Service levels – not the most fascinating topic but please bear with us as this blog contains some useful information!
What are they
“Service levels” is the term used to describe clear objectives set out in measurable terms, usually in addition to the general obligation on the supplier to provide the services.
Why are they important
They are often key because if properly written and you are tied into a term, they may be the only safe way you can terminate for poor performance. For example, the amount of catalogues delivered on time, the amount of uptime in a hosting arrangement, the response time in a support and maintenance contract etc might be service levels and a contract might say that 3 failures to deliver a certain amount in a certain period will entitle you to terminate. This is a lot less hassle than trying to say that delivery failures mean the supplier didn’t use reasonable skill and care. It’s particularly hard if your supplier slightly slips below the level of service you’d hoped for, (possibly) not a big deal. But then they do it again, and then again. On each occasion not by much but the repeated nature means you either want some kind of recourse or to get out of the contract. Unless the contract puts a direct obligation on the supplier to meet the service levels and gives you a remedy, then unfortunately you may be stuck with what you feel is a less than adequate service.
Reasonable endeavours
The use of language here is key. Often contracts will state that the supplier will use “reasonable endeavours” to meet the service levels – i.e. they will try (not even necessarily try their best!) This is not the same as placing a contractual obligation on them to meet that service level. Equally a contract may set out different levels (e.g. gold, silver and bronze) for different prices. But again, unless there is a contractual obligation on the supplier, the variance in levels may simply mean that they have to try harder!
Breach of service levels
So the first step is ensuring the supplier is contractually obliged to meet the service levels. But then you need some kind of recourse if the supplier fails to meet those service levels.
Contracts may provide for the supplier to review the services and develop a plan of action to improve. Sounds great, right? But again, this doesn’t contractually mean anything if they then don’t improve so you’d still be stuck in a contract with an under performing supplier. Provided the supplier meets their obligation to “try” then it would be difficult to argue that their failure was a material breach of the contract entitling you to terminate.
As the customer, you may want the right to service credits (i.e. some kind of refund) or, better yet, the right to terminate the contract on a specified number of failures.
Of course if you are the supplier then you may be hoping that your customers don’t read the above! But service levels are equally important to suppliers as you need to be careful about what you agree to. Don’t claim to “guarantee 100% performance” – this is unrealistic. You need to strike a balance about what you expect to achieve and what the customer wants.
If you want more information, we can send you our FAQs on Service Level Agreements.