Contracts

Release order
documentation

Purchase
requisition

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RFQ

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Contract
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Vendor
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Contracts: General
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.
-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

Release
order
D K

D U

Item category
D = Service

Acct. Assgt. Cat.

U = Unknown

Item category
D = Service

Acct. Assgt. Cat.

K = Cost center

Account Assignment Category

Acct. Assgt. Category
U
K
?
Cost center 1324
Specification of a certain
cost center
Contract

Contract

__ U

__ K

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

Example of
account assignment
categories:
K = Cost center
A = Asset
P = Project

At the time the release order is created

the account assignment category is
usually known (e.g. K for cost center).

Release Order
Definition
Release orders are purchase orders issued with reference to a

contract. They specify the following:

Quantity to be released ( quantity ordered)
Delivery date

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 with
reference to centract.)

Manual data:
1 Reference to contract
(contract number)
1 Delivery date
1 PO quantity

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Rel. order

The release order is

saved and transmitted to
the vendor.

Contract____
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The release order

documentation in the
contract is updated.

Automatic Creation of Release order with

Reference to Requisition

- Create purchase requisitions

2 - Contract assigned as source of supply

- Convert requisitions into release order

4
SAVE

- Release order created

- Release order documentation
updated

Release Order Documentation: Example

Release order documentation

Rel order
( POnumber)

Date

Value

450000026
450000042
450000056

05/01/1996
12/02/1996
06/04/1996

1,000
1,500
2,5000

Contract

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Rel. order

1 The release order documentation provides you

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

Open target value

15,000

Price Determination Using Master Conditions

Level of conditions

1580

1580

1580

1560
1540

1560
1540

1560
1540
Sem. Consultant K4 1 day

Sem. Consultant K4 1 gay

ABC Software Co.

$2,000.00

$2,100.00

Service

ABC Software Co.

Plant 1 ( Boston)
$2,000.00

PO

Purchase
requisition
Vendor

Vendor

Sem. Consultant K4 1 gay

- Service no. 1540

$2,100.00

ABC Software Co.

-Service no. 1540
Plant 2 (hartford)
$2,000.00
-Service no. 1540
Plant 1 (Boston)
$1,950.00

Adoption in document

Planat

Conditions in Purchasing Documents

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.
Maintenance:

Conditions can be maintained in the following documents:

Quotation
Purchase order
Contract

Example:
Conditions
Condition type
xx
yy
RA 01

Description

Amount

Wages
Overheads
Discount on net price

$ 100.00
$25.00
8%

Chapter 5 Optimizing the Procurement Process

1 System-aided source determination for purchase

requisitions.
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 purchase
orders ( release orders) for transmission to a vendor.

Processing Purchase Requisitions

Create
requisition

Preq.
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Manual
or
automatic

Determine
source of
supply

Contract
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Release
(=approve)
(optional)

Preq.

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__o.k.__

If it was not possible to determine a source:

Assign vendor and continue processing
requisition

1 PO
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Release
2 __ ____
order
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RFQ
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Origin of Purchase Requisitions

Filed manually in the user

departament

Generated automatically

or

Purchase
requisition

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Project system (PS)

Plant maintenance (PM)

Requisitions : Further Processing

Purchase
requisition

Vendor

PO

Release
order

Source
assigned

Conversion

-Automatic
source
determination

Purchase
requisition

PO

Release
order

OR

No source
assigned

-Manual
souce
determination

RFQ

Conversion