Elements of Service-level Agreement for Construction Projects
Originally Posted On: https://www.optsy.com/elements-service-level-agreement-construction-projects/
Elements of an SLA for Construction
Service-level agreements (SLAs) are a crucial component of every business, particularly in the construction industry. 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 a Service Level Agreement (SLA), misunderstandings within the contract data can lead to potential risk of problems, necessitating the hiring of lawyers to resolve legal disputes.
An SLA formalizes the negotiation of what was discussed between the company and the customer. In most cases, Service Contracts will be required when working with any large organization 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, some standard sections should be included. Below is a list of the sections that an SLA should consist of every time you begin a new project.
Who needs SLAs
Everyone in construction of any kind should provide SLAs.
HVAC and plumbing contractors will find them useful to ensure that the customer knows precisely what to expect. For example, if you’re expecting a Nest thermostat and you install a Honeywell, it can lead to an argument unless the SLA states that you will be using a Honeywell.
Electrical and computer service contractors can find themselves in lengthy, contentious discussions about what wiring or cabling was intended to be done. This is especially important if the workflow project doesn’t include an entire building. For example, if your employees are 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 clearly with the documents, and you’ll have much less to discuss as the job progresses.
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.
Objectives
The SLA should define the objectives of the services. It should explain what the client would like to see completed and, if there is a process, how they would like it to be completed. These requirements, being documented, will ensure everything proceeds smoothly.
Details of the Services
Not only should the details include the project itself, but they should also detail aspects of the workflow, such as the project 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 (whether digital or manual), the touchless faucet that you’ll install, and, of course, most importantly, the approvals and signature.
Performance Standards
Defining performance will include not only the level of service being provided but also the expected timeline, the number of team members to expect, and additional details about the teams’ actual performance and compliance.
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, completing the entire roof in one day, it can be clarified and discussed before the work begins.
Reporting Mechanism
Tell the customer how you’ll report on progress. If you plan to email them every Friday night, make that clear. If reporting and collaboration are conducted at specific stages, such as when all demolition is complete and again when the wallboard is installed, make this clear in this section.
Your reporting mechanism should be documented. Do it in writing or by email 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.
Remediation
Define how the customer can file complaints and how they will be handled. This section also outlines the compensation process for customers in the event that the contractor fails to meet the service agreement standards. This compensation should be financial. For example, if the work isn’t completed on time and the customer doesn’t approve the necessary delays, the contractor loses five percent of the contract value.
The remediation should be reasonable enough for the contractor so that they don’t incur a loss for missing a due date by a few hours, but it should also be implemented at the stages of the contract so they can make a difference.
Critical Failure
A critical failure would mean what happens if the contract fails to meet its terms. This failure should be defined. For example, if a plumber is 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 receive 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, contractors must update customers and obtain signed approval for any delays. This can avoid the declaration of a critical failure when circumstances are out of the contractor’s control.
Additional Sections
Other actions may be included in a Service Level Agreement (SLA).
Contract management – If the contract is long-term, how it will be managed needs to be defined. This section outlines the reporting standards and describes the process for reviewing and documenting performance standards.
Price changes – If prices change during the contract, which is a common occurrence in long-term construction projects, there should be provisions outlining how changes will be reported and how the parties will address 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 the agreement will be documented.
Conclusion
A service-level agreement should include a contracting creation process. This means that if everything isn’t included, it opens the door for misunderstanding and unmet expectations. Sometimes, it’s worth drafting the contract with additional insights regarding the project and then leaving the processes more open-ended. 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 contract management software built into the platform, which users can manage directly within the Optsy system. Learn more about this function right here: https://www.optsy.com/service-level-agreement-software/ .
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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 .