Contract Management Overview
The Contract Management module is used to manage complex contracts. A contract can be linked to a single project, or to multiple projects. A contract can generate a quote or be generated from a quote. A contract can also be created from a sales order.
A contract can be defined over multiple levels (lines), to break the overall scope into larger and smaller chunks of work. Lines are made up of line items, which can each have their own billing type, and their own claim configuration. Individual billing types allows for invoicing that contains a mixture of quantity and progress billing. Line items that have the same claim configuration share billing details such as their currency, supporting multi-currency within the contract, or separate Bill To details, or a default retention percent.
Contract Management has revision and snapshot capabilities, to keep track of changes in long term contracts that are already underway.
Billing Types
A contract’s billing process is chosen at the line item level. If all the contract line items have the same billing type, then this is the only billing process that is used. Alternatively, there could be separate billing types used across the different line items, chosen to suit the nature of the work.
Line items that are eligible for a contract claim will be pulled into a single contract claim for the selected claim configuration, regardless of billing type, and will appear on the same invoice.
Quantity Billing Type
The Quantity billing type is useful for line items that deal with discrete quantities that can be billed for as they are used.
Progress Billing Type
The Progress billing type is used for the completion or part-completion of pre-agreed milestones for each contract line item that uses this billing type. A line item that uses Progress billing can be pulled into a contract claim, and then a percentage or the total of one or more milestones can be invoiced. Thus, as a milestone progresses, it can be invoiced. The milestones for a contract line item each account for a percentage of that line item’s total
| Milestones with a Recurring type (see Adding a Recurring Milestone Set) contain a set of identical milestones that are automatically created based on the selected Interval, Modifier and Duration. If you want to set up a billing schedule for a Contract Line Item, select a Milestone of the Recurring type with appropriate settings for your needs (for example, once a month billing for 12 months). |
Rates Billing Type
The Rates billing type is useful for contract line items that deal with time (labor) and materials that are required for the fulfilment of the contract.
Labor costs can be claimed at an agreed Labor Rate after timesheets are captured and accounted for in the related project. Materials purchased and received can be claimed against an agreed Price List. Alternatively, Markup Sets can be used to determine the claim value.
Claim values are calculated by the system when the contract claim is created.
GL Controls in the Contract
Within a Contract, GL Controls follow this hierarchy:
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Contract Line Item
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Contract Header
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Standard AR GL Control
The GL Control in Contract will determine the AR Invoice posting. If a GL Control is not specified in the Contract Line Item, the GL Control at the header will take effect when an AR Invoice is posted.
If no GL Controls are specified, the system will default to the standard AR GL Control when posting the Invoice.
Claim Configurations
Use Claim Configurations to control the payment terms, Bill To customer, currency details, and planned retention for contract line items, and subcontract line items. Each contractor subcontract can have multiple claim configurations, as well as the default claim configuration, providing flexibility amongst the separate contract/subcontract line items and the way contract/subcontract claims are billed/paid. When a contract claim is created against a contract, it must be for a selected Claim Configuration.
For contracts, all line items using the selected claim configuration that are not already in another open claim will be pulled into the new contract claim. For contract line items using Rates billing, Part Transaction Details and Time Transaction Details are pulled into a contract claim if they are not already in another open contract claim.
For subcontracts, all line items using the selected claim configuration will be pulled into the new subcontract claim.
Contract Status
The contract status shows the stage of the current revision of a contract, as defined:
New |
When a new contract is created. |
Tendered |
Change the contract status to Tendered when the contract tender/quote is submitted. The Tender BaseLine check box will be selected. |
Awarded |
When the tender/contract is awarded/won. The Contract BaseLine check box will be selected. |
Active |
When the contract is ready for execution; the Active check box will be selected. |
Completed |
When the contract is completed. |
Closed |
When all revenues and costs have been processed for a completed contract. |
Cancelled |
When the contract is cancelled or voided. |
Multi-Currency
For contracts that deal with suppliers from multiple countries, multi-currency can be used to bill different contract line items in different currencies.
When payments come in, they are automatically converted to the base currency for any analysis and reporting.
Currencies and their associated Exchange Rates must be pre-configured and maintained in standard Kinetic, to be used within Advanced Project Management.
Creating a Project from the Contract
When you create a Project from a Contract, you are also linking the project to the contract. Once your contract is active and has a linked project, you can start use Contract Claiming to raise A/R Invoices for work or materials specified in the Contract and managed from within the Project.
Activating the Contract
When you have finished capturing the contract and are ready to start it, you can activate it.
Step 1: Activate the Contract. See Activating a Revision.
Step 2: Change the contract status to Active. See Changing the Contract Status.