Guideline on Service Agreements: Essential Elements

Disclaimer

About this Guideline

The Guideline on Service Agreements: Essential Elements provides advice, guidance, practical examples and templates for individuals charged with developing a service agreement or reviewing a service agreement drafted by the other party in an evolving service relationship. A companion document, the Guideline on Service Agreements: An Overview, provides senior executives and managers with key concepts to consider when establishing service agreements.

The Guideline is the result of extended consultation with departments and agencies, and is part of the Treasury Board of Canada Secretariat (TBS)'s efforts to support the development and management of service agreements. It is one of a series of guidelines to support client-centred service and service excellence, and forms part of TBS' suite of service policy instruments. This Guideline supports the Directive on Internal Support Services and will also support organizations in pursuing consolidation and greater efficiencies in the delivery of services.

1. Introduction

The approaches outlined in the Guideline on Service Agreements: Essential Elements reflect current best practices from the private sector, other jurisdictions, and consultations with government departments. This Guideline supports the Directive on Internal Support Services and will also support organizations in pursuing consolidation and greater efficiencies in the delivery of services. The Guideline recognizes that although the use and applicability of service agreements should be standard government-wide, service agreements themselves should be tailored to the circumstances and requirements of the participating departments, the various collaborative arrangements they may use, and the complexity of the service relationship. The goal of this Guideline is to help service managers and executives produce effective agreements that support client-centered, well-managed services.

This Guideline outlines a flexible approach to developing service agreements tailored to the specific requirements of a particular relationship and/or the complexity or scope of the service relationship. Application of the approaches described in this Guideline should improve the consistency and clarity of service relationships across government.

Background

Did You Know?

A service is the provision of a specific output, including information, that addresses one or more needs of an intended recipient and contributes to the achievement of an outcome.

For example, Public Works and Government Services Canada's Shared Travel Service Initiative (STSI) books air reservations (specific output) through its call centre and its on-line self-service booking services (set of actions) for all government employees (the recipient) in support of its program delivery responsibilities (outcome).

A service agreement is a formal agreement between two or more parties (e.g., between departments, between a department and a common or shared service provider, or between various levels of government) that articulates the terms and conditions of a particular service relationship. The term “department” applies generically to organizations listed in the Financial Administration Act, Schedules 1, 1.1, and 2.

Service agreements serve three primary functions:

  • Articulating the expectations of the parties to the agreement.
  • Providing a mechanism for governance and issue resolution.
  • Acting as a scorecard against which to examine performance and results.

Note

Although the principles and elements involved in a service agreement between two government departments are equally applicable to service arrangements with external non-government organizations (NGOs) or private sector entities, these types of arrangements are typically governed by a legal contract, a grant or contribution agreement, or through an invoice or sales agreement. These types of contracts and agreements are not within the scope of this guideline.

Service agreements can enhance governance, accountability, and service quality by clearly defining roles, responsibilities, processes, and performance expectations. The practice of establishing service agreements is strongly recommended in any type of client / service provider or collaborative service relationship.

This Guideline applies to client/provider arrangements in which a Government of Canada service is provided by one department to, or on behalf of, another department; when two or more departments collaborate on a service initiative or project; or when a province or municipality delivers a service for or jointly with a federal government department, or a department provides a service to a province or municipality. It reflects the current operating and policy environment and will be updated to reflect any legal and/or policy changes that affect the development and execution of service agreements.

The creation of service agreements is a sound management practice in any type of client / service provider or collaborative service arrangement including:

  • Bi-lateral: service arrangements where one department provides selected services (on a service-by-service basis) to one or more other departments.
  • Co-op sharing: arrangements where a small number of participating departments pool resources (i.e., people or money) to fund a shared resource or a one-time project.
  • Cluster group: arrangements where a number of participating departments jointly fund and govern an ongoing service, a joint procurement, or a project.
  • Shared service: arrangements where a service, typically an internal service, is provided by an organization or unit created with a specific mandate to deliver that service to internal clients. Such arrangements are characterized by an independence that enables equitable treatment of all clients, a client-controlled governance structure and client retained budgets through which they purchase services from the shared service provider.
  • Common services,: mandatory or optional, are offered by a central supplier – a common service organization (CSO) – to support the requirements of departments. Departments must use the mandatory common services listed in Appendix E of the Common Services Policy. Departments may use optional common services offered by CSOs when it makes sense to do so.
  • Arrangements with other jurisdictions: where a province or municipality delivers a service for or jointly with the federal government or alternatively where a department provides a service to a province or municipality in return for a fee.

The term “client” applies generically to both clients in a client / service provider arrangement and to participants in a collaborative service arrangement. The term “service provider” or “provider” applies generically to providers in a client / service provider arrangement and the lead department that is delivering a service within a collaborative arrangement.

This Guideline should be read in conjunction with the following documents:

The Structure of this Guideline

This Guideline is divided into the following sections.

Section 2 outlines the suggested steps for defining a service agreement.

Section 3 identifies key considerations when building a service relationship.

Section 4 looks at the types of service agreements and the situations to which they are best utilized.

Section 5 takes a closer look at the specific elements that should be considered when developing a service agreement – scope, governance, operations, finances, performance, and implementation.

Appendix A provides a checklist of the key elements typically included in a service agreement.

Appendices B to D present examples of the main types of service agreements.

2. Defining and Building the Service Relationship

Important!

Before initiating a service relationship whereby a department is providing a service to or on behalf of another department, the parties to the agreement are encouraged to ensure that they have:

  • The legal mandate to provide the service.
  • The authority to recover cost, if applicable.
  • Revenue re-spending authority, if applicable.
  • Delegated Financial Administration Act authorities for sections 33 and 34 to the service provider as required.
  • Any other necessary authorities, including authority to collect personal information.

A service relationship between two or more parties arises when one provides a service to another, typically on a fee for service basis (client/provider relationship); or when two or more departments collaborate by pooling resources to jointly create and/or deliver a service or project (collaborative relationship).

A service agreement is a formal agreement between two or more parties that articulates the terms and conditions of a particular service relationship.

Defining the service relationship, specifically the nature and scope of the services involved, how the relationship will be governed and operated, finances, and the performance measurement and reporting regime, is therefore, a necessary prerequisite to defining a service agreement.

Developing a service relationship typically involves answers to the following questions:

Important!

Depending on the underlying legislative or policy authority, whether the service provider is a Common Service Organization under the Common Service Policy or not, and/or the funding mechanism in play (appropriation, revolving fund, or net-voting authority), fees or charges for services may be based on full costs, incremental costs, or some other agreed upon basis. For the purposes of this guideline, the term “cost” is used generically. Parties to a service agreement must determine the appropriate basis underlying the service's fee structure.

  • What services am I receiving and for how much? What am I providing and what is the basis of recovery if any? Stable, long-term service relationships are based on win-win propositions. The client receives value for money while the provider successfully delivers the service while covering their costs through appropriation or some other basis of recovery.
  • How will it work? Successful service relationships can sour over seemingly minor operational misunderstandings. Therefore, the parties should clarify governance, relative roles and responsibilities, related decision-making powers and approval processes, and put mechanisms in place to solve and/or mitigate issues in a timely fashion. The implications of client compliance with service provider standards should also be fully understood.
  • How do we get there? Implementation of a new service relationship has an impact on both clients and providers and often demands a level of commitment and resourcing that can stretch the capacity of both parties. Implementation of a new client/provider or collaborative arrangement typically involves changes in roles, responsibilities and processes, the implementation of new technologies or interfaces, the training of users and support staff, and the transfer and/or conversion of data. The parties should define the implementation approach, timeframes, responsibilities, and resource and skill requirements.

Key Inputs

A degree of preparation is required by both parties before they can productively sit down to discuss a service relationship.

Ideally, the clients should have a clear idea of the problem they are trying to solve or opportunity they are wanting to take advantage of and how they expect the new service relationship will help or contribute to these considerations. They should have a good understanding of their current baseline costs and their current and desired levels of service. If there are non-negotiable or unique business requirements (e.g., functions that must be retained, privacy or independence concerns, implementation timelines or deadlines, unique regional or functional requirements), these should be clearly identified. In short, clients need to be good buyers.

Ideally, the service providers will have defined their services offerings (i.e., service inventory), how the service is offered (e.g., basic and optional service packages), how the service is delivered (e.g., channels, minimum technical requirements, transferred and retained functions, business processes), the cost recovery model if applicable, and the implementation approach and activities. The service providers should also determine whether a new client can be accommodated within their existing capacity or whether an incremental investment is required to expand their productive capacity.

In some cases, particularly when new services are involved, the client and/or service provider may not have the information required to fully define all aspects of their service relationship. Service agreements can still be concluded in cases where more analysis or a pilot project is required. However, for the protection of both parties, a process to complete the analysis or pilot should be jointly formulated and articulated in the service agreement. The process should include appropriate off-ramps should the analysis or pilot indicate that a viable win-win relationship is not achievable. It is preferable that a non-viable relationship be abandoned at the outset before significant investments or contractual commitments are made.

Checklist: Defining and Building the Service Relationship

Recommended Practice

  • Undertake a joint planning exercise to define the service relationship
  • Determine the governance and management regimes for each service and for the relationship as a whole

Considerations

  • Number and scope of services included
  • Service levels and performance expectations
  • Length of the service agreement
  • Roles, responsibilities, and accountabilities of each party to the arrangement
  • Notice period and processes for a party leaving the arrangement or for terminating the arrangement as a whole
  • Nature and complexity of the service arrangement
  • Risks associated with the proposed service relationship
  • Experience of the parties in developing and implementing service arrangements
  • Implications to the organization of the implementation of the service arrangement

3. Defining a Service Agreement

Determine the Type(s) of Service Agreements Required

Although individual service agreements can, and should, look very different from one another, they can generally be categorized into three types – a Memorandum of Understanding (MOU), a Master Agreement (MA), and a Service Level Agreement (SLA). The choice of agreement and the relationship to one another depends upon the scope and complexity of the service relationship and services involved.

