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What Is a Professional Services Agreement?
A professional services agreement (PSA) is a form that firms or consultants can use to create a contractually binding arrangement with a highly skilled business or individual. These agreements usually cover single projects with defined scopes or timelines. As a legally binding contract, a PSA provides protection for both the consultant and the business that requests the services.
A PSA typically lists the services that the consultant will perform, the compensation that the business will provide, and the time frame for the contract. Because many PSAs also detail procedures, terms, and requirements for the service, they can be several pages long.
Who Needs a Professional Services Agreement?
Because PSAs tend to be detailed and lengthy, most organizations use them only when contracting a consultant to provide highly technical professional services. The “professional” aspect of a PSA can refer to two different definitions of the term:
- Professional license: Service providers may have required business licenses that legally allow them to offer skilled services in a designated region.
- Professional approach: Consultants may have specific qualifications, such as advanced certifications, a predetermined amount of high-level experience, or certain technical capabilities.
What Type of Services Can a PSA Cover?
Professional services typically cover intellectual deliverables rather than physical products. For example, a PSA wouldn't be appropriate for an organization providing manufacturing, labor, or construction services. However, your organization may need a PSA if you contract a consultant to provide services like:
- Cost estimation
- Data analysis
- Environmental studies
- Laboratory analysis
- Land surveys
- Management consulting
- Market research or analysis
- Project or campaign planning
- Program evaluation
- Software development
- Technical support
- Web design or development
- Writing or editing
Here is an article with more examples of professional services.
When Should You Use a Professional Services Agreement?
Most organizations use PSAs for projects with clearly defined requirements, such as limited time frames or specific tasks. However, some PSAs cover ongoing services that require advanced technical skills, certifications, or licenses. PSAs can even serve as blanket agreements that allow a business to contract a consultant or firm for a set period of time.
No matter what your PSA covers, your organization should always prepare one before starting to work with a consultant. By signing a PSA before services commence, you can establish the scope of the project, the workflow, the time frame, the rate, and other key details.
What Information Goes Into a Professional Services Agreement?
You can customize a PSA to include almost any necessary stipulations or protections. However, most PSAs include a few standard sections:
- Purpose: States the general nature of the contract, such as the organization engaging the consultant to perform services as defined in an attached document, often labeled Schedule A
- Services or Duties: An attached document often labeled Schedule A that includes a description of the project, the scope of the work, and the deliverables that the consultant will provide
- Term: Specifies the start and end date of the PSA or the number of days, weeks, or months the agreement lasts
- Timetable: An attached document often labeled Schedule B that includes the dates by which the consultant will reach major project milestones
- Compensation: States the exact or maximum amount the organization agrees to pay the consultant and may include an attached document often labeled Schedule C that features a timetable for periodic payments
- Personnel: An attached document often labeled Schedule D that lists the individual consultants who will provide the stated services
- Relationship Between Parties: Establishes that the consultant remains an independent contractor and is not employed by the organization
- Confidentiality: Confirms that the consultant agrees to keep any data or other information involved in the project confidential
- Rights: Clarifies which party owns any data or intellectual property (IP) collected or produced as part of the project
- Indemnification: Confirms whether the consultant or the organization can be held liable for any damages that arise from the project
- Insurance: Lists the types of insurance coverage the consultant must have throughout the project, such as statutory workers' compensation, commercial general liability insurance, property insurance, automobile liability insurance, professional liability insurance, or crime insurance
- Compliance: Maintains that the consultant will adhere to any federal, state, or local laws and regulations that apply to the project
- Assignment: Confirms whether the consultant has the discretion to assign the agreement to another consultant or subcontractor
- Termination: States how, when, and under what circumstances the organization can terminate the PSA as well as whether the consultant will continue to receive compensation
Image via Unsplash by sctgrhm
How Do a Professional Services Agreement and a Subcontract Differ?
Subcontracts and PSAs are both binding agreements that outline the services a firm or consultant will provide for another organization. However, an independent contractor or subcontractor carries out the services included in a subcontract, while a vendor provides the services detailed in a PSA.
- Has a more involved business relationship with the organization
- Takes responsibility for important decisions regarding the project
- Is expected to reach performance goals related to the project
- Must follow project-specific rules established by the organization
- Receives payment for implementing a program or project
- Provides ongoing services over a period of months or years
- Provides services that aren't specific to a project or its unique requirements
- Has a number of competitors who provide the same or similar services
- Offers services that support the organization's programs
- Is not required to meet performance goals or internal metrics
What Other Types of Business Agreements Do Consultants Need?
In addition to PSAs, consulting firms and independent consultants often need a range of contracts and legally binding documents. As a consultant, you may have to prepare:
- Consulting Agreement: When consulting for another organization, many firms prepare a simple contract that states the scope of work, the time frame, and the consequences of breaching the agreement.
