Service Factor is used by the majority of commercial pump manufacturers in their standard products, "my 20hp pump pumps more than your 20hp pump", mentality.
As usual, electricpete has the correct scoop, the pump design should not use the service factor, leaving room for field problems such as low voltage, unbalanced voltage, wire size, poor splices, higher flow rates than planned, sags in the power grid voltage, and for longer motor life.
Our solution is to trim (or have the manufacturer trim), the impeller such that no service factor is used anywhere on the pump curve, even at flow rates higher than the BEP or design flow rate. This can be hard to accomplish though, far more time and effort is required to get this done.
PUMPDESIGNER