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Service level agreements: getting them right

By intouch * posted 24-06-2016 13:56

  

By McCullough Robertson construction, infrastructure and procurement Senior Associate Goran Gelic. 

Service delivery is a key feature of organisations, businesses and government entities. Corporate services such as information technology, human resources, procurement and legal services need to be readily available, efficient and cost effective.

 

On IPWEA's Ask You Mates online forum, the subject of internal service level agreements created some discussion and raised a number of questions.

While formal contractual arrangements that impose onerous liabilities and obligations on service providers can be an effective method to a customer obtaining one-off or intermittent services, these types of arrangements may not always be appropriate. For example, formal contractual arrangements may not be required for internal service providers, such as services provided by one government department to another.

When used correctly, a service level agreement (SLA) can be used as an effective tool to manage service delivery. A SLA can ensure performance expectations are clearly set out so parties have a clear understanding of what is required and by when. Quality service is recognised as a key factor to customer value and as a result, the use of SLAs is becoming increasingly widespread in a range of industries, business and government.

 

What is an SLA?

A SLA is document agreed between a customer and service provider which sets out the type, quantity and quality of services to be delivered. There is no obligation on a customer to use an external service provider and a SLA can govern services provided by internal sources.

The parties can intend for a SLA to create a legally binding contractual relationship, but this is less important for a SLA used for internal purposes. A SLA should address the following issues:

  1. the type and quantity of the services to be provided;
  2. each party’s role, responsibilities and how the relationship between the service provider and the customer is to be managed;
  3. the customer’s expectations and how those expectations are to be managed;
  4. service levels and standards of service;
  5. performance indicators to measure service levels and standards of service;
  6. he consequences of the service provider failing to perform;
  7. costs and terms of payment; and
  8. a review process to monitor the SLA including a dispute resolution process.

When used for internal purposes, the customer and service provider should have the same goal – to achieve exceptional service delivery within the organisation. The SLA should be driven by cost compared to benefit and the parties should be striving for continuous improvement and innovation.

 

Key issues to get right

Service levels
Service levels are critical to the effectiveness of the SLA and need to be realistic, achievable and measurable. They can relate to the quality, cost, timeliness, quantity or other reasonable measure that the customer requires the service provider to achieve.

To this end, when addressing service levels in a SLA, it is important to keep in mind the following:

  1. service levels should be based specifically on what the service provider is required to achieve, rather than the outcomes of the service generally; and
  2. in describing service levels, do not be vague and plain English should be used, particularly in describing technical terms.

Evaluation of service levels

The actual service levels achieved should be evaluated regularly to ascertain whether the objectives of the SLA have been achieved. Regular meetings should be facilitated to check performance and to see if there are any areas of improvement. Depending on the nature of the services, the SLA can be an active document that is regularly updated to capture any required improvements or updates.


If the service provider does not meet the service levels, the consequences should be considered. It may not be appropriate to implement monetary penalties or a right to terminate the SLA if an internal service provider is not achieving the required service levels. Rather, performance issues may need to be rectified through internal procedures such as the provision of additional resources, review of procedures or elevation to management.

 

Implementation

Organisations looking to implement a SLA for internal services may already have existing systems and processes in place for the provision of internal services. Change management may be required to ensure that senior management and staff are supportive of the SLA regime and are prepared for service delivery performance management and monitoring.

When implementing a SLA, the process should be transparent, staff should be involved in the negotiation/consultation process and appropriate communication protocols should be established to facilitate the SLA.

 Goran Gelic is a construction, infrastructure and procurement Senior Associate at McCullough Robertson.

He has acted on a number of significant infrastructure projects (both domestic and international) including roads, rail, mining and hospitals. He has worked in-house both in government (Queensland Water Infrastructure) and the private sector (Transpacific Industries Group).

He has extensive experience in a variety of contract structures, procurement documentation and issues as well as contract litigation and administration. Through his role he has gained an expertise in BIM and its application in the construction and procurement industry. Goran works regularly with clients on BIM issues and is a regular presenter throughout Australia on BIM issues.

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