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NSW Pre m i e r’s Depart m e n tCorporate Services Reform Te a m

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service

level

agreementsg u i d e l i n e s f o r p u b l i c s e c t o r o r g a n i s a t i o n s

Service Level AgreementsGuidelines for Public Sector Organisations

NSW Premier’s DepartmentCorporate Services Reform Team

© 1999

Level 23Governor Macquarie TowerFarrer PlaceSYDNEY NSW 2000

Telephone: 02 9228 5323Facsimile: 02 9228 4185Email: [email protected]: http://www.premiers.nsw.gov.au/about/csrguide.html

Cataloguing-in-Publication entry

New South Wales. Corporate Services Reform Team.Service level agreements. Guidelines for public sector agencies.

ISBN 0 7313 3061 7

1. Civil Service - New South Wales - Standards2. Civil Service - New South Wales - Customer Services3. Service level agreements - New South Wales

351.944

These guidelines were developed by Robyn Allen with the assistance of Stockdale and Associates.

Edited by Neil James

Design by City Design & Production Pty Ltd

FO R E WO R D

Service Level Agreements are an important vehicle for improving corporate

services delivery throughout the public sector.

The benefit of improving corporate services infrastructure across the sector is

that it will provide better delivery of government services to the NSW

community.

These guidelines will assist public sector organisations with the development of

individual service level agreements. They have been written at the request of a

number of agencies seeking practical advice in this area.

The document outlines the processes involved in reaching a service level

agreement, as well as the content which forms the basis of an agreement. The

guidelines are equally applicable within an agency and between agencies.

Effective service level agreements will result in improved performance by

service providers as well as increased discipline on service users.

Copies of this document are available from the Inte rn et

h t t p : / / w w w. p re m i e rs . n s w. g ov. a u / a b o u t / c s rguide.html or th rough th e

N SW Gove rnment Info rmation Service. Fe e d b a ck is welcome and

should be dire c ted to the Corp o ra te Services Re fo rm Team via email

[email protected].

I encourage all agencies to utilise these guidelines in developing service level

agreements as an integral part of their corporate services management.

C. Gellatly

Director General

1s e r v i c e l e v e l a g r e e m e n t s

g u i d e l i n e s f o r p u b l i c s e c t o r o r g a n i s a t i o n s

TABLE OF CO N T E N TS

C HAPTER 1: INTRO D U C T I O N

1 C o rp o ra te services re fo rm

2 What is a service level agre e m e n t ?

3 B e n e f its of a service level agre e m e n t

4 Using these guidelines

C HAPTER 2: G E T T I NG TO AG R E E M E N T

1 Sta rt up

2 I nvolving key playe rs

3 Identifying needs and ex p e c ta t i o n s

4 D e f ining service leve l s

5 E stablishing perfo rmance indicato rs

6 C o n fi rming mutual issues

7 D ete rmining costs and te rms of pay m e n t

8 Agreeing to the document fra m ewo rk, content and st yl e

9 E stablishing a rev i ew pro c e s s

10 C reating and signing the service level agre e m e n t

G etting to agreement - Check l i st

CHAPTER 3: KEY AREAS OF CO N T E N T

1 Pa rties to and period of the agreement

2 Agreement objective s

3 D e s c ri ption of serv i c e s

4 Communications, re p o rting and rev i ew

5 Mutual obliga t i o n s

6 Billing and pay m e n t

7 Va ri a t i o n s

8 E xc l u s i o n s

9 D i s p u te re s o l u t i o n

10 Te rmination conditions

11 S e rvice sch e d u l e

12 G l o s s a ry

C HAPTER 4: E VA LUAT I NG PERFO R M A NC E

1 Ach i evement of objectives

2 E valuating the ach i evement of service leve l s

3 Regular communication

A P P E N D I C E S :

A St ru c t u re of a ge n e ric service level agreement

B S a mple service level agreement - XYZ Accounts Paya b l e

C Re s o u rc e s

D G l o s s a ry

2g u i d e l i n e s f o r p u b l i c s e c t o r o r g a n i s a t i o n s

s e r v i c e l e v e l a g r e e m e n t s

CHAPTER 1: INTRO D U C T I O N

1. Corp o ra te Services Re fo rm

C o rp o ra te services re fo rm is a key platfo rm for building long-te rm

improvement in the NSW public sector. Effective reform will boost the

performance of public agencies and reduce the costs they incur in delivering

services.

‘Corporate services’ is a generic term which describes a variety of support

functions used in the public sector, such as:

Human resources management

Legal services

Fleet management

Information technology

Purchasing and procurement

Property management

Financial management

There are two strategic elements in achieving corporate services reform:

Consolidating, simplifying and standardising corporate services processes.

Developing shared service arrangements, particularly in handling routine

transactions.

Service level agreements are one of the main tools available to corporate services

managers in improving their service relationships and establishing shared

arrangements. Such agreements are already in use in some NSW public sector

agencies.

