The Procurement Glossary » Service Level Agreement (SLA)

Service Level Agreement (SLA)

Contracts & Legal

Also known as: SLA

Definition

A contractual commitment defining the level of service a supplier must deliver, with measurable targets and consequences for missing them.

Explanation

SLAs make performance objective: response times, uptime, quality or delivery targets, plus service credits or penalties. They turn vague expectations into enforceable metrics and are central to managing outsourced and service contracts.

Example

The IT support SLA guarantees a one-hour response for critical issues, with service credits if breached.

Related terms

• Key Performance Indicator (KPI) — A metric chosen to track progress toward a specific objective.
• Service Credit — A pre-agreed rebate the supplier gives the buyer when it fails to meet an SLA target.
• Statement of Work (SOW) — A document defining the scope, deliverables, timeline and acceptance criteria for a services engagement.
• Supplier Performance Management — The ongoing measurement of how well suppliers meet expectations on quality, delivery, cost and service.

Frequently Asked Questions

What is Service Level Agreement (SLA)?

A contractual commitment defining the level of service a supplier must deliver, with measurable targets and consequences for missing them. SLAs make performance objective: response times, uptime, quality or delivery targets, plus service credits or penalties. They turn vague expectations into enforceable metrics and are central to managing outsourced and service contracts.

Can you give an example of Service Level Agreement (SLA)?

The IT support SLA guarantees a one-hour response for critical issues, with service credits if breached.

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