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Using the Contract Request Wizard

Objective

After completing this lesson, you will be able to utilize the Contract Request Wizard to create and manage a mock contract.

Manually Create a Contract Request

To manually create a contract request in SAP Ariba Buying, follow the steps below:

Log into your SAP Ariba solution.
On the dashboard, select Create, then choose Contract Request.
The system will ask, What would you like to create?. Choose Contract Request.
Use the contract request wizard to create the request step by step.

Note

Depending on your site configuration and the choices you make as you move through the wizard, you might not encounter certain fields or certain pages. For example, in sites configured for SAP Ariba Catalog only, you cannot enter any accounting fields, and the Milestones and Payment Terms pages are not available.

The list outlines different sections, covering definitions, limits, pricing terms, milestones, access control, payment terms, appendices, and a summary.

Contract Request Wizard Step 1: Definitions

In Step 1 of the Contract Request wizard, the basic header information for the contract is defined including the contract’s title, description, effective and expiration dates, hierarchy and contract type, and whether to allow accumulation of spend.

Dates

Effective date: The date on which users can begin to issue release orders. A contract can be created with a future effective date to prevent releases until the set date.
Expiration date: The final date on which release orders can be issued against the contract.
Evergreen: Select Yes to create an evergreen contract (a contract that does not expire). Select No to create a contract that does expire. If you select No, you need to set the Expiration Date.

Purchasing Unit Filtering

In the definitions step of the Contract Request wizard, enhanced purchasing unit filtering can be applied to contracts to support selection of the best contract terms during requisitioning or invoicing, and enhanced selection of parent agreements during subagreement creation.

Contracts at the purchasing unit level also apply to child purchasing units.

For example, you can create a contract at country/region level (parent purchasing unit) that applies to all plants (child purchasing units) in that county/region. But a plant might have negotiated another contract with the same supplier for better terms, in which case that plant’s contract will be used.

Note

You can only create contracts for purchasing units for which you are responsible.

In the example chart below, the contracts are applied as follows:

Plant 1 will have access to all three contracts: C1 (its own contract), and C2 and C3 (contracts specified for the parent purchasing units which applies to all children).
Plant 2 and UK will have access to contracts C2 and C3.
Plant 3, Plant 4, France, Germany, and Western Europe will have access to contracts C3.
Plant 5, Plant 6, Poland, Czech, and Eastern Europe will have access to contracts C4.

The flowchart shows the hierarchical structure of a company’s European operations, including divisions in Western and Eastern Europe, specific countries, and associated plants.

Contract Request Wizard Step 2: Limits

In Step 2 of the Contract Request wizard, contract limits, notification parameters, the preload amount, and forecasted spend are defined.

Contract Limit Compliance

Contract limits enforce boundaries on the total amounts or quantities that can be charged against a contract at the header level.

If the contract’s limits are exceeded, SAP Ariba will automatically close either the contract or the line items that have exceeded the maximum commitment plus tolerance. This is called Limit Compliance.

The diagram below illustrates the following compliance rules:

Overall Limit: Independent of line-item limits, if the overall limit is exceeded by the specified tolerance, the contract is Closed. A contract can go beyond the maximum limit and remain open until the tolerance is reached.
Line Item Limit: The contract is Closed when all item limits exceed tolerances. The contract remains Open as long as at least one line-item limit is below tolerance. Individual items are made unavailable as they exceed their tolerances.

This flowchart represents a system of limits and tolerances related to items and contracts, ensuring compliance and appropriate actions based on specific conditions.

Limit Notifications

Notification triggers can be configured to alert involved parties when specific contract conditions are approaching or have been breached.

Types of Notifications:

Contract Approaching Maximum Limit: Triggered when a specified percentage of the contract's maximum commitment is reached.
Minimum Commitment Not Met: Alerts when the contract's minimum commitment level is unfulfilled.
Contract Expiration: Notifies users a set number of days before a contract expires. Includes specific settings for evergreen contracts.

