Guideline on Service Agreements: Essential Elements

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?

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.

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 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.

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.

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.

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.

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.

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.

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.

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.

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.

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.