A Medical Device: Field Service - Service Level Agreement (SLA) is a contractual agreement between a field service provider (“Service Provider”) and a Customer (typically a medical device company) that contains the terms and conditions that govern how the Service Provider will perform field service tasks for the Customer; how the parties will communicate with one another; how the parties will modify the agreement over time to fit their ongoing business relationship; how the Customer will pay the Service Provider; and all other details governing the relationship between the parties.
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One example of a business relationship governed by an SLA might be a Customer who is a medical device company who wishes to retain the services of a Service Provider to provide setup and training services for hospitals who purchase the Customer’s medical devices. In this relatively straightforward example, it quickly becomes apparent that a contract specifying each party’s obligations in this arrangement must specify the obligations and actions of many different employees of both the Customer and Service Provider who, usually, must coordinate their actions with employees of the other party.
For example, there must be a process that governs how the Customer communicates the need for training for one of its new hospital customers to the Service Provider. The Service Provider must be able to communicate with the Customer through the appropriate channels to coordinate and schedule the setup and training session. The Service Provider will likely be required by the Customer to be able to conduct a training session within a defined timeframe. The Customer will likely require the training staff of the Service Provider to be trained by the Customer and may also require the training staff of the Service Provider to have met certain educational requirements and/or to maintain certain professional credentials. The Customer may also require the training staff of the Service Provider to use certain training materials, to collect certain information when hospital staff are trained (such as the names of the hospital personnel who attended training), to have a supervisor of the hospital employees sign a checklist of training topic that was covered, etc. Will travel expenses by reimbursed by the Customer or will the Service Provider provide an all-inclusive price to the Customer? How will the Customer pay the Service Provider? What are the payment terms? How should the parties handle complaints about training quality? How should disputes between the parties be resolved? All of these issues must be addressed in the SLA.
SLAs, therefore, are frequently complex contracts because they typically govern a relationship that: a) requires a considerable amount of coordinated activity by different employees of both the Service Provider and Customer (and, frequently, third parties, such as the end users of the Customer’s products); and b) is anticipated to change over time as the Customer’s business needs change (for example, as the Customer releases new products that require support by the Service Provider).
Unlike many simple contracts in which the terms and conditions are fixed over the life of the contract, SLAs must attempt to provide a framework for binding the parties to a contractual agreement in which some of the terms and conditions are fixed while other terms and conditions are anticipated to change as the business needs of the Customer change over time and key employees of both parties change.
SLAs are usually drafted in a manner that enables the agreement to be easily amended or updated over time by mutual consent of both parties and usually include language that specifies how future versions of the agreement will be labeled with a numbered versioning scheme (e.g. SLA v1.0, SLA v2.0, etc.) that enables the parties to track changes to the contract over time and helps to ensure that both parties are coordinating their business activities according to the proper (current) version of the SLA.
The following provides an overview of the topics that are typically addressed in an SLA.
Management of the Agreement
The Preamble contains a set of statements that defines the general intent of the agreement and provides any additional background information that would be required for a 3rdparty (i.e. someone not an original party to the agreement) to understand the purpose for the contract between the parties. It should be noted that while the purpose of the Preamble is to establish the intent of the agreement between the parties, the Preamble itself is generally considered to be legally non-binding – all intent described in the Preamble must be adequately addressed and covered by the legally binding language in the remainder of the agreement.
The Preamble will typically include the type of services to be performed by the Service Provider and the names of the Customer equipment to be serviced. These are often attached to the agreement as exhibits (e.g. Exhibit A, B, C, etc.) that enable these services and/or equipment lists to be updated throughout the term of the agreement by replacing the exhibit with a new version without having to alter the main body of the contract.
General Information should list the following information for each party that is bound by the agreement: a) name of the party (usually a business); b) the legal address for the party; c) the name of an employee responsible for approving any changes to the agreement; and d) the contact information for that employee.
The Duration specifies the start date and the anticipated end date of the agreement. As the relationship between the Service Provider and Customer changes over time, newer revisions of the SLA typically contain modifications of the Duration to extend the SLA.
Stakeholders include a list of key employees for each party that is anticipated to be involved in the relationship between the Service Provider and Customer. Each employee should be listed by name, contact information, and a short description of his/her role or area of responsibility that can be used by the opposite party to identify the appropriate person to receive communication while the agreement is in effect.
