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What is a Service Certificate?
The service certificate has the function of defining and regulating the agreement for the provision of services between the client and the contractor. This agreement is often found for the provision of IT services, such as the maintenance and operation of servers, on behalf of customers.
Key components of a service certificate include the object of service, service description, performance requirements, transfer of services, duties to cooperate, service level agreement, warranty and liability, handling of risks (for example liability, rectification of defects), remuneration, contract duration and termination, productive operation, data protection and export compliance as well as regulations on the change request process (amendment procedure for contract adjustments).
Since these are a number of important points, the service certificate is usually also a longer document which, if carefully executed, can be up to 120 pages or more long.
Why Should Operation and Implementation Be Contractually Separated?
Since service certificates can be long and complex documents, as mentioned above, when preparing them, attention should be paid to separating the work required for implementation, for example an initial project, from the company. Initial projects to introduce a software or service are often unique and tailored to the customer, as the prevailing infrastructure and processes have grown over the years. In most cases, the requirements are met first so that the actual service can also be implemented later. The subsequent operation of the software can usually be standardized very well.
When these services are combined, the complexity of the document inevitably increases because warranty and service levels are differentiated for different services. In addition, operation and implementation require different cooperation obligations on the customer side. A simple reference is then no longer possible and the relevant services must therefore always be precisely referenced and delimited.
The remuneration structure is also usually very different for the types of benefits mentioned. The company is often tied to data volumes and monthly retainers, while initial projects work on the work done and the remuneration of the plant produced. In addition, there are also variable components as part of the initial project, such as server lists and costs for deployed administrators, which are charged upon request from the client.
What Are the Customer's Duties to Cooperate?
The duties of customers to cooperate are important elements of a performance certificate, as some work by the contractor is only possible with the local assistance of the technicians on the customer side. When deploying software locally, this often involves installing software packages or updates for security purposes or providing API endpoints and data keys that are necessary to transfer and exchange data.
For the customer's requests for changes, it is also important to contractually secure the customer's obligation to cooperate in order to be able to access the customer's systems, where the operated software is running, or to make backup copies or start up backup servers, which keep the service running while the software is being adjusted by the contractor.
Even when accepting the service provided, the customer should be obliged to accept the service in accordance with the specifications or service description. Transmission of test data or error messages for acceptance and during operation may also be necessary.
What is the Legal Nature of a Service Certificate?
In many cases, the service certificate is deliberately kept as a work contract, as a contractor is obliged to produce a specific work in return for payment of a defined wage (remuneration for work) in accordance with Sections 631 et seq. of the German Civil Code. The contractor must also deliver a clearly defined success and not simply provide a service. Billing and uniaxial time use are usually not enough. To fulfill the contract, the work must be performed in accordance with the defined criteria.
The contractor acts independently and freely decides how many employees will be deployed to provide the work. In the event of successful acceptance, the client owes the contractor the remuneration for work.
This approach has the advantage that the contractor has a clear idea of costs right from the start of the project and is not surprised at the end of the project. This type of cooperation has become a practice in software development, as contractors also have a concrete idea of the time required after carrying out a project several times. This applies in particular to offering specific development products or integration services with standard software.
What is the Significance of Cooperation Obligations on the Part of the Client?
As stated above, cooperation obligations play a major role in IT contracts, as cooperation by the client is often not just optional. This lack of optionality also shows that the obligations to cooperate are disguised performance obligations on the part of the client. It is therefore not enough to hide the obligations to cooperate in the general terms and conditions, but these should be located in the service certificate itself. In any case, it should be clear to the customer that his duty is not only to pay money, but that certain work is also absolutely necessary so that the contract can be carried out successfully. When formulating cooperation obligations, it is therefore important to use language that is understandable to the client, which clearly shows the client's employees what they need to do and at what point in time.
The contractor is responsible for ensuring that the duties to cooperate have been understood and to ensure that they are implemented as intended.
What Points Should You Definitely Consider as Part of a Service Certificate?
The service certificate regulates a number of points mentioned above for the provision of IT services. Among other things, the following points can be found regularly in service certificates, even if there is no statutory rule on structure:
- Service description
- Rights of use
- Contract period
- Basics of cooperation, including procedures in the event of conflicts of interest (project controlling)
- Quality and service level of services (so-called service level agreements)
- Type of service allocation (for example, per operating system instance or per client workstation
- Penalties for late performance
- Customer's duties to cooperate
- Data security and data protection
- Managing risks (e.g. liability, rectification of defects)
- Hard and software transition
- Transfer of employment relationships
- Amendment process for contract adjustments
What Types of Contract Structure Exist for Service Certificates?
