Hiring a Project Manager as a Contractor: Service Agreement Terms (Client Guide for Software Implementations)

Software implementations live and die on coordination: requirements, timelines, stakeholder alignment, change control, testing, training, go-live readiness, and post-launch stabilization. When you hire a project manager contractor (rather than bringing someone on as an employee), you get speed and flexibility—but you also take on a different kind of risk profile. The work is critical, the contractor is often embedded with your team, and the line between “independent professional services” and “employee-like direction” can get blurry fast.

A well-drafted contract project manager agreement makes the engagement workable for both sides: it clarifies deliverables, sets expectations about availability and authority, protects confidential information, and reduces disputes about scope creep and payment. This guide walks through the essential service agreement terms you should consider when engaging a PM under a project manager 1099 contract (U.S. terminology), specifically for software implementation environments.

Note: This article is informational and not legal advice. For high-stakes implementations, consider qualified legal counsel in the relevant jurisdiction.

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Why implementation PM engagements need tighter contract terms

In implementation projects, the PM is often asked to:

• Drive the master plan and delivery cadence (standups, steering committees, RAID logs)
• Coordinate internal departments (IT, security, procurement, legal, operations)
• Coordinate vendor(s) and integrators
• Manage change requests and timeline impacts
• Produce documentation (plans, status reports, runbooks)
• Enforce governance and escalation paths

These responsibilities can create real exposure if the agreement doesn’t define:

• What “success” looks like (outputs vs. outcomes)
• Who has decision-making authority
• How changes are handled
• Who owns deliverables
• Whether the contractor can access sensitive systems/data
• What happens if timelines slip (and what isn’t the PM’s fault)

A strong pm contractor contract is designed to keep the engagement productive while protecting your company operationally and legally.

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1) Parties, purpose, and role clarity

Start by being explicit about:

• Client legal name (and any affiliates who can request services)
• Contractor legal name (individual vs. LLC)
• Project name and high-level purpose (e.g., “implementation of XYZ platform and integration to ABC systems”)
• Role definition (e.g., “Project Manager providing project coordination and governance services”)

Implementation-specific tip: define whether the PM is your internal-facing PM, vendor-facing PM, or both—and whether they can represent the company in vendor meetings.

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2) Scope of services: define deliverables, not just activities

The most common failure point in a contract project manager agreement is a vague scope like “manage implementation.” That invites scope creep and disputes.

Instead, define service categories and tangible deliverables, such as:

• Project governance
  • Kickoff agenda and meeting notes
  • RACI / stakeholder map
  • Communications plan
• Planning
  • Integrated project plan (workstreams, milestones, dependencies)
  • Resource plan and assumptions
  • Risk register (RAID log) updated weekly
• Execution support
  • Weekly status report format and cadence
  • Facilitation of standups and steering committee meetings
  • Action item tracking and escalation log
• Change control
  • Change request intake and log
  • Impact analysis template (schedule/cost/resources)
• Go-live readiness
  • Cutover plan and runbook coordination
  • UAT coordination and defect triage process
  • Hypercare plan and handoff checklist

Important: A PM often can’t guarantee outcomes (e.g., “go live by X date” or “integration will work”). Your agreement should focus on best efforts and specific work product, unless you intentionally want milestone-based responsibility.

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3) Term, schedule, and availability (especially for fractional PMs)

Your agreement should state:

• Start date and end date (or “until completion” with a long-stop date)
• Expected hours per week (e.g., 20 hours/week)
• Time zone and typical working hours
• Meeting expectations (e.g., must attend steering committee weekly)
• Whether on-site work is required (and who pays travel)

If you’re hiring a PM to stabilize a troubled project, consider adding a ramp period (e.g., first 2–3 weeks focused on discovery, replan, and governance reset).

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4) Payment terms: hourly, retainer, or milestone (and how to avoid disputes)

When you hire project manager contractor, payment disputes usually stem from unclear billing rules. Choose a model:

Hourly (common for implementations)

Define:

• Hourly rate
• Minimum/maximum weekly hours (if any)
• Rounding increments (e.g., 0.1 hour)
• What is billable (meetings, documentation, status reporting)
• Approval requirements for overtime or weekend work
• Invoice cadence (weekly or biweekly) and payment net terms (Net 15/Net 30)

Monthly retainer (good for fractional PMs)

Define:

• Monthly fee
• Included hours
• Overages rate
• Unused hours policy (use-it-or-lose-it vs. limited rollover)

Milestone-based fees (use with caution)

If you pay by milestone, define:

• Acceptance criteria for each milestone
• Dependencies you must provide (access, SMEs, vendor cooperation)
• What happens if the milestone is delayed due to factors outside PM control

Implementation-specific tip: Include language that your company will provide timely access to systems, stakeholders, and vendor contacts, and that delays caused by client or third parties may affect timelines.