2. What is a service level agre e m e n t ?

A service level agreement is both a process and a document.

The service level agreement process involves the customer and service provider

agreeing on suitable targets for particular services. This process is also treated as

a commercial transaction, and the services are paid for by the customer. The

achievement of these targets is measured and any discrepancies are discussed and

resolved openly.



The advantage of this process is that:

It gives the service provider an opportunity to improve performance.

It gives the customer an opportunity to review priorities.

A service level agreement document is like a contract. It formalises an

agreement between two parties by setting out a minimum level of service. The

key difference from a commercial contract is that a service level agreement is

usually between parties within one government organisation or entity (such as

the NSW Government).

3. Benef its of a service leve l agre e m e n t

The main reason organisations enter into service level agreements is to improve

the effectiveness and efficiency of service delivery.

There are benefits for both customers and service providers.

4. Using these guidelines

These guidelines are designed for managers of corporate services throughout

the public sector, as well as for anyone participating in activities which are

affected by a service level agreement. They explain in simple terms the benefits

of developing a service level agreement as well as the processes required.

Benefits of a service level agreement:

• Sets clear perf o r mance e x p e c t ations of the customer and service pro v i d e r .

• Clar i f ies the roles and responsibilities of both par t i e s .

• Focuses attention on customer’s pr i o r ity needs.

• Encour a g es a service quality culture, and continuous im p r ov e m e n t .

• Provides a mechanism for both parties to plan for the futur e .

• Puts purchasing power into the hands of the cust o m e r .

• Provides a useful tool for the customer to monitor perf o rm a n c e .

• Service pro v i d e r s are in a be t t er position to plan their deliv e r y functions.

• Can provide gr e a t er certainty of income for service pro v i d e r s.


s e r v i c e l e ve l a g r e e m e n t s


The guidelines are divided into the following chapters:

Chap ter 1

Provides a general outline of the purpose of service level agreements within the

NSW public sector.

Chap ter 2

Outlines the stages necessary to develop a service level agreement.

Chap ter 3

Details what a service level agreement contains and what the document looks

like.

Chap ter 4

Explains how the success of a service level agreement can be measured, and

how it can be improved.

Appendix A

Provides a blank template which can be adapted for a broad range of service

level agreements.

Appendix B

Provides a hypothetical service level agreement in order to illustrate the general

terms and concepts in the guidelines.

Appendix C

Lists some useful publications and resources which are relevant to service level

agreements.

Appendix D

Provides clear definitions of the key terms used throughout this document.

Each chapter can be read in conjunction with the illustrations in the appendices.

These guidelines will also be an essential reference at each stage of the

development of individual service level agreements.

5s e r v i c e l e ve l a g r e e m e n t s



CHAPTER 2: GETTING TO AG R E E M E N T

The process of reaching an agreement is as important as the agreement itself.

The best service level agreements result from close cooperation between the

two parties. Working in partnership will help each party understand the extent

to which it is dependent on the other.

The first round of service level agreements sometimes depends on detailed

input from the service provider. The provider is often more aware of different

service options and constraints than users. Up to this point, service users may

not have seen themselves as ‘customers’.

Service requirements, however, should always be specified by the customer.

Customers determine their needs based on their particular business drivers. As

c u sto m e rs use the service level agreement, th ey are like ly to be more

demanding and drive the process.

1. Sta r t up

The first step in a service level agreement is to decide who will represent the

provider and customer units in the negotiation process. Choosing a small team

(2 - 4 people), with equal numbers from each unit or agency, is the best way to

keep things moving. Invite participation from others when needed.

Start up is the time to agree on the main goals of the service level agreement

and to define the process you will adopt.

There will be a temptation to start writing the agreement from the outset.

However, considerable effort will be saved over the long term by taking time

now to define the business and the relationship in detail. Be sure to draw out

and discuss the underlying concerns of both service provider and service user.



The timeframe for the service level agreement is a key component. The

customer should consider the likely costs and benefits of different periods

before deciding on the timeframe which best suits the business. Service

providers will take the timeframe of the agreement into account when setting

prices.