Change / Modification Process
Contains the contractual mechanism for how either party may propose and discuss changes to the agreement. For example, this portion of the contract may specify a Change / Modification committee comprised of a list of specific employees of both Customer and Service Provider tasked to convene a meeting within a certain time period to discuss proposed changes to the SLA after one party formally requests a change to the SLA. This enables the agreement to extend beyond the initial scope of activities and/or to accommodate additional conditions or obligations as time progresses and issues arise that both parties agree to address as part of the ongoing relationship between the Service Provider and Customer.
Version Control contains the specification for how future agreement drafts and executed versions of the agreement are to be numbered as the agreement changes over time in accordance with the Change / Modification Process portion of the agreement. This specification assists with tracking different versions of the agreement over time and enables current agreement versions to be easily referenced in each party’s internal quality control systems.
Periodic review names a Business Relationship Manager for each party and dictates that the Business Relationship Manager review the agreement periodically to remind each party of its obligations under the agreement, and to serve as the primary contact for all other parties to the agreement. The Business Relationship Manager is usually tasked in this portion of the agreement with facilitating future amendments to the agreement and to obtain internal approval as required to ensure the party is in compliance with the terms and conditions of the agreement.
Managing the Agreement
Specifies the mechanism(s) to maintain collaboration and continued execution of the agreement. These communications may schedule periodic (e.g. monthly, quarterly, bi-yearly) conference calls to allow the Customer and Service Provider to discuss ongoing activities pursuant to the agreement or may allow for more informal communication between the parties.
Additional portions of this section may be added to specify the obligations of each party to maintain certain documentation of their activities pursuant to the agreement, review specific standards and protocols (e.g. service protocols, training manuals, etc.) that are usually attached to the agreement, ensure compliance with the agreement, and to specify key performance indicators that may be required by one or more parties to be tracked and reported as part of the agreement (e.g. customer satisfaction surveys, training assessment test scores, etc.).
Intentions of the Agreement
Goals and Objectives
Outlines the general agreement goals and obligations for each party required to enable each party to work together effectively to enable the Service Provider to provide field service to the Customer.
Provides specific detailed service parameters for the Service Provider. Specific sections in this portion of the agreement may include:
- Service Scope – listing the specific services the Service Provider will provide;
- Customer Requirements – listing the specific responsibilities of the Customer to enable the Service Provider to provide service for the Customer;
- Service Provider Requirements – listing the specific responsibilities and requirements the Service Provider must meet to provide service to the Customer;
- Service Assumptions – detailing additional general requirements and responsibilities of each party; and
- Exclusions – a list of general items specifically excluded in the aforementioned responsibilities and requirements.
Provides details to ensure consistent service for the Customer and includes:
- Service Availability – specific hours the Service Provider must maintain and the relevant contact information;
- Service Requests – time frames in which the Service Provider must respond to all service requests;
- Quality / Performance Metrics (of Service Provider) – detailed service statistics the Service Provider must collect, record, and report to the Customer;
- Quality / Performance Metrics (of Customer) – detailed metrics the Customer must collect, record, and report to the Service Provider that are designed to measure the quality of service provided by the Service Provider; and
- Problem Resolution / Escalation – governs communication protocols and flowcharts for communicating problems/issues to the other party.
Provides the method of payment for services completed by the Service Provider, the prices for resources (e.g. per hour cost of Service Provider service employees), the arrangement for the Service Provider to secure materials required to provide service; and the pricing for materials used by the Service Provider in the provision of services to the Customer.
Mitigation of Differences
Dictates the policies and procedures for handling complaints and disputes that may arise between the parties in the course of their relationship. This portion of the agreement typically contains severability language, which states that if parts of the contract are held to be illegal or otherwise unenforceable, the remainder of the contract should still apply. Other remedies for dispute resolution may also be defined here in the case that the parties are unable to reach a negotiated solution to the dispute at hand (such as arbitration).
Terms of Resolution
Defines a list of payments/compensation for specific failures of a party. These payments are typically used to incentivize timely performance on behalf of both parties.
Defines the obligations of each party in the case of one or both parties deciding to terminate the agreement. This portion of the agreement frequently requires the parties to formulate a Transition Plan that is implemented to end the relationship between the parties. Such a plan usually addresses issues such as the return of loaner equipment, the return of training materials, the protection of confidential information, and the timeframe for any outstanding payments between the parties.
While SLAs are complex and highly specific to the nature of the intended business relationship between a Service Provider and a Customer, this overview provides an introduction to the main components of an SLA that are common to most SLAs and would be found in an SLA governing the business relationship between a Service Provider providing field setup and training to end-user purchasers of a Customer’s medical device business.
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