Adv Louis Nel Business Review Advice: Service Level Agreement checklist and important factors

I am sure we all agree that having service level agreements (‘SLAs’) in place makes a lot of sense for a number of reasons:

• It identifies key areas from all parties’ perspective
• If drafted properly, mutually agreed upon, and linked to the breach provisions of the main contract (unless it is a ‘stand alone’ agreement), it takes the issue of breach out of the subjective, ‘witch hunt’ category
• The latter points also apply to the work/task/job performance assessment
• The above can be linked to regular reviews
• Each party must decide what for them constitutes Key Performance Areas (‘KPA’) and Key Performance Indicator(s) (‘KPI’)
• The finally agreed wording must be recorded in writing and can be contained in a ‘stand alone’ agreement or attached to an existing agreement as an addendum 

I don’t believe there is a ‘one fits all’ generic SLA. Clearly, different issues may be important to each party, on the one hand the client and on the other hand the service or product provider – each if these must be evaluated and addressed in the final document. 

Let’s deal firstly with the client’s perspective (which, in many cases, may constitute a comparison with its current provider) :

• Costs – savings i.e. one of the objectives, e.g. compared with its current supplier, is what cost savings will be attained? 
• Availability during office and after hours and, in the case of the latter, is there a fee/cost escalation?
• Reliability and consistency in performance standards and quality
• Performance: response times
• Accessibility: time & complexity
• Delivery & turn-around times especially if your own business is time-sensitive
• History: statistics of performance – what problems have you encountered in the past & how would you address them in the SLA?
• Security: on the site of the provider, management of information in terms of POPIA, and how is this enforced vis a vis its personnel and suppliers?
• Problem solving & escalation – is there a clearly identified responsible person and methodology? Monitoring Performance – a baseline is required for each KPA as a point of departure to measure performance (KPI) against  
• Does the service provider have ‘back-to-back’ SLAs with parties to whom it sub-contracts
• Penalties may be considered for failure to meet SLA requirements 

Let’s deal next with the SLA from the service/product provider’s perspective:

• Ensure demands realized – deliverables: ‘old story’ i.e. under-promise & over-deliver – each of the aspects mentioned above pertaining to the client’s perspective must be addressed (i.e. is it attainable & can it be met?)  
• Accurate forecasts are required from clients: especially regarding anticipated volume for service over time, seasonal aspects, etc   
• Reporting structure – identify and clearly demarcate individuals and escalation process
• Resources: do you have the equipment/infrastructure/people?
• History: discuss with the client key issues in general and problems that it had with its previous provider and how these can be addressed
• Baseline/point of departure needs to be agreed upon (flexible) – i.e. discuss in depth the client’s KPA and KPI
• Progress payments based on performance/targets detailed in the SLA is worth considering
• By the same token penalties/rewards are another option for late/on-time & ahead of time/deadline performance 

 More detail about the challenges you may face will be covered in the next insert.

© ADV LOUIS NEL

LOUIS-THE-LAWYER

APRIL 15 2023

 DISCLAIMER - Each case depends on its own facts & merits - the above does not constitute advice - independent advice should be obtained in all instances