Understanding Service Level Agreements: Ensuring Contract Performance (Full Transcript)

Speaker 1: What is a Service Level Agreement? If you've ever dealt with contracts, you'll find there are often mechanisms built into the agreement which measure the service provider on their performance. These measures are often referred to as SLAs or KPIs. In this video, we'll be exploring SLAs, also known as Service Level Agreements. However, if you'd like to learn more about KPIs, check out the video we made on this subject on our channel. An SLA is a written agreement which defines the minimum level of service required from a service provider under a contract. This differs from KPIs, which measures the performance of a service provider against certain targets. An SLA will define what the minimum level of service is, and provide a course of action for when this level of service is not met. This often includes monetary implications, aiming to reimburse the client for some or all of the loss incurred as a result of underperformance. SLAs are monitored regularly, ensuring performance is tracked and corrective action is promptly taken when measurement thresholds are exceeded. Since the late 1980s, SLAs have been used by fixed-line telecom operators, ensuring uninterrupted network for telephone lines. However, since then, they are commonly used in a wide variety of industries and businesses, construction included. Within construction contracts, you'll often find SLAs which measure a contractor or subcontractor against certain metrics. These may include defects identified, complaints received, productivity of work, communication between parties, health and safety, financial reporting, aborted works, and construction programmed to name a few. Reporting of SLAs usually comes in the form of a report, and is presented in a monthly or quarterly performance review between contract stakeholders. If performance falls below a minimum requirement, there could be cost implications for the service provider. However, you may find that when performance exceeds expectations, there are cost incentives for the service provider. Carrot and Stick is a good metaphor to describe this type of mechanism. It gives the service provider an extra level of motivation to ensure good performance under a contract. In summary, SLAs act as a meaningful mechanism to ensure performance under a contract is upheld, enabling a client to meet their business objectives and strategies. If you found this video useful, please consider clicking the like button, we always appreciate the support you guys give us on our videos. Matrone, a commercial hub to your business.