Since the topic of service certificates is used to contractually regulate a number of different topics in the field of IT services, there are also a variety of different forms. Our previous experience shows that the following contract variants are somewhat popular.
- Framework contract with plants
- Modular components through performance certificates
- Framework service certificate and attached service certificates
Framework contract with annexes
framework agreement
The framework contract covers all regulations that form the framework for subsequent provision of services. It usually also includes the topics listed above, such as subject matter of the contract, contract period, type and scope of services, use of subcontractors, data protection, confidentiality, liability, service duration and termination, jurisdiction, rights of use, force majeure and emergency concept.
The framework agreement often only regulates the legal aspects of cooperation in detail, which then also makes it a playing field for lawyers. The sections such as the subject matter of the contract and scope of the service serve as an introduction usually only address elementary points such as an acceptance obligation on the part of the contractor. For a detailed description of the service to be provided, the framework agreement refers to the appendices.
For regulated companies such as banks and insurance companies, it is often necessary to establish additional sections on instruction and audit rights, which ensure that the client can enforce legal and regulatory obligations with the provider at any time.
annexes
At the beginning of the annexes, it is advisable to include a brief summary and an overview of the attached attachments. An analysis of the type and scope of the services to be provided is an essential part of the investments. The overall result, the individual services and the place of delivery should be described in detail here. For better readability, it is advisable to divide the individual solutions into subsections.
In order to eliminate misunderstandings right away with the agreement, care should be taken to ensure that each service is presented in a responsibility matrix and that the client is informed which services must be provided by his employees to ensure the success of the project. For larger projects, a RACI matrix can help to represent responsibilities and process chains for the flow of information.
At this point, care should once again be taken to separate a previous initial project from subsequent service provision within the framework of a standardized product. The above separation for better readability should definitely be observed here. Since the services of the initial project are often not standardized, milestones and deadlines for takeovers should be agreed here. A “Definition of Done” should also be explicitly provided here. For example, there can be no discussion about the scope of the work after work has begun.
If, as part of the initial project, there is a transfer of hardware or employees from contractor to client, these procedures must also be set out explicitly.
Another very important part of the service description capital is a detailed presentation of the pricing model. Here too, attention should be paid to a separation between any special projects and standardized provision of services. We discussed why a separation also makes sense here above.
In addition to describing the customer's service and duties to cooperate, the topic of IT and data security should also be described. Companies usually rely on existing service level contracts or order processing contracts, which are negotiated with the customer. The order processing contract should also comment on the technical and organizational measures that have been taken to protect the data.
Benefits of the framework agreement with investments
The use of a framework agreement with annexes is supported by the fact that all essential provisions are summarized in one contractual document. This often makes it easier to read and is also easy to obtain a signature, as only one document is signed.
The framework agreement and annexes usually apply to projects that can be traced back to a project or solution. The use of the systems facilitates Preparation of a contract, as unused equipment can be easily removed. More complex projects with multiple services should nevertheless make use of a framework contract with service certificates.
Framework contract plus modular service certificates
For companies that offer a range of different services, the modular form of creating several different service certificates is ideal.
For this type of design, the systems described above are each combined in a separate service certificate. The individual sections are then tailored to the respective service certificate. The number and scope of service certificates depend on the complexity and number of services booked.
The original framework contract is therefore reduced to a few pages, as the equipment required to provide the service is transferred to the respective service certificate. In some cases, the framework contract only contains a reference to the service certificate. Sections that are relevant for all services to be provided and whose design is independent of the type of service are often still included in the framework contract. Examples of this include order processing and the confidentiality agreement.
Benefits of the framework agreement plus service certificates
The advantages of the modular structure are that the technical topics can be further separated. This allows the legal department to concentrate on the framework part, while the departments responsible for providing services can focus on preparing the respective service certificates.
Should the client decide to make use of further services during the service phase, further service certificates can simply be added and completed. It is often not necessary to amend the framework agreement.
Framework service certificate and attached service certificates
Further complexity and modularity can be represented by using a framework agreement, in addition to a framework service certificate including associated service certificates. A framework service certificate is used to further group legal conditions into a higher-level document for similar services so that text passages do not have to be repeatedly repeated in the individual service certificate.
Benefits of the framework performance certificate
As already mentioned, the advantage of the framework service certificate is that it can be used as a means of further grouping and summarizing the pending service certificate. With these measures, multiple answers can usually be avoided, although the complexity of the document also increases due to the inclusion of cross-references.
Other Variants: An Overview
In addition to the variants shown, there are countless other ways and mixes for drawing up service certificates. For an overview, we have summarized the alternatives presented once again in a table.
