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Effective Strategies for Developing Terms of Reference (ToR): Definition, Components, and Practical Steps

01 November 2024

Terms of Reference (ToR) are an important element in project planning. In addition, this one thing also serves as a reference for all parties involved to understand the objectives, responsibilities, and expected results.

With clear and comprehensive documents, the potential for misunderstanding can be minimized, so that the project can run smoothly and according to target.

So, what exactly is meant by Terms of Reference, what are the components in it, and how to compile it effectively? All are explained in this article.

Definition of Terms of Reference (ToR)

Terms of Reference (ToR) is a document that explains in detail the objectives, scope, and implementation methods of a project. ToR functions as a guideline that helps the project team or stakeholders understand the context and scope of the work to be carried out.

This is very important in the world of business, government, and non-profit organizations. ToR is an effort to ensure that everyone has the same understanding of what, why, and how to do something.

Main Components in Terms of Reference (ToR)

This document generally has several important components that must be explained in detail. The following are the main components of the Terms of Reference:

Title and Background

This section contains the title of the project or activity, as well as the background of why this activity is needed.

This section explains the context of the project, including the problem to be addressed, the opportunity to be taken, or the need to be met. The background helps the reader understand the relevance and urgency of the project.

Objectives

The objectives of the project or activity are clearly stated in this section.

Usually, objectives are divided into two: general objectives and specific objectives. General objectives describe the broader results to be achieved, while specific objectives are the concrete and measurable results expected from the implementation of the activity.

Scope of Work

This section explains the boundaries and areas in which the project will operate. It includes details of the tasks or activities to be carried out, as well as the geographical scope, time, and resources available.

The scope must be clearly described to avoid confusion or differences in interpretation during the project.

Methodology

The methodology section explains how the project or activity will be implemented.

This methodology can include data collection methods, analysis techniques, and approaches used to achieve the stated objectives. The methodology should also reflect the team's capacity and available resources.

Implementation Team and Responsibilities

This section provides details about who is involved in the project and the roles and responsibilities of each individual or team. A clear division of responsibilities will help prevent confusion and increase the efficiency of project implementation.

Implementation Schedule

Here, the project implementation schedule or timeline is listed in detail.

This schedule usually includes important stages (milestones) in the project, deadlines, and who is responsible for each stage. This schedule is important to ensure that the project runs according to plan and everyone knows when their tasks must be completed.

Resources and Budget

This section details the resources needed to implement the project, including human resources, equipment, and budget needed.

The budget plan must be realistic and detailed, covering all relevant operational and non-operational aspects. In addition, it is also important to include the source of funds and who is responsible for managing the budget.

Expected Results (Deliverables)

Deliverables are the final products or expected results of a project or activity.

This section should clearly explain what the expected outputs are, whether in the form of reports, documents, or other relevant products. These deliverables will be the benchmark for evaluating the success of the project.

Risks and Mitigation

In a good Term of Reference, there needs to be an identification of risks that may occur during the implementation of the project, both technical, financial, and managerial risks. In addition, a risk mitigation plan is needed, namely the steps that will be taken to reduce the impact of the risk if it occurs.

Evaluation and Monitoring

The ToR must also include how the project evaluation and monitoring will be carried out.

Evaluation aims to assess the success of the project in achieving its objectives, while monitoring is carried out continuously to ensure the project is running according to plan.

Key performance indicators (KPIs) need to be determined so that evaluation can be carried out objectively.

Stakeholder Involvement

This section explains who are the parties involved or affected by the project, and how they will participate in the implementation of activities.

Stakeholder involvement is important to ensure that the project gets the necessary support and responds to relevant needs.

How to Create Terms of Reference (ToR)

Preparing this document requires several important steps to ensure that the ToR can be a comprehensive and easy-to-understand guide. The following are the steps to create a good Terms of Reference:

Identify Project Needs and Objectives

The first step is to clearly understand why the project or activity is needed. This can involve discussions with stakeholders, data collection, or situational analysis to determine the problems or opportunities faced.

Formulate Background and Objectives

After understanding the project needs, formulate the background and objectives of the project.

Briefly explain the situation or problem to be addressed, and what is expected from this project. Create specific, measurable, relevant, and time-bound (SMART) objectives.

Determine Scope and Methodology

The scope and methodology must be described in detail and clearly.

Determine the project boundaries and how the project will be carried out, including the technical approach to be used. Make sure the methodology chosen is in accordance with the team's capabilities and available resources.

Form a Team and Responsibilities

Identify who will be responsible for each stage of the project. The division of roles and responsibilities must be done clearly to ensure there is no overlap or confusion during the implementation of the project.

Create an Implementation Schedule and Budget Plan

Create a project implementation schedule by listing the milestones and deadlines that must be achieved. In addition, also prepare a detailed budget plan, including all the necessary resource requirements.

Identify Risks and Mitigation Plans

In preparing the ToR, it is important to consider the risks that may arise during the project. List risks and mitigation plans so that the team can be better prepared for potential problems.

Define Deliverables and Success Indicators

Make sure the project deliverables are clearly stated, and create key indicators to measure the success of the project. These indicators will help the team to objectively evaluate the project's achievements.

Get Input from Stakeholders

Before the ToR is ratified, make sure to get input from relevant stakeholders. This is important to ensure that the document covers all important aspects and has full support from all parties involved.

With a clear and detailed ToR, project implementation will be more focused, efficient, and measurable. Terms of Reference are not only technical guidelines, but also communication tools that connect all stakeholders in achieving common goals.

Preparing a ToR is just one of many aspects of project management. Join the Project Management 101: Waterfall and Agile program from prasmul-eli, to learn about other aspects.

Takes place in two days. This ISO 9001:2015 certified program has 10 discussions that include: