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Creating a New Contract

A contract identifies that a formal pricing agreement exists between your organization and a supplier. Each contract includes purchasing information for one or more resources. The contract identifies the prices, terms and conditions for the purchases of those resources during the effective period of the contract.

You can create a contract document in APM to record the pricing agreement, and the list of resources that you have contracted to be supplied. This topic explains how to create a new contract from scratch. If you have completed the RFQ process, and want to create a contract from the RFQ document, please see Editing a Contract That Was Created From an RFQ.

Note: The My Desk view only displays the tabs described below if you are set up as a buyer on your employee record and the Purchasing Desk option is selected on the My Desk Settings tab.

To Create a New Contract

1.	From the site, select the Purchasing view.

2.	Select the Contracts tab. By default, this tab lists all of the open contracts for the site.

Tip: You can also create contracts from the My Desk view, Contracts tab.

3.	Click New. The Contract window appears.

4.	On the Properties view, General tab, enter the following information:

Setting Name

Description

Contract

The number of the contract. APM automatically enters the next consecutive number, but you can change this information if necessary. If this box is left blank or the number is not unique, an error message will appear.

Title

The title of the contract. Enter a descriptive title up to 100 characters.

Buyer

Select the name of the employee who is the buyer responsible for this contract. When this employee views the My Desk view, this contract will appear in their list of contracts.

Contract type

Select the appropriate contract type from the list. This will allow you to filter or sort lists of contracts by classification. Contract classifications are defined at the site level.

Consignment Contract

If this contract is used for consignment resources, select this option. A contract cannot refer to both consignment and non-consignment resources. If you select this option, the system will set the purchase type of all supplier resources on the contract to “consignment”.

Change value

Enter the estimated value for the contract. This amount is used by the system to determine an appropriate approval route (if contract approvals are used). If you are redrafting the contract, enter the amount that the contract will increase over the current total contract amount. The system adds the Change value and the previously Approved value and displays the result in the Total estimated value box. When you send the contract to be approved again, only the changed amount will need to be approved.

Supplier

The name of the supplier this contract is with. You can enter the supplier name, or browse to search for the supplier.

Contact

Select the name of the supplier’s contact person for this contract.

Reference number

Enter the supplier’s reference number for this contract.

Authorized by

Select the supplier contact who authorized this contract on behalf of the supplier.

Starts on

Enter the starting date for the period during which this contract is in effect. The expiry date can be no earlier than this date.

Ends on

Enter the ending date for the period during which this contract is in effect. The expiry date can be no earlier than the effective date. Once the contract has expired, the prices for the resources on the contract will no longer be valid. Note that the contract’s expiry date can be longer than the expiry date for the pricing agreement.

5.	Select the Purchasing Policies tab. Set the following rules for the contract:

Setting Name

Description

Supplier resource purchase order policy

The contract’s prices can be used as estimates only, or as the fixed prices for each resource. This rule controls the price and extra charge information on a purchase order. • Estimate only: The prices will be entered as the default price on purchase demands or purchase order lines that reference a contracted supplier resource. The buyer will be able to change the default price. • Fixed: Prices that are fixed cannot normally be changed on purchase demands or purchase order lines that reference one of the contract’s resource prices. The price can only be changed in exceptional cases.

Terms and conditions policy

The contract’s terms and conditions (FOB point, freight terms, shipping method, payment terms) can be used as guidelines only or as fixed values: • Guidelines only: The terms and conditions set on the contract will be entered as the default values on purchase demands or purchase order lines that reference a contracted supplier resource. The buyer will be able to change the default values. • Fixed: Terms and conditions that are fixed cannot normally be changed on purchase demands or purchase order lines that reference a contracted supplier resource. The values can only be changed in exceptional cases.

6.	Enter the supplier’s terms and conditions for the contract:

Setting Name

Description

FOB point

The free on board (FOB) point agreed to with this supplier. Select the appropriate FOB point from the list.

Freight term

The freight term agreed to with this supplier. Select the appropriate freight term from the list.

Shipping mode

The shipping mode agreed to with this supplier. Select the appropriate shipping mode from the list.

Payment terms

The payment terms agreed to with this supplier. Select the appropriate payment terms from the list.

7.	If the contract is for an on-site contractor, set the contractor options:

Setting Name

Description

Used for on-site contractor time reporting

Select this option when the contract is for on-site contractors. When this option is selected, only supplier resources using the purchase type ‘on-site contractor’ can be added to the contract.

Invoicing rule

The rule for reconciling contractor timecards to the supplier’s invoice: • Invoice lines are matched to individual timecards: select this option to reconcile invoice lines within APM. A purchase liability will be created for each of the on-site contractor timecards. • Invoice lines are not matched to individual timecards: select this option to reconcile the invoice lines manually. You might want to do this if matching invoice lines to individual timecards is too rigid of a process.

8.	Select the Price Policies tab. Set the following rules for the contract:

Setting Name

Description

Supplier resource information

Select whether the contract’s supplier resource values can be changed on supplier resource records or not. These values are: pricing agreement effective and expiration dates, discount percentage, extra charges, primary supplier setting, and the replenishment rule for the resource. • Fixed: If the values are fixed, they cannot be changed on the supplier resource. Any changes to the contract’s values are automatically applied to the supplier resources. • Defaults only: If the contract’s information will vary on the supplier resources, choose the ‘information is default values only’ setting. The contract's information will be defaulted onto new supplier resources where it can be changed. Changes to the contract’s information are not applied to the supplier resources.

Replenishment policy

The contract’s replenishment rule allows you to control whether or not resources replenished with a price from the contract require a manual review before the purchase order is generated. • Review is required: If you select this option, the replenishment process adds the resources to the replenishment requisition. The purchase order is not created until a buyer has reviewed the requisition and selects the generate purchase orders option. • Review is not required: The replenishment process adds the resources to the replenishment requisition as usual. However, the purchase order is generated immediately. The buyer does not have to review these resources. Note: The contract’s replenishment rule setting does not circumvent the existing rules associated with blanket orders. If an open blanket order exists for the contract and resource being replenished, the replenishment process generates a blanket order release. A replenishment requisition review is not required in this case

Preferred Supplier

Select whether the supplier resource prices defined for the contract are the resource’s preferred supplier information or not.

9.	Enter the pricing agreement information for the contract:

Setting Name

Description

Pricing agreement starts

Enter the date that the current pricing agreement for this contract starts. This may be the same as the starting date for the contract, or it may be a different date.

Pricing agreement ends

Enter the date that the current pricing agreement for this contract ends. This can be the same as the ending date for the contract or an earlier date. This date cannot be earlier than the date on which the agreement starts. Each contract can have multiple pricing agreements.

Lead time

Enter the supplier’s lead time for this contract.

Discount

Enter the percentage discount for the prices on this contract. This discount will be included in the loaded cost for each purchase order line created from the contract.

10.	Select the Description tab. On this tab you can enter a detailed description of this contract.

11.	Now that you have filled in the contract properties, you can perform any of the following to complete the contract:

•	Adding Extra Charges to a Contract

•	Adding Supplier Resources to a Contract

•	Setting Expiry Notification Rules on a Contract

•	Adding Notes to a Contract

12.	When you are finished entering contract information, save and close the contract window.