Service Level Agreements and Covid-19
Whilst we are still enduring uncertain times, in the mist of the Covid-19 pandemic, there are things that businesses can do to protect or reaffirm the contracts and relationships they already have or are considering entering into.
When looking for services, businesses are likely to consider:
- The quality they want to receive;
- A price that is satisfactory;
- Service provided to the timescale sought;
- Good personnel; and
- Good IT systems to assist in delivery.
Setting and reviewing Service Level Agreements (SLAs)
Given the considerations of the parties when entering into a service type contract, it is advisable for a business to set out and agree SLAs with the contracting party.
Such measures will assist the parties in setting out what service they require and monitoring/keeping track of the service.
A business wants the service and the quality of service to be aligned. The expectations of the parties can be set out in a SLA to focus the parties on the services and quality agreed.
The parties may then agree that if such service levels are not maintained the aggrieved party will receive compensation, credits or refunds. If service levels do not resume, parties may be able to exercise their right to terminate the contract.
How Covid-19 effects SLAs
The service you receive could be affected in a negative capacity due to the effects that Covid-19 is having on all businesses. The questions to ask yourself are:
- Are you prepared to accept a lower level or different type of service level (even if just in the short term) due to social distancing rules, or delays in supply and manufacture of items?
- Are you prepared to accept delays with delivery, supply chain issues or pricing issues? Has Covid-19 meant the supply chain has suffered or slowed? Are you still receiving what you are paying for under the terms of your contract?
- Has the cost of delivery and supply increased? Could it decrease if the party you are contracting with can provide the service at a lower cost due to staff working at home rather than in an office?
If you have become dissatisfied with the service you are receiving since Covid-19, some parties may argue that a force majeure event has occurred and attempt to exercise their right to terminate a contract.
Alternatively, you may want to discuss any issues with the contracting party to see if you can reach an amicable solution in the short term, or agree to vary the terms of the contract.
If changes are to be made, what could these look like?
Parties could look to adjust:
- Penalties/service level credits; and
They could also seek to add new Service Level Agreements to cater specifically for Covid-19, such as:
- SLAs relating to staffing issues;
- SLAs relating to targets;
- Setting out the minimum number of staff to work on a specific account or project;
- Set out where staff are expected to work from in order to maintain the standard of service requested;
- Account for any IT concerns with regard to staff working from different locations;
- Ensure that wherever staff are based that the Data Protection Act (DPA) is adhered to; and
- Parties may consider adding clauses to an agreement to allow for financial auditing of the supplier if there are concerns that the supplier will be unable to deliver.
Financials and supply chain:
Parties may now want more of a focus on how the supply chain works and to understand how the supply chain is accountable if there are issues with the services.
The party receiving the service will rightly want to understand how the supplier is going to provide the service to the standard agreed in light of Covid-19 and the added pressures of rules placed on individuals and businesses alike.
Ultimately, Covid-19 has created more issues for customers to think about regarding a supplier’s performance. Existing and new SLAs will need to be updated and adapted to cater for Covid-19.
However, a lot of businesses may be more tolerant of change, particularly temporary changes to the services they receive under a contract. There is an element of empathy with all fellow human beings during these unprecedented times.
Even if a business does not seek to terminate a contract due to a change in SLAs at the current time, they may do so if service levels are not resumed after a reasonable period of time.
We would advise it is more important than ever to maintain good levels of communication to assist and aid all business relationships and negotiations.
If you have any questions regarding Service Level Agreements, please don’t hesitate to contact a member of our Commercial team today.