A greement t imeframe considera t i o n s

7s e r v i c e l e ve l a g r e e m e n t s


S h o rt Te rm: 1 ye a r Long Te rm: 4+ ye a rsMedium Te rm: 2-3 ye a rs

• No incentive for

p r ovider to inv e s t

• Lik e l y to be the most

ex p e n s i v e op t i o n

• Limited opportunity to

a ch i e ve further

e f f i c i e n c i e s

• Able to c h a n g e

p r ov i d e r s q u i ck l y

• Provider more lik e l y to

i n ve s t to benef it

c u s t o m e r

• Lower pr i c e s

• High potential for

f u r ther eff iciencies to

be ac h i e ve d

• Customer locked into

a g reement for long e r

• Inv e s tment by pro v i d e r

e s s e n t i a l

• Price incentives are

p o s s i b l e

• Eff iciency gains may

h a ve plat e a u e d

• Customer may miss out

on be t t er options by

being locked in


Typical service provider concerns

• Risk of f a i l u r e

• User unclear about needs

• User wants something we can’t

p r ov i d e

• Our pr i o r ities won’t be t h e r e

• User will impose unr e a l i s tic deadlines

• User will be inf l ex i b l e

• User will expect more than t h e y pay for

• User wants to tell us how to do it

• We’ll spend too much time managing

the agr e e m e n t

Typical service user concerns

• Loss of contr o l

• Loss of r o l e

• Not getting what we want

• We don’t know how to specify what

we want

• Provider doesn’t understand our

b u s i n e s s

• Provider will be inf l ex i b l e

• Provider will cost too much

• We’ll spend too much time managing

the agr e e m e n t

2. Invo lv ing key playe rs

A network of service relationships surrounds a service level agreement. Getting

the agreement to work well depends on identifying these relationships and

consulting those most affected by the service.

Key players may include the service provider, suppliers, customers and a range

of other stakeholders who have an interest in the outcomes of the service.

Examples include the Minister, other agencies, and the public.

Customers may be internal or external users who receive the service, direct or

indirect. Direct customers obtain the service with no intermediary, while

indirect customers (or ‘end-users’) are at the end of a service delivery chain.

Often end-users are the most affected by changes, yet they are the last to be

consulted. Ignoring them during the development of a service level agreement

can cause problems at implementation.

This is a good time to check your agency’s delegations to identify who will be

the appropriate signatories. Where the agreement is between units within an

agency, the signatories are generally the managers of the service provider unit

and the service user unit. As a rule, the signatures of chief executives would be

required only for a service shared between agencies.

3. Ident ifying needs and ex p e c ta t i o n s

Un d e rstanding and managing the needs of the diffe rent customer and

stakeholder groups can be difficult in a public sector environment. Front line

staff may value ease of access to a system. Managers are more likely to be

concerned with the quality of information. External stakeholders may require

costs to be transparent.

Re s e a rch customer and sta keholder attitudes to find out which serv i c e

attributes are most valued by each group. A service attribute is the aspect of

service quality that is relevant to the customer or stakeholder.




Tips for identifying key players

• Be sure to identify all the sta ke h o l d e rs

• Art i c u l a te the needs and ex p e c tations of key gro u p s

• Where th e re are competing ex p e c tations, make this known to all part i e s

• Re d e f ine pri o rities and agree on re a l i stic outcomes

For example, from the staff’s perspective, the most important service attributes

of a payroll service would be accurate pay delivered on time. The most

important service attribute for managers might be that salaries are posted to the

correct account.

It is important for customers to take the time to distinguish their essential needs

from their broader expectations. Minimum needs should be quantified to

enable service levels to be specified accurately. Customers need to be clear

about their priorities.

E xa mples of service at tr i b u tes and customer ex p e c tat ions

4. Def ining service leve l s

A service level is an agreed measure which might include one of the following

elements to describe the performance of a service delivery:

quantity

quality

timeliness

cost

Service levels are similar to standards, but this term is usually reserved for

organisation-wide performance, and as an aid for public scrutiny.




Attribute Expectation

Av a i l a b i l i t y S u i t able hours

Re s p o n s i ve n e s s P ro m pt att e n t i o n

Ti m e l i n e s s Speedy pr o c e s s i n g

Re l i a b i l i t y Ac c u r acy in billing

E qu i t y C o n s i s tent decisions

E xa mples of ser vice leve l s

Before prescribing service levels the service user needs to describe all the

services to be provided and define current performance. You can measure

improvements against this baseline.

The service provider should outline the capabilities and constraints of their

operation. This will help the customer understand the context for their service

requests and eliminate any unrealistic expectations.

The rule of thumb for the service provider is to under-promise and over-

deliver.

This is the appropriate time for the customer to define critical areas of service

delivery and negotiate the service levels to be provided. In all cases the

agreement should indicate the minimum level of per formance. Both customer

and service provider need to agree on the needs and expectations which cannot

be met.

5. Establ ishing perfo rmance indicato rs

Having decided on appropriate service levels, the next step is to agree on how

these will be measured. Staff will lose confidence in the service level agreement

if the measures are not credible. For example, using ‘tick marks’ on a counting

1 0g u i d e l i n e s f o r p u b l i c s e c t o r o r g a n i s a t i o n s



Tips for setting service levels

• Identify service levels that are measura b l e

• Avoid setting too many (this leads to loss of pri o ri t y )

• Set service levels based on user satisfaction as well as service output

• Identify ‘key service levels’, for critical are a s

Attribute Expectation Service Level

Av a i l a b i l i t y S u i t able hours Open 8:30am - 6:30pm w e e k d ay s

Re s p o n s i ve n e s s P ro m pt att e n t i o n Help desk r e p l y within 1 hour

Ti m e l i n e s s Speedy pr o c e s s i n g Cash banked within 24 hrs

Re l i a b i l i t y Ac c u r acy in billing 99.5% accur a c y

E qu i t y C o n s i s tent decisions No complaints about unfair tr e a t m e n t

sheet to record incoming calls is an unreliable method, especially when phones

are busy. A more reliable method would be to gather data automatically through

the telephone information system.

