Contracts

Purchase requisition

___ ______ _______ _____ ___

___ ______ _______ _______ ____

RFQ

___ ______ _______ _____ ___

___ ______ _______ _______ ____

Release order documentation

___ ______ _______ ___

___ ______ ____

___ _______ __

Contract

___ ______ _______ ___

___ ______ _______ _______ __Vendor

Definition

A contract is a longer-term agreement with a vendor concerning the procurement of materials or services, which is valid for a certain period of time.

Ways of creating contracts Manually

By referencing a preceding document (e.g. purchase requisition,

RFQ/quotation, other cantract)

Types of contract

-Quantity contract: (E.g. laying 10,000 m pipes)The contract is fulfilled when the agreed target quantity has been released thorough the issue of release orders against the contract.

Contracts: General

-Value contract: (E.g. laying pipes to a value of $20,000 )The contract is fulfilled when the agreed target value has been released through the issue of release orders against the contract.

Item Category and Account Assignment Category in Contracts

The item category and the account assignment category determine how a contract item is processed.

Contract

D U

Item category

D = Service

Acct. Assgt. Cat.

U = Unknown

Item category

D = Service

Acct. Assgt. Cat.

K = Cost center

ReleaseorderD K

Account Assignment Category

Acct. Assgt. CategoryU K? Cost center 1324

Specification of a certain cost center

Contract

__ U

If the account assignment for na item is not know at the time the contract is created, the item is initially given the account assignment category U = unknown

Contract

__ K

At the time the release order is created the account assignment category is usually known (e.g. K for cost center).

Example ofaccount assignmentcategories:K = Cost centerA = AssetP = Project

Definition

Release orders are purchase orders issued with reference to a

contract. They specify the following:

Quantity to be released ( quantity ordered)

Delivery date

Release Order

Adoption of data

The contract data adopted in the release order includes the

following:

Vendor data

Price

Terms of delivery and conditions

Updating When a release order is created, the release order doumentation is

update 9total value per release order)

The quantity released is update for each service line in the contract

Manual Creation of Release Orders: Procedure

The buyer creates the release order.(Create PO withreference to centract.)

Rel. order

___ ______ _______ ___

___ ______ _______ _______ __

The release order issaved and transmitted to

the vendor.

Contract

___ ______ _______ ___

___ ______ _______ _______ __

Manual data:1 Reference to contract

(contract number)1 Delivery date1 PO quantity

The release orderdocumentation in the contract is updated.

Automatic Creation of Release order with Reference to Requisition

1

2

3

4

- Create purchase requisitions

- Contract assigned as source of supply

- Convert requisitions into release order

SAVE

- Release order created- Release order documentation updated

Release Order Documentation: Example

Contract

___ ______ _______ ___

Rel. order

1 The release order documentation provides you with information on the current status of the release orders issued against a contract1 It indicates the total value of value of each release order and the remaining open target value of the contract

Release order documentationRel order Date Value

( PO number)

450000026 05/01/1996 1,000450000042 12/02/1996 1,500450000056 06/04/1996 2,5000

Open target value 15,000

Price Determination Using Master ConditionsLevel of conditions

1580

15601540

Sem. Consultant K4 1 day

$2,100.00

Purchase requisition

Vendor

- Service no. 1540

$2,100.00

?

Adoption in document

Service

1580

15601540

Sem. Consultant K4 1 gayABC Software Co.$2,000.00

PO

ABC Software Co.-Service no. 1540Plant 2 (hartford)

$2,000.00-Service no. 1540Plant 1 (Boston)

$1,950.00

Vendor

1580

15601540

Sem. Consultant K4 1 gayABC Software Co.Plant 1 ( Boston)$2,000.00 Planat

Definition:

Conditions determine the effective price of a service a PO.

The system provides you with the price per unit as well as

discounts and surcharges.

Conditions in Purchasing Documents

Maintenance:

Conditions can be maintained in the following documents:

Quotation

Purchase order

ContractExample:

Conditions

Condition type Description Amount

xx Wages $ 100.00

yy Overheads $25.00

RA 01 Discount on net price 8 %

Chapter 5 Optimizing the Procurement Process

1 System-aided source determination for purchaserequisitions.

1 Conversion of requisitions into order quantities or contract release orders for transmission to a vendor.

Chapter 5 Objectives

1 Course participants learn how the system determines and suggests existeng sources for procurement purposes.

1 They learn how to convert requisitions into purchaseorders ( release orders) for transmission to a vendor.

Processing Purchase Requisitions

Createrequisition

Determinesource of

supply

Release (=approve)(optional)

If it was not possible to determine a source:Assign vendor and continue processing requisition

Preq.___ ______ _______ ___

Contract___ ______ _______ ___

Preq.___ ______ ______o.k.__

PO1 __ ___2 __ ____

__Release

order__ _____ ____

__RFQ__ _____ ____

__Manual

orautomatic

Origin of Purchase Requisitions

Filed manually in the userdepartament

Generated automatically

Project system (PS) Plant maintenance (PM)

Purchase requisition___ ___

___ ________

or

PO

Releaseorder

Requisitions : Further Processing

Conversion

Conversion

-Automaticsourcedetermination

-Manualsoucedetermination

OR

Purchaserequisition

No sourceassigned

Sourceassigned

Purchaserequisition

?

Vendor

RFQ

?

PO

Releaseorder