Important!

Regardless of their complexity, it is strongly recommended that service managers consult expert counsel, such as corporate and legal services, in developing their service agreements.

Within a service relationship, the parties may share, provide, or consume one or more services. The parties can chose to establish one or more service agreements, each of which may encompass one or more services. Service agreements can and should be used to describe all aspects of the relationship. Section 4 describes the types of service agreements and the situations in which each should be utilized.

Complete Service Agreement Terms and Conditions

The articulation of requirements, gaps, expectations, and degree of risk (legal and otherwise) form the basis of the service relationship while the governance and operational structures and processes form the basis of the operational relationship. Important elements of the service relationship, particularly the commitments made by each party to the other, should be included in the service agreement.

Key elements of a service relationship that are typically covered in a service agreement include:

  • Scope: Identification of the services covered by the relationship and often expressed in terms of functions, processes, activities, or projects.
  • Governance: Questions of “Why”, “Who does what?”, “Who decides what?”, and “Who answers for results?”.
  • Operations: Day-to-day activities related to the provider's delivery of the service.
  • Finances: The fee structure or resource pooling arrangements, cost transparency, variances and adjustments, and settlement arrangements.
  • Performance: Identification of outputs and outcomes the parties expect to achieve from the arrangement.
  • Implementation: The activities involved in implementing the services, the support offered by the service provider, the typical timelines and level of effort required, the responsibilities of each party, and the key risks.

Section 4 further outlines the types of service agreements while section 5 provides guidance on the specific elements in each of these areas that could be included in a service agreement.

Checklist: Defining a Service Agreement

  • Document the key elements of the service relationship
  • Determine the type of service agreements required (see section 3)
  • Define service level requirements relative to business needs
  • Identify the terms and conditions to be included in the service agreement using Section 4 and Appendices A through D as a guide
  • Draft the service agreement with the support of your organization's corporate and legal services as required and have them review the draft and/or final service agreement

4. Types of Service Agreements

The speed and ease of developing a service agreement depends on many factors. Service agreements can be put in place quickly and easily when the service relationship is relatively simple and well understood and there are few issues to resolve. However, the preparation of more complex service agreements (e.g., to maximize the use of resources, respond to government-wide planning activities, or support horizontal initiatives between two or more departments) normally requires additional time and effort to complete.

Generally, there are three types of documents that are used to articulate a service agreement: a Memorandum of Understanding, a Master Agreement, and a Service Level Agreement.

Typically:

  • A Memorandum of Understanding (MOU) defines the broad parameters of a service relationship between the parties to the agreement, the service vision, and the exercise of decision-making authorities (see example, Appendix B).
  • A Master Agreement (MA) is an overarching document that sets out the services included, how the bundle of services will be managed, and the operational details that are common for all services. The MA lays the overarching framework for multiple service level agreements, typically one for each service covered by the MA (see example, Appendix C).
  • A Service Level Agreement (SLA) establishes the operating parameters and performance expectations between the parties to the agreements. Normally a SLA is established for each line of service or project (see example, Appendix D).

These documents can be used alone or in combination. The choice of document(s) and their connection to one another depends upon the complexity of the service relationship as demonstrated by the following examples.

Service Agreements in Practice: An Example

As part of its service agreement with a client department to provide or arrange for overseas accommodation and support, Department X establishes one or more SLAs that address items such as communications, housing, office space, and security.

Simple or One-tiered Service Agreement

A simple service agreement is used when the service delivery situation is uncomplicated (e.g., roles and responsibilities are clear, obligations are readily identified and evaluated, and there are few or no risks). A simple service agreement can be as straightforward as a one or two-page MOU between two or more parties, if it addresses certain elements of scope, governance, the financial arrangements, and performance. Inclusion of service levels in some manner is strongly encouraged in even the most basic of service delivery situations.

Medium or Two-tiered Service Agreement

Where the service relationship, management, and delivery are moderately complex, service agreements are normally divided into two documents. The first document – often an MOU – describes the organizational relationships (including governance) and management processes that will regulate delivery of the service. It identifies the commitments the parties are undertaking and establishes the vision, mission, and mandate that frame the service relationship.

The second document, a SLA, delineates the operational specifics of the service, including clear, detailed information about the scope and service levels to be delivered. The SLA sets out detailed performance expectations, including service and performance standards, and acts as the basis for future evaluation activities.

Complex or Three-tiered Service Agreement

Important!

Depending on the complexity of the service arrangement, parties may choose to combine the planning phases. Typically, negotiations for more complicated service arrangements (i.e., “three-tiered” service agreements) take place in phases, with documentation produced at the conclusion of each phase.

Complex service relationships and collaborative arrangements are most appropriately captured through a three-tiered service agreement, typically involving a MOU, one or more MAs, and one or more SLAs. The MOU typically defines the broad aspects of the service relationship between the parties particularly what the parties expect to mutually accomplish through the agreement and how the parties will govern the relationship. The MA sets out the services and/or projects, how the services or projects will be managed, and overarching operational parameters that are common across all projects and services. In most three-tiered service agreements, SLAs are established for each line of service outlining the scope, financial arrangements, and performance expectations.

Figure 1: Examples of Types of Service Agreements

Figure 1: Examples of Types of Service Agreements
Text version: Figure 1: Examples of Types of Service Agreements

Choosing the Right Type of Agreement(s)

No single approach or format for service agreements is suitable for all circumstances. The appropriate form and format are determined by a variety of factors, including:

  • Scope and significance of the agreement: Consider the range of services, products, or functions addressed by the arrangement and their impact on the parties' ability to fulfill their mandates. Identify any limitations to the services under consideration.
  • Complexity of the client/provider or collaborative arrangement: Assess issues around the type of arrangement, the number of parties involved, the complexity of any procurement required, integration with other departments, relative roles, responsibilities, and accountabilities, cost, and political visibility.
  • Type of service covered: Consider the complexity of the function, line of business, or services included in the agreement.
  • Term (start and end date) of the relationship: Assess the risks and impacts related to the duration of the relationship.
  • Risk: Assess the nature and level of risks.
  • Experience: Note the experience of each party in developing and implementing comparable services or collaborative arrangements.
  • Implications of the change: Consider possible consequences for staff, managers, and the department as a whole, including the impact of disruptions on operational and organizational structures.

Checklist: Basic Elements of Service Agreements

  • Legal Names of all the Parties to the Agreement
  • Recitals (elements that typically summarize the mandate, authorities and capabilities of each party; provide useful background information, and; document the parties' general understanding of the agreement (typically “whereas” and “therefore” statements)
  • Definitions
  • Commencement Date and Duration
  • References to Supporting Documents or Agreement(s)
  • Process for Maintaining the Agreement
  • Notice Period and Process for Parties Wishing to Leave the Agreement
  • Designated Officials
  • Signatories

5. Elements of a Service Agreement

Service relationships are generally defined by scope (e.g., services expressed in terms of functions, processes, activities, or projects), governance (e.g., decision powers, roles and responsibilities), operations (e.g., day-to-day operating procedures), financial arrangements (e.g., fee structures, settlement arrangements), performance (e.g., expected outputs, levels of service, reporting), and implementation (e.g., activities, timelines, level of effort).

Across these areas there are key elements, included in a service agreement(s), which together, articulate the service relationship. The elements are described below.

Scope

Important!

Service scope includes any and all services, activities, processes, functions, projects, and initiatives provided by or shared with the other parties to a service relationship. The nature of service scope varies depending on the particulars of the service relationship.

Clarity of scope is at the core of any service relationship. Disagreements regarding the scope, quality, and level of service are common. To maintain a positive relationship, it is critical that the parties have a clear understanding of scope so that the extent of work involved and respective obligations are clearly understood.

Understanding scope starts with the identification of the services covered by the relationship. Service scope may be expressed in terms of functions, processes, activities, or projects.

Moving to a new service arrangement is ultimately a transition from an existing state (i.e., who, what, where, and how the client is currently delivering the service) to a targeted end state (i.e., who, what, where, and how the service provider will deliver an equivalent or enhanced service).

Details are important. To fully understand the scope, the parties to the agreement should discuss and agree upon the following:

  • What services, functions, processes, and activities are in scope? What portions will the provider now deliver? What portions will be retained and delivered by the client?
  • Are there gaps between the scope of the provider's service and the clients' existing in-house service? How will any gaps be dealt with?
  • Are there gaps between existing service levels and the provider's service levels? How will any gaps be dealt with?
  • How will processes change? How will process hand-offs now work between the client and the provider?
  • Are there network, application, firewall, and interface changes required?
  • What are the relative roles, responsibilities, and accountabilities of the client and the provider? What are the impacts on people, including training, job transition, and workplace relocation?
  • What is the preferred channel for delivering each service or function? Self-serve? In-person? Call or e-mail centre? Will there be a shift in service channels over time for efficiencies?
  • Are there transformation opportunities? What projects need to be in scope to realize the potential benefits?

Service Bundles

Service providers may bundle their services to provide options to clients and / or to more closely tie an appropriate fee structure to how the services are consumed.

Basic service package: Typically includes all services that all clients use on a regular basis and at a standard level of service for all clients.

Supplementary services package: Typically includes services that are only required by some of the provider's clients.

Optional service extensions: Typically a function that complements a basic or supplementary service. For example, expert financial advisory services as an extension to a basic reporting service.

Project services: For projects required to transition or upgrade a client, a provider may offer a team of experts to assist the client on a project-by-project basis.

Service level extensions: Where a client requires a level of service (e.g., hours of operation, turnaround times, the reporting frequency) beyond the standard level offered, a provider may offer a range of optional service level extensions.

Unique services: Special services, functions, or features to address a unique, business-critical need for one client.