Performance can be difficult to measure, especially where the benefits are

intangible. In most cases, a sensible mix of output and outcome measures

generates the best result. Measuring customer attitudes towards the service can

confirm or challenge other performance data. One-off surveys can also measure

whether a specific objective has been met.

6. Conf i rming mutual issues

An effective service level agreement acknowledges that customers and service

providers have responsibilities and obligations to each other. It is important to

address these points in the negotiation process, and acknowledge them in the

document. In some agreements, customer responsibilities may be extensive.

This might include reasonable notice of planned changes to their operation, or

an agreement to train staff to use particular software.

Ne g otiations should include a mechanism for alte ring the service leve l

agreement and a process for resolving disputes. Disputes where the two parties

have attempted a resolution and failed are often referred to a third party for

mediation or arbitration.

7. Dete rmining costs and te rms of pay m e n t

Some corporate services are required for the benefit of the whole organisation,

regardless of whether they are used by individual units. Service providers

typically bill these as a block amount. Service providers should use this cost

allocation method only for genuine corporate overheads.

When service providers are ready to distribute charges they should make a

distinction between costs that are allocated as an overhead, and charges based on

a customer usage. Usage charges are based on the user’s consumption and

encourage the customer to make savings.

1 1s e r v i c e l e v e l a g r e e m e n t s


S o u rce: Fi s h e r, Ury and Pa t ton Getting to Yes (19 81 )

Tips for negotiating an agreement without giving in

• Separa te the people from the pro b l e m

• Focus on inte re sts, not positions

• Invent options for mutual ga i n

• Insist on using objective cri te ri a


Where service providers have operated from an aggregate budget, they will not

automatically know the costs of individual services. They are unlikely to have

information on all of the expenditure that accrues to an activity.

Breaking down costs by activity does take time and effort, but it is a worthwhile

investment which provides the basis to identify savings.

The example of disaggregating costs in Figure 1 is based on breaking down the

costs of two activities (accounts payable and debt management) for Shared

Services Finance, a hypothetical business unit. To arrive at this breakdown of

costs, the business unit would need to have collected detailed information on

the quantity of resources consumed by each activity.

Activity Based Costing is an accurate method of cost management, which traces

rather than allocates costs to a particular output.

Pricing strategies depend on government policy and will vary from agency to

agency. Some agencies may require full cost recovery. Others may require that

subsidies are made tra n s p a rent. Ne g ot i a to rs should ch e ck on the policy

constraints which govern their agency. Where there is flexibility, business units

sometimes charge premiums for priority service, or different rates for peak and

off-peak periods in order to spread demand.

Billing and payment mechanisms are also negotiated at this stage.




Costing your services

1. Select serv i c e

2 . Identify activities and sub-ta s ks

3 . Identify the costs component for each activity

4 . Include indirect cost s

5 . Identify cost dri ve rs (pers o n - h o u rs, usage ra te s )

6 . C o m p a re service costs with market ra te s

FIGURE 1: EXAMPLE - DISAG G R E GAT I NG CO STS

Expenditur e $



S h a red Ser vices Fi n a n c e

Total Expenditure

S h a red Services F i n a n c e

Accounts Paya b l e

S h a red Services F i n a n c e

Debt Manage m e n t

E mp l o yee r e l a t ed e x p e n s e s 3 , 4 2 3 , 2 5 6

A d m i n i st ra t i o n 9 ,16 3

B o o k s and per i o d i c a l s 2 , 4 5 6

C o n t ra c to r s 24 9 , 0 0 0

EDP e x p e n s e s 3 0 , 013

O f f ice accommodation 7 0 6 , 815

M a i n te n a n c e 9 , 5 2 0

M otor v e h i c l e s 16 5 , 0 0 0

O ther e x p e n s e s 2 , 0 24

P r inting and st a t i o n e r y 10 2 , 6 6 0

St a f f dev e l o p m e n t 84 , 54 5

St o re s 16 , 94 8

Te l e p h o n e s 18 , 5 6 6

Trav e l 15 , 2 21

I n te r nal c h a r g e s 64 , 2 3 2

(HR, Fleet, Pr o p e rt y )

