Service Level Agreements (SLAs)

A service level agreement defines the level of service a buyer expects from their supplier.

It sets out how the level of service will be measured, as well as remedies or penalties when service falls below the agreed level. SLAs are critical in procurement.

For a buyer, a minimum acceptable level of service is that which makes it possible for them to carry out the task or activity for which the product or service was needed. For a supplier, service levels are a commitment to minimum standards agreed with the buyer.

When service levels are not met, it is up to the supplier to take action in the form of supplier performance management.

Service levels should be:

A buyer may take into account a number of factors when setting the level of service:

• What their customers think they need
• Past experience of using a service
• What suppliers are promising
• Comparisons with other suppliers
• The price being paid, can they get what they want for the budget they have available? Or can the supplier deliver the level of service required for the price offered.