This chapter covers the following topics:
This chapter provides specific considerations for implementing Oracle Procurement Contracts, as well as additional considerations for end-users. It also provides an overview of the Oracle Procurement Contracts features that support the key stages of the procurement contract life cycle.
Before you proceed with the implementation of Oracle Procurement Contracts, it is recommended that you address the business considerations outlined in the following table. The table also lists the sections in this guide where you can find relevant information:
Question | Related Section |
---|---|
How many organizations will be involved in the implementation? | Establish Contract Standards Global Agreements |
Which organizations will administer and control the standard contract terms at the global level? | Establish Contract Standards |
How does your organization currently create and store contracts? | Clauses Contract Templates Deliverables Variables |
Do you need to translate your standard terms into multiple languages? | Contract Templates Printed Contract Documents |
Does your organization have a formal approval cycle for the standard contract terms? If so, do you need additional approvers to approve business documents with contract terms as compared to business documents without contract terms? | Approvals in Oracle Procurement Contracts |
What are the processes that you and your suppliers will collaborate on in order to complete and sign off on contractual obligations? | Approve and Sign Contracts Supplier Authored Contracts |
What are the standard print formats for your contracts? | Printed Contract Documents |
Are there standard business rules based on which contract clauses need to be included while authoring a contract? | Contract Expert |
Is the contract term always the same based on a purchasing document type? | Automatic Application of Templates |
This section provides process overviews and specific considerations for the phases of the contracts life cycle.
Oracle Procurement Contracts enables you to establish and manage your contract standards in the Contract Terms Library, a feature of Oracle Contracts. You establish your contract standards by defining the standard clauses, contract templates, and contract deliverables that you want to enforce while authoring your contracts.
Organizations that operate globally can use the Contract Terms Library to establish organization-wide standards and enforce them on a global basis. To accommodate local or country specific regulations, an organization may provide local contract library administrators the flexibility of tailoring these global standards.
Standard clauses contain the standard business language to be used in contracts.
Contract administrators can create standard clauses in the library, route the clauses for approval, and publish the clauses for use across the organization.
Contract administrators can optionally define alternate or incompatible clauses for a standard clause. Users can insert tokens, called variables, in the clause text. These tokens refer to the structured business terms that are negotiated on a contract. They are replaced with the negotiated values when the contract is printed.
Companies implement best practices by creating standard contract boilerplates (templates) based on their unique contracting requirements.
Contract templates enable rapid assembly and creation of contracts and minimize the overhead involved in legal review and approval. Contract templates may include a set of pre-defined, pre-approved standard clauses. They may also include deliverables that are tasks or documents required to fulfill a contractual obligation. For instance, organizations may create deliverables to track the submission of a status report on the progress of the contract.
As with standard clauses, contract administrators can route contract templates for approval, after which the contract templates can be used in contracts.
You can create global templates which can be adopted by local organizations and modified based on local organizations' requirements.
This section describes the implementation and other considerations for:
Oracle Procurement Contracts leverages Oracle Contracts' functionality for creating and managing standard clauses and contract templates, including deliverables.
The features provided by Oracle Contracts are:
Contract Terms Library
Clauses
Templates
Deliverables
Variables
Folders
Sections
Contract Document Attachments
Printing Contractual Terms
For detailed description of these features, see Setting Up Contract Terms Library.
Before proceeding with implementation of Oracle Procurement Contracts, you should familiarize yourself with the setup procedures related to establishing contract standards in the Contract Terms Library.
Implementation considerations for setting up clauses include:
Intent: When defining a new clause, you must specify an intent (Buy or Sell) for the clause. After setting the intent for a clause, it cannot be changed.
If your organization only uses the Contract Terms Library for the Buy intent, set the value for the OKC Clauses Library Intent profile option to Buy. This ensures that users only create clauses with the Buy intent. For Oracle Procurement Contracts the intent should always be Buy.
Include By Reference: Use this feature if you want to substitute an alternate referenced text instead of the full clause text on a printed contract. To define alternate text, use the Reference Text field while defining the clause. This is useful if your printed contract is extensive and contains commonly used terms that you do not have to repeat on every standard contract.
Note that users with the Override Authoring Controls privileges can override this feature on a contract and choose to make the clause non-standard and include a special text. In this case, the system does not print the reference text; instead, the non-standard clause text from the contract is printed.
