Best practice: orders and contract management

[Former Member]

Hi!

I am currently working with a client who has impropriety set-up their contract management. I am trying to find out what the best practice in SAP PS is to harmonize such practice with the standard.

The situation is as follows (picture in the attachment):

Project structure: SAP Investment Management >>>> Investment Program >>>> Investment Measure >>>> SAP Project System >>>> Top level WBS element >>>> Network

How do resources get consumed? (e.g. materials)

To consume resources, I formalize my request through a contract. This request then becomes a contract, which successively becomes a 'buy order'.

The problem:

The budget only gets consumed when my contract becomes a 'buy order'. So during the formalization phase, the budget value will remain static. E.g. I want to plan 5 investments and have 0 buy orders at the moment. For each plan, I will have the same budget figure and when I go to implement these contracts, I will go under-budget. So the system does not calculate that maybe plans 1 and 2 will use 90% of the budget leaving not enough for plans 3,4, and 5 (who all see a full budget).

What is the best standard in SAP PS to deal with this issue and what tools can I use to implement this? I was thinking the project builder. If so, could someone explain how to appropriately configure this?

I sincerely appreciate any feedback,

Best regards,

Jessica

[Former Member · Accepted solution]

Hi Maria,

Thanks for helping.

To be clear, can you confirm that what you are saying goes against what has been previously mentioned by Paulo? According to your comments, the standard does the following:

Maria: Once the PR is instantiated, the system automatically charges the budget with actual + committed value. Therefore: Any new PR during the period PR >>> PO will consider the previous PR's budget consumption.

Paulo: The contract does not need an account assignment (yet just fixes price and quantity) and does not consume the budget until its becomes PO.

Which of two is correct?

I have been searching within the SAP forums however have not yet found a solution.. I have attached a diagram which illustrates my problem. Hope it helps.

Thanks,

Jessica

[sanjeevc · Accepted solution]

Hi,

Budget functionality work based on commitment + actual but its depend on tolerance parameter like what you have configured in PS prospective

if budget functionality is active on your system even wbs as account assignment using by you then system will check budget which you assign to wbs by cj30 and release by cj32.

Regards,
Sanjeev

[MTerence · Accepted solution]

Hi Jessica,

There is a confusion running around the terms you are using.

As per the standard process, Budgets are maintained at project / investment management.

Please find above simple process.

A project is budgeted with 100 USD. A network is created with a PR, maintaining the service activity with quantity and price, system will calculate the value as commitment. If the commitment is more than 100 USD (from Budget) system can display a warning / error message.

Then when you convert it to PO, service entry sheet can confirm the contract amount reduced.

As per the information provided by Paula, the contract amount will be detected when confirming through service entry sheet.

On the other hand maintaining the service activity quantity and price, will check your budget.

Let me know whether you are able to solve your query.

I strongly suggest you to contact a PS/MM consultant, so he can demonstrate the process and help you understand the SAP terms and process.

It will be difficult for us to suggest it, since SAP is like a clay, you can mould it according to your needs.

Regards

Terence

[Former Member · Accepted solution]

Let me try to re-phrase my question:

Budget: 100

I have a PR. If I receive another PR in the time interval that my PR becomes PO, does the user see the original budget of 100, or will the budget be consumed immediately as the PR is implemented? (even if the PR may not become PO)?

Regards,

J

[Paulo_Vitoriano · Accepted solution]

Hi Jessica,

Good to read the question that is easy to understand !

In the standard system the budget will be consumed by PR immediately.

There is also an OSS note that allows to ignore PR-commitments for the budget control and consider only PO commitments for the budget control.

Alternatively, if PR will not be implemented it can be cancelled, and the budget will get back to the project.

Regards,

[MTerence · Accepted solution]

Hi Jessica,

If the first PR consumes 90 of the Budget and when the second PR if you try to put more 30, system will stop you to save this PR as the Budget is exceeded. At this stage the cost planned in PR or PR converted PO it is called as commitments.

It will consider if PR is converted to PO also, when the goods issue occurs, this cost will be changed from commitment to actuals.

You need to config the system to give a warning or error message when the Budget is exceeded.

Regards

Terence

[sanjeevc · Accepted solution]

Hi Jessica,

As i told you in earlier post before GRN all kind of cost is commitment, once GRN done it commitment will convert in actual cost.

and budget consumption is depend on budget profile and parameter what you have configured.

so budget functionality will work as you want but you have to configure system accordingly.

Regards,
Sanjeev

[Paulo_Vitoriano]

Hi Jess,

Let me try to answer for the part that I have understood (hopefully), as overall your post seems bit confusing to me.

Within the project structure (or as a stand-alone project) you can have a WBS without any budget control, and we can call it Pre-Project that is a kind of study work while there is no budget approved by the client.

Once the project becomes a "buy order" and approved by the client you will create another WBS or another subtree of WBS-elements with a budget control.  I believe in the make-to-order scenario you can generate automatically a new project from the sales order.

Next you can transfer the cost from Pre-Project to the "buy order" by reposting or settlement or just leave it apart, whatever the scenario is.

I'd assume if Pre-Project is not transformed into "buy order" at the end of the day that is on the company cost as a kind of "practice development".

Regards,

Paulo

[Former Member]

Hi Paolo,

Thanks for the reply, I guess I was not clear in my post.

Through the system, the client manages:

     - Orders (here the process is standard and works correctly)
     - Contracts

The problem arises when dealing with contracts:

After the 'buy request' has been made the contract value does not erode the budget until the 'buy order' is released. Therefore: during the period between the 'buy request' and 'buy order' the budget value remains unvaried. If other orders occur during this interval, these orders will not see a new the updated budget value.

Summary

Orders: Budget (100) >>> Order (30) >>> Buy Request (budget = 70) >>> Buy Order (budget = 70)

!Contracts: Budget (100) >>> Contract (30) >>> Buy Request (budget = 100, this value is wrong, it  should be 70)  >>> Buy Order (budget = 70)

What is the SAP PS standard to configure this procedure correctly?

Thanks again for the help,

Jessica

[Paulo_Vitoriano]

Hi Jess,

Sorry, but I continue puzzled with your terminology.  Do you mean PR instead of Buy Request and PO instead of Buy Order?

You can reference the contract in PR/PO, but it does not consume the budget.  Imagine that you have a contract with preferred supplier for one year and 1M EUR, next you can have many different projects using service via PRs/POs with reference to the same contract.  The contract as such is just an agreement document fixing prices and quantities available, it does not need any account assignment.

Again this is just based on my attempt translation.

Kind regards,

[Former Member]

Hey,

Sorry for the late reply and thanks again for answering!

So from your explanation, the standard allows for contracts not to consume the budget?

Also,

I am undecided if whether or not to use the project builder to fix my problem or to use the transaction ME45N, which I have not found my information about on the internet.... which would you recommend??

Thanks again for the help,

Jessica

[MTerence]

Hi Jessica,

!Contracts: Budget (100) >>> Contract (30) >>> Buy Request (budget = 100, this value is wrong, it  should be 70)  >>> Buy Order (budget = 70)

With respect to your quote above.

Budget = 100

Your Contract = 30 (This i raise a external service activity in PS, which will have the contract assigned)

When you raise this PR, this falls under commitment. Budget consumption will be calculated has Actual + Commitment

So if the Actual + Commitment is exceeded the budget value system will give an error message.

This you need to configure how you want the budget check happen in system. For PS budget availability check refer below document.

Can you please confirm, is this the scenario you are looking ? I am trying to manipulate whether this can be covered in standard PS stuff.

Regards

Terence