Ensuring that a client organisation receives the most appropriate type and level of service is an act of intention, not one of faith. Specifying services to reflect the client organisation’s real needs, those of its customers and other interested parties is not a trivial matter and must be adequately addressed. This article reviews the need for service specifications and service level agreements (SLAs) arising from the requirements of stakeholders. The purpose of each and the ways in which they are expected to contribute to the effective management of services provision are identified. Performance monitoring and quality assurance are also discussed.

Keywords

facilities management, service specification, service level, service level agreement, SLA, performance measurement, critical success factor, key performance indicator

Time equivalence: 30 minutes (article only); 2 hours (article and exercises).

Learning objectives

  1. Define a service specification and a service level agreement (SLA) and describe their respective functions.
  2. Explain why service specifications and SLAs are essential tools in facilities management.
  3. Describe the use of critical success factors and key performance indicators in assessing the performance of service providers.
  4. Identify means of collecting and assessing performance data.
  5. Discuss the correct use of rewards and penalties as part of incentive systems for improved performance.
  6. Describe the use of service specifications and SLAs as the basis for continual improvement and their relationship with contractual arrangements with service providers.
  7. Assess the role of quality assurance systems in both service provider and client organisations.

Introduction

Specifying the actual services required and the performance expected of the service provider are key aspects of any facilities management arrangement (Atkin and Brooks, 2009). Accordingly, this article demonstrates how the service requirements of stakeholders can be formalised in service specifications and service level agreements (SLAs). We see that these are essential tools in facilities management irrespective of whether services are outsourced or retained in-house. These formal documents emphasise the standards of service required rather than the processes involved. The typical points which each should address are itemised and examples given, drawing on guidance in Atkin and Brooks (2009). Performance measurement is then considered in terms of critical success factors and key performance indicators, which ensure that performance aims are directly related to the client organisation’s business objectives. Various means of performance monitoring are considered and, finally, the role of quality assurance systems is reviewed.

Involving stakeholders

Identified stakeholders should be involved in specifying their requirements and the level of performance that will be acceptable. This means:

  • involving stakeholders, as far as practicable, in identifying their requirements (for example, through the use of questionnaire surveys and in contributing to the drafting of service specifications and SLAs);
  • controlling stakeholder input and changes once the specification has been agreed; and
  • prioritisation by stakeholders of their requirements.

Organisations may find that they are defining and specifying their requirements for the first time. In such cases, there is a risk that they might unknowingly specify a higher level of service than was received in the past and that, consequently, bids may be higher than forecast. Value management, a technique for ensuring that real needs are addressed, can be used to guard against over-specification, whilst allowing standards to be raised over time.

Health and safety

All organisations must have a general policy on health and safety, which has a two-fold purpose:

  1. to provide and maintain, as far as is practicable, a healthy and safe place of work; and
  2. to take responsibility for compliance with relevant legislation.

Organisations need to be aware that their responsibilities for health and safety extend beyond their employees to the extent that no activity should pose risks to visitors or persons outside the facilities. The organisation also has responsibility for anybody and anyone who is affected by the action of an employee and the organisation’s policy statement and risk assessments must reflect this. A person must be appointed who is competent in implementing and ensuring that the organisation complies with health and safety legislation. Employers must have access to a competent person (who could be an employee, contractor or consultant) and must ensure that he or she has adequate training, time and resources to discharge his or her duties under health and safety legislation.

Management and supervision

Responsibilities imposed by legislation at all levels of management and supervision must be identified. This must extend to all who are directly involved in the day-to-day management of facilities; for example, purchasing personnel and senior managers will have roles to play. Care should be taken to allocate responsibility in line with authority, with resources to cover the administration procedures for dealing with accidents and contingency plans for handling power cuts, bomb alerts, floods and fire. Safety representatives from all user bodies should always be involved.

Proper consideration should be given to providing information about substances, plant and machinery to employees and to updating this information. Additionally, training in health and safety responsibilities for all employees should be provided.

Safety rules and practice

Organisations need to assess the risks to the health and safety of employees and anyone else affected by the activities of the organisation (for example employees, customers, visitors and the general public) and devise means of implementing preventive and protective measures. Assessment must cover planning, organisation, control, monitoring and reviews. There is a close link between risk assessment and arrangements specified in the policy statement.

