the program (short of the deployment of AI) has a limited ability to change the next set of questions according to the previous answers. Yes, a decision
tree could do some selection. But a decision tree has a finite number of choices and cannot pick up nuances. In the arena of targeted creative content, the decision tree would also have to be huge.
- If my client is asking the questions in real time, there are several advantages:
- The client has a good idea of the starting point – what questions need to be asked first – based on its experience with various industries, company size, etc. The customer is seen holistically when determining what to ask. A decision tree would require the prospect to fill in a huge number of blanks to approximate this outcome.
- My client probably has a better idea of what the customer really needs than the customer. The gathering of the information will be much more efficient in total. If the prospect were filling in blanks, it might be the wrong blanks with the wrong answers.
- The client’s team can react to nuances in the customer’s input as the questions are asked and answered. That means the questions will focus in on the actual needs (and wants) of the customer.
- My Client also knows what the end product – the SOW – should look like and can tailor questions to reach the correct end point.
Reduced Ambiguity & Errors of Omission
- If it were possible to create a complete SOW online, which I obviously doubt, and even if both parties had to sign it, there still is room for ambiguity and errors of omission.
- The customer may focus on the wrong aspects of the SOW.
- Nuances may be missed.
- My client knows what sections to go over with a customer to be certain they are on the same page as far as deliverables and specifications.
- Ambiguities can be corrected before they become a problem.
- This interactive, real-time process reduces the probability of errors of omission.
The MSA is Read Before it is Signed
- A drop down MSA may not be read carefully by the customer.
- I will not address the legal implications if, as is often said, most people never read drop-down agreements (though I do admit to being curious.)
- My preference is to do everything possible to make certain that the customer has read at least the key commercial aspects of the MSA before signing it.
- The assumption that a written or electronic version (Word, Google Docs, etc.) of an MSA will be read more carefully by the customer than a drop down may not be correct. I would take a bet on that though.
- An example of a key term the customer needs to understand is the change order process – something I build into MSAs. The contract not only requires a signed change order to modify a SOW, but also sets out a process to be followed to get there.
- The risk of not having a strict process is that people working on the project (and possibly low-level people at that) may decide on a substantive change without bothering with approval or even informing management. If the customer decides it is in its best interest to claim the change is binding, my client has a major problem. It may have to choose between a loss of margin on the project or making the customer angry.
- Presenting a drop-down contract indicates unwillingness to negotiate.
- If changes were to be negotiated, the contract would have to be converted to another format and then marked up, so a “written” agreement would still be required.
- A contract provided in Word, Google Docs, or Apple Pages indicates room for compromise.
- The Client does not have to accept every, or even any, proposed change.
- If negotiated properly, my client will explain why the Ts and Cs are what they are;
- The customer can make a rational risk-versus-reward determination based on the facts;
- If the parties cannot negotiate a win-win contract, should they do business together?
- Assume, hypothetically that the MSA requires my client to modify deliverables that fail to meet the specifications, but no time limit is given:
- The customer may come back with a proposed time limit.
- Following further discussions, the customer may retreat to a requirement that my client make its “best efforts” to match the deliverable to the specifications. “Best efforts” is a tough requirement.
- My client may then come back with “commercially reasonable best efforts.”
- A drop-down license does not provide a method to negotiate purposely ambiguous, but effective, compromises.
For creative content, among other types of deliverables, a drop-down SOW is not practical. A drop-down MSA is even less so, as any needed changes requires the parties to begin working with a separate document anyway. That is the only way valid negotiations, compromise and purposeful ambiguity can be introduced.