Where offered, and as part of the service level agreement, each client chooses the packages they need. Alternatively, clients may choose to retain services in-house rather than purchasing options or extensions from the provider.

The objective of the scope discussion is to clearly identify the level of effort involved so that adequate resources can be applied. Clarity of scope will also support operational and implementation planning.

To the extent that the service description cannot be satisfactorily defined at the time the service agreement is prepared, a process to determine scope with an appropriate sign-off process should be developed and included in the agreement. Opting-out clauses should be considered as a full investigation of scope and related costs may affect the feasibility of the arrangement.

In particular, clarity of scope is important to reduce the risk of disputes. This is particularly important in arrangements where defining scope is a challenge and/or scope is a significant driver of cost and operational complexity.

Scope Elements

Depending upon the complexity of the service arrangement, a service agreement may include provisions for some or all of the following scope elements:

  • Vision or purpose statement: Articulate a clearly defined vision statement and associated business strategy to ensure that participants agree on what they expect to achieve from the service relationship and to provide a consistent reference point for managing the relationship.
  • Declaration of key principles: Outline the principles or values that underpin the development and implementation of the service relationship. The declaration can include statements about the mode of operation, commitments to particular business practices, and operational practices such as transparency and openness.
  • Services and activities: Identify the services, functions, processes, activities, or projects that are subject to the agreement. Where the service provider is already delivering the service and scope is well understood, simply referring to the name of the service may be sufficient. In more complex environments, a detailed description of the service or activity may be required. Equally important is the identification of services or functions that are out of scope and likely to be retained and performed by the client. There may also be new functions or activities that the client may need to develop in order to manage the service relationship (contract management) and these should be clearly noted.
  • Service bundles / service inventory: In more complex environments, service providers may bundle their services to provide options to clients or to more closely tie an appropriate fee structure to how the services are consumed (see box on service bundles). To the extent that these exist, indicate the bundles chosen by the client.
  • Tiered service / delivery channels: Specify how services will be provided to users, support escalated for complex or non-standard transactions (e.g., self-serve, help desk, core professionals, expert resources), and which channels will be used for each service tier (e.g., web, mail, e-mail, phone, fax, in-person) including availability and accessibility commitments. If the client will be required to adopt particular service provider standards (e.g., processes, applications, communications or interface protocols), the implications and timeframes for adoption should be specified. If there is a plan to shift clients to more cost effective channels over time, these should also be clearly defined.
  • Relative roles and responsibilities: Outline the expected roles and responsibilities for both client and provider in the new service arrangement. This is particularly important for services retained by the client.
  • Key service assumptions: Include any other requirements or assumptions that provide clarity or specificity about scope. Some examples include assumptions or requirements related to regional operations or support for remote locations, unique business requirements, or any specific deviations from a provider's standard service or service levels.

Checklist: Scope Elements of Service Agreements

  • Vision or Purpose Statement
  • Declaration of Key Principles
  • Services and Activities
  • Service Bundles / Service Inventory
  • Tiered Service / Delivery Channels
  • Relative Roles and Responsibilities
  • Key Service Assumptions

Governance

Important!

Governance plays a different role at different stages in the lifecycle of a relationship. Consider:

  • Strategic Governance: A critical role required to set the overall directions and delivery model for the service arrangement and relationship.
  • Transitional and Project Governance: To drive the transition and any related transformation initiatives toward the end-state vision for the service relationship.
  • Operational Governance: Responsible for operational direction and oversight within the overall directions set by strategic governance and includes the accountability framework through which parties meet agreed expectations.

Strategic governance can be established early on to set the parameters of the service relationship. It continues throughout the lifecycle of the relationship, supported first by transitional governance followed closely by operational governance.

Governance relates to the standards and processes that help achieve goals by enabling decisions to be made, and authority and accountability to be shared. Governance also refers to the structures that support these standards and processes, such as an Assistant Deputy Minister (ADM) Steering Committee or Senior Management Board.

Governance plays an integral role in developing, implementing, and managing a successful service relationship. Governance is like steering a ship – setting the course toward the destination and then making frequent steering adjustments to guide the ship through the currents and shoals along the way.

In developing good governance and accountability arrangements, it is helpful to focus on three key questions:

  • Who decides what?

    Decision making is at the heart of governance. Governance deals with the ways in which decisions are influenced and taken. Governance includes both authority (formal roles) and influence (informal and advisory roles) in decision making. Governance is a continuing process that extends beyond policy decision making and into implementation and operational decision making.

  • Who does what?

    To be effective, a governance arrangement has outcomes that are seen as legitimate by the key stakeholders – in this case, clients and service providers. Legitimacy is derived from many factors including a clear and accepted process leading to decisions made by the appropriate bodies or persons; assurance that the views and interests of all parties are taken into account; and a right of recourse if stakeholders are unhappy with the process or outcomes. These requirements are factored into the structuring of the governance arrangement, its form and composition.

  • Who answers for results?

    Accountability is taking responsibility for performance in light of agreed expectations. Authority can be delegated but accountability cannot. For example, if the ship runs aground, the captain is accountable, no matter who was at the helm.

The governance elements in a service agreement are designed to ensure that the parties have a clear understanding, not only of who decides and who does what, but also when and how each will act in terms of enabling the service relationship. This will help ensure transparency and accountability, promote flexibility, and enable the parties to adapt and adjust the relationship and agreement in a systematic way as circumstances require.

Governance Clause: An Example

This section deals with overall governance and the respective roles and responsibilities of departmental committees to address common service delivery issues.

Integrated Services Committee (ISC):

  • The ISC consists of a Director General or equivalent official from each department. It is chaired by the Director General, Corporate Finance, Planning and Systems of Department X. The ISC meets four times a year or more frequently as required.
  • The mandate of the ISC is to:
    1. Assess the operation and implementation of this MOU.
    2. Provide direction and guidance on common service policy and delivery issues.
    3. Serve as the dispute resolution body.
    4. Review proposed changes in common service charges, related costs, or service levels.
  • The ISC will consider broader common service delivery issues resulting from changes in government policies and guidelines and the direction of the appropriate ADM-level Council.
  • The department's Planning and Coordination Division will act as ISC Secretariat.

Governance Elements

Depending upon the complexity of the service arrangement, a service agreement may include provisions for some or all of the following governance elements:

  • Form and structure: Ensure that the form and composition of the governance bodies – which may include one or more committees or boards – reflects the complexity of the arrangement, the capacity of the parties to participate, and the need for involvement from specific individuals or organizations. Risk is a key factor used to understand the complexity of the arrangement. Secretariat support for governance committees, if required, should be described.
  • Roles and responsibilities of individual members: Outline the expected contributions of individual members of the governance body and their commitments, including time, expertise, and resources.
  • Roles and responsibilities of the governance bodyas a whole: Ensure that the parties agree on the mandate and decision-making authorities of each governance unit such as committees, sub-committees, or board. Confirm the interactions and reporting relationships. Since identifying and effectively managing risks is a major part of ensuring the health of a service arrangement and relationship, assessing risks and managing mitigation strategies are typically key responsibilities of a governance body.
  • Relation of governance bodies to internal and external stakeholders such as service delivery managers and client groups: Articulate in the governance framework when and how governance units such as boards and committees will be expected to interact with stakeholders, including the means by which stakeholders affected by the service relationship can communicate comments and concerns to the governance body.
  • Accountability: Describe the specific accountabilities of both parties and any delegations of authority that are required to support the service. Accountability provisions may include an open and transparent performance management framework, explicit standards or performance expectations, external benchmarking, independent verification or audits, service management and client relationship management regimes and expectations, consequences (including financial consequences in the case of external service provider relationships), and dispute resolution processes.
  • Decision-making processes: For key governance decisions, specify the timeframes and mechanics of the decision-making process. Examples may include annual budget approvals, investment prioritization decisions, and decisions on strategic directions.
  • Dispute resolution process: Include provisions for the parties to resolve disputes in good faith. Also describe an agreed-upon escalation process should resolution prove elusive.

    Dispute Resolution: An Example

    Department A delivers services to Canadians on behalf of a program administered by Department B.

    • The Parties agree to make all reasonable efforts, in good faith, to resolve any dispute arising from implementation of this agreement through informal discussions and the development of mutually satisfactory options. Matters that cannot be resolved at the working level or that impact on multiple areas of interest will be referred to the Steering Committee (or Director General, or Assistant or Associate Deputy Minister) for decision.
    • Where Parties fail to resolve the matter to their mutual satisfaction, they agree to refer the matter to the Deputy Head, Department A and the Deputy Head, Department B.
    • Any unresolved disputes will be reported to their respective Ministers at such times as it is deemed appropriate or required.
  • Amendment and termination: Identify who has the authority to revise or terminate the agreement, what form, format, and processes will be applied, and the roles and responsibilities of the parties after the agreement has been terminated. This may also include provisions specifying specific off-ramps should certain criteria be met or not met.

    Amendment by Mutual Consent: An Example

    Department A delivers services to Canadians on behalf of a program administered by Department B.

    • This MOU may be amended in writing at any time with the mutual consent of the Parties, as represented by their Designated Representatives.
    • The Annexes to this MOU may be amended in writing at any time with the mutual consent of the Parties, as represented by their Designated Representatives or their respective delegates.
    • Amendments will be effected as follows:
      1. The Party proposing the change will submit in writing to the other Party the proposed amendments to any clauses in this MOU.
      2. The proposed amendments will be reviewed by the other Party and contentious issues will be negotiated by the Designated Representatives or their respective delegates.
      3. The formal amendment will be signed by both Parties.
      4. In the event a dispute arises that cannot be resolved, the Dispute Resolution provision will apply.
  • Audit and monitoring activities: Specify any mechanisms or processes to evaluate the execution of the service agreement to ensure that the key terms and conditions are being fulfilled.

