Serves as the contractual dictionary and performance playbook for any Transition Services Agreement. It clarifies the critical legal and commercial terms—scope of services, pricing mechanisms, true-up rules, liability caps, audit rights, and exit criteria—so that both Parent and NewCo share an unambiguous understanding of obligations and costs. The section then translates those terms into measurable service-level agreements, offering sample metrics for IT uptime, help-desk response, payroll accuracy, and regulatory filing timeliness, complete with target thresholds and credit/penalty guidance. Finally, it outlines a governance workflow that specifies how service data are captured, reported, and escalated, ensuring that deviations from the agreed standards trigger timely remediation rather than protracted disputes.
A. Essential Contract Terms
- Scope of Services
- Precise description of activities, systems, deliverables, and geographic coverage.
- Term and Sunset Date
- Fixed end date; extensions require Steering-Committee approval and written amendment.
- Pricing Mechanism
- Cost-plus, unit rate, or fixed fee—each with auditable cost drivers and quarterly true-ups.
- Service Levels (SLAs)
- Quantitative targets tied to business impact; linked to credits or penalties.
- Exit Criteria
- Checklist of technical cut-overs, knowledge-transfer sessions, and data-migration proofs needed to terminate service.
- Data Security and Privacy
- Encryption standards, access controls, breach-notification windows, data-return or destruction obligations.
- Governance and Reporting
- Monthly performance review, dashboard template, and escalation ladder.
- Change-Control Procedure
- Formal request, impact analysis, approval matrix, and adjusted fee schedule.
- Liability and Indemnity
- Caps on direct damages; exclusion of indirect or consequential losses; clear carve-outs for data breaches.
- Audit Rights
- Parent and carve-out may inspect service records, cost allocations, and security controls with defined notice.
B. Core Service-Level Categories and Metrics
- IT Hosting & Infrastructure
• System uptime: ≥ 99.8 % (measured via automated monitoring)
• Incident response: acknowledge within 15 minutes (ticket-system timestamp) - Help Desk
• First-call resolution: ≥ 85 % (service-desk reports)
• Average speed to answer: ≤ 30 seconds (telephony analytics) - ERP / Finance Platform
• Batch-job completion: 100 % by 06:00 (job-log reconciliation)
• Close-calendar adherence: ± 0 days versus plan (close-status tracker) - Payroll Processing
• Payroll accuracy: 0 gross-to-net errors (payroll reconciliation)
• Funding confirmation: bank confirmation received by T-1 15:00 - Accounts Payable / Accounts Receivable
• Payment-file rejection rate: ≤ 0.5 % (bank reject reports) - HRIS Availability
• System uptime: ≥ 99.5 % (HRIS monitoring tool) - Network Connectivity (TSA Tunnels)
• Latency: < 100 ms (network probes)
• Packet loss: < 0.5 % (WAN analytics) - Reporting & Compliance Support
• Regulatory filing timeliness: 100 % on or before due date (filing receipts)
Set penalties (e.g., 5 % service-fee credit per SLA miss) and a cap (typically 15 % of monthly fee).
C. SLA Governance Workflow
- Parent Service Owner submits monthly KPI dashboard by Day 5.
- Carve-out TSA Lead verifies metrics; raises disputes within two business days.
- TSA PMO consolidates performance report; highlights red or amber items.
- Monthly TSA Review Board:
- Approve credits/penalties.
- Agree remediation actions and target dates.
- Persistent SLA breach (> 3 consecutive months) escalated to Steering Committee for potential early exit or re-scoping.
Using clearly defined terms and quantitative service levels ensures both parties understand expectations, enables objective performance management, and supports a timely, dispute-free TSA exit.
