Bringing a management services provider can significantly improve your daily operations, provided you have a strong management services agreement. Only a robust agreement with clear expectations and benchmarks will help you get high-quality services. 

In the post, we will check what to include in a management services agreement, as well as the best practices and benefits. You also get a template to get started. 

What is a management services agreement? 

A management service agreement (MSA) is an agreement between a company and a service provider where the provider agrees to provide specific management and administrative services to the company. For instance, as a usual corporate practice, many companies outsource background verification of new hires to a vendor and create a management service agreement for it. This agreement outlines the scope of these services, compensation arrangements, and more. 

MSAs are usually created to outsource  IT management, human resources management, financial management, or any other operations management in a company. These agreements are signed by a third party (management service organization, limited liability company, sole business entity, or an independent contractor) that is an expert in handling these tasks and can take over that function easily.

“An MSA basically functions to create a good business relationship between the two parties, covering not only liabilities and risks but also obligations, rights, and responsibilities.”

~ Supin Prem, Sr. Manager, Legal Tech, SpotDraft

A management service agreement is often considered the same as a master service agreement and a managed service agreement. While these terms are related, there are slight variations. Master service agreements are broad and cover any type of service, typically covering multiple projects or services over a longer period of time. Managed service agreements focus more on IT, where the provider takes responsibility for managing specific systems or operations on an ongoing basis. On the other hand, management service agreements cover all types of management services such as overseeing business operations, project management, or other strategic management functions.

Management services agreement template

Streamline your operations by creating a strong management services agreement. Download the Management Services Agreement template now. 

Elements of a management services agreement 

Some key clauses you must include in a management services agreement are:

1. Parties: Include the full legal name and addresses of all parties involved. If you are the company receiving the service, then your company name will come under Client/Company, and the other management company delivering services will come under Service Provider.

2. Scope of work: Clearly outline the services to be provided by the service provider. Be as specific as possible here. Divide services into milestones, expected delivery dates, and turnaround times. Also, outline any specific performance metrics or targets that the service provider is expected to achieve.

3. Term and duration: Mention the agreement's start date and duration.

4. Fees and Payment Structure: Mention the pricing structure (hourly, fixed, revenue-sharing), payment schedules, and any penalties for late payments.

5. IP Rights: Address ownership and usage rights of intellectual property(IP) created during the engagement. It includes any copyrights, trademarks, patents, or trade secrets that may arise from the services provided. Also, mention how the service provider has to ensure the confidentiality of clients' IPs.

6. Confidentiality: Define which information is confidential and how it has to be handled. Also, mention how long the confidentiality obligation lasts. For instance, service providers cannot disclose any confidential information they collect during the agreement period, even after the contract has ended.

7. Indemnification and Liability: Determine the extent of liability assumed by each party for any losses or damages caused by their actions or omissions during the agreement period.

8. Dispute Resolution: Define the mechanism of resolving disputes during the agreement agreements. It could be negotiation, mediation, arbitration or litigation.

9. Governing Law: Mention under which jurisdiction's laws will govern the agreements. This is especially important if the parties are located in different jurisdictions. In case of any issues, either party has to follow the laws set by the governing law.

10. Termination and renewal: Lastly, add required termination clauses. When will agreements end? Define the circumstances under which either party can terminate the agreement (e.g., breach of contract, non-performance, termination for convenience). Detail any notice periods required and how termination notice can be provided. Also, state if the agreement can be renewed and how renewal will take place. 

What is the use of a management services agreement

Some key benefits of having a management services agreement are:

1. Set clear expectations 

A management services agreement clearly defines the scope of services. It eliminates the chances of any ambiguities and ensures both parties understand who is responsible for what. These agreements bring not only task clarity but also financial clarity by specifying clear payment schedules. Both the client and service provider can budget and forecast accordingly.

2. Improves operational efficiency

Management services agreements also include key performance indicators (KPIs), which allow for measuring the effectiveness of any service. Having predetermined KPIs is always helpful to improve operational efficiency. Clients can track these KPIs alone and reach out to the service provider for any lapses. Service providers can also use these KPIs to identify areas of improvement.

3. Reduces risks

MSAs mention liability and indemnification to protect parties from risks. Both parties are aware of confidentiality guidelines, what would be considered a breach, and how potential disputes would be handled.  It ensures both parties can foresee all potential risks involved and define ways to handle or prevent them in advance.

Management services agreement template

Streamline your operations by creating a strong management services agreement. Download the Management Services Agreement template now. 

Best practices for handling management services agreements

Here are some best practices that will help you manage MSAs effectively:

1. Create an MSA playbook

Create a playbook with standardized terms to help you draft or review any new MSA agreements. You can also create templates for different types of services based on the playbook.

2. Regularly review playbooks

Review MSA playbooks from time to time for relevance. You can tweak any clauses or conditions if they are no longer relevant.

3. Create a centralized repository

Store all MSAs in one centralized portal for easy access and tracking. You can monitor all existing agreements and verify if service providers are meeting all required KPIs.

4. Prepare for termination/renewal

Monitoring MSAs for termination or renewal is critical. If a contract is going to be terminated, you may have to look for an alternative management services organization to ensure continuity. Also, you will have to work with the provider on post-termination tasks such as returning data, revoking their access, etc. If a contract is up for renewal, you can renegotiate specific terms that may need changes.  

Create effective management services agreements faster and better

SpotDraft is a contract lifecycle management platform that helps you manage your MSAs effectively.

Using SpotDraft, you can:

• Create contract templates for MSAs to fastrack contract creation
• Set contract approval workflows to streamline internal reviews
• Get eSignatures on MSAs and automate reminders
• Review MSAs quicker with AI-enabled suggestions backed by custom playbooks
• Track termination and renewals easily to take the next steps.

The best part is SpotDraft comes with in-built MSA playbooks for reviews that ensure you are not missing any key details in your agreements. 

SpotDraft MSA playbook | Source: LinkedIn

Book a demo now to see all the features in action. 

Frequently asked questions (FAQs) 

1. What is a management service?

Management services are third-party services that help companies in financial, human resources, IT, admin, and health care management. Companies look for management services that are best in their respective service and outsource that function to them for efficient handling. 

2. When are management services agreements used?

Management services agreements are used when a company wants to outsource a particular management function (financial, human resources, IT, admin, or health care) to a third-party service provider. These agreements specify all the terms and conditions of this working relationship. 

3. What is the purpose of a management services agreement?

Management services agreements are created when clients outsource a particular management function (financial, human resources, IT, admin, or health care) to a third-party service provider. It acts as a base for the business relationship between the clients and the service provider. It provides clarity on the scope of work, compensation, payment schedule, duration, IP Rights, confidentiality, indemnification, liability, termination, and renewal. 

4. How can I write a management services agreement?

You can write a management services agreement by finalizing the scope of work, compensation, payment schedule, duration, IP Rights, confidentiality, indemnification, liability, termination, and renewal. Once these details are finalized, you can use a contract management solution like SpotDraft to create the agreement and send it for signature. 

5. Who manages management services agreements?

All involved parties (clients and service providers) usually manage management services agreements. Both parties have their own legal team or contract managers who oversee the drafting, negotiation, execution, and tracking of agreements.

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