Compound price discounts are calculated up the hierarchy, only considering the current contract and any applicable parent agreements above it in the hierarchy. Child subagreements below the current contract are never considered.

When a contract covering an item or service is a subagreement within a contract hierarchy, the pricing can be compounded (or combined) with pricing discounts of parent agreements, assuming both of the following conditions are true:

• The parent agreement immediately above the current contract in the hierarchy uses a percentage discount pricing term (except when using a contractible factor).
• The current contract has the Compound with applicable parent pricing terms? field checked to Yes for the item.

Compounded price discounts are serially calculated within each contract, beginning with the subagreement attached to the release order or selected for direct invoicing.

For example, consider a three-level contract hierarchy. A supplier-level master agreement contract uses a discount of 1% and its subagreement is a commodity-level contract with a discount of 2%. A second subagreement is created with a discount price of $9.99, using the first subagreement as its parent. In this case, compound pricing is calculated in two steps:

1. from the second subagreement to its direct parent (the first subagreement): (9.99 * .98) = 9.7902
2. then from the first subagreement to its parent (the master agreement): (9.7902 * .99) = $9.692298

Override pricing

Override pricing is where the price is not compounded through the contract hierarchy, and instead the price from one contract overrides any other contract prices. Override pricing requires the use of no-release contracts within the hierarchy. If only release-required contracts are used, the contract with the lowest unit price is automatically chosen.

Compounding contractible factors

A contractible factor will be compoundable with applicable parent contractible factors (when the factors are identically named) if the parent contractible factor uses one of the following pricing terms:

• discount percent
• amount based tiered discount
• cumulative amount based tiered discount
• cumulative based tiered discount
• quantity based tiered discount