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last updated: 18th January 2013

A service level agreement (SLA) is a formal document that defines a working relationship between parties to a service contract. The standing of the SLA depends on whether the service is being provided by an internal (In-house central department/function) or an external (Bought-in) service provider. Using an in-house reprographic unit and bought-in cleaning services as examples, the relationships between the parties are demonstrated and explained:

When the services are provided by an in-house provider, the SLA takes the place of a contract.  SLA’s are typically used where there is internal charging for the provision of the in-house service or where the service is so critical to the end user that a formal written agreement is the most appropriate means of ensuring that the requirement is met.

Where the services are bought in from an external supplier, there will be a formal contractual arrangement between the institution and the service provider.  The SLA is used to provide the day-to-day working detail needed to support the contract. It is the starting point and basis for contract monitoring and management and often the trigger for corrective action that could prevent a more serious contractual situation arising.

There may be instances where an institution sets up a separate, sometimes termed a ‘captive’ company, to provide a desired service.  The working relationship in terms of the way the company is treated as an in-house or bought-in service depends on the management structure of the company. Please refer to the guidance on captive companies.
 
Within this Guide the term "Managing Department" has been used to identify the Department within the institution that will set up and carry out the day-to-day management of the service provision regardless of whether it is bought-in or provided in-house.  The Managing Department should take full account of the end users’ needs and should have sufficient knowledge of the service to be able to establish the resources required to meet the needs, and if necessary negotiate them with the service provider. 

The content of an SLA should be agreed between the service provider and the Managing Department within the context of the institution’s administrative, financial, safety and environmental procedures and regulations and, of course, take into account of the needs and opinions of end users.

The Managing Department is responsible for ensuring that SLAs are in place where they are appropriate.  The amount of detail in the SLA is for agreement between both parties.  Where the in-house service provider was successful in a tendering exercise against external competition, a SLA containing all of the provisions of the tender documents would be put in place (as would have happened had an external provider have been appointed).

Performance must be monitored against the standards set in the SLA to ensure that quality levels are maintained, and costs must be kept within target to enable accurate budgeting, and to prevent the overspend of allocations.

Examples of Service Level Agreements are available here: SLA example 1 and SLA example 2

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