Tot al 4 , 8 9 9 , 4 19

Expenditur e $

Expenditur e $

E mp l o yee r e l a t ed e x p e n s e s 1, 9 6 6 , 2 6 9

A d m i n i st ra t i o n 5 , 0 6 3

B o o k s and per i o d i c a l s 1, 2 2 8

C o n t ra c to r s 7 0 , 0 0 0

EDP e x p e n s e s 2 6 , 9 2 8

O f f ice accommodation 4 7 5 , 0 04

M a i n te n a n c e 5 , 712

M otor v e h i c l e s 9 9 , 0 0 0

O t her e x p e n s e s 1, 0 0 0

P r inting and st a t i o n e r y 61, 5 9 6

St a f f dev e l o p m e n t 5 0 , 7 27

St o re s 8 , 5 54

Te l e p h o n e s 11,13 9

Trav e l 9 , 2 0 0

I n te r nal c h a r ge s 3 5 , 2 44


Tot a l 2 , 8 2 6 , 6 6 4

E mp l o yee r e l a t ed e x p e n s e s 1, 4 5 6 , 9 8 7

A d m i n i st ra t i o n 4 ,10 0

B o o k s and per i o d i c a l s 1, 2 2 8

C o n t ra c to r s 17 9 , 0 0 0

EDP e x p e n s e s 3 , 0 8 5

O f f ice accommodation 2 31, 811

M a i n te n a n c e 3 , 8 0 8

M otor v e h i c l e s 6 6 , 0 0 0

O t her e x p e n s e s 1, 0 24

P r inting and st a t i o n e r y 41, 0 64

St a f f dev e l o p m e n t 3 3 , 818

St o re s 8 , 3 94

Te l e p h o n e s 7, 4 27

Trav e l 6 , 0 21

I n te r nal c h a r ges 2 8 , 9 8 8


Tot a l 2 , 07 2 , 7 5 5


8. Agreeing to the document fra m ewo rk , content and st yl e

The actual document containing a service level agreement can va ry

considerably. Some of the most effective are contained in a few pages,

describing the services provided, indicating costs and contact information.

Others may specify services and service levels down to the finest detail. The

individual document reflects the nature of the relationship between the

customer and service provider.

A highly specified service level agreement can indicate a lack of trust and

understanding between the parties. However, considerable detail may be

essential in formulating a complex service. Over-generalised service level

agreements can also be frustrating for both customers and service providers.

Disputes are common where roles and responsibilities are not clearly defined.

All organisations are affected by changes in their environment, and it’s

important to build flexibility into the agreement. One means of doing this is to

separate the broad areas of agreement that are unlikely to change from the

details that can be altered subject to discussion. Sometimes this section is called

the service schedules.

9. Establ ishing a rev i ew pro c e s s

At this stage it is important to define how you will monitor the agreement, and

what mechanisms you will use to resolve disputes. Monitoring performance

should present few problems if service levels have been well defined. Check that

stakeholder feedback is built into this process.

Regular meetings are a common means of keeping track. The frequency

(monthly or quarterly) will depend on the complexity and detail of the service

level agreement. It may also be appropriate to meet more frequently at the

beginning, and less frequently when the relationship is well established.

A six month ly rev i ew of service re qu i rements and prices, fo l l owed by

adjustment of the service schedules as appropriate, will maintain the relevance

of the agreement and ensure better service for the customer.

Service Schedules specify



• Specif ic ser v i c e s

• Detail

- q u a n t i t y

- quality

- levels of ser v i c e

• Ra t e or pr i c e


Usually a client representative is appointed to manage the agreement from the

customer’s perspective. The service provider may appoint a line manager, or an

‘account manager’ to supervise service delivery and communicate with the

customer.

10. Creat ing and signing the service level agre e m e n t

If you have not already done so, check your agency’s delegations to identify the

signatories to the agreement. If no clear delegation exists, it will be necessary to

create one.

The effort that both parties have made in drafting the agreement will be repaid

by a good working relationship for the future. Mark the occasion, communicate

the outcome and celebrate your success so far.




1. S ta r t up

❑ H ave you clari f ied the goals of the service level agre e m e n t ?

❑ A re the steps invo l ved in the service level agreement process def i n e d ?

❑ H ave you decided on the length of the agre e m e n t ?

2 . I nvo lving key playe rs

❑ H ave you identif ied the key playe rs ?

❑ Who are direct and indirect custo m e rs ?

❑ Has a good wo rking relationship been established?

3 . Identi fy needs and ex p e c ta t i o n s

❑ What are the broad needs of each sta keholder gro u p ?

❑ Do you have clear def initions of their issues and objective s ?

❑ H ave you agreed on what services will be prov i d e d ?

4 . D e f ine service leve l s

❑ H ave you discussed the operational capabilities of the service prov i d e r ?

❑ A re service levels and the sta n d a rds of service clearly def i n e d ?

❑ H ave you agreed on critical areas of service delive ry ?

❑ H ave you agreed on pri o rity ta rgets for imp rove m e n t ?