Checklist: Governance Elements of Service Agreements

  • Form and Structure
  • Roles and Responsibilities
  • Stakeholders Relationships
  • Accountability
  • Decision-making Processes
  • Dispute Resolution Process
  • Amendment and Termination
  • Audit and Monitoring Activities

Operations

Operations covers all the day-to-day activities related to the provider's delivery of the service. As long as the client receives the scope of services at the level of service outlined in the service agreement, day-to-day operations are generally not a concern.

In developing the service agreement, consider not only what happens when things go right, but also what will happen when things go wrong. Despite the best efforts of client and provider, things can go wrong, such as the late processing of a transaction due to staff shortages to a complete service disruption due to a disaster.

In all cases, plans are needed to ensure that issues are identified quickly, escalated to the right level for action, and that action is taken to resolve the issue as soon as possible. Communication between provider and client is critical.

Service managers and their service providers should discuss and identify the most likely and most critical issues that might arise, agree upon a resolution process, and incorporate these in their service agreement. Typical issues that can arise include:

  • Day-to-day user issues such as slow system response times, to posting errors, system bugs, and report printing problems
  • Channel problems including web inaccessibility, slow call centre response times, lack of access to provider staff, and long in-person wait times
  • Transactions that do not comply with policy
  • Security or privacy breaches
  • Unexpected demand and/or volumes change
  • System outages
  • Specific regional issues
  • Any other major service disruption

Depending on the nature and complexity of the service arrangement, the operational elements included in the service agreement may be few, particularly if it is an existing stable service and operating roles and responsibilities are clear.

Important!

When negotiating the privacy elements of a service agreement, it is highly recommended that service managers consult their privacy and legal experts. In most cases, a Privacy Impact Assessment (PIA) will be required for a new service arrangement. Managers should consult the Directive on Privacy Impact Assessment and related policies, guides and tools.

Operational Elements

Depending upon the nature and complexity of the service arrangement, a service agreement may include provisions for some or all of the following operational elements:

  • Policies and signing authorities: Clearly specify the policy suite and delegations of authority that will apply to transactions processed by the service, particularly any client-specific policies or delegations that are more restrictive than government-wide standards. Add specific signing or decision-making authorities to the agreement to cover special circumstances such as approval processes in project-based agreements. Include the process that will be used to escalate and resolve compliance issues should the provider receive a request to process a transaction that does not comply with policy or in-force delegations.
  • Infrastructure: Include precise information as to the nature and quality of IT or any other equipment and/or asset involved and who will be responsible for providing, maintaining, and disposing of the equipment. This prevents confusion, omissions, and conflict as the service agreement is executed.
  • Work sharing: Clearly identify roles and responsibilities and document the impact on the service agreement's financial arrangements. Work-sharing arrangements can pose problems if not well thought-out and documented.
  • Customer relationship management: Document the customer relationship management and client-provider communications processes that will apply (e.g., service requests, resolution of user issues, billings, changes in scope, additional services, and newsletters) and the standards that will apply such as response time and resolution times. These provisions should also describe any annual planning or work plan processes supporting the management of the service agreement as a whole, such as change management and adjustments to scope. An annual risk assessment and mitigation plan may also be appropriate in complex arrangements.
  • Privacy: Specify any personal information held by the provider and the purpose for which it is collected, used, retained, and disclosed. Departments that provide services to or on behalf of another department will require access to data related to the delivery of those services, including personal information. When sharing of information is necessary and desirable, and is lawfully authorized, provision may be made within the service agreement.

    Access to Information and Privacy Clause: An Example

    • Department X may request and keep copies or originals for the duration of the agreement where this is deemed necessary for operational purposes.
    • Department X will be considered to be the office of primary interest and any requests received under the Access to Information Act will either be transferred there for processing, along with a copy of the relevant records, or will only be processed by the service provider after consultation with Department X. This also applies to any reports and findings relative to the service. The service provider will also consult Department X before releasing any information subject to the agreement under the Privacy Act.
    • It is understood that Department X owns all the data and files developed and used by the service provider in delivering the service on its behalf and that the original data and files will be returned to Department X upon conclusion of the agreement. However, the service provider may need to retain copies for as long as legal and operational requirements dictate. It may, for example, need to keep records responsive to a Privacy Act request for a minimum of two years.
    • The service provider, in cooperation with and at the cost of Department X, also undertakes to complete a Privacy Impact Assessment (PIA) for any new or increased collection, use, disclosure, or retention of personal information connected to the delivery of the service, update the PIA as required during the course of the agreement, and implement measures judged necessary to ensure the privacy of individuals in relation to the delivery of the service.
  • Security: Outline appropriate security measures that will be undertaken to safeguard assets and information used in the delivery of the service and in accordance with Treasury Board guidelines. Security should be involved during the design process to be fully aware of any possible implications for the organization.
  • Disclosure and use of information: Where information or data may be a sensitive issue, address the roles and responsibilities of the involved parties with respect to the protection of sensitive information or data.
  • Specific requirements: Specify any unique operational provisions required to support a particular region or business requirement.
  • Service disruptions / Business Continuity Plans: Include requirements for the provider to have a Business Continuity Plan (BCP) in place. The ability to quickly adapt and add new services in a time of emergency, such as to provide disaster assistance or the ability to continue to provide service during such a time is an important consideration for the service agreement.

Checklist: Operational Elements of Service Agreements

  • Policies and Signing Authorities
  • Infrastructure
  • Work Sharing
  • Customer Relationship Management
  • Privacy
  • Security
  • Disclosure and Use of Information
  • Specific Requirements
  • Service Disruptions / Business Continuity Plans

Financial Arrangements

Important!

For all types of arrangements, service providers should ensure that they do not enter into arrangements where the cost of doing so is greater than their available funds, be it appropriated funds, fees, or a mix thereof. This requires a solid understanding of their underlying cost model, the scope of work to be delivered, and the cost of taking on the new business (including but not limited to incremental costs).

A number of financial arrangements are in use across the types of client/provider and collaborative service arrangements described in Section 3: Defining a Service Agreement. Different financial arrangements are more or less suited to particular types of arrangements.

In crafting an appropriate financial arrangement, the following principles should be applied to the extent possible:

  • Provide stable multi-year funding for the service provider
  • Minimize administrative burden
  • Ensure cost transparency and clear accountability
  • Ensure adaptability and scalability
  • Provide incentives for desired behaviours particularly around service efficiency and providing value for money.
  • Accommodate funding for investments to keep services current to client needs and/or shifts in service delivery methods and channels.

Did You Know?

“Funding” deals with how the service provider acquires the resources necessary to deliver a service or a client acquires the resources necessary to purchase a service.

“Cost” refers to the resources a service provider consumes to deliver a service.

“Price” or “Fee” refers to the amount charged to clients for the services they have purchased (typically incremental or full cost).

Departments must ensure that they have the legal mandate to provide a service before expending departmental appropriations in delivering or collaborating in the provision of the service. Departments that provide services must also have the authority to recover cost and to re-spend revenue, if applicable. Any cost recovery model used must be consistent with existing cost-recovery authorities and Treasury Board policy.

Agreement on the basic funding model is the first step in concluding a financial arrangement between a client and a provider. Three basic funding models, in various combinations and with some variation, cover most client/provider and collaborative service arrangements:

  • Fee-based model: In this model, budgets remain with the client who pays for services based on actual usage. This model often requires detailed invoicing of services and can lead to disputes over volumes and actual services consumed versus the “quality” of those services. It requires that significantly more detail be built into a service level agreement and can be extremely complex to administer. The service provider typically has the expertise and capacity to support a defensible cost accounting regime capable of calculating the fee structure, particularly if services are offered in bundles and different fee structures are applied to different bundles. However, this model offers the greatest level of control over services the client will pay for, although it is also more difficult for the client to estimate the cost of these services for the year. Unless spending is very closely monitored, the client may end up paying more than budgeted for the year. Fee-based models are typically found in bilateral and shared service arrangements, arrangements with other jurisdictions, and may also be used in common service arrangements for optional service offerings.
  • Pooled resources model: In this model, the parties typically develop and agree on an annual scope of work for the service or project in question. The human resource requirements and costs of the annual plan are estimated and allocated usually based on their relative sizes (ability to pay) or use of the service. Participants make financial, human resources, or in-kind contributions as agreed by the parties. The program or project office is responsible for managing within the established budget. This model provides funding certainty for the year, is easy to administer, and clearly links contributions to an agreed-upon scope of work. The model requires diligent participant monitoring of progress against budget and tends to be less flexible to emerging or urgent demands that fall outside of the annual planning cycle. Pooled resource models are typically found in co-op sharing and cluster group arrangements.
  • Appropriation-based model: This is the simplest model to administer for both the client and service provider, but only pertains to service arrangements within the federal government and typically only to providers of common services. Appropriations are allocated to the service provider on an annual basis. The service provider has stability of funding, but not a great deal of flexibility for adapting to changes in client demand. The ability to invest in service enhancements is typically constrained and over time, it is possible the service will become stale relative to evolving client requirements. Clients do not need to worry about the cost of these services, but they tend to have limited say in the scope or quality of the services delivered. Over time, it can be difficult to tie the appropriation back to the value of the service being delivered to a specific client. Since there is no direct link between cost and service outputs, there tends to be very little cost transparency. Savings over time remain with the service provider, not the client departments. Appropriation-based models are typically found in common services and, in some limited cases, could be used for certain areas of a shared service arrangement.

Important!

When negotiating the cost recovery elements of a service agreement, it is highly recommended that managers consult their finance group.

In general, as client control over the funding of the service increases, the complexity to administer the funding also increases. For example, a flat fee based on estimated annual usage would tend to be easier to administer and would provide a more predicable and stable flow of funding. However, there is little connection between user behaviour and fees charged. A fee for service model that is calculated on actual transaction volumes would be complex to administer but could be tailored to drive desired user behaviours. Such a model would also be more adaptable and scalable and would be more cost transparent. Based on lessons learned from other public and private sector organizations, most organizations are moving away from “detailed” invoicing for services based on usage, to models that are simpler to administer.