Organisations must take account of the special requirements of persons who have any kind of disability and others with special needs, and ensure that appropriate measures are taken to safeguard their presence. This may involve adaptation of existing means of access to and escape from buildings. Organisations should seek professional advice on how their buildings and other facilities comply with relevant legislation, including that aimed at ensuring the inclusiveness of environments for those with special needs.

Day-to-day responsibilities

Organisations must monitor and review arrangements to achieve continual improvement in health and safety, using the policy and the management system. Improvement will be enhanced through the development of policies, approaches to implementation and techniques of risk control. A checklist should be provided to guide the framing of service specifications and SLAs, with respect to the requirements of health and safety in the workplace.

Specifications and agreements

There is a simple logic to the need for service specifications and service level agreements (SLAs) and to the distinction between them. In short, one has to say what one wants and then to say what the acceptable performance is of that service.

Service specifications and SLAs are formal documents that together should set out the following.

  1. Customer’s expectations of the quality, performance and value of the services to be provided in a clear and unequivocal manner.
  2. Minimum acceptable standards of the service and the customer requirements that have to be met.
  3. Output or performance-oriented measures, concentrating on what is to be provided as opposed to how.
  4. Agreement between the customer and service provider for providing a range and target level of services.

In practice, SLAs are often made by parties within an internal market, that is, between the departments or other operational units within an organisation, and act as a type of contract. This type of contract is not necessarily accompanied by a charge for the service. SLAs are also suitable for situations in which services are outsourced. Here, the SLA provides an important basis for the contract and is the starting point in developing a partnership agreement.

Service specifications

A service specification is a document that quantifies the minimum acceptable (technical) standard of service required by the customer and will generally form a part of the contract with the service provider. The production of the service specification is a prerequisite in the negotiation and drafting of SLAs and should set out the following.

  • Internal standards, relating to corporate or department policy as well as those that have been adopted on previous contracts.
  • External standards, covering conformance to statutory requirements, International Standards, health and safety legislation, industry standards and manufacturers’ recommendations.
  • Procedures the service provider has to comply with in order to achieve the required technical standards.
  • Quality and performance targets.

The extent of detail in the specification will depend on the importance and complexity of the service or asset item. The following is an example outline of sections and contents.

Part 1. Terminology
1.1 Definition of terms
Part 2. Areas, items and services
2.1 Scope of areas, items and services covered by specification
Part 3. External standards
3.1 Legal/regulatory requirements
3.2 Manufacturers' recommendations
3.3 Industry accepted best practice
Part 4. Internal standards
4.1 Corporate/departmental requirements
4.2 Established standards/codes
Part 5. Categorisation of areas, items and services
5.1 Procedures for each category
5.2 Frequency of procedures for each category

In the case of a cleaning contract, for example, the specification could describe the standard of cleanliness to be achieved in terms of the maximum amount of dust or debris which is permitted to remain following cleaning. Another example would be a service specification for cleaning, showing, first, prescriptive specifications and, second, performance requirements.

Service level agreement (SLA)

An SLA is a statement of intentions existing between the service provider and the customer – the recipient of the service – setting out a specified level of service. The agreement is formalised by producing a document that describes the following:

  • name of each party;
  • roles and responsibilities of each party;
  • scope of services that are to be provided;
  • quality and performance-related targets;
  • time-related targets
  • prices and rates;
  • resources required:
  • method of communication and interaction between customer and service provider; and
  • change procedures.

The SLA may be of a general format, applicable to a number of services or facilities or it may be customer, facility or service specific. In any event, it will incorporate relevant service specifications.

Development of SLAs

The customer has certain expectations about the level of service that the service provider should deliver. These expectations need to be translated into formal requirements and targets. In the development of these targets, the service provider should be involved and the agreements developed jointly, so that targets are both appropriate and practicable. An example of a target is where the response to a problem – for instance the failure of a light fitting or photocopier breakdown – should be within a specified period that is practicable for the service provider and tolerable for the customer. Stakeholders need to specify what their tolerance threshold is for rectifying a range of failures or malfunctions. So, what does an SLA contain?