5 . E s tablish per fo rmance indicato rs

❑ H ave you fo rm u l a ted indicato rs to measure service perfo rm a n c e ?

6 . C o n fi rm mutual issues

❑ A re customer and service provider obligations def ined clearly in wri t i n g ?

❑ H ave you fo rm u l a ted indicato rs to give early wa rning of pro b l e m s ?

❑ H ave you established a wo rkable dispute resolution pro c e s s ?

❑ A re te rmination conditions provided fo r ?

7. D ete rmine cos ts and te rms of pay m e n t

❑ H ave you agreed on a basis for dete rmining cost s ?

❑ H ave you dete rmined an appro p ri a te cost tra n s fer mechanism?

❑ H ave you agreed on the fre quency of billing?

8 . A gree on the document fra m ewo rk, content and s t yl e

❑ Does the document re f lect a part n e rship and service relationship?

❑ Is it f l exible enough to accommodate ch a n ge s ?

9 . E stablish a rev i ew pro c e s s

❑ Who will be responsible for rev i ewing perfo rm a n c e ?

❑ H ave you agreed on the fre quency of rev i ew meet i n g s ?

❑ H ave you agreed on a pro gram for imp rove m e n t s ?

❑ H ow will customer and sta keholder fe e d b a ck be sought?

10 . C re a te and sign the service level agre e m e n t

❑ H ave you communicated the outcome to sta ff ?

❑ Has someone with appro p ri a te auth o rity signed the document?



Getting to Agreement - Checklist



Service agreement documents typically contain the following subject areas. A

template of this outline forms part of these guidelines at Appendix A.

1. Pa r t ies to and per iod of the agre e m e n t

This section is usually found on the first page and includes the units or

organisations that are parties to the agreement, the names and signatures of the

re p re s e n ta t i ves of those organisations, and the period cove red by th e

agreement.

2. Agreement objective s

A general statement of the key goals of the service agreement should be defined

early in the process.

3. Descri pt ion of serv i c e s

This section broadly describes the services included in the agreement, with the

specific detail relating to each service contained in the service schedules. The

advantage of this approach is that agreed changes to service details can be made

in the schedules without altering the main body of the document.

If your agreement is simple, you may choose to include the service description

and service levels in this section of the document and leave out the service

schedule.

4. Communicat ions, re p o r ting and rev i ew

Most service agreements describe arrangements for general communication

between the customer and service provider. If contact information is specific to

separate services, it may be more appropriate to list those details in the service

schedules.

5. Mutual obl iga t i o n s

This section is useful for expressing the general obligations of both parties.

More detailed obligations can be specified in the service schedules.



6. Bil l ing and pay m e n t

It is important to include a section on the method of billing and payment,

including an agreed frequency. Including the schedule of fees that cover the

services to be provided will ensure that the customer is clear about the basis of

the bills they will receive.

7. Va ri a t i o n s

Include a process for agreeing on variations. Usually this requires both parties’

acceptance and a specific period of notice.

8. Exc l u s i o n s

Sometimes it’s as important to describe what is excluded (for example,

additional equipment, after-hours support) as to describe what is part of the

agreement.

9. Dispute re s o l u t i o n

It’s important to include a mechanism for resolving disputes. This is a general

guideline for making a decision when the two parties cannot agree. In more

complex services, a detailed escalation procedure may be necessary. Where

there are shared services between agencies, the final decision is usually made at

a meeting of the two Chief Executives.

10. Te rmination conditions

To avoid protracted negotiations when an agreement is terminated, it is a good

idea to include details of how to compensate either party for its initial

investment. Any penalty for early withdrawal should be covered here as well.

11. Ser vice sch e d u l e

This section describes each service provided to the customer, the agreed service

level (or standard), and how achievement of the standards will be measured.

Detailed pricing information may be appropriate here.

It’s quite common for the service schedule to be in table format. Depending on

the needs of your agreement, table headings might include some of the

following:




Description of service

Activities

Service levels/targets

Performance measure

Customer obligations

Rate or price

Not every service agreement includes a service schedule. For some service

agreements, service levels may be adequately described earlier in the document.

A service schedule is particularly useful where the services are tailored to each

customer’s needs and where the service information is very detailed.

12. Glossar y

A good service agreement will include a section that provides pre c i s e

definitions of key terms.




CHAPTER 4: EVA LUAT I NG PERFO R M A NC E

1. Ach i evement of object ive s

One of the key benefits of a service level agreement is that it provides clear and

documented measures of performance.

The first priority is to evaluate whether the objectives of the agreement have

been met. This is usually done annually or bi-annually and is important for the

next round of negotiations.

If the objectives were not achieved, you may need to consider the following

questions:

2. Evaluat ing the ach i evement of service leve l s

Regular meetings will provide the opportunity to check that the service levels

are being achieved. If the agreement includes key service levels, check that other

service levels are not overlooked. Just because key service levels have been

achieved does not mean that the other service levels are not important to the

customer’s business.