For details on the function security, see Establish Authoring Roles and Controls .
Keyword Search Feature: To maximize the results of the search feature for standard clauses, ensure that the following concurrent programs are run periodically:
Synchronize Clause Text Index
Optimize Clause Text Index
The frequency of running these programs should be determined during the implementation based on the usage frequency of the Keyword field during search.
Other considerations for using clauses include:
Provision Check Box: Sourcing documents may have provisions as clauses that are applicable during the negotiation but are not intended to be part of the final contract. Select the Provision check box to mark such clauses as Provision. A provision clause can only be used in sourcing documents (such as RFQ) that are supported by Oracle Procurement Contracts.
If you require a clause to be used in both Oracle Sourcing and Oracle Purchasing, verify that the Provision check box is not selected. You cannot change this attribute on subsequent versions of the clause.
Deliverable Variables: If the printed contract needs to contain a tabular list of deliverables, which are required to be fulfilled as part of contract execution, you must create a clause that holds one or all the deliverable variables in it. Depending on your business needs, you may include the deliverable variables as part of a clause that contains additional text, or create a clause that only contains one or more deliverable variables. Optionally, print the contract PDF document to validate the exact location of the deliverable table within the clause text.
Contract templates are required to author procurement contracts. You can consider managing templates based on your specific needs, such as transaction types, products or services procured, supplier categories, and so on. During contract authoring, users can search for the appropriate contract template by the template name. So make sure the template name reflects the major keywords that users might use during their search.
Implementation considerations for setting up contract templates include:
Intent: When defining a new contract template, you must specify an intent (Buy or Sell) for the template. After setting the intent for a template, it cannot be changed.
If your organization only uses the Contract Terms Library for the Buy intent, set the value for the OKC Clauses Library Intent profile option to Buy. This ensures that users only create templates with the Buy intent. For Oracle Procurement Contracts the intent should always be Buy.
Keyword Search Feature: To maximize the results of the search feature for contract templates, ensure that the following concurrent programs are run periodically:
Synchronize Template Text Index
Optimize Template Text Index
Determine during implementation how often to run these programs based on the usage frequency of the Keyword field during a search.
Document Types: To author procurement contracts, ensure that you have created at least one template and assigned it to one or more procurement document types. Examples of document types are RFQ, Auction, and Standard Purchase Order.
If you plan to use a common contract template to support multiple document types, note the following: If the contract template contains clauses that use variables sourced for specific document types, the system displays a warning if the same clause is used in a contract for a different document type.
For example, if a contract template is assigned to document types RFQ and Standard Purchase Order, you can apply the template to RFQs in Oracle Sourcing or purchase orders in Oracle Purchasing. If this template contains a clause with a system variable "Sourcing Document Number" the value for this variable will be substituted on the RFQ, but not on the purchase order. For the users creating a purchase order, the system displays a warning indicating that the variable could not be resolved. One way to avoid issues on a contract is to carefully review the validations results for the contract template and decide whether or not to include clauses with these variables in the template.
Layout Template: When choosing a layout template for a contract template, ensure that you do not choose the RTF type layout template. The RTF type is not supported by Oracle Procurement Contracts.
Contract Expert is a rule-based contract creation tool that assists purchasing professionals in authoring complex contracts. Using Contract Expert, organizations can define their business policy rules that govern the contract clauses to be included in a purchasing or sourcing document.
Contract Expert rules are defined in the contract terms library. Rules can be applicable to specific templates or applied globally for all contracts authored in the organization. During authoring, Contract Expert leads you through a contract creation questionnaire and automatically adds needed clauses based on the responses that you provided
In addition to author responses, policy rules can also be based on the business terms and other values contained in the purchasing or sourcing document, such as purchasing category, payment term, and agreed contract amount. For example, buying organizations may require additional clauses in contracts for the purchase of hazardous materials, or contracts for which the supplier is located in a specific foreign country.
