Service level agreements (SLAs) are an important part of every construction business. It clearly defines the scope of work to be done and exactly what the contractor will deliver to the customer. It also defines the customer’s responsibility in terms of payment or any portions of the work they need to handle. Without an SLA, misunderstandings can cause problems and even lead to lawsuits.
An SLA formalizes what was discussed between the business and the customer. In most cases, an SLA will be required when working with any large business or government entity. SLAs are less frequent when working on smaller projects or with homeowners, but they can save a lot of hassle, misunderstandings, and negative online reviews.
While every SLA will be slightly different, there are some standard sections that should be included. Below is a list of the sections of an SLA that you should include every time you begin a new project.
Who needs SLAs
Everyone in construction of any kind should provide SLAs.
HVAC and plumbing contracts will find them useful to ensure that the customer knows precisely what to expect. For example, if they’re expecting a Nest thermostat and you install a Honeywell, it can lead to an argument unless the SLA states you were going to use Honeywell.
Electrical and computer service contracts can find themselves in long, contentious discussions about what wiring or cabling was supposed to be done. This is especially important if the project doesn’t include an entire building. For example, if you’re supposed to run network cables to one room, but the client thought you would drop them down into every room in between the primary room and the server room.
Plumbing is another place where misunderstandings can happen. You can end up in court over a customer’s expectation of a touchless faucet.
Roofing contracts are a frequent topic of argument. Define the project well, and you’ll have much less to talk about.
Element of a Service Level Agreement
There are parts of an SLA that should be included in every document. Other times, not all parts need to be included. Some sections of your SLAs can be standardized so you don’t have to rewrite them every time. These are your boilerplate sections.
The SLA should define the objectives of the services. If, for example, you are running network cable to a room; the object is to supply network connections in that room. If the customer complains about other rooms, the objective will make it clear they agreed to just that one space.
Details of the Services
Not only should the details include the project itself, but it should also detail things like the cleanup. If the job includes wallboard, taping, and painting, it should also discuss how the space will be left when your crew leaves. This will also be the place to detail specifics, such as the type of cable to be used, the brand of thermostat, or the touchless faucet that you’ll install.
Defining performance will include not only the level of service being given but also the expected timeline, how many crew members to expect, and more details about the actual performance of the team.
This can be a space where the customer will define their expectations. For many corporate and government entities, these standards are pre-defined. If the customer’s expectations, however, are unrealistic, for example, getting the entire roof done in one day, it can be defined here and discussed before the work begins.
Tell the customer how you’ll report on progress. If your plan is to email them every Friday night, make that clear. If reporting will be done at specific stages, for example, when all demolition is done, then again when the wallboard is up, make that clear in this section.
Your reporting mechanism should be documented. Do it in writing as much as possible. It’s very easy to deny that a conversation occurred in the driveway when the customer takes you to court or arbitration.
Define how the customer can file complaints and how they will be handled. This section also defines how the customer will be compensated if the contractor doesn’t meet the service standards. This compensation should be financial. For example, if the work isn’t completed on time and necessary delays weren’t signed off by the customer, the contractor loses five percent of the contract.
The remediation should be reasonable enough for the contractor that they aren’t losing money for missing a due date by a few hours, but also should be placed at the stages of the contract so they can make a difference.
Critical failure would mean what happens if the contract fails to meet the terms of the contract. This failure should be defined. For example, if a plumber was contracted to arrive on the 5th of the month to complete a job and by the 19th they still haven’t shown up, the customer should be able to void the contract and get a full refund.
If the performance standards aren’t met throughout the contract, the project might be called a critical failure. In this time of supply chain issues, it’s vital that contractors update customers and get signed acknowledgment of delays. This can avoid the declaration of a critical failure when circumstances were out of the contractor’s control.
Other actions may be included in an SLA.
Contract management – If the contract is long term, how it will be managed needs to be defined. This section will define reporting standards and how performance standards will be reviewed and documented.
Price changes – If prices change during the contract, which happens frequently in long-term construction projects, there should be provisions of how changes will be reported and how the parties will handle those circumstances.
Change management – In this section, the SLA will define in more general terms how changes to the agreement will be handled, how the parties will notify each other, and how agreement will be documented.
A service level agreement should be included with every contract. If it’s not included, it opens the door for misunderstanding and unmet expectations. Included in the agreement are also the customer’s obligations, such as payment terms and penalties for late or non-payment, so the SLA protects the contractor as well.
If you’re using Optsy for your field service management, you’ll find that service agreements are available within the program and can be managed right from within Optsy. Learn more about this function at https://www.optsy.com/service-level-agreement-software/.
For more information about SLAs from the legal experts, NOLO has put together an excellent overview that looks at them even more in-depth: https://www.nolo.com/legal-encyclopedia/how-to-draft-a-service-agreement.html.