Take this opportunity to set targets for improvement. These should be both

realistic and challenging, with deadlines attached. It is important to involve

those doing the work in setting targets and to review progress regularly.

3. Regular communicat ion

Build regular feedback into the evaluation process. As well as a formal review

meeting, many service level agreements provide contact information for

different aspects of the service.



• We r e the objectives unr e a l i s tic or inappr o p ri a te ?

• Did the customer c h a n g e dir e c t i o n ?

• Was the problem with the service pro v i d e r ?

• Was the process understood by both par t i e s ?

2 1s e r v i c e l e ve l a g r e e m e n t s


S e rvice Level

Agreement

between

(The Service Provider)

and

(The Customer)

APPENDIX A: GENERIC SERVICE LEVEL AG R E E M E N T

S E RVICE AGREE M E N T

Number

This document represents a formal service agreement

between (the Service Provider)

and (the Customer)

for (general description of services)

for the period to

S i g n a t u re s

For the Service Provider For the Customer

(Name, title) (Name, title)

Date Date





Page #

1. G e n e ral In fo rm a t i o n

Agreement objective s

D e s c ri ption of serv i c e s

Communications, re p o rting and rev i ew

2. TERMS AND CO N D I T I O N S

Mutual obliga t i o n s

Billing and payment arra n ge m e n t s

D i s p u te resolution process

Va ri a t i o n s

E xc l u s i o n s

Te rm i n a t i o n

3. S E RVICE SCH E D U L E S

S e rvices prov i d e d

S e rvice levels, measures and customer obliga t i o n s

C o n tact deta i l s




1. GENERAL INFO R M AT I O N

A greement object ive s

D e s c ri pt ion of serv i c e s

Communicat ions, re p o r ting and rev i ew




2 . TERMS AND CO N D I T I O N S


Bi ll ing and payment arra n ge m e n t s

D i s p u te re s o l u t i o n




Va ri a t i o n s

E xc l u s i o n s

Te rminat ion of Service Agre e m e n t






APPENDIX B: SAMPLE SERVICE LEVEL AG R E E M E N T

S e rvice Level

Agreement

between

Shared Services Finance

and

The XYZ Department

SA M P L E



S E RVICE AGREE M E N T

Nu m b e r: 3XYZ99/00

This document represents a formal service agreement

between SHARED SERVICES FINANCE

and THE XYZ DEPARTMENT

for Accounts payable services

for the period 1 July 1999 to 30 June 2000.

S i g n a t u re s

For the Service Provider For the Customer

Rosemary Pounder Carlos Velasquez

General Manager Manager Finance Division

Shared Services Finance XYZ Department

Date 15/6/99 Date 15/6/99


SA M P L E




Page #

1. G e n e ral Info rm a t i o n

Agreement objective s

D e s c ri ption of serv i c e s

Communications, re p o rting and rev i ew

2. TERMS AND CO N D I T I O N S


Billing and payment arra n ge m e n t s

D i s p u te resolution process

Va ri a t i o n s

E xc l u s i o n s

Te rm i n a t i o n

3. S E RVICE SCH E D U L E S

S e rvices, service levels and customer obliga t i o n s

I nvoice processing and payment of suppliers

Petty cash disburs e m e n t s

Accounts payable management re p o rt

C o n tact deta i l s


SA M P L E

1. GENERAL INFO R M AT I O N

A greement object ive s

The purpose of this service level agreement is to establish a clear

commitment between the Shared Services Finance and the XYZ

Department to work in partnership to provide a reliable and timely

accounts payable services.

D e s c ri pt ion of ser v i c e s

This service level agreement covers the accounts payable functions for:

1. Invoice processing and the payment of suppliers

2. Petty cash disbursements

3. Accounts payable management reports

Hours of operation: 8:30am to 5:00pm weekdays.

Communicat ions, re p o r ting and rev i ew

Shared Services Finance has appointed an account representative who

will be responsible for monitoring the service levels specified in this

agreement, and will be the primary contact for the XYZ Department.

Please contact Juliette Smith on X222 for any queries about service

delivery and performance.

Review meetings between the account representative and the Manager,

XYZ Finance Division, will be scheduled on a monthly basis to discuss

service delivery and any issues of concern.




SA M P L E

2 . TERMS AND CO N D I T I O N S


Both parties agree that they share obligations for the services provided

and undertake to maintain open channels of communication. The terms

and conditions of the Agreement are confidential.

S h a red Services F inance

Is committed to continuously improving its services.

Will review processes and policies and adopt a flexible approach in

order to meet customer needs.

XYZ Finance Divis ion

Will ensure documentation complies with regulatory requirements.

The specific obligations of each party are outlined in more detail in the

service schedule.

Bi ll ing and payment arra n ge m e n t s

XYZ Finance will be charged $A.bc per payment transaction, for

invoice processing and payment of suppliers. The estimated volume of

transactions is D,000 per annum.