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5) Expenses and tools: who pays for what?

Spell out:

• Pre-approval requirement for reimbursable expenses
• Travel policy (mileage, lodging caps, per diem, receipts)
• Software/tools (Jira, Asana, Smartsheet, Miro, Office 365, Slack)
• Whether the contractor uses your accounts or their own licenses

Security note: If the PM uses their own tools, your confidentiality and data handling obligations should cover those tools (and ideally require your approval for any third-party storage).

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6) Authority and decision rights: reduce organizational friction

Implementation PMs are most effective when authority is clear. Include terms that define:

• Whether the PM can assign tasks to your employees or only recommend/coordinate
• Whether the PM can submit tickets/requests to vendors
• Whether the PM can approve changes, spend, or vendor SOW updates (often: no, unless explicitly delegated)
• Escalation path: project sponsor, steering committee, executive sponsor

A practical clause: the PM may “facilitate” and “coordinate,” but final decisions remain with designated client roles.

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7) Change management: a formal process for scope creep

Your PM will inevitably be asked to “just add” reporting, training coordination, additional integrations, or extra vendor management. Your pm contractor contract should include:

• A written change request process
• How changes affect fees/timelines
• Who can approve changes on your side

This avoids the classic conflict: “We assumed it was included” vs. “That’s beyond scope.”

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8) Independent contractor status (1099): structure and compliance

If you’re using a project manager 1099 contract, you’re signaling that the PM is not an employee. While classification depends on facts and local law, your agreement can reduce confusion by addressing:

• Contractor controls the manner and means of performing services (within project requirements)
• Contractor responsible for taxes and insurance
• No benefits, no withholding
• Contractor can provide services to others (subject to confidentiality and conflict rules)
• No guarantee of ongoing work

Important practical balance: You still need governance—deliverables, deadlines, meeting schedules. The key is to avoid treating the contractor like an employee (e.g., requiring set daily hours, micromanaging tasks unrelated to deliverables, providing extensive training like you would for a new hire).

Because misclassification risk is fact-specific, many software companies use a contractor through an LLC or an agency—still not a silver bullet, but it can change the engagement structure.

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9) Confidentiality, security, and data access (critical in software projects)

Implementation PMs often see sensitive information:

• Customer data
• Security architecture
• Pricing, contracts, vendor terms
• Product roadmaps
• Credentials and access pathways

Your agreement should include:

• A robust confidentiality clause
• Definition of confidential information (including “derived” info)
• Use and disclosure limitations
• Required security measures (device encryption, password management, MFA)
• Incident reporting timelines (e.g., within 24–48 hours of suspected breach)
• Return/destruction of information at end of engagement

If the PM will access production systems, consider attaching or referencing your security policies and requiring compliance.

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10) Intellectual property: who owns plans, templates, and deliverables?

A PM will produce work product like schedules, plans, dashboards, runbooks, and templates. Your contract project manager agreement should clarify:

• Work made for hire / assignment: you own deliverables created specifically for the project, upon payment.
• Background IP: the PM may bring pre-existing templates or methodologies; you typically get a license to use what is incorporated into your deliverables.
• Tooling and reports: define whether you can reuse artifacts internally across departments or subsidiaries.

Implementation-specific tip: If the PM builds project artifacts in their own accounts (e.g., a Smartsheet workspace), require migration/export to your environment.

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11) Non-solicitation, non-compete, and conflict of interest

Many clients want restrictions, but they must be reasonable and enforceable in your jurisdiction.

Consider:

• Conflict of interest disclosure: contractor must disclose if they work for your direct competitor, your implementation vendor, or a party with adverse interests.
• Non-solicitation: for a limited period (e.g., 12 months), contractor won’t solicit your employees/contractors.
• Non-compete: often risky, sometimes unenforceable; if you include it, keep it narrow (industry, geography, duration) and consult counsel.

For implementation PMs, conflicts can be subtle—e.g., the PM also does work for the integrator and is incentivized to protect the integrator’s margin rather than your timeline.

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12) Warranties, standard of care, and “no guarantees”

Project management is a professional service. A balanced approach:

• Contractor warrants they will perform services in a professional and workmanlike manner consistent with industry standards.
• Contractor does not guarantee project outcomes that depend on third parties, internal resourcing, or vendor performance.
• Contractor must correct nonconforming deliverables (within reason).

This prevents your company from accidentally buying an “outcome guarantee” you can’t realistically enforce.