- Limited Liability Company (LLC) Articles of Organization: If you start a consulting firm, you may opt to form an LLC. In most states, you have to file articles of organization to register your LLC with the Secretary of State. Many LLCs must also create an operating agreement, which is an internal document.
- Nondisclosure Agreement: When working with confidential information, consultants often have to sign an NDA, preventing you from sharing proprietary information.
Do You Need an Attorney for a Professional Services Agreement?
Whether you need to customize a standard PSA or you want to create an agreement from scratch, it's important to have a lawyer draft the document. When you contract an attorney, you can benefit in a few key ways:
- Language: An experienced attorney understands how to interpret legal terms and what language to include to create a legally binding agreement.
- Customization: If you need to include an extra element like an NDA or a customized version of a standard component like a timetable, a lawyer can ensure that your PSA covers your unique project.
- Protection: An attorney can make sure a PSA offers protection for both parties involved. Most PSAs protect consultants from liability while providing adequate compensation, and they ensure that organizations receive the services as stated.
- Review: Before you sign the other party's PSA or agree to their requests to revise yours, a lawyer can review the document and ensure that it provides sufficient protection.
Here is an example of a standard PSA.
No matter what type of PSA you need, the ContractsCounsel team is at your service. Get a free proposal and take the first step toward creating a customized professional services agreement today.
Meet some of our Professional Services Agreement Lawyers
We are a boutique legal practice focused on media, fintech and international trade and have significant experience of advising on high value matters in these areas and delivering results. We advise start-ups, established businesses and professionals on a wide range of commercial and corporate arrangements, not only in the UK, but also in the European Union, United States and Latin America.
Talin has over a decade of focused experience in business and international law. She is fiercely dedicated to her clients, thorough, detail-oriented, and gets the job done.
Entertainment attorney and film producer. Counsel clients on all matter of entertainment-related contracts, including talent representation, crew deals, financing agreements, and production legal. Former litigation attorney and owner of a documentary and scripted film and television production company. Well versed in small business foundation and general business contracts.
I have been practicing law for more than 4 years at a small firm in York County, Maine. I recently decided to hang my shingle, Dirigo Law LLC. My practice focuses mostly on Real Estate / Corporate transactions, Wills, Trusts, and Probate matters.
Tim has 20 years of experience representing a wide variety of emerging and established companies in the technology, software, bitcoin and professional services industries. He works directly with his clients’ executives and boards of directors on corporate, intellectual property, and securities law issues. Recently, Tim has advised clients on Series A and Series B financings, corporate structuring, complex video licensing agreements, and structuring new hedge funds. Tim previously served as Forrester Research, Inc.’s General Counsel and Secretary where he was chief legal officer, led the company’s legal group, and managed the company’s legal and regulatory affairs. Tim played an integral role in the company’s initial public offering in 1997 and coordinated its secondary offering in 2000. He directed the legal process in the company’s acquisitions of Giga Information Group, Inc., Fletcher Research and Forit GmbH and oversaw over $125million in transactions. He also managed the company’s intellectual property assets. Tim is admitted to practice in Massachusetts and New York. Tim holds a Juris Doctor degree from the Boston College Law School and a Bachelor of Arts degree from Trinity College
Melissa Green joined the American Medical Association (AMA) as an Assistant General Counsel in November 2019. In her role at the AMA, Melissa supports the CPT and Masterfile licensing programs, in addition to supporting the legal needs of the Professional Satisfaction and Practice Sustainability business unit. Prior to arriving at the AMA, Melissa was the Chief Legal Counsel and Privacy Officer at The Chartis Group, a healthcare advisory services and analytics company, headquartered in Chicago, where she was responsible for commercial transactions for Chartis and its wholly owned SaaS company, and also served as the organization’s privacy officer responsible for HIPAA compliance. Melissa started her legal career in Cincinnati, Ohio at the law firm of Frost Brown Todd where she served as an associate in the Corporate department doing healthcare transactions, securities, and general corporate work. In 2007, Melissa transitioned into her first in-house counsel role at GE Aviation. During her time at GE, she had many roles including supporting new engine sales transactions for the Europe/Middle East/Africa region, its Electric Power business located in Dayton, its Engine Services business (supporting the CF34 and CF6 engine lines), and compliance. Upon leaving GE, Melissa had a brief stint at MedStar in Virginia before accepting a full-time position at the University of Maryland Medical System in Baltimore, Maryland in July 2013. Originally from East Lansing, Michigan, Melissa received her bachelor’s graduate from Michigan State University’s – James Madison College and is a graduate of the University of Michigan Law School.
Robert Jay H.
My Legal career hasfocused on representing businesses (corporations and limited liability companies) as general outside counsel. In this capacity, I have drafted a broad range of legal documents as well as analyzed proposed agreements drafted by the other party's attorney to the agreement for the pupose of determining the risks to which my client would be exposed. I maintained the client's minute book if no one in-house was available for that task. Additionally, if rquested, I served as a general advisor to the client's executive offers and to its Board of Directors.