Petty cash disbursements will be charged a flat rate of $C,000 per

annum.

Shared Services will invoice XYZ Finance Division at the end of each

accounting period at the agreed rates until 30 June 2000. The rate will

be renegotiated for the period 1 July 2000 to 30 June 2001.

Payment will be made by Treasury transfer.




SA M P L E


D i s p u te re s o l u t i o n

Any concerns should be raised at the regular review meetings, or by

contacting the Shared Services Account Representative.

If a complaint or dispute cannot be resolved by negotiation between the

parties, advice and assistance may be sought from the General Manager,

Shared Services and the Manager, Finance Division, of the XYZ

Department. If a resolution cannot be obtained, representation will be

made to the Director General, who will be the final arbiter.

Va ri a t i o n s

Alterations to this agreement may be made only after consultation with,

and consent from both the General Manager, Shared Services, and the

Manager, Finance Division, XYZ Department. Requests for changes

m u st be made in writing and adequ a te time allowed fo r

implementation.

E xc l u s i o n s

This Agreement covers the accounts payable services listed in the

s chedule. Approving payments is the responsibility of the XYZ

Department. Any additional services must be agreed to by both the

General Manager, Shared Services, and the Manager, Finance Division,

XYZ Department, and are subject to negotiated additional charges.

These additional services will be detailed in an attachment to this

agreement.

Te rm i n a t i o n

This agreement will operate for the specified period unless terminated

by the consent of both the General Manager, Shared Services and the

Financial Manager, XYZ Department.

Upon termination of this agreement all assets used to provide services to

the XYZ Department remain the property of Shared Services.



SA M P L E




SA M P L E

APPENDIX C: RESOURCES

Re l a ted NSW Gove rnment legislation, pol icies and guidel ines

Consulting with Sta ke h o l d e rs, Public Sector Management Office, The Pre m i e r ’ s

D e p a rt m e n t

D ra ft Code of Practice for NSW Gove rnment Pro c u re m e n t, Sta te Contracts Contro l

B o a rd, (19 9 8 )

D ra ft Policy Sta tement for NSW Gove rnment Pro c u re m e n t, Sta te Contracts Contro l

B o a rd, (19 9 8 )

Guidelines for ach i eving savings in Pro c u rement and Purch a s i n g, Department of Public

Wo rks and Services, (19 9 6 )

Guidelines on the Use of Consulta n t s, Public Sector Emp l oyment Office, (19 9 5 )

Public Finance and Audit Ac t 19 8 3

Public Sector Management Ac t 19 8 8

Public Sector Management Act 1988 - Regulation, (Public Sector Management (Goods and

S e rvices) Regulation 19 9 5 )

Regulation of Comp et i t i ve Te n d e ring and Contracting in the New South Wales Public

S e c to r, Public Bodies Rev i ew Committee, (Re p o rt No.3 19 97 )

S e rvice Comp etition Policy Guidelines, Council on the Cost of Gove rnment, (19 97 )

Tre a s u rer’s Directions, Public Finance and Audit Ac t 19 8 3

S e rvice Level Agreement (SLA) Development Kit, NSW Police Service (19 9 8)

O ther useful documents

G e n e ral Conditions of Contra c t, Au st ralian Sta n d a rd 2124 - 1986 and 19 9 2

Re s o u rce Agre e m e n t s, Au st ralian Gove rnment Publishing Service (19 91 )

I n te rn et site s

N SW Gove rnment Home Pa ge: http://www. n s w. g ov. a u

Council on the Cost of Gove rn m e n t: http://www. o c c g . n s w. g ov. a u

C e n t re for Au st ralian Public Sector Management, Gri ff i th Un i ve rs i t y

h t t p : / / w w w.cad.gu.edu.au/capsm/capsm.htm

Ne g ot iat ion re fe re n c e

Fi s h e r, Ury & Pa t ton, G etting to yes; negotiating an agreement without giving in,

G ri ffin (19 91 )



APPENDIX D: GLO S SA RY

Activity based costing Activity based costing is an elaborate form

of full (absorption) costing.

Benchmark, benchmarking A benchmark is a performance standard set

by the organisation as a target to emulate.

Customers Internal or external receivers or users of

the service or product. Can be

individuals, groups or organisations.

Direct customers Receive the service with no intermediary.

Indirect customers Receive the service through an

intermediary. Sometimes called the

‘end-user’.

Full cost This cost includes the direct and indirect,

or overhead costs of an activity.

Outcomes Intended impact or effect of a product or

service.

Outputs Products and services produced or

delivered to customers.

Service level An agreed measure of quantity, quality,

timeliness and cost used to describe the

performance of service delivery.

Stakeholders People, groups and organisations whose

interests are affected by the provision of

the service.

Targets Intended service levels expressed as

quantity.



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