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13) Liability, limitation of liability, and indemnities

This is where risk gets real. Terms to consider:

• Limitation of liability: cap damages (often tied to fees paid in a lookback period).
• Exclusion of consequential damages (lost profits, business interruption), with exceptions for confidentiality breaches or IP infringement.
• Indemnification: if the contractor infringes IP or violates law, they indemnify you; if you provide infringing materials or unlawful instructions, you may indemnify them.
• Data/security carveouts: many clients require higher exposure for data mishandling.

Implementation PMs rarely want “unlimited liability,” and clients rarely want “no liability.” The right compromise depends on project sensitivity and insurance.

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14) Insurance requirements (often overlooked for PM contractors)

Depending on project size and data exposure, you might require:

• General liability
• Professional liability / errors & omissions (E&O)
• Cyber liability (if handling sensitive systems)
• Workers’ compensation (if they have employees/subcontractors)

Your agreement should state:

• Coverage minimums
• Proof of insurance (COI)
• Notice of cancellation

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15) Subcontracting and key personnel

If you’re hiring a specific individual, treat them as key personnel:

• No substitution without your written consent
• Any subcontractors must be bound by written confidentiality and IP terms at least as strict as yours
• Contractor remains responsible for subcontractor work

This prevents a surprise “bait-and-switch” mid-implementation.

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16) Termination: plan for offboarding without chaos

Software implementation priorities change. Your agreement should include:

• Termination for convenience (e.g., 15–30 days notice)
• Termination for cause (material breach, confidentiality violation, failure to perform)
• Payment obligations through termination date
• Transition assistance (limited hours at standard rate)
• Return of credentials, documents, and project artifacts
• A clean handoff: current project status, open risks, next steps

A termination clause is not just about ending the relationship—it’s about protecting continuity of delivery.

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17) Practical exhibits to attach (highly recommended)

To keep the main agreement readable, use exhibits:

• Exhibit A: Statement of Work (scope, deliverables, assumptions)
• Exhibit B: Rates and payment terms
• Exhibit C: Security requirements / acceptable use
• Exhibit D: Project governance (meeting cadence, reporting templates)
• Exhibit E: Tools and access list (accounts, environments)

Exhibits make it easier to update scope without renegotiating the full contract.

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A sample “term checklist” for hiring a contract PM

When you hire project manager contractor, pressure-test your agreement with this list:

• [ ] Clear deliverables and cadence (status reports, plans, RAID)
• [ ] Defined authority/decision rights and escalation path
• [ ] Change request process for additional work
• [ ] Billing rules (hourly/retainer), approvals, invoice cadence
• [ ] Confidentiality + security requirements + incident response
• [ ] IP ownership of deliverables + license for background templates
• [ ] Independent contractor language aligned to how you’ll actually operate
• [ ] Conflict of interest disclosure and limits
• [ ] Termination + transition assistance + artifact handoff
• [ ] Insurance (as appropriate for data access and project size)

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Common mistakes software companies make in a PM contractor engagement

1. No written SOW: “Just jump in” becomes a month of undocumented expectations.
2. Vague definition of deliverables: PM is busy, but output isn’t measurable.
3. No change control: scope increases, then finance disputes invoices.
4. Treating a 1099 PM like an employee: classification risk and resentment.
5. No handoff plan: knowledge leaves when the contractor leaves.
6. Poor security hygiene: shared credentials, unmanaged tools, unclear data rules.

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Final thoughts: make the agreement serve delivery, not just legal protection

A great pm contractor contract is operational: it gives your implementation structure, avoids “who owns this?” debates, and reduces friction when priorities shift. If you’re building a repeatable implementation motion—especially across multiple customers or deployments—your templates, SOW structure, and governance exhibits become part of your delivery maturity.

If you want a faster way to generate a tailored project manager 1099 contract or contract project manager agreement with the clauses above (and the right blanks filled in for scope, payment, IP, confidentiality, and termination), you can use Contractable, an AI-powered contract generator at https://www.contractable.ai.

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Other questions to continue learning

• What’s the difference between a project manager contractor and a project manager employee for implementation work?
• What should a Statement of Work include for a contract PM on a software deployment?
• How do you structure milestone payments without creating disputes over acceptance?
• What are the biggest 1099 misclassification risks when you hire a PM contractor?
• Should you require E&O insurance for a contract project manager agreement?
• How do you handle IP ownership when the PM uses their own templates and frameworks?
• What security terms should you include if the PM needs admin access to systems?
• How do you write a change order clause that works in agile implementation environments?
• What onboarding and offboarding checklists reduce risk when the PM is a contractor?
• How do you set clear decision rights between the PM, product owner, sponsor, and vendor?