It is not unusual to see mixed funding models that try to take advantage of the best features of the three noted above. For example, in shared service models in the private sector and in provincial governments, some core functions are funded through a fixed appropriation while volume-dependent functions are funded through fee-based cost recovery. The shared service may negotiate a service arrangement with a client for the year based on a client's service requirements for “core” and any “additional” services. Service volumes could be negotiated within a maximum and minimum range. Clients that exceed the maximum would have to pay an additional amount based on an agreed-to rate structure. If a client does not reach the minimum, there could be an option to receive a refund or to carry over the unused portion for the next year. Investments to keep the service current could be managed on a pooled basis or through an investment premium included in the cost recovery calculation.

Financial arrangements are the most critical aspect of building a win-win relationship. They are very difficult to get right and modifications may be required to accommodate changing conditions. It is very important that flexibility and adaptability be built into the service agreement to ensure that parties can adapt the financial arrangement to maintain a strong relationship.

Service Bundles: Typical Fee Structures

Fee structures typically reflect how services are consumed. As a result, it is not unusual to see different fee structures attached to the different service bundles described in Section 4. The most common fee structures for each bundle are:

Basic service package: In a cost recovery model, the fee structure is typically based on a client's expected volumes for a period of time (usually a year) by a standard rate that reflects cost recovery. In an arrangement where the participants pool resources, the fee is based on an allocation of the total budget based on the client's relative size or transaction volumes.

Supplementary services package: This package is based on expected client volumes per additional service by a standard rate that reflects cost recovery.

Optional service extensions: Most optional service extensions involve incremental advisory services with a fee structure based on expected usage multiplied by a standard per diem rate that reflects cost recovery.

Project services: Generally a firm, all-inclusive price is used (for example, per diem rate multiplied by estimated effort) plus estimated materials / travel costs or a fee that covers time and material (for example, per diem rate multiplied by actual effort) plus actual materials.

Service level extensions: Where there is a specific output involved, such as additional reports, a standard rate is normally multiplied by a metric per output (for example, fee per report). Where there is no specific output (for example, extended help desk hours), a standard rate x is often multiplied by the expected volume.

Unique services: Full cost for the creation and operation of the unique service, function, or feature.

Financial Arrangement Elements

Depending upon the complexity of the service arrangement, a service agreement may include provisions for some or all of the following financial arrangement elements:

  • Funding model: Ensure the funding model to be used as the basis for the financial arrangement is clearly described in the service agreement. A clear description of the model used, whether it is fee-based, pooled, appropriation-based, or another mix, should be included. It is essential that both parties agree on the desired results and behaviours they wish to encourage in order to determine the best funding model and the basis on which the price or fee is being determined.

    Terms of Payment: An Example

    Department X undertakes a specific research project on behalf of Department Y.

    Terms of Payment

    Payment by Department Y will be made upon receipt and verification of periodic claims for payment. Claims will be made on delivery of specified deliverables or as directed by the Steering Committee. The estimate of Department X financial requirements is based upon a budget forecast that is satisfactory in form and detail to Department Y and is set out in the Project Cost Projections. Final payment will be made following receipt of all the deliverables identified in Schedule A.

  • Fee structure: Outline charges for the service provided and establish how those charges will be determined. Discussions should focus on the nature of the services being provided, how those services are bundled and offered to the client, and the most suitable price or fee structure for the particular type of service or bundle (see box). Baseline assessments of client demand for services, if possible, will allow the parties to establish an agreement that accurately accounts for the client's needs and constraints. Include provisions or a process to periodically review and if necessary, adjust the fee structure. Because the fee represents a transfer of resources between the parties, negotiations need to address the exact process, terms, and conditions that apply to determining the fee such as cost transparency and resource sharing. A fee links resources consumed to outcomes achieved.
  • Resource pooling arrangements: Document how the scope of work will be determined and costs accumulated. Include a prioritization process whereby participants agree on the scope of work and total budget. The formula for determining each participant's contribution should be included. The costing approach may also be discussed.

    Resource Pooling Arrangement: An Example

    Department X will provide, on a secondment basis, a full-time resource (Individual Y) for a period of twelve (12) months, starting on a date to be determined and agreed to in a secondment agreement.

    The duration of this secondment may be amended by mutual agreement. Department X agrees to cover the salary and related costs including travel and training for Individual Y during the secondment period.

    Department X will also provide statistical advisory services and support to the project team in conducting the Feasibility Study on a cost-recovery basis as requested. It is anticipated that this will involve between 5 to 10 person-days at the EC-07 level, between May 21 and August 25.

  • People and in-kind contributions: Document any commitments for resource transfers and in-kind contributions. This typically happens in resource pooling arrangements but can also occur in fee-based models. It is possible to have a service agreement price of “nil” dollars. Careful documentation of all resource transfers and in-kind contributions, such as use of office space, will clarify among the parties the source and nature of the resources contributed to the agreement. If there are minimum requirements for staff, such as secret clearance or accommodation, spell these out.
  • Incentive pricing: Provide an incentive through your fee structures for desired behaviours. For example, to encourage use of lower-cost channels, fees may be less for accessing a service online rather than in-person. To reduce the number of customizations, fees for a custom report may be significantly greater than for a similar standard report. The parties should determine the behaviours they wish to encourage or discourage to make overall service delivery more efficient and effective, and incorporate appropriate incentive pricing into the service agreement.
  • Investments in service enhancements: Articulate how and through what means the services in question will be maintained and upgraded to current client requirements and how those investments will be funded. An annual investment planning and prioritization process should be articulated in the service agreement. Funding for service enhancements are typically managed through prorated contributions in the case of a pooled resources model or are built into the costs supporting the cost recovery fee calculations.
  • Cost transparency: Identify all costs in the early planning phases to ensure a sound basis for negotiating an acceptable resource level. This may include a right to audit or review the calculation and accumulation of costs.
  • Variances and adjustments: Anticipate the types of changes the service agreement may be required to address, such as changes in scope, quality, and volume. Embed appropriate procedures for dealing with variances and adjustments within the service agreement so that each party has flexibility to respond to changing conditions.
  • Contingent funding: If the delivery or consumption of a service is contingent on either the client or provider obtaining a funding approval through an internal process, Treasury Board submission, or a Memorandum to Cabinet, this should be noted and appropriate off-ramps should be provided if the necessary funding is not obtained.

    Contingent Funding: An Example

    Department A delivers services to Canadians on behalf of a program administered by Department B.

    The agreed upon financial arrangements will take effect upon Department A obtaining Vote Netting authority to charge and re-spend, and will be retroactive to the beginning of the fiscal year in which Department A obtains the Vote Netting authority.

  • Consequences: In service provider arrangements with other jurisdictions, financial penalties for late delivery or falling short of service levels may be used. Where consequences are to be used, clearly spell out when and how penalties will arise and how the penalty will be calculated.
  • Settlement arrangements: Be clear about processes and mechanisms that will be used to settle any charges, including billing arrangements, payment schedules, late payments, and disputed charges. Promote the prompt and accurate settlement of accounts. Consider including interdepartmental settlement / financial codes to which charges are to be billed in the service level agreement. The Treasury Board Secretariat (TBS) Guide to Costing also identifies principles and best practices associated with costing services. Cost is one of a number of factors influencing price, it is nonetheless a key component in determining the fees that will be charged under the service agreement.
Service Linkage to Payment: An Example

Department F acknowledges that on a quarterly basis, Department G will initiate an inter-departmental settlement request to Department F in accordance with this MOU to recover project charges and costs incurred by Department G for any work performed during the quarter.

Department F will effect settlement within 30 days of its receipt of the request.

Department G may initiate a settlement request to Department F, up to a maximum of $50,800 for Stages 1 and 2 as follows:

  • Stage 1: $17,400 for professional services and $8,000 for authorized travel; sub-total $25,400
  • Stage 2: $17,400 for professional services and $8,000 for authorized travel; sub-total $25,400

All settlements and conduct of the MOU may be subject to audit and evaluation by staff of Department F's Office of the Inspector General Audit Division.

Checklist: Financial Arrangement Elements of Service Agreements

  • Funding Model
  • Fee Structure
  • Resource Pooling Arrangements
  • People and in-kind contributions
  • Incentive Pricing
  • Investments in Service Enhancements
  • Cost Transparency
  • Variances and Adjustments
  • Contingent Funding
  • Consequences
  • Settlement Arrangements

Performance

Performance Measurement Framework: An Example

Department A delivers services to Canadians on behalf of a program administered by Department B.

  • Department A will develop and implement an ongoing performance measurement strategy which will identify pertinent performance indicators and measurements to monitor the service and to evaluate the level of success of the service. These may include indicators of client satisfaction, timeliness, accuracy, and quality as well as volumes and program application market penetration and efficiency.
  • Department B and Department A will jointly develop a research framework to effectively measure and target strategies to improve services to Canadians.
  • The Parties agree to manage performance in order to ensure continued service excellence.
  • A full description of performance criteria and activities for ongoing performance management is outlined in Appendix D

The success of any service relationship can be assessed by its performance against target. Performance can be defined “as what a government did with its resources to achieve its results, how well those results compare to what the government intended to achieve, and how well lessons learned have been identified.”See footnote 1

Performance, in terms of a service agreement, identifies outputs and outcomes the parties expect to achieve from the arrangement. Together, outputs and outcomes demonstrate how well the service arrangement has achieved its objectives. The collection of performance information is critical to ensuring continuous improvement of service delivery.

Research and experience indicate that establishing and monitoring performance against service standards and measuring client satisfaction are two of the most valuable activities an organization can undertake to promote service excellence. Service standards document a provider's commitment to the level of performance clients can expect under normal circumstances. Client satisfaction measures a client's actual and perceived assessment of the quality of the service received against their expectations.

