Establishing and Managing Service-Level Agreements

Service-level agreements (SLAs) are a powerful tool in managing vendor performance for outsourced fleet maintenance.

An SLA is a contract that describes expectations for service quality. It may include, for example, guaranteed turnaround time for preventive vehicle maintenance. The fleet manager can bank on an oil change being completed in 72 hours and plan the truck’s work schedule accordingly.

Outsourcing fleet maintenance has become more critical as utilities reduce the scope and expense of their in-house service facilities.

Nebraska Public Power District, which serves 84 of Nebraska’s 93 counties, streamlined its fleet management organization several years ago using SLAs with external service providers. Now, the internal team focuses on new equipment preparation as well as compliance inspections and repairs on mounted equipment. The outsourced service providers take care of all preventive maintenance and emergency repairs.

With fleet vehicles working from over 30 locations across Nebraska, it didn’t make sense to drive a truck six hours each way for an oil change, according to Rob Barbur, NPPD’s fleet superintendent.

“It just made sense logistically to move service to an outside vendor,” he said. “Now we do all of the chassis service outside of our facility, and we have agreements signed with what we call preferred providers.”

An SLA should detail the utility’s priorities, such as prices and turnaround times for standard services, including parts and labor. Priority service is typically even more important than price, especially for after-hours and weekend repairs, which may come at an additional cost beyond standard services.

NPPD is willing to pay for priority service with a vendor that meets their standards, such as following a detailed preventive maintenance checklist.

“We’re not looking for the Jiffy Lube service; we’re looking for the complete service,” Barbur said. “We want everything looked at, corrected and marked on the sheet.”

Flexibility is Key
However, given labor and materials shortages among qualified service shops, even the best-laid plans can go astray. Many shops have been hit hard by labor turnover. One of NPPD’s preferred shops lost five technicians in a single day.

SLA terms and penalties must be flexible in light of the current realities of labor and inflation. With NPPD’s vendors, emergency repairs that used to be done overnight are now waiting a week or more for a service technician to have time to roll the truck into the bay. And that’s with a preferred vendor.

“We go to a shop outside our network, and they say they can look at it in three to four weeks,” Barbur said. “That’s not counting the time for the actual repair.”

While enforcing SLA terms may seem like the right thing to do, consider the possible backlash. For a utility with a large, rural operating territory, there may not be many other options. In NPPD’s area, many towns have only one or two vendors that work on commercial vehicles.

“The shop owners talk to each other, so you have to be realistic about enforcement because you could wind up without a provider,” Barbur said.

It’s essential to have a system for drivers and local managers to report problems with the service shops. NPPD keeps a running log of complaints and concerns and phones the service shop to discuss the issues. If necessary, someone from the fleet maintenance staff will visit on-site. When possible, they bring a driver with firsthand knowledge of any issues.

“Generally, that corrects the problem, but if it continues, we will select another vendor in the area,” Barbur said.

Sometimes problems are due to a simple lack of communication. Perhaps a new service writer has started at the shop and wasn’t informed of the agreement with the utility.

SLAs are critical to managing fleet maintenance and repairs with outside vendors. They hold both sides accountable with expectations in black and white.

“You have to have an agreement because it’s worth its weight in gold when things start to go bad,” Barbur said. “It’s good to have the SLA to fall back on, not just a conversation you had.”

About the Author: Gary L. Wollenhaupt is a Phoenix-based freelance writer who covers the transportation, energy and technology sectors for a variety of publications and companies.

6 Tips for Establishing and Managing SLAs

1. Formally evaluate candidates. NPPD uses a matrix to assess shops, gathering information about facility size, capabilities, number of technicians and technician certifications. Visit or have local employees inspect shops in person to verify information. “A shop may say they have 25 bays, but half of them are in a building across the street where they store spare parts,” said Rob Barbur, NPPD’s fleet superintendent.

2. Communicate priorities. Be clear if you care more about responsiveness and thoroughness than the lowest price. “We’re not looking for the cheapest down and dirty price; we’re looking for a vendor that will do everything we want,” said Travis Schweer, NPPD fleet coordinator.

3. Ask local employees. Talk with drivers and superintendents, who can recommend shops in their areas.

4. Work with small businesses. Talk with the shop before inviting them to bid. NPPD uses a 14-page SLA document, which could be overwhelming for a shop owner to read and fill out. The document should be detailed but as brief as possible. “If a small shop is overloaded with work, they’re not going to be interested in taking on a huge challenge,” Barbur said.

5. Allow for pricing changes. Shop owners don’t want to get locked into pricing over a multiyear agreement, so allow for price increases as costs rise. However, falling costs should also be reflected in the contract.

6. Have an easy exit clause. Allow either side to exit the agreement without penalty at any time. “If we’re not happy, we can leave, and if they’re not happy, they can leave, so they are not locked into the commitment forever,” Barbur said.