What is a Service Level Agreement (SLA)? (Types, Best Practices, Common Mistakes)

In the world of facilities management, success hinges on the ability to keep every facility operational. Equipment downtime is expensive, after all! To keep the lights on and the equipment running, you need to develop strategic partnerships with service providers who can deliver consistent, measurable results. 

A Service Level Agreement (SLA) serves as the foundation for these essential relationships. This agreement establishes clear expectations for each partner, as well as accountability between facility operators and their service providers. 

Today’s facility managers are expected to reduce downtime and control costs, and a well-structured SLA can be the key to both of those things. The Service Level Agreement is an essential tool for improving maintenance operations, engaging in meaningful vendor management, and protecting the company’s bottom line. 

Your CMMS platform should help you craft the best possible SLAs and follow through on all elements of the agreement. Modern Facilities Management Software (FMS) must ensure that SLAs are clear, precise, measurable, and consistently evaluated. 

What is a Service Level Agreement (SLA)?

As part of your overall approach to vendor management, SLAs are contracts created by companies to govern their relationships with service providers. These formal agreements create the framework for contracted work. They clearly outline the expectations the company has for the contractor by outlining the work request, any compliance requirements, and payment terms. 

SLAs are signed before work begins. Importantly, they create measurable outcomes for the contractor or provider’s work. 

Additionally, SLAs are supported by your Facilities Management Software (FMS)---especially your CMMS. A great CMMS provider will provide you with fully customizable SLAs to meet your exact and unique company needs. 

Why are SLAs important in facility management? 

If you have spent even the smallest amount of time in the facilities management world, you know that equipment failures and maintenance issues directly impact a company’s bottom line. Operational disruptions cause frustrating experiences for customers, and emergency maintenance quickly becomes expensive. 

Without proper Service Level Agreements in place, your facilities risk: 

• Extended equipment downtime affecting business operations
• Inconsistent service quality leading to customer dissatisfaction
• Increased administrative burden from managing underperforming vendors
• Compliance violations and potential regulatory fines
• Hidden costs and budget overrun

Effective SLAs, on the other hand, prevent these very issues. When SLAs are properly structured and monitored, they prompt providers to deliver consistent, high-quality service. This, in turn, keeps your facilities operating smoothly. Now that’s a great way to support business objectives from the position of facilities management! 

Vendors typically covered by SLAs

Vendor management is a major part of facilities management work. There are many different kinds of vendors who fit under the umbrella of SLAs. Essentially, if you are hiring a third-party vendor to do any facilities maintenance or management work, you need to have an SLA in place governing that relationship. 

• HVAC technicians and companies
• Fire and life safety system providers
• Electrical contractors
• Plumbing services
• Security system providers
• Emergency response teams

• Janitorial services
• Pest control providers
• Landscaping companies
• General maintenance contractors
• Waste management services
• Snow removal services (in applicable regions)

• Refrigeration specialists
• Elevator maintenance providers
• Generator maintenance teams
• Kitchen equipment repair services
• Lighting system contractors

• Environmental services providers
• Hazardous waste disposal teams
• Regulatory compliance inspectors
• Health and safety consultants

• Roofing contractors
• Parking lot maintenance crews
• Window cleaning services
• Painting contractors
• Flooring specialists

This list is not comprehensive, but it should give you a good idea of the wide scope of Service  Level Agreements in the facilities maintenance area. With this many potential vendors, a great Facilities Management Software solution will help you keep everything organized. 

Key elements of a strong SLA 

Successful Service Level Agreements lead to positive outcomes in facilities management. The best way to understand how to craft a strong SLA is to work backward. Consider the outcome you need to achieve, and then determine the guidelines that will get you there. 

For example, let’s say that a retailer needs to ensure that their customers’ shopping experience is incredibly comfortable---or even luxurious. In those circumstances, the retailer needs to provide excellent HVAC services. It has to be cool in the summer, warm in the winter, and pleasant all year round. To keep the HVAC system running smoothly, you could establish a clear, precise SLA that supports this goal. You know what you need (a perfectly comfortable temperature all year), so draft an SLA that gets you what you need. 