Recipients:

Notifications are automatically sent to the contract requester and users with edit access.
Additional users can be added during contract setup.

Configuration Options:

Available Balance Percentage: Define the threshold to trigger the 'Contract Approaching Limit' notification.
Days Before Expiration: Set how many days before expiration the notification should be sent.
Recurring Notifications: Specify the interval in days for repeating notifications.

Release Limits

Release limits control the ordering process within contracts by setting boundaries on the order amounts or quantities for materials and services.

Release limits are configured on the Pricing Terms page of the Contract Request wizard.

Contract level release limits set overall minimum or maximum order amounts or quantities for all items included in an order.
Item level release limits manage limits for each specific line item.
Catalog level release limits apply limits to all items included in specified catalogs.
Commodity level release limits establish limits for categories of goods or services based on commodity code.

Minimum Limit Enforcement:

Soft Limits: Trigger warnings and may require additional approvers but do not block transactions.

Hard Limits: Transactions that do not meet these limits are blocked until corrected.

Maximum Limit Enforcement:

Hard Limits with Tolerance: If exceeded, may add approvers or block transactions, depending on setup.

Soft Limits with Tolerance: Trigger warnings but generally allow transactions to proceed.

Note

Tolerance percentages can be applied to both hard and soft limits, affecting how strictly limits are enforced during ordering and invoicing processes.

Application in SAP Ariba Buying and Invoicing:

Minimum and maximum limits affect ordering processes and compliance, with specific enforcement rules based on whether users are internal or accessing through an SAP Ariba Catalog.

For invoices, tolerances determine whether an invoice triggers an exception based on contract values.

Spend Accumulation Settings

Spend accumulation settings determine how contract quantities and amounts are tracked between contracts in a hierarchy.

Spend is tracked within each contract, but can also be accumulated up the hierarchy levels to the parent agreement.

Using different combinations of these settings, you can determine exactly how spend is accumulated throughout a contract hierarchy.

The two main settings that control spend accumulation are as follows:

In the Definitions (step 1) of the contract request wizard, the Include Subagreement Accumulators setting determines if subagreements can be accumulated in the parent agreement.
Later, in the Pricing Terms (step 3) of the contract request wizard, the Add Accumulators to Parent Agreement controls which subagreements accumulate in the parent agreement.

This image shows how a user can configure spend accumulation. Figure 1 shows the "Include Subagreement Accumulators" "Yes" or "No" options from a parent agreement. Figure 2 shows the "Add Accumulators to Parent Agreement" which can be found in the pricing terms of subagreements.

To review spend accumulation from within a release order, select the contract ID from the line item details. Spend accumulation can also be found within the contract itself.

Screenshot of a contract details found within the contract ID linked to a release order line item. Screenshot shows Contract ID C569839 with start date 8/24/21 by Active Education SUPPLIER TEST. Contact person with an available amount of $456.85 USD and an amount spent of $54.45 USD, expiring on August 18th, 2024. Below are item details including a description stating sample pricing terms with a discount percent of 10%, and an amount used at line level stated as $54.45 USD. A back button is present in the lower-left corner

Preload Amount

The Preload Amount field is used to indicate prior spend against existing contracts. This is useful for contracts that may already exist with spend, but that is just now being entered into the system.

Preload amounts are tracked only at the header level and only affect spend accumulation and tiered pricing in supplier level contracts

The screenshot displays a user interface element labeled “Preload Amount” with a text box for entering a numerical value. The text box is preceded by the label “Preload Amount:” and followed by the currency designation “(USD)”. There is also an instruction above the text box that reads, “Enter a preload amount to reset the spend accumulations for the contract, for example, to reflect prior spending on this contract.”

Forecasted Spend

The Forecasted Spend is used to track the total amount you anticipate to spend over the life of the contract. This allows organizations to anticipate, analyze, and optimize spend and performance.

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