When setting up Contract Expert for authoring contracts consider the following:
Profile Options
Ensure that the Profile Option OKC: Enable Contract Expert is set to Yes before using Contract Expert. Even if the profile option is set to No, the Contract Expert Rules setup will still be available, but contract templates cannot be made Contract Expert enabled unless the profile option value is Yes
Value Set Restrictions:
Ensure that you understand the restrictions in using Value Sets provided in the Oracle Contracts Implementation and Administration Guide when you are creating questions based on response type ‘List of Values’. For instance, Contract Expert does not support date based value sets. It is important you review these restrictions to avoid errors at later stages when creating rules.
Remember that deleting a value set or changing the name of a value set, after using it in a question, could potentially cause system issues when the question is used in a business document during contract authoring.
Contract Templates and Contract Expert
Contract Templates must be Contract Expert enabled in order to use Contract Expert in business documents.
When a global template is copied in a local organization, the rules from the global template are not copied over. However, if the local organization already has rules that are assigned to all templates, you would notice that those rules are available for the template you just created.
Currently, the system allows you to create and approve contract templates that are Contract Expert enabled without any clauses. However, from an implementation perspective, it is recommended that you provide at least the outline structure in the template. It would be useful to define all the sections of the contract and the order and numbering sequence that needs to be used for these sections.
It is recommended that you provide a Default Section assignment for clauses that are used in Contract Expert rules. This ensures that the clauses are placed in appropriate sections when Contract Expert is used on a contract. Contract Expert uses the following order to determine the section into which an expert clause is placed on a contract:
Obtain the Default Section assignment from the Clause Definition.
If the default section assignment is not found in the clause definition, get the Default Section assignment from the template.
You must create a contract template revision to update any of the Contract Expert fields. However, note that if you update the Expert Clauses Mandatory check box or the Default Section field by creating a revision, the changes take effect on all new and existing business documents the next time Contract Expert is used on a business document even though the template may not have been reapplied on the business document.
Exception to the previous point: If you disable Contract Expert on a contract template revision, this will not impact existing business documents that have already run Contract Expert using the original version of the contract template, unless the contract template is reapplied on a business document. In other words, you can continue to run Contract Expert on the business document until you explicitly reapply the contract template.
Note that if you choose to check Expert Clauses Mandatory on a contract template, all expert clauses will be made mandatory. Use this only if this is the desired behavior. Clauses that are made mandatory cannot be removed from the business document.
Creating Expert Rules
Remember Questions and Constants can be reused across multiple organizations. You do not need to create these in every organization
Questions used in rules must be manually sequenced in the order in which you expect the sales personnel or a contract administrator to answer them. Dependent questions must be carefully placed under the main question so that they flow logically as the users are answering questions.
Remember rules are unique to an organization. So, even if you have similar rules in different organizations, you will have to create these rules individually in each organization. Unlike clauses or templates, rules cannot be copied across organizations.
During implementation, pay additional attention to the Apply to all Templates check box on a rule. Use it only if you are sure the rule will apply without exception to all templates (current and future) created in the organization.
Note that even though draft clauses are allowed to be included in a contract template, this does not apply to contract expert rules assigned to that template. All clauses used in rules must be in Approved status.
Note that numeric value sets are not supported for questions with response type of List of Values. If the response to your question is a number, remember to use a constant instead.
Deliverables are contractual commitments and obligations that can be associated to a contract template. This feature is specific to Oracle Procurement Contracts. Some considerations for using deliverables include:
Contract Templates: You may have a common contract template that supports multiple document types across Oracle Sourcing and Oracle Purchasing. When such a template is applied to a purchasing document, clauses marked as "Provisions" and deliverables of type "Negotiation" are not copied to the purchasing document.
Comments: When defining a deliverable on a contract template, the comments that you enter provide additional details of the purpose of the deliverable, to the buyer when the buyer authors the contract deliverables. This information, in the Comments field, is not available to the supplier from the iSupplier Portal.
Deliverable Types: Types of deliverable include Contractual, Internal Purchasing, and Negotiation.
If a contract template, with all types of deliverables attached to it, is applied to a sourcing document, all the deliverables are copied to the sourcing document. However, only Negotiation type of deliverables can be acted upon during the sourcing event. Applying the same contract template to a purchasing document will not copy the Negotiation type deliverables.
Oracle Procurement Contracts supports the following types of variables:
System
User-defined
Deliverable
Note: Oracle Procurement Contracts does not support the Table type variable.
Implementation considerations for setting up contract variables include:
Use the Value Set functionality to define values for the user-defined variables.