That could make your vendor management SLA look like this:

• Response time requirements (2 hours for emergencies, 4 hours for partial outages, 24 hours for routine service)
• First-time completion rate minimums (85% or higher)
• Preventative maintenance schedule (monthly checks with 100% completion rate)
• Technician qualifications (valid EPA certifications, documented training)
• Documentation standards (before/after photos, detailed service notes)
• Cost structure (agreed-upon service rates, parts markup limits, overtime policies)
• Billing requirements (invoices submitted within 48 hours of service)
• Refrigerant handling and reporting protocols
• Communication expectations (advance notice of visits, status updates)
• Performance review schedule (quarterly business reviews)
• Equipment lifecycle planning (replacement recommendations, upgrade paths)
• Consequences for non-compliance (financial penalties, service credits)
• Escalation procedures for emergency situations

SLAs incorporate several critical components. They are as follows: 

Performance Metrics

A strong SLA will specify and track performance metrics. These should be precise and measurable. 

• Work order completion rates
• Mean Time to Repair (MTTR)
• Response time standards
• First-time completion rates
• Preventive vs. reactive maintenance ratios 

Does your Facilities Management Software track these metrics? 

Financial Requirements

There should be no room for interpretation in the financial section of the SLA. Vendor management best practices require accurate and transparent pricing and payout models. 

• Transparent pricing structures
• Timely billing and invoice submission
• Clear payment terms
• No hidden fees or unexpected charges

Does your CMMS help you automate these processes? 

Compliance and Documentation

Your company is held to compliance standards, which means holding your service workers to these standards, too. This mitigates the risks associated with hiring service providers and contractors. 

• Insurance requirements
• Required certifications and licenses
• Safety protocols
• Regulatory compliance standards 

Does your Facilities Management Software support your need to be fully compliant with all federal, state, and local requirements? 

Partnership Expectations

Last but not least, the SLA should outline the partnership expectations between the organization and the contractor. These are especially important when you are handling multiple service providers as part of your vendor management responsibilities. 

• Review scorecard metrics
• Develop improvement plans when needed
• Encourage continuous enhancement of service delivery
• Address any compliance or performance issues 

Your Facilities Management Software/CMMS should support these complex relationships as part of its approach to vendor management. 

Great SLAs are collaborative

SLAs are, by nature, prescriptive. That doesn’t mean that they can’t also be collaborative! Vendor management may sound like it’s the manager telling the vendor exactly what to do, but proactive companies appreciate the knowledge and expertise their vendors bring to the discussion. 

Ideally, you will craft SLAs in partnership in collaboration with your service providers. Contractors and service providers bring valuable information to the discussion. They can caution you if the SLA is too aggressive or simplistic, and they can also help you draft specific parameters that you might not even know to look into. 

An ideal arrangement is a partnership in which both parties meet regularly to review the SLA, including scores and outcomes for established agreements. If those scores are too low to be satisfactory, you can develop success and improvement plans. 

Think of this as an opportunity to encourage continuous improvement---and to underscore the consequences of underperformance. This is a far better arrangement than terminating contractors without warning because they haven’t hit every benchmark.

Vendor management/facilities management runs so much more smoothly when you have great relationships with providers. Those relationships take time and effort. Use the Service Level Agreement drafting, revision, and review process to build that relationship over time. You will certainly see better outcomes through this method! 

Types of SLAs in Facility Management 

SLAs are not limited to maintenance or facilities management. However, within facilities management, there are several categories that SLAs can fit into. Ultimately, the type of SLA that is appropriate is dependent upon the specific focus of the agreement and the requirements of the industry. 

Performance-based SLAs focus on measurable outcomes like response times and completion rates. These are particularly critical for emergency repairs and critical systems maintenance.

Availability SLAs ensure systems and facilities maintain specified uptime requirements. This is especially important for retail locations where downtime directly impacts sales.

Compliance SLAs address regulatory requirements and safety standards. These help protect organizations from liability and ensure proper documentation of all work performed.

Industry-specific variations will take into consideration the specialized needs of different industries. Different industries may require specialized SLA terms based on their unique operational needs. For example, HVAC and pest control services typically require faster response times than cosmetic repairs. 

How do different industries apply SLAs for maintenance, repair, and compliance tasks? 