Service standards and client satisfaction measurement are key components of a client-centred approach. Service standards and client satisfaction measures for services to external clients have been in use since the 1990s. In a client-centred approach, internal services should also be designed around client needs and expectations within fiscal constraints and thus standards and measures are equally applicable. Under the Common Services Policy, all common service organizations (CSOs) are accountable for developing, in consultation with clients, meaningful and visible standards. The use of standards and performance reporting against those standards can be a valuable addition to a service relationship.

A service agreement should document service standards and client satisfaction measurement procedures for the client of the service, as well as performance measurement procedures.

Did You Know?

Performance Elements

Depending upon the complexity of the service arrangement, a service agreement may include provisions for some or all of the following performance elements:

  • Performance targets: Specific performance targets should be established in the service agreement and should cover both service standards and client satisfaction measures. Depending on the nature of the service involved, performance targets may be expressed in terms of volumes per period of time, cost savings, response times, expected results, service levels, outputs, outcomes, or qualitative benefits realized. Targets should be measurable at a reasonable cost. Targets should be comparable to various cost, service level, and satisfaction baseline measures to clearly document the level of improvement achieved over time.

    Targets should provide meaningful information about the service to both the client and the provider and, ideally the continuous improvement of service performance. To this end, targets should address the client's overall experience from start to finish, rather than isolated steps in a process, particularly where more than one organization is involved in delivering the service. Many factors can affect decisions about specific service standards and client satisfaction measurement activities. Specific operational metrics such as tracking how long an application takes to be assessed or processed can help the parties determine appropriate service standards and allow them to monitor specific parts of the process in more detail.

  • Performance measurement and reporting: The performance measurement and reporting regime for a service agreement should be structured to ensure the information available to participants is meaningful, timely, impartial, and consistent with standardized government reporting, including input into the Management Accountability Framework and any legislative and policy-based reporting requirements, such as the Policy on Management, Resources and Results Structures. Communication of performance measurement results to clients (end-users and stakeholders) and staff demonstrates transparency, accountability, and a commitment to quality service.
  • Tying performance to Performance Management Agreements (PMAs): Depending on the scope of the initiative, the success of a significant service relationship codified as a PMAs goal of a senior executive should be considered. Performance objectives could then cascade down to the PMAs of responsible individuals in their department. Tying service relationship goals into PMAs will encourage the correct level of management attention which is often a prerequisite for success.
  • Identifying responsibility and processes for monitoring service standards and client satisfaction: To promote clarity, rigour, and continuity requires clear documentation of who is responsible for monitoring performance and satisfaction, together with approaches, mechanisms, and measures for assessments, how frequently standards and satisfaction will be measured, and what reporting and follow-up will look like. Methodologies should be appropriate to the service, the channel, and the end-user and stakeholder. Operational issues and items can generally be assessed through standard quality tools, including cause and effect and fault-tree analyses. Processes should be proportional to the service.
    Important!

    Client satisfaction measurement is considered public opinion research and as such managers should consult the TB Communications Policy of the Government of Canada and associated Procedures for Planning and Contracting Public Opinion Research. Public opinion research is a mandatory common service and as such, departments must coordinate their planning, contracting, and implementation of their research requirements with PWGSC.

  • Evaluation and reporting frequency: Measuring performance, including service standards and client satisfaction, on a regular basis informs future action and provides the basis for ongoing improvement. A formal schedule for reporting on short-, mid-, and long-term performance is typically included in each service agreement with separate schedules prepared for each SLA negotiated in accordance with any policy-based reporting requirements. Regular measurement and reporting of client satisfaction and client input through surveys or focus groups allow the parties to monitor progress and make adjustments as required. The frequency and nature of client satisfaction and input measures should be outlined in the agreement.
  • Benchmark the service delivery process: Comparisons of the performance of the service covered by the agreement with the performance of similar operations helps participants identify strengths and weaknesses and promotes improved processes and outcomes. Internally, benchmarking can also be used to assess changes in the performance of service delivery by the department over time.
  • Performance of the arrangement: A key role of most governance bodies is to periodically evaluate the performance of the service delivery arrangement, from both the effectiveness of the arrangement (e.g., reviewing performance measures and client feedback), and the effectiveness of the governance processes and structures to review how the relationship has operated and determine whether it is still the best way to do business.
  • Risk reporting: Ongoing monitoring of risk and mitigation of risks is part of evaluating the arrangement and includes a link to change control.
  • Continuous improvement: Although performance measurement and reporting can support continuous improvement, it doesn't just happen. Specific processes should be established to identify and implement improvements and to assess their effectiveness as reflected in better service performance. A continuous improvement commitment and process should be established in the service agreement. In some cases, targets are modified each year to reflect an expectation of improved efficiencies through continuous improvements.
  • Consequences: Where there are specific financial consequences of non-performance, such as not achieving a performance target, the performance measurement and reporting process may have significant consequences for the provider and could lead to disputes that affect the quality of the relationship. It is important that any measure that may be used to assess penalties be as objective as possible. The measures, how they are to be calculated, and the measurement process itself should be clearly spelled out in the agreement.

Checklist: Performance Elements of Service Agreements

  • Performance Targets
  • Performance Measurement and Reporting
  • Tying Performance to Performance Management Agreements (PMAs)
  • Identifying Responsibility and Processes for Monitoring Service Standards and Client Satisfaction
  • Evaluation and Reporting Frequency
  • Benchmarking the Service Delivery Process
  • Performance of the Arrangement
  • Risk Reporting
  • Continuous Improvement
  • Consequences

Implementation

All of the activities and tasks required to implement a new service should be considered in the development of a service agreement.

In many ways, the successful execution of a service relationship depends on the care with which the details of the implementation are articulated and carried out. Schedules, milestones, performance objectives, and, where appropriate, detailed project or work plans need to be established to ensure all parties share common expectations about what implementation will look like. Plans and execution should be funded, resourced, managed, and tracked.

Implementation efforts are highly dependent on the complexity of the service involved and the collaborative arrangement in question. Moving to a new service relationship typically involves:

  • New governance structures and processes;
  • Changes to roles and responsibilities;
  • Impacts on people that may include everything from training, to transfers, secondments, and relocation;
  • Shifts in culture in both the client and provider departments;
  • Modifications to information and technical architectures particularly around interoperability;
  • Changes to business processes and practices;
  • Increments to provider capacity to handle the additional volumes; and
  • Data cleansing and conversion including related privacy considerations.

Generally, implementation discussions will not be necessary between parties renewing a long-standing service relationship. In more complex arrangements where multiple services are being provided under a single master agreement such as translation services for Department X, implementation details for individual services or projects are often captured in individual SLAs.

Implementation Elements

Depending upon the complexity of the service arrangement, a service agreement may include provisions for some or all of the following implementation elements:

  • Transition activities: Specify the relevant implementation activities that will need to be executed; e.g., data conversion or changes to processes and practices.
  • Transition roles and responsibilities: Clearly outline which of the implementation activities the client and the provider will be responsible for, and how the two parties will jointly manage the implementation process.
  • Milestones: Specify the implementation milestones to be achieved, including the sequencing of key activities, any key interim targets, the go-live date, and any milestones related to subsequent service releases or enhancements.
  • Resource commitments: Document the financial, human resource, and in-kind resources each party will commit to the implementation process.
  • People / human resource considerations: Where there are significant impacts on people, outline how related decisions will be made and how such challenges will be managed and communicated. This is particularly important if employees are moving from their department to work in a collaborative arrangement or shared service. In these cases, the specific mechanisms to enable the transfer should be outlined.
  • Transition and learning plans: Include implementation and training plans in the service agreement or a process to jointly develop and agree on an implementation plan. Such provisions help ensure a common understanding of the implementation processes and results. Related training plans ensure that staff are equipped for the changes and clarify the human resource implications.
  • Risk management: Specify how implementation risks will be identified and managed by the parties.

Checklist: Implementation Elements of Service Agreements

  • Transition Activities
  • Transition Roles and Responsibilities
  • Milestones
  • Resource Commitments
  • People and Human Resource Considerations
  • Transition and Learning Plans
  • Risk Management

6. Conclusion

When departments negotiate arrangements to work together or when they work individually to provide better services for internal and external clients, service agreements provide a means to promote the delivery of cost effective client-centred, well-managed service. They help reinforce accountabilities when one department provides service to or on behalf of another department by ensuring roles and responsibilities are clearly outlined and deputy heads have the correct information to discharge their accountabilities. Service agreements also increase the quality and consistency of service arrangements throughout the Government of Canada through the use of common structures, approaches, and, to some degree, processes. Together, these activities help enhance the management of service delivery and promote efficiency and effectiveness.


Appendix A. Summary of Service Agreements Elements

Introduction

Note!

In some cases, the same element may be found in more than one type of agreement. If so, they should be at differing levels of detail. For example, a high-level description of scope may be found in a Memorandum of Understanding (MOU) and perhaps is as simple as the name of the service (for example, Application Hosting). The accompanying Service Level Agreement (SLA) for the same service may, however, would provide much greater detail on the scope of the Application Hosting service being provided, including details about the applications being hosted, the technical environment, supporting help desk services, business continuity provisions, and related service levels of performance targets. The provisions in the various agreements should complement one another. Overlap and duplication should be avoided to minimize the risk of conflicting interpretations between the various provisions.

The following table provides a list of elements typically found in service agreements and indicates, for simple, medium, or complex service arrangements, in which type of service agreement those elements are typically found.

Depending on the scope of the service relationship and the type of service arrangement, some items may not be applicable. For example, if the service in question will be billed on a cost recovery basis, there may be no requirement to discuss the pooling of resources.

