A Master Service Agreement is a contract between two parties that establishes the terms and conditions on which they will work together.
A Master Service Agreement (MSA), also known as an Umbrella or Framework Agreement, is a legally binding agreement that sets out the terms and conditions between a service provider and a customer. This agreement governs how both parties will conduct current and future business.
The Master Service Agreement covers each party’s responsibilities as they relate to human resources, delivery requirements, payment, intellectual property rights, dispute resolution, limitations of liability, data protection, warranties and termination. It is typically used by parties who plan on having an ongoing business relationship and is therefore designed to be flexible. This eliminates the need to renegotiate the basic terms and conditions each time a new project or service is needed.
Related to the Master Service Agreement is the Service Level Agreement (SLA) and the Statement of Work (SOW) – both of which set out the services one party will provide within a project. These contracts are highly detailed and define a specific project or aspect of the relationship between parties, whereas the Master Services Agreement defines the terms and conditions for the entire relationship.
History of Master Service Agreements
Master Service Agreements are typically drawn up between Managed Service Providers (MSP) and their clients. Managed Service Providers originally emerged in the IT sector in the 1990s. Today, Managed Service Providers work in a variety of industries, including recruitment, to provide IT expertise and solutions for their clients. In the staffing sector, Managed Service Providers provide a range of resourcing services for clients – such as finding or even directly hiring contract or permanent candidates.
Recent Trends in Master Service Agreements
In the wake of the pandemic, there has been a push to digitalise Master Services Agreements. This includes negotiating the provisions of the agreement online and adopting a paperless system that makes the contract easier to access after it’s been completed. Automated electronic signatures are also being used more often, with key data being stored in cloud platforms.
Expansion of Strategic Partnerships
A Master Service Agreement can help a business develop an ecosystem of strategic partners, and as a result, reduce risks such as skill shortages and supply chain disruptions. In the recruitment space, such ecosystems can help companies find talent for time-sensitive projects or fill positions where specialist expertise is required in a fraction of the time.
Advantages of Master Service Agreements
- Master Service Agreements can help foster trust and develop long-term relationships between parties.
- A Master Service Agreement clearly sets out the terms and conditions in an ongoing relationship between service provider and customer, which results in increased efficiency and consistency in current and future work.
- As a Master Service Agreement aims to define the overarching terms and conditions of an ongoing relationship, it may take longer to complete than a standard contract. However, this saves valuable time and money in the long term, as there is less to discuss each time a new project or service is needed.
- Master Service Agreements lay out the legal foundation of a business relationship and therefore provide legal protection for both parties in the case of a dispute.
Disadvantages of Master Service Agreements
- As there is significant ground to cover within the Master Service Agreement, negotiations may take a longer period of time.
- If the Master Service Agreement is too rigid in its wording it may become unusable as circumstances change.
- A Master Service Agreement could make it harder to end a business relationship if the agreement contains a Statement of Work that has not been fully completed.