Service-level Agreement in Project Management

Telecommunication service providers introduced service-level agreements (SLA) within contracts with their customers in the 1980s. SLAs became more popular in the following years due to outsourcing. Today, many organizations are using SLA not only with their external providers, but also between internal departments and teams.

What is an SLA?

A service-level agreement is primarily a commitment between a service provider and a customer. It can take the form of a legally binding document within a contract between a company and its telecom service provider, or an informal office agreement between a company’s IT department and its client departments like accounting, marketing, or HR.

An SLA is important for a customer to have with its service providers for several reasons. As a customer, you inform your provider the minimum acceptable service you expect them to give for your business or company to operate normally. With the agreement, your service provider commits to this minimum requirement and will address issues at an agreed time and manner should they fall short of their commitment. Failure of the provider to do so gives you the right to make demands or terminate their services without implications.

Aside from setting the expectations of the service provider, an SLA also is a mechanism to create and improve a business relationship between two or more parties. Through the SLA, the customer shares with the provider what is important for them. The agreement guides the provider on how to best offer their service to maintain the customer relationship. The responsibilities of both parties are clearly stated and agreed upon, putting them on the same page.

Basic contents of an SLA

A service-level agreement includes key components and details of the service to be provided. As such, it is usually crafted by the service provider. Customers, when meeting with vendors, state their requirements and include them in request for proposal (RFP) documents. But as an agreement document, either customer or service provider can craft the SLA.

An SLA has two important areas: services and management. Under services, it should include at the least the following components:

  • List of services provided
  • List of services excluded
  • Service availability
  • Condition of level of service (or different levels for multiple services)
  • Duties and responsibilities of each party
  • Response time
  • Escalation procedures
  • Resolution time
  • Service credits, in case the provider fails to provide the agreed level of service

For the management area, the following are the components that should be present:

  • Measurement standards and methods
  • Reporting process
  • Conflict resolution process
  • Indemnification clause
  • Other exclusions due to unforeseen events

SLA in project management

Example 1

There are many instances where an SLA plays an important part in project management. One instance is when an SLA is needed between a customer and a service provider during a project. When vendor services play a crucial part in the successful completion and delivery of a project, it is important to have an SLA. The agreement helps define the performance characteristic of the service provider. When the service level is upheld and sustained, the project can proceed as planned without delay. The SLA also helps establish a channel or mechanism to address project issues due to services.

For example, a company chooses a software-as-a-service project management software for an important client project. The company has presented to its client a project plan where it shows that they can finish the project in six months. But in order to complete the project, they need to use a project management software that they chose from an online PM software provider. The company chose the PM SaaS provider company because they have agreed to an uptime of 99.999 percent that the company requires and the PM software vendor can provide.

Example 2

Another instance where an SLA is important is when project management is the service being offered. An IT department or project management office (PMO) can craft an SLA to inform its customers of the details of the service they provide. Offering your project management services with an SLA lets you set expectations clearly for your customers. You can list only the services you provide, and so state what is in scope and what is out of scope. You will be able to manage your services, resources, and time more efficiently. You can also state what are the customer’s responsibilities, so they can prepare and complete the project successfully.

For example, your team offers project management assistance services to other departments in your company. Your SLA should include a description of your team’s services, such as 4 hours of training about project management, template documents for different PM deliverables, assistance in creating a project charter, and the set up of a project planning tool. It should state that your services are limited to assisting the customer team but is not responsible for creating the project status report, project plan revision, or project activity tracking. Your SLA should also include client responsibilities, hours of availability, and means of communication.

Conclusion

Adopting a service-level agreement to guide your project management brings several advantages. It helps you improve your management performance. You can track your resources better and allocate them more effectively. Also, it reduces risk because of scope and responsibility details, as well as improve communication between parties, which can reduce adverse conflict resolution.

Jose Maria Delos Santos

Jose Maria Delos Santos

Jose is a subject matter expert and member of the writing team for Project-Management.com and Bridge24. He has written hundreds of articles including project management software reviews, books reviews, training site reviews, and general articles related to the project management industry.

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