Service level agreements

Service Level Agreements

Before starting this process be sure you actually need an SLA.  What do you need to achieve

1. Introduction

The need for service providers to become more accountable to their customers is well recognised and, to bring this about, a monitoring system needs to be introduced. As a customer for one or more support services you control finances and are in a position to influence the quality and quantity of support service delivery.

This means that your service providers must be flexible and more responsive to your needs and this is good news for the Fire Authority as a whole.  It means that the distribution of support service resources should be matched with the customer demand. However, this system is not without its problems.  With greater choice for you, the customer, and greater flexibility for your supplier(s) comes the potential for misunderstandings.

To avoid the possibility of misunderstanding, service providers and customers must be clear about what has been agreed and what has been accepted.  The easiest way to achieve this is to record the details of the agreement in a simple and straightforward way; in a Service Level Agreement (SLA).

This paper is intended as a guide to SLAs for customers.  It will help you to understand how an agreement is compiled, what to look for in a service level agreement and how you can and should influence the contents.  There is also a brief introduction for suppliers included in section 10 of this document.

2. Is a SLA always necessary? 

Some form of agreement regarding service delivery is always necessary, but it need not be a lengthy document.  The golden rule is to keep the production of paper down to the minimum which will achieve your aims.  Customers of some business units offering straightforward services on a job by job basis, manage with very simple service level agreements

3. Who draws up a SLA?

For practical reasons, service providers will often wish to draw up their own SLA.  This may or may not be acceptable to you as the customer.  If there is sufficient knowledge and resources available to you, you may wish to take the initiative. Another approach is to request a draft SLA to be submitted as part of the procurement process for the service.  This allows you to assess the content and quality of the SLA and the key aspects which the service provider has identified from your specification.  If you choose this approach, it should be clear how you will assess the draft SLA and whether marks will be awarded for this, e.g. as part of evaluating ‘Methodology.’  If you do not tell service providers what you are looking for, they are more likely to just submit a standard SLA which may not be suitable for your needs.

Remember, it will be to the suppliers’ advantage to keep the detail in an SLA to a minimum.  It is in your interest to make sure the important points are covered but be aware of spending too much time on this.

4. What to look for in a SLA

In any service contract, you will be interested in agreeing the following details:

  • The title of the agreement; who you are dealing with and how long the agreement is to stand ('Identification').
  • The what, when, where and how much of the service ('Specification').
  • The conditions under which you and the supplier agree to operate ('Conditions').
  • How much the service will cost and how you will pay ('Charges').

We will consider each of these areas in turn.  Note: An SLA will normally form just one part of a larger set of contract documents.  It is important to ensure that if the same matter is dealt with in more than one document it is very clear when each one applies.  For example, if charges are set out in the SLA then it must be clear whether these are a breakdown of the overall contract price which may be stated elsewhere in the documents, or if the contract price is variable based upon the charges in the SLA.

5. Identification

Certain details within an SLA distinguish the one you are negotiating from any other. These details are:

  • Title of the agreement and/or reference number.
  • Customer Identity (your name and contact number).
  • Supplier Identity (name and contact number).
  • Date and duration of the agreement (usually expressed as “valid from and until ….”).

 Points for you, the customer, are:

A reference number saves time in correspondence and filing so introduce one if the supplier has not, or bolt your own reference onto the suppliers’.

Consider very carefully the duration of the agreement that the supplier is proposing.  Some services lend themselves to longer agreements than others but any agreement for an ongoing service that is offered for three years, can be agreed for one.  What benefit do you receive for committing yourself for longer? One way of dealing with this is to set an initial period of one year, with the possibility of renewing the terms if both parties are in agreement.  This allows flexibility to continue the arrangement if it is working well or make adjustments as needed.

The decision to renew or amend the SLA can be made at the annual or semi-annual Review Meeting described below.

6. Service specification

The specification describes in general, and in detail, the service that you are asking for, and the content and complexity of the specification may vary.  The main points for you to note are:

  • Fully scrutinise the proposition and further explore any areas of noted ambiguity for further explanation.
  • Ask the supplier to explain or expand on any areas of ambiguity.
  • Think about how you will monitor delivery for different service aspects – can you do this as a customer or are you relying on the service provider to monitor their own work and target any problems?

