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Considerations for working with contracts

Review these considerations and guidelines when starting to work with contracts, to help you obtain maximum benefit from using contracts and global contracts. In addition, check your company's business process requirements for information about working with contracts, service requests, and release orders.

 

Contracts

You can create contracts that use release orders (to release funds from the associated contracts), and those that do not use release orders. Depending on your business needs, you may decide to use one or both types.

  • When release orders are required
  • Release orders encumber funds on the contract. Ariba Contract Compliance automatically reduces the available amount on the contract based on the status of the corresponding requisitions. The Ariba Contract Compliance system administrator configures Ariba Contract Compliance to calculate contract available amounts based on your company's business requirements.
  • A contract can contain flat-rate or tiered pricing discounts. Ariba Contract Compliance automatically deducts the discount when users create release orders against the contract.
  • Release orders support standard procurement functionality, such as change orders and line item split accounting.
  • Ariba Contract Compliance can automatically attach a contract to a requisition when a user selects a catalog or non-catalog item that is covered by that contract. Authorized users can also select items directly from a contract when creating release orders.
  • When release orders are not required
  • Buying organizations might want to convert their current paper-based contracts to contracts of this type. For example, an organization that has a large number of paper-based contracts could convert those contracts to contracts, thus creating a central online repository that buyers can browse and search for specific contracts. Additionally, a purchasing agent might want to create this type of contract to document an annual service contract.
  • When working with global contracts
  • A global contract can be modified, approved, or denied only in the partition in which it was created. Similarly, a global contract can be opened or closed only in the partition in which it was created. If you designate one partition in which to create global contract requests, users will always know which partition to log into to create change requests, or to open and close global contracts.
  • Once a global CR is fully approved and the contract is created, you cannot change the CR release access from global to partition-specific, or vice versa.
  • Use Ariba Buyer searches to locate global contracts and global CRs in the current partition or in all partitions.

Service requests

  • Because services often follow a predictable schedule and the associated costs are consistent, you may choose to use a contract without release orders for certain service requests. The supplier provides routine services and bills your company on a regular basis, and since release orders require additional time or resources to process, you may choose not to release orders.
  • Alternatively, since contracts without release orders do not support receipts and payments, you may prefer to use a standard purchase order for certain long-term purchases (for services, etc.). You can enter a due date for one year, add line items for each “service” delivery that is scheduled, and receive and pay against each item as the service occurs.

Release orders

  • A release order “releases” funds against the contract, including related discount pricing. Ariba Contract Compliance treats release orders like any other order, except that release orders can contain special pricing, value-added services, or other benefits associated with a contract. Each release order references the associated contract (based on the release order ID).
  • When a release order is created against a contract or a global contract, the release order ID is based on the contract ID. For example, release orders created against C10 would use the following number scheme: C10-1 (Order ID for release order 1), C10-2 (Order ID for release order 2), and so on. Since the release order ID is based on the contract ID number, users can easily identify the contract associated with the release order.
  • The requisition that is used to create a release order lists the contract ID in a display-only field. Users cannot view contract details unless they have access to the Contracts tab (and the contract is listed on the tab).
  • If a release order is created that causes the associated contract to close because the funds are exhausted, and the release order is subsequently canceled, the contract will automatically reopen and reflect the remaining available amount.

Note: You can easily search for contracts and CRs. On the Create Search screen, select Contract or Contract Request, and click Add/Remove Search Filters to specify any or all of the following contract-related filters to use in your search:

  • Add approver to approval flow
  • Allow invoicing against contract?
  • Allow receiving against contract?
  • Approved By
  • Commodity Code
  • Contact
  • Contract Description
  • Contract ID
  • Contract Title
  • Contract Type
  • CR Description
  • CR ID
  • CR Title
  • Currency
  • Date Approved
  • Effective Date
  • Evergreen
  • Expiration Date
  • Global Release Access (to locate global contracts and global CRs)
  • Hierarchical Type
  • Partitioned Commodity Code
  • Preparer
  • Related Contract ID
  • Release Required
  • Status
  • Supplier
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