The following is an example outline of sections and contents.

Part 1. Agreement details
1.1 Name of parties to the agreement
1.2 Effective date of agreement
1.3 Period of agreement
Part 2. Scope of services – specification of services 
2.1 Management of maintenance and buildings, plant and equipment
2.2 External landscaping
2.3 Management of minor building works
2.4 Management of utilities and telecommunications
Part 3. Delivery times and payments 
3.1 Service priority categories and times
3.2 Fees and payments
Part 4. Performance 
4.1 Records required to be kept
4.2 Performance measures
4.3 Submission of performance reports
Part 5. Customer-service provider relationship 
5.1 Communications
5.2 Incentives and penalties
5.3 Customer satisfaction scoring
5.4 Feedback to service provider and actions
5.5 Procedures for revising service levels

The SLA can contain details and targets relating to all or some of the items listed earlier. In principle, the document should identify those measures that the customer will use to judge the level of service received from the service provider. These measures will generally fall under the following aspects of the service: quality, performance, delivery time, charges for services and the nature of the interaction with the service provider. The SLA can also set out the procedure for incorporating any changes that occur in these targets.

CSFs and KPIs

The factors critical to an organisation’s success should be considered when determining the criteria for measuring the performance (or fulfilment) of an SLA. These are known simply as critical success factors (CSFs).

Definitions

Critical success factors
are those actions that must be performed well in order for the objectives or goals established by an organisation to be met satisfactorily.

Key performance indicators (KPIs)
enable management to understand, measure and control progress in each of the CSFs

Within each CSF will be one or more key performance indicators (KPI). KPIs enable management to understand, measure and control progress in each of the CSFs. For example, an organisation may have set a goal of providing the highest-quality service that ensures each internal customer receives best value. A CSF in achieving that goal would be agreed SLAs. Here, a KPI might be published service levels to show clearly what has to be achieved and then, subsequently, to say what has been achieved.

In another example, an internal perspective on productivity, a CSF, would lead to KPIs that highlighted abortive work, backlog and ability (or inability) to perform tasks concurrently. Measures of productivity could include:

  • percentage of total work complete at a given time;
  • percentage of activities planned against unplanned;
  • percentage of total hours by customer type; and
  • breakdowns against planned preventive maintenance hours.

Where customer perspectives are concerned, a CSF could be quality for which one of the KPIs would be complaints (or the lack of them) which, in turn, would equate to a measure of the number of complaints over time or, alternatively, a satisfaction rating.

There are many CSFs and KPIs that interact and combine to bring about a culture and methods that aim to achieve best practice. Performing at the top end of these measures would bring an organisation to the point of achieving best practice and, with that, best value in the management of its services and facilities.

Performance measurement

The customer’s view of the quality of a service or product is based on tangible and intangible factors, both of which are important. Tangible factors are those which can be objectively measured, such as the time taken to deliver an item, the charge made and the level of operational performance.

Intangible factors include those which are more subjective in nature and, therefore, more difficult to measure; for example, the utility of the item to the customer, its adaptability and advantages over other types or merely the courtesy of the service provider’s employees. The difficulty of quantifying some factors should not preclude their measurement as they can be as important as those that are easily measured.

Organisations should not, however, impose too many or overly demanding performance measurements and excessive monitoring on service providers as this could become counter-productive. A sensible approach is to concentrate on KPIs.

Before performance measurements can be put in place, output specifications must be established. For this, a good understanding of the organisation’s requirements is essential, and this constitutes part of the informed client function (ICF) – see article on Strategy is the key to successful FM. The approach of establishing output specifications and then corresponding measurement systems can result in quantifiable business improvements and reinforces the link between the facilities management plan and the organisation’s overall business objectives. If output specifications are correctly set up, the system for measuring them should reflect contractual arrangements.

Service providers can gain competitive advantage by taking on much of the performance measurement and by identifying the means for adding value. The hard measurements reported, as based on the output specification, can be supplemented by the identification of soft benefits, which exceed contract requirements. This type of relationship between service provider and client organisation is encouraged and formalised in partnering arrangements – see articles on partnering.