7. Conditions

This section is important because it allows any ambiguity about the responsibility of the customer and supplier to be clarified. It also allows the customer’s “What If” questions to be answered.

 Example:

  • If the service is not up to standard what are my rights?
  •  If I wish to change the service is there some way can I vary the agreement?
  • If I need extra service in a hurry in order to cope with an unforeseen event, can you guarantee to supply?  And how quickly?

The questions that you should be asking yourself as you read this section are:

  • Is the supplier being reasonable in the conditions he is proposing.  If not how should they be changed?
  • Are there any conditions that I need to add?

NB: There may be instances where numerous conditions or a lengthy specification are unavoidable.  In such cases it may be more convenient to put these in a separate document, particularly if the conditions or the specifications are standard (i.e. if they usually apply where the service is delivered).

If you are faced with this situation it is prudent to ensure that:

  • You have access to a dated copy of the specification or conditions and that your service level agreement is accurately cross-referenced.
  • If you agree changes to, or additional conditions or specification, then make sure the supplier properly records these in your service level agreement.
  • You have a provision for independent arbitration or mediation by an agreed third party in the event of any disputes.
  • An SLA is not a formal legal document unless it forms part of a contract.

8. Review meetings

A SLA should include a schedule for review meetings, in addition to more informal communication and monitoring.  These meetings will provide an opportunity to look at how the Service is operating as a whole, beyond just the day-to-day management of jobs or specific problems.  They can help to identify any longer-term issues which need to be addressed and to confirm expectations.

Such meetings may be scheduled on a six-monthly or annual basis, depending on the nature of the service. It should be possible under the terms of the SLA to bring a review meeting forward or postpone it if the parties agree to this. An agenda for such meetings should be kept on file and issues added to it throughout the year so they are not forgotten

9. Charges

Knowing how much the service will cost you is a very important part of the SLA.  You may wish to compare prices with other customers or from year-to-year.

The section containing the charges should answer that question for you and suggest how and when payment is to be made.

Here are some important considerations when looking at charges for services:

  • Does the charge seem reasonable – is it broken down into enough detail to allow you to make comparisons?
  • Are you happy with the method of charging?  It is almost always preferable to insist on a fixed rather than hour-by-hour or day-by-day charging.
  • If hour-by-hour or day-by-day charging is agreed, make sure you are in a position to regularly monitor the progress of the supplier and your mounting bill.
  •  Is the price all inclusive or are there “extras” to be paid for?

And Finally……

The advice in this paper is aimed at helping you to negotiate service level agreements in a confident and competent way.  Remember many suppliers of support services are new to this. They need your help in the form of honest and constructive criticism about the services they deliver and how they are presented to you.  Do not hesitate to use your influence as a customer.

10. A supplier's guide to SLAs

In most Fire Authorities, customers will want SLAs that are easy to understand but still cover all the essential aspects of the service.  Where a standard service is supplied to many customers, details specific to each customer can be put in a short SLA.  All customers would also receive a separate document covering the standard service specification and general trading conditions.

The subjects covered in a SLA will vary from service to service, making it impossible to produce a single template SLA for general guidance.  However, the list below contains most of the headings that will be covered in agreements and may be used as a checklist when drawing up individual SLAs.

10.1      Identification

  • Title and reference number of the agreement
  • Customer and supplier names
  • Period of the agreement
  • Title and reference number of any linked specification/conditions
  • Relationship of SLA to other contract documents

10.2    Service or Produce Specification

  • General description
  • Scope of operations
Detailed description including:
  • Standard and quality of physical product(s)
  • Quantity or scale of service
  • Frequency and timing of delivery
  • Details of performance reports
  • Records to be kept
  • Management information to be produced
  • Quality assurance methods to be employed
  • Details of service to cover contingencies
  • Details of enquiry facilities

10.3    Conditions

  • Responsibilities (supplier, customer, third party)
  • Action in case of unsatisfactory performance
  • Variations/terminations/review/communications
  • Normal routes for correspondence/communications
  • Security and privacy arrangements

10.4    Review meetings

  • Schedule for review meetings
  • Standing agenda and updates
SLA example (January 2015)