No matter what industry you’re in, your main facility management goal is to keep all facilities fully operational. A broken-down facility loses money because of customer inconvenience, and it also leads to higher maintenance costs. 

Service Level Agreements may change by the trade, but you will see patterns emerge. For example, companies across countless industries require HVAC coverage. Retail and food companies alike need to deal with pest control to avoid inventory damage and reputation management. 

In every industry, unmet SLAs bring big risks---and possibly fines. Imagine if you failed to specify in your plumbing SLA that the plumber needed to be fully insured. If that plumber ended up damaging someone’s property, such as tenants in a building or retail product in a warehouse, you have a stronger case for compensation if they actively violated their SLA. 

Measuring and enforcing SLA compliance 

If you are working with an effective and modern CMMS platform, then your CMMS can play a crucial role in monitoring and enforcing SLA compliance. Two of the most exciting applications of a flexible, customized CMMS are automated tracking and data analysis. 

Automated Tracking

This includes: 

• Real-time monitoring of response times
• Automatic alerts for missed deadlines
• Performance tracking against established metrics
• Documentation of all service activities 

Data Analysis

This analysis includes: 

• Performance trending over time
• Vendor scorecard generation
• Cost analysis and budget tracking
• Compliance verification ("What Metrics Should Your CMMS Be Tracking?")

Common SLA Mistakes to Avoid 

Organizations should be aware of several common pitfalls related to SLAs: 

• Using generic templates without customization to your specific business needs (every organization is different!) 
• Setting unrealistic performance expectations (which creates frustration and higher rates of turnover) 
• Failing to regularly review and update the terms of the SLA
• Lacking clear consequences for non-compliance
• Not maintaining proper documentation of performance issues
• Ineffective communication channels between parties

Here are 10 rules for creating great SLAs so you can avoid those mistakes! 

1. Be specific with your language. Avoid vague terms like "within a reasonable time frame" or "best effort." Instead, define exact response times and measurable outcomes.
2. Set realistic, achievable expectations. These should align with your business needs and market conditions. For example, don't demand 1-hour response times if your location or budget doesn't support that level of service. 
3. Implement performance tracking from day one. Without proper monitoring, you can't enforce SLA terms or identify important trends. (Your CMMS can help you with performance tracking!)
4. Schedule regular SLA reviews. At a minimum, these should be quarterly. For critical services and major projects, you may need to review the SLA monthly to confirm that everything is happening according to SLA standards. 
5. Avoid using generic templates. Your business is unique, and your SLAs should reflect your specific operational requirements 
6. Include clear consequences for non-compliance.  You will want to have a defined process for performance improvement.
7. Include contingency plans for emergency situations. 
8. Build flexibility into your agreements. This will allow you to accommodate seasonal changes or business growth. 
9. Don't forget to include compliance and documentation requirements. These protect both parties and ensure regulatory compliance. 
10. Create crystal-clear cost structures and billing requirements. 

How Fexa optimizes SLA management 

When you use a flexible CMMS program like Fexa, you can create powerful, effective SLAs that are customized to your exact needs. 

Fexa can automate your Service Level Agreement tracking and reporting, provide analytics to help identify positive and negative trends, and enhance your vendor management experience with real-time data. 

Fexa offers:

• transparent scorecards that are easy to read and access
• survey tools to collect data on in-process and completed SLAs
• feedback tools to evaluate performance 
• automated monitoring of SLA work
• real-time tracking of provider performance
• automatic notification of any missed deadlines 
• easy access to documentation of service activities
• compliance verification
• trend analysis
• cost tracking and budget management
• insurance and certification tracking
• automated alerts for expiring documents
• safety control verification 
• performance dashboards
• mobile access for field teams 

Effective Service Level Agreement management through a modern CMMS helps organizations like yours maintain high-quality facility operations, all while controlling costs and ensuring compliance. If your current FMS or CMMS isn’t making your vendor management experience easier, more transparent, and more informed, then it may be time to make the switch. By establishing clear expectations and using technology to monitor performance, facilities can build strong provider partnerships that support their business objectives. Vendor management doesn’t have to be a burden! Schedule a demo with Fexa to see how we can make your vendor management and SLA experience simpler and more effective.