A service level agreement is ideal if you engage a company or individual to provide a service for your company which is of significant importance to you. For example, when your supplier’s services are critical to you meeting your customer’s requirements.
A service level agreement defines the service they must provide, the level of service to be delivered and sets out responsibilities and priorities.
It is important that you are involved in drawing up the agreement together with the supplier.
Key clauses in this agreement include:
- The service being provided
- Standards of service
- Delivery time scales
- Responsibilities of each party
- Monitoring and reporting of the service
- Legal and regulatory compliance
- Payment terms
- Dispute resolution
- Confidentiality and non-disclosure provisions
- Termination of the agreement
Building in formal performance reviews is the key to success. If your supplier fails to meet agreed service levels, your agreement should provide for compensation. It is important to identify the most critical components of the service and apply the strictest penalties to these.
As the needs of your business change, you may require different performance criteria and your service level agreement should provide for this allowing for regular discussion and renegotiation. If you use technology then service levels need to be updated to take into account improved technology.
Due to the nature of the close working relationship you will have with such an important supplier your service level agreement needs to be clear and fair. That way your relationship will flourish and grow to the benefit of both parties.
Remember: A contract or agreement is primarily intended to allocate the different risks and rewards in a fair manner.
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