Determining the service levels that a service provider will have
to meet in performing its obligations under an outsourcing
arrangement is a critical aspect of the negotiation process. This
third article in our outsourcing series provides a checklist of
issues that organizations should consider prior to negotiating the
agreement so that surprises and misunderstandings can be
To be truly meaningful, service levels should:
cover or describe portions of the outsourced services that are
measureable (i.e., the applicable services can be
accurately measured and validated by the supplier); and
provide the customer with confidence that the service provider
will be able to perform the services better than it is able to
perform itself (or better than the customer's current service
When considering service levels, ask yourself:
Have you established a good baseline of the service levels that
are currently being achieved? It helps if you have a reliable
record of the service levels that were achieved either in-house or
with another service provider prior to negotiating service levels
with the prospective service provider.
Have you made your service level expectations clear to the
service provider? If your expectation is to achieve the same or
better service levels than those you are currently enjoying, it is
worth communicating that expectation to the prospective service
provider prior to negotiating the agreement (e.g., in the
applicable RFP or term sheet).
If you have been clear about your service level expectations,
have you also made it clear to the prospective service provider
that the pricing provided must reflect those service level
expectations? If you are going through an RFP
process — and assuming all else is equal
— it may be useful to ask the prospective service
provider to include pricing based on a number of different service
level scenarios so you can better gauge the savings or incremental
costs associated with a particular service level.
Are there any service levels that are so vital to your
organization that you will want a right to terminate the services
or the agreement if those service levels are not met? It is
important to keep in mind that such termination rights are for the
protection of your organization — you shouldn't have
to meet a complicated series of criteria before your right to
terminate the services is triggered. Also, there should be no
ambiguity as to when such termination rights arise. Remember that
having the right to terminate does not necessarily mean you will
exercise that right; it usually takes a lot for an organization to
decide to walk away from a service provider.
Do the service levels apply to services that will provide value
to your organization if the service levels are exceeded? If so, you
may want to consider a bonus or earn-back mechanism to encourage
the service provider to exceed the service levels.
Does the agreement include a mechanism for dealing with the
service provider's failure to meet service levels? At a
minimum, the mechanism should address: (i) how fast the problem
should be escalated; (ii) when the problem must be resolved; and
(iii) what the service provider will do to prevent such failure
Taking these service level issues into account should
help you negotiate an outsourcing agreement that will more
effectively meet the needs of your organization.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).