In the table, for a simple or medium arrangement, certain elements are not included. This is based on the assumption that the arrangement is simple enough that these elements are not necessary. If, in developing a simple MOU, it is felt that some or all of these types of elements are indeed required, it is likely that the arrangement itself should be considered medium or complex rather than simple or medium. The choice of service agreements (MOU, MA, and/or SLA) would be governed accordingly.

Summary of Service Agreement Elements

Basic Elements
ElementSimpleMediumComplex
MOUMOUSLAMOUMASLA
Parties to the Agreement Yes Yes Yes Yes Yes Yes
Recitals (“Where as” and “Therefore” Statements) Yes Yes Yes Yes Yes Yes
Definitions Yes No Yes No Yes Yes
Commencement Date Yes Yes Yes Yes Yes Yes
Duration Yes Yes Yes Yes Yes Yes
Reference to Supporting Documents or Related Agreements Yes Yes No Yes No No
Maintenance of the Agreement No No Yes No Yes Yes
Notice Period for Termination or Withdraw Yes Yes No Yes No No
Designated Officials Yes No Yes No Yes Yes
Signatories Yes Yes Yes Yes Yes Yes
Scope Elements
ElementSimpleMediumComplex
MOUMOUSLAMOUMASLA
Vision Yes Yes No Yes Yes No
Purpose or Objectives Yes Yes No Yes No No
Key Principles Yes Yes No No No No
Service Scope Yes Yes Yes No Yes Yes
Service Bundles / Service Inventory Yes No Yes No No Yes
Tiered Service Delivery / Channels No No Yes No No Yes
Relative Roles and Responsibilities Yes No Yes No No Yes
Key Service Assumptions No No Yes No No Yes
Governance Elements
ElementSimpleMediumComplex
MOUMOUSLAMOUMASLA
Form and Structure Yes Yes No Yes Yes No
Roles and Responsibilities Yes Yes No Yes Yes No
Relationships with Stakeholders and Other Bodies No No No No Yes No
Accountability Yes Yes No Yes Yes No
Decision Making Processes No Yes No No Yes No
Dispute Resolution Yes Yes Yes Yes Yes Yes
Amendment and Termination Yes Yes No Yes Yes No
Audit and Monitoring No No No No Yes No
Operation Elements
ElementSimpleMediumComplex
MOUMOUSLAMOUMASLA
Policies and Signing Authorities No No Yes No No Yes
Infrastructure No No No No No Yes
Work Sharing No No No No No Yes
Customer Relationship Management No Yes No No Yes No
Privacy Yes No Yes No Yes No
Security Yes No Yes No Yes No
Disclosure and Use of Information No No Yes No No Yes
Specific Requirements No No No No No Yes
Service Disruptions / Business Continuity Planning Yes No Yes No No Yes
Finances Elements
ElementSimpleMediumComplex
MOUMOUSLAMOUMASLA
Funding Model Yes Yes No Yes Yes No
Fee Structure Yes Yes No No Yes Yes
Resource Pooling Arrangements Yes Yes No No Yes Yes
People and In-kind Contributions No No Yes No No Yes
Incentive Pricing No No Yes No No Yes
Investments in Service Enhancements No No Yes No No Yes
Cost Transparency No Yes No No Yes No
Variances and Adjustments No No Yes No No Yes
Contingent Funding No Yes No No Yes Yes
Consequences No Yes No No Yes No
Settlement Arrangements Yes Yes No No Yes No
Performance Elements
ElementSimpleMediumComplex
MOUMOUSLAMOUMASLA
Performance Targets Yes No Yes No No Yes
Performance Measurement and Reporting Yes Yes Yes Yes Yes Yes
Link to Performance Management Agreements (PMAs) Yes Yes No Yes No No
Monitoring Responsibilities and Processes No No Yes No No Yes
Evaluation and Reporting Frequency Yes No Yes No No Yes
Benchmarks No No No No No Yes
Performance of the Arrangement No No No No Yes No
Risk Reporting No Yes No No Yes No
Continuous Improvement No No Yes No No Yes
Consequences No Yes No No Yes No
Implementation Elements
ElementSimpleMediumComplex
MOUMOUSLAMOUMASLA
Transition Activities Yes No Yes No No Yes
Transition Roles and Responsibilities Yes No Yes No No Yes
Milestones Yes No Yes No No Yes
Resource Commitments No No No No No Yes
People and Human Resource Considerations No No No No No Yes
Transition and Training Plans No No No No No Yes
Risk Management No No No No No Yes

Appendix B. MOU Example

Example

Memorandum of Understanding (MOU)

Between

[Department A] and

[Department B] etc.

Version Log (Add or remove lines as necessary)
NumberSection(s)
(if applicable)
DateChanged byDetail
1[Section, page or sub-title][YYYY-MM-DD][Name, title or division][Nature and detail of the change]
2[Section, page or sub-title][YYYY-MM-DD][Name, title or division][Nature and detail of the change]

1. Recitals (“Whereas” and “Therefore” Statements)

This section typically describes the mandates or capabilities of the parties involved and the overall goal of the agreement. For example, “Whereas Department A has the authority, capacity and expertise to deliver XYZ service and is authorized to charge and re-spend revenues received in delivering XYZ service” and “Whereas Department B is a new entity that requires XYZ service”, therefore “Department A agrees to provide XYZ service to Department A on a cost recovered basis”.

2. Commencement and Duration

This section outlines the start and end dates of the agreement.

3. Mutual Vision, Strategy, and Outcomes

This section develops a common vision and associated business strategies to ensure the parties are aligned with the mutual vision and strategies as negotiations evolve. This section should identify the outcomes expected from the establishment of a relationship and their linkage to the business objectives of the department.

4. Purpose and Objectives

This section defines the specific intent of the service relationship being formed and the expected outcomes for all parties to the agreement.

5. Reference to Supporting Documents of Related Agreements

This section identifies supporting documents such as project charters or Treasury Board submissions and/or related MAs or SLAs.

6. Scope

This section identifies the service that will be provided. It should also identify any key service assumptions (e.g., multi-channel strategies and priorities such as in-person centres within a region).

7. Fee Structure or Resource Pooling Arrangements

This section outlines the overall financial arrangements for the relationship. In cases where only an MOU is required, this section outlines the specific fee structure and/or resource pooling arrangement for the service in question. In more complex arrangements, such details would normally be in the MA or SLA with the MOU stating the overarching principles of the financial arrangement in question.

8. Performance Targets and Reporting

This section outlines the specific service level or other performance targets to be achieved and the nature and frequency of the performance reports related to those targets.

9. Authorities and Accountabilities

This section identifies any changes in the legislative authority and accountability for the program. Typically, authority and accountability generally do not shift to the department delivering the service. At a minimum, accountabilities should be discussed, agreed to, and documented. As the service is further defined, the authorities and accountabilities should be re-examined for compliance.

10. Relative Roles and Responsibilities / Governance

This section identifies the governance structure that will oversee and guide the service relationship and manage the specific service falling under the service relationship. It outlines the specific roles and responsibilities to be assumed by each party and how key planning and financial decisions will be made, as necessary.

11. Implementation

This section identifies the approach and timeframes for the phases and stages of the implementation process, including detailed planning, service management, service delivery, and when the parties expect the service to become operational. It should also identify when designated officials expect to review the effectiveness of the relationship, prior to continuing or including additional services. In large horizontal initiatives, this section may also identify key decision points.

12. Designated Officials

This section identifies who in each party will be accountable for the implementation and for the operation of the service. It may also establish committees and decision-making bodies if necessary.

13. Business Continuity

This section identifies the disaster recovery provisions that will be in place and may also identify specific time commitments for recovery from service disruptions including the clear delineation of recovery priorities.

14. Dispute Resolution

This section identifies how any disputes arising from the implementation of the MOU will be resolved and how issues that cannot be resolved by the parties to the agreement will be considered by higher authorities (escalation).

15. Amendments and Termination

This section identifies how amendments to the agreement will be made (e.g., in writing and with the mutual consent of both parties) and any provisions regarding the termination of the agreement, including authorities required.

16. Signatories

Although departmental signing authorities vary across the Government of Canada, execution of service agreements should be aligned with departmental policy. It is anticipated that the parties to any service agreement will identify individual office holders who are accountable for the actions being undertaken.

By signing below, Approvers indicate their acceptance of all terms and conditions outlined in this Agreement.

ApproversName TitleApproval Date
[Signature][The MOU should be signed at the Designated Official, DM/ADM level][YYYY-MM-DD]
[Signature][The MOU should be signed at the Designated Official, DM/ADM level][YYYY-MM-DD]

17. Agreement Termination Signatories

ApproversName TitleApproval Date
[Signature][The MOU should be signed at the Designated Official, DM/ADM level][YYYY-MM-DD]
[Signature][The MOU should be signed at the Designated Official, DM/ADM level][YYYY-MM-DD]

Appendix C. Master Agreement Example

Example

Master Agreement (MA)

Between

[Department A] and

[Department B] etc.

Memorandum of Understanding Reference:

[Identification of Governing Memorandum of Understanding]

Version Log (Add or remove lines as necessary)
NumberSection(s)
(if applicable)
DateChanged byDetail
1[Section, page or sub-title][YYYY-MM-DD][Name, title or division][Nature and detail of the change]
2[Section, page or sub-title][YYYY-MM-DD][Name, title or division][Nature and detail of the change]

1. Recitals (“Whereas” and “Therefore” Statements)

This section typically describes the mandates or capabilities of the parties involved and the overall goal of the agreement. For example, “Whereas Department A has a mandate to provide common services in the areas of real property and acquisition services” and “Whereas Department B requires real property and acquisition services” therefore “Department A and Department B agrees to enter into a Master Agreement that will govern the following real property and acquisition services … [specify services]”.

2. Commencement and Duration

This section outlines the start and end dates of the agreement, including notation of significant milestones such as evaluation and benchmarks. For example, the agreement will be for two (2) years with a semi-annual performance review.

3. Definitions

This section includes any definitions that may be required to ensure the language of the agreement is understood and meaningful to the parties to the agreement.

