Repricing ensures that requisitions accurately reflect the current price and tiered discount, based on the current cumulative pricing balance stored with the contract. Repricing occurs regardless of whether the contract was auto-attached, or manually added to the requisition from the Contracts tab.

Limits ensure that funds are allocated evenly over the life of a contract, instead of being exhausted quickly on one or a few items.

See the Ariba Contract Compliance Guide for information about how to implement Ariba Contract Compliance.

Refer to your company's business rules regarding the use of discounts, limits, and pricing terms, and whether to create contracts that allow you to exceed a tolerance of zero.

Discounts, pricing terms, and repricing

When creating a contract, you specify pricing terms (based on commodity, item, or supplier) using flat discounts or tiered pricing:

• With flat discount pricing, specify a discounted price for a specific item, or a fixed percentage off the regular price for a catalog item, commodity code item, or all the items offered by a supplier.
• With tiered pricing, specify different discounts based on the volume purchased on the contract. Depending on the type of contract you create (commodity level, item level, or supplier level), you specify:
  • Quantity-based volume pricing
  • Quantity-based volume discount
  • Amount-based volume discount
  • Amount-based volume pricing
• When invoicing is allowed for a contract, cumulative price discounts are calculated only when an invoice has completed the reconciliation process. (Receipts may exceed the quantity levels, but the cumulative price discounts will not be calculated until the associated invoices have completed the reconciliation process.)

When a requisition contains items added from a contract, and the items use tiered pricing levels, Ariba Contract Compliance automatically reprices items as necessary between the time the items are added to the requisition, the requisition is approved, and the release order is created and sent to the supplier. Ariba Contract Compliance does not attempt to auto-select a different contract to obtain a better price.

Contracts within a contract hierarchy can be configured to compound prices across multiple contracts or completely override pricing terms, even with the markups or rates specified by contractible factors in category items.

Limits

You can set spending limits that apply to the entire contract (overall limits), to releases made against the contract, and to specific items listed on the contract. Limits help users receive the best prices when they create releases against a contract. For example, if you set up a pricing term that guarantees a significant discount (based on purchasing a specific quantity of an item or spending a specific amount of money), you can set a minimum allowed per release limit to encourage users to create release orders that meet that minimum.

If a contract covers specific items, each item on the contract can be limited by either a monetary amount or quantity. Contracts that cover all the products offered by a specific supplier, or that cover products based on specific commodity codes, are always limited by a monetary amount.

Tolerances

You can specify a tolerance percentage for specific items or commodity codes. Use tolerances to allow users to spend more than the maximum commitment amount approved on the contract (or for specific items on an item level contract), or to prevent them from exceeding the spending limit. Although tolerances provide flexibility for users, use them only if your business policy permits you to spend more than the approved amount.

Enforcement of limits and tolerances

Limits are enforced by Ariba Contract Compliance as follows:

• Contract minimum commitment is not enforced.
• Contract maximum commitment is enforced.
• Tolerance percent is enforced.
• Contract release limits (minimum allowed per release) is not enforced.

For item level contracts, item level pricing term limits are set by quantity or amount, and:

• Minimum amount is not enforced.
• Maximum commitment is enforced.
• Tolerance percent is enforced.

Ariba Contract Compliance validates enforced values when a user views the approval flow for a request that contains an item referenced on a contract, or submits a release order that contains an item referenced on a contract.