In practice, the overall performance of a service provider can be determined by monitoring adherence to standards and targets under the following headings:

  • conformance to regulations and standards;
  • quality-related and performance-related targets for service delivery;
  • expenditure targets;
  • time-related targets; and
  • interaction between customer and service provider.

Performance data can be collected in a number of ways. For example, the service provider may complete worksheets and job reports or feedback from customers might be sought actively in the form of comments on worksheets, complaints and customer surveys. Once the organisation has collected these data they should be used to complete a score-sheet at regular intervals. This should be undertaken for a sample of the services delivered by each service provider based on KPIs. These will be given in the SLA and contract and will provide a basis for measuring performance in a way that involves both the customer and service provider.

The service provider’s level of service delivery to the customer will be, to a greater or lesser extent, affected by the quality system that the client organisation has in place. The satisfactory performance of the service provider will be more assured if the quality system is geared to the levels of service performance established in the SLAs. In other words, the ways in which quality and service performance are measured, in accordance with the SLAs, should reflect those prescribed in the client organisation’s quality system.

Updating service specifications and SLAs

Service specifications should not be regarded as fixed statements of service requirements, but as a basis for continual improvement as circumstances and customer requirements change. Experience will reveal how better results and improved value can be achieved by a change in specification. Service providers should be involved in the process of updating and improving service specifications and SLAs in order to draw upon their experience of actually providing the service. If necessary, visits to other facilities might be necessary to provide insights into how improvements might be possible. 
These actions will ensure that the organisation is able to determine if the specified service was obtained and so draw lessons for the future. At all times, it is essential that the requirements set out in the service specifications and SLAs should be reflected in the contracts with service providers.

Quality assurance systems

If client organisations are to receive a satisfactory level of service, not only they but also their service providers must have good quality assurance (QA) systems in place. Service providers’ QA systems should form an integral part of their service provision. To add value, service providers have to adopt QA to enhance service provision through a reduction in errors and reworking. Thus, a quality approach can save money. Clients should therefore consider QA systems of bidders during the assessment of bids.

Quality assurance systems generally consist of a policy statement, a quality manual and a work practice manual. The policy statement is the organisation’s explicit commitment to a quality-assured system covering its services. The quality manual provides a detailed interpretation of the way in which each of the quality standards is to be met within the context of the operations of the business. The work practice manual explains the detailed procedures that must be followed in order to comply with the QA system.

For a system to be effective, it needs to be applied as work is being done. Thus, for example, logs and reviews should not be completed retrospectively. Contract documents should incorporate quality-of-service criteria and stipulate that payments will depend on the provider meeting these criteria. These contractual provisions should assure the quality of services or products of service providers. The issue of penalties and incentives relating to performance standards should be considered following performance reviews.

Conclusions

Service specifications are an integral part of the process and work with SLAs to define the quality and/or performance required from a service. Both they and SLAs are fundamental to the business of effective facilities management, irrespective of whether the service is outsourced or retained in-house. Time spent preparing tightly written service specifications and SLAs will be repaid amply in the future since contracts will be easier to manage and less prone to misinterpretation. Quality assurance systems should be adopted by organisations as a necessary part of facilities management and used to support the work of managers and service providers alike. This ensures, as an absolute minimum, that a consistent set of standards is applied as a basis for seeking continual improvement.

Exercises

  1. How would you go about ensuring that stakeholders did not ‘gold-plate’ their requirements?
  2. How would you ensure that your organisation was fully aware of current legislation in regard to health and safety?
  3. How would you differentiate between the information provided within a service specification and that within an SLA?
  4. Choose a service (other than cleaning) and then write down the headings under which details of the service could be specified adequately.
  5. Identify the special features of the SLA for the outsourcing of information technology by an insurance company.
  6. Write down the CSFs and their associated KPIs covering the business objective of competitive prices.

References and bibliography

Alexander, K., Atkin, B.L., Bröchner, J. and Haugen, T. (eds.) (2004) Facilities Management: Innovation and Performance. London: Spon.
Atkin, B. and Brooks, A. (2009) Total Facilities Management. Third edition. Oxford: Blackwell Science.
Barrett, P.S. and Baldry, D. (2003) Facilities Management: Towards Best Practice. Second edition. Oxford: Blackwell Science.

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