4. Purpose and Objectives

This section specifies the management relationship between the parties to the agreement.

Typical Common Content of the Purposes and Objectives Section

  • Recognition of the plans and activities of both parties that will position them to meet or exceed current service levels over a specific time period.
  • Recognition that the relationship is founded on the successful delivery of agreed service levels and that non-performance will cause both the seeking of remedies and the possible discontinuance of the agreement (non-exclusivity).
  • Recognition that the department receiving the service has responsibilities and that failure to meet those responsibilities may affect the performance of the department providing the service.

5. Scope

This section should identify the various services covered under the MA. It should also identify the associated SLAs and any relevant supporting documents such as project charters or Treasury Board submissions. Define channels to be utilized and designation of priority channels if applicable.

6. Relative Roles and Responsibilities / Governance

This section identifies the governance structure that will oversee and manage the specific services falling under the MA. It also outlines the specific roles and responsibilities to be assumed by each party. As necessary, this section will also outline how key planning and financial decisions will be made across the services included in the MA.

7. Customer Relationship Management

This section should describe the Customer Relationship Management regime of the service provider. This should include the services available, issue resolution processes, key contact names and contact information, any related response times, and issue resolution commitments. Escalation procedures for day-to-day relationship issues should also be detailed. The nature and frequency of reports to the appropriate governance committee on the volume of issues and the timely resolution of those issues should be described.

8. Performance Targets and Reporting

This section describes how all the services covered by the MA will be measured and reported. It should describe the distribution and frequency of performance reporting and the governance committees that are involved in performance review meetings. The process through which service improvements to one or more services are tracked in response to performance deficiencies should also be described.

9. Financial Arrangements

This section identifies the nature of financial arrangement to be applied to the services covered by the MA. The methodology for calculating the fee structure or resourcing pooling arrangement should be documented. This section identifies how and when payment will be made to the provider. The financial implications of non-performance, or the exceeding of service levels, should be spelled out.

Note: To estimate the cost of providing services, refer to the TBS Guide to Costing.

10. Amendment

This section recognizes that the document will be amended over time to reflect the evolving relationship and the addition or removal of services under the MA. During the first year of operation, the MA should be reviewed on a semi-annual basis. In subsequent years, the review should be annual.

11. Security and Access to Information and Privacy

This section identifies requirements regarding privacy and security of data, access to information, and the service organization's compliance in meeting, or exceeding, these requirements.

12. Dispute Management

This section provides a general description of the dispute management process and procedures to be applied to the MA. It should describe the process to resolve the dispute, together with the escalation process, and identify responsible personnel in all parties to the agreement. Any specific additional details will be associated with each service described later in the SLA should also be noted.

13. Termination

This section identifies the agreed-upon terms and conditions necessary to terminate the MA or a specific service covered by the MA, prior to its intended date (e.g., six (6) months notification in writing).

14. Signatories

Signatures of authorized individuals must be aligned with the respective department delegation of authority. Generally, MAs are signed by senior staff responsible for the service or product under consideration.

By signing below, Approvers indicate their acceptance of all terms and conditions outlined in this Agreement.

ApproversName TitleApproval Date
[Signature][The MA should be signed at the Designated Official or ADM level][YYYY-MM-DD]
[Signature][The MA should be signed at the Designated Official or ADM level][YYYY-MM-DD]

15. Agreement Termination Signatories

ApproversName TitleApproval Date
[Signature][The MA should be signed at the Designated Official or ADM level][YYYY-MM-DD]
[Signature][The MA should be signed at the Designated Official or ADM level][YYYY-MM-DD]

Appendix D. Service Level Agreement Example

Example

Service Level Agreement (SLA)

Between

[Department A] and

[Department B] etc.

Master Agreement Reference:

[Identification of governing Master Agreement]

Version Log (Add or remove lines as necessary)
NumberSection(s)
(if applicable)
DateChanged byDetail
1[Section, page or sub-title][YYYY-MM-DD][Name, title or division][Nature and detail of the change]
2[Section, page or sub-title][YYYY-MM-DD][Name, title or division][Nature and detail of the change]

1. Recitals (“Whereas” and “Therefore” Statements)

This section typically describes the mandates or capabilities of the parties involved and the overall goal of the agreement. For example, “Whereas Department A and Department B have entered into a Master Agreement governing a range of real property and acquisition services” and “Whereas Department B requires property management services for the following properties … [specify properties]” therefore “Department A agrees to provide property management services to Department B on a cost recovery basis and in accordance with the following terms and conditions”.

2. Commencement and Duration

This section outlines the start and end dates of the agreement. The agreement may be renewed if agreed to by both parties. It should be reviewed at regular intervals by both parties to ensure its effectiveness and appropriateness and to make adjustments as required.

3. Definitions

This section includes any definitions that may be required to ensure the language of the agreement is understood and meaningful to the parties to the agreement.

4. Scope

This section defines the details of the service being requested and the business objectives being sought. These should align with the vision, strategies, and outcomes described in the MOU and MA. This section should include:

  • Service(s): Identify the service or services that are covered by this agreement and ensure alignment to the MOU or MA as applicable.
  • Service Scope: Describe the scope of the service in terms that are clear and unambiguous to both service recipient and service provider. Include a definition of any service bundles chosen by the client and channels through which services will be delivered. Define channels to be utilized and designation of priority channels if applicable.
  • Resource Requirements: Identify resources to be provided by the parties to the agreement to enable the service to be executed, such as training.
  • Service Assumptions: Identify any planning or delivery assumptions made by either party.
  • Relative Roles and Responsibilities: Identify the specific roles and responsibilities to be assumed by each party. As necessary, this section will also outline how key planning and financial decisions will be made. Roles and responsibilities should be linked to the service level and performance targets to be achieved.
  • Location: If applicable, include the operating centres and the front-line delivery locations for the service covered by the agreement.
  • Scope Amendments and Authorities: Identify individuals who may authorize changes to the scope of service defined in the SLA and the process to effect such changes, as well as any associated changes to the financial arrangements.

5. Service Levels and Performance Targets

Common Service Level Targets

Common examples of targets include:

  • Business Availability/Disruption
    • Measures availability/downtime of systems and services
  • Reporting
    • Timeliness (for example, receive report within three (3) days of month end)
    • Completeness (100% of required information included)
    • Accuracy (spot audits – 99% accuracy)
  • Financial and Accounting
    • Cost of the services provided relative to planned expenditures
  • Operational Measures
    • Response times and “time to fix”
    • Number of incidents/complaints
    • Continuous improvement. For example, state as a percentage of reduction in use of resources.
    • Compliance with preventative maintenance plans for technological equipment utilized in the provision of services. For example, in the case of technical failures, bring equipment back to 100% level of service within a specified timeframe.
    • Business resumption and disaster recovery plans for services and systems
  • Compliance

This section describes specific service levels or performance targets to be achieved by the service provider once the service has been clearly defined. There may be multiple service level targets per service. Targets are to be stated in business terms and understandable to the client receiving the service. Typically, service level targets focus on service availability, time to recover or repair, cost effectiveness, end-user response time, accessibility, accuracy, and client satisfaction measurements. The following information is typically used to describe a service level target:

  • Definition
  • Timeframe
  • Assumptions
  • Responsibilities (for both program owner and service provider)
  • Service level
  • Measurement formula
  • Key performance indicators
  • Measurement reporting period
  • Data sources
  • Escalation
  • Contractual exceptions
  • Penalty/bonus definition and formula

6. Operational Considerations

This section deals with key operational considerations related to the service in question. Examples include privacy, security, infrastructure or technical requirements, work sharing arrangements if applicable, signing authorities, and disclosure and use of information.

7. Performance Tracking and Reporting

This section describes how the services will be measured and reported and processes that will be enacted based on a comparison of results with service level objectives.

This section should describe the distribution and frequency of performance reporting and include a schedule of review meetings if applicable. Individuals responsible for performance tracking and reporting should be identified. The process through which service improvements will be determined and executed in response to performance deficiencies should be described including the authorities required to proceed with the identified changes.

8. Financial Arrangements

This section describes all aspects of the financial arrangement between the client and provider. The items typically covered include the fee structures or resource pooling arrangements, any incentive pricing, investments in service enhancements, cost transparency, variances and adjustments, and settlement arrangements. This section is aligned with the MOU and MA. Any financial consequences resulting from performance deficiencies should be clearly described. It should also include a description of the amendment process, if applicable, and identify the responsible individuals.

9. Implementation

This section identifies the approach and timeframes for the phases and stages of the implementation process, including detailed planning, service management, service delivery, and when the parties expect the service to become operational. It should also identify when designated officials expect to review the effectiveness of the relationship, prior to continuing or including additional services.

10. Security / Access to Information and Privacy

This section identifies the service provider's requirements regarding privacy and security of data, information, and access with respect to any and all services identified in the SLA, and also covers the service provider's compliance in meeting, or exceeding, these requirements.

11. Dispute Management

This section describes the dispute resolution process and procedures to be applied for each service identified in the SLA. The process that will be used to define a problem or incident should be identified. The escalation process should also be identified as well as all responsible personnel.

12. Designated Officials

This section identifies who in each party will be accountable for the implementation and for the operation of the service. It may also establish committees and decision-making bodies if necessary.

13. Signatories

By signing below, Approvers indicate their acceptance of all terms and conditions outlined in this Agreement.

ApproversName TitleApproval Date
[Signature][The SLA should be signed at the ADM/DG level][YYYY-MM-DD]
[Signature][The SLA should be signed at the ADM/DG level][YYYY-MM-DD]

14. Agreement Termination Signatories

ApproversName TitleApproval Date
[Signature][The SLA termination should be signed at the ADM/DG level][YYYY-MM-DD]
[Signature][The SLA termination should be signed at the ADM/DG level][YYYY-MM-DD]