Explaining Contract Terms

Objective

After completing this lesson, you will be able to describe how to create a Contract Terms document with pricing details and publish a Contract Workspace.

Source-to-Order with Contract Compliance Process Flow

Process flow outlining RFP creation, supplier approval, vendor registration, contract management, and requisition creation by respective roles.

What is Contract Compliance?

Contract compliance is a module within SAP Ariba Buying which controls the pricing portion of the contacting process
This includes pricing options which can be challenging to support with a traditional catalog item:
- Tiered pricing
- Term-based pricing
- Monthly services
- Milestones

Example Use Cases

Release Order (Catalog Items)

You have negotiated a bulk quantity discount with a supplier and must support a pricing structure which reduces the price of an item as the order quantity increases
You are already buying from a supplier and have a catalog in place, but you have negotiated new pricing for next year which will change on a quarterly bases

Release Order (Non-catalog Items)

You have run a sourcing event for the spot purchase of items and would like to quickly transition the items to a requisition and purchase order, maintaining a link between the PO and contract

Non-release Order

You have a standing service contract with a vendor, e.g. snow removal, where the service is provided automatically and invoiced later
You have a number of different pricing structures for a supplier and wish to aggregate the spend from them all into a single master level contract

Two Types of Contracts - Workspaces and Terms

Contract workspace interface screen showing tabs for overview, documents, tasks, team, and history with draft documents and incomplete tasks.

Form for providing mandatory contract data, including fields for Contract ID, related ID, hierarchical type, amounts, parties, dates, and term type.

Contract Workspace vs Contract Terms

A Contract Workspace is a container for all documents and tasks. It contains a legal text of the contract (Main Agreement) and can contain a Contract Terms document that applies the negotiated prices to the catalog.
The Contract Terms document controls pricing. It sits within a Contract Workspace and is the link between the Sourcing/Contracts and Procurement modules.

Publishing a Contract Workspace

Publishing is the final step in the contract creation process and indicates that the contract is finalized. The current version of the Contract Workspace is frozen so no further editing is possible unless an Amendment is created. Contract Terms are published along with the Contract Workspace.
Only available if:
- All required tasks are in a completed status - Completed/Reviewed/Approved
- Once the Main Agreement and other assembled documents have been generated
Once all required tasks are completed, the owner will publish the Contract Workspace from the Attributes sections.
The status will be:
- Published if the Effective Date is the current date or earlier
- Pending if the Effective Date is in the future. When the Effective Date is reached, the status will automatically change to Published.

Creating Terms from a Workspace

Step 1: Create or Edit the Contract Terms Document

The Untitled Contract Workspace interface in procurement shows tabs for documents, tasks, team, and status as Not Created.

Create the Contract Terms

If your Contract Workspace doesn't contain a Contract Terms document, you can create it on the Documents tab using the Actions menu.

Edit the Contract Terms

If your Contract Workspace contains Contract Terms document, click it and select Open.

Step 2: Enter Header Data

Contract management interface with steps for setup, including definitions, limits, pricing, milestones, access, payment terms, and summary.

Choose Your Terms

On the Definitions step, you will choose between important settings like whether the contract is release or non-release and what type of pricing will be used.

Non-editable Fields

Some fields on this page may not be editable. That’s because they are set by the Contract Workspace and changes must be made at the workspace level.

Step 3: Edit Pricing

This interface allows editing supplier-level pricing terms, including descriptions, discounts, percentages, tiered pricing, and term-based rates for contracts.

Configure the Pricing Terms

Several pricing options are available: discount price, discount percentage, tiered pricing, term-based pricing.
The options you see will depend on the choices you made on the Definitions page.

Step 4: Publish Contract Workspace

This overview screen summarizes contract details, including ID, status, version, owner, commodity, language, region, department, and spend permissions.

Complete Required Tasks

Any tasks marked as Required in the template must be completed before the workspace can be published. This may include internal reviews or approvals.

The Amendment Process

Further changes to the contract workspace after publishing can only be made after starting an amendment. Amendments may include changes to the team, expiration date, pricing, or potentially the contract document itself.

Create Contract Terms and Publish Contract Workspace

In order to push the generator pricing from sourcing into the catalog, you will need to create a Contract Terms file. The Terms will pick up the data from the sourcing event automatically, but you may need to enter some additional information that is required by the catalog.

You have come to final agreement with your supplier on both contract language and pricing, so it is time to publish your Contract Workspace to complete the process and make the generators available for purchase.

After completing this activity, you will be able to:

Create contract terms
Publish contract workspace

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