Other considerations for using contract variables include:
When using the Display Clauses feature in the Variables library, the clauses listed are specific to the organization that you are currently in.
You cannot delete a variable if another procurement organization has used this variable in a clause.
So if the system does not let you delete a variable that is not used in any clauses in your organization, it is possible that another procurement organization is using the variable in a clause.
To view the definition of a system variable used in Oracle Procurement Contracts, you must click the Variable Name link in the Variables library. You cannot alter the definition of system variables.
For the seeded system variables, see the System Variables section.
The contract negotiation process includes the stages of creating a sourcing document with contract terms, publishing it, gathering responses, and finally making an award.
To enable online negotiation of procurement contracts, Oracle Sourcing must be implemented.
In addition to the standard negotiation processes in Oracle Sourcing, Oracle Procurement Contracts enables buyers and suppliers to negotiate on the contractual terms during a sourcing event and to capture additional information through supplier-updatable contractual variables.
Using Oracle Procurement Contracts, buyers and suppliers can manage deliverables that represent obligations arising from the negotiation process. They indicate the success or failure of the fulfillment of the deliverable by changing the status of the deliverable for the negotiation.
For example, a buyer may require a sourcing supplier to give a project proposal presentation within a month of bid acknowledgement, and can define this requirement as a negotiation deliverable. The supplier performs the presentation, and updates the deliverable status online.
Note: After buyers award business to a supplier, they can create a purchasing document from a sourcing document. All the contract terms are copied over except those that are specific to the sourcing document.
For more information on general negotiation operations in Oracle Sourcing, see the Oracle Sourcing online Help.
In an offline business scenario, a buyer creates a draft contract in Oracle Purchasing. The buyer and supplier then conduct negotiations offline. When both parties agree on the contractual details, including the contract terms, the buyer submits the contract for internal approval.
This section covers the implementation and other considerations for:
Implementation considerations for setting up the process of authoring negotiation with contract terms are:
Contract Document Attachment:
Oracle Purchasing supports the use of contract document attachments on a purchasing document, but Oracle Sourcing does not. To include additional contract-related documents in an online negotiation, you can add them to a sourcing document as a regular document attachment.
If you need to include these documents in the purchasing document, when the negotiation is awarded, you must ensure that the purchase order is not submitted for approval automatically from Oracle Sourcing. To do this, users of Oracle Sourcing should make sure the Initiate Approval check box is not selected during the award process.
As a result, the created purchasing document will have a status of Incomplete and is not automatically routed for approval and signatures. At this point, you can upload these attachments and classify them as Contract category in the Manage Contract Document page.
Once the purchasing document is approved, you cannot attach any documents with the Contract category unless you revise the purchasing document.
Note: The supplier-updatable variables is a feature available only in Oracle Sourcing. So even if a purchasing document has such a variable, suppliers cannot update it from the Oracle iSupplier Portal application.
Other factors to consider when implementing the process of authoring negotiation with contract terms are:
Flow down of Provision and Negotiation Deliverables:
You can define contractual, negotiation, and internal purchasing types of deliverables to a sourcing document. Only negotiation deliverables can be acted upon during the negotiation process.
Supplier Updatable Variables:
In the Contract Terms Library you can define a variable and enable it for supplier updates. On sourcing documents, such as a bid, bidders are asked to propose a value for these variables, which may be later used for analysis during the award process. The values provided by the bidder in the awarded bid are automatically carried over to the purchasing document.
You can use the user-defined variables feature to request additional information, such as a DUNS Number, from a supplier that is then printed in the final contract.
If you create a contract template and associate it with document types used only in Oracle Sourcing, it will still be used on a purchasing document created after awarding a sourcing document. You will not, however, be able to reapply the template to the purchasing document. When you change the contract template, the current template will not be available in the search results. Also, you cannot apply this template to a new purchasing document.
When you publish or submit a sourcing document with contract terms for approval, the system validates the contact terms for errors and inconsistencies. The system only displays errors related to contract terms, but not the warning messages. Before publishing a contract or submitting it for approval, you should always validate the contract terms for inconsistencies using the Validate option in the Contract Terms page.
For the seeded errors and warning messages, see List of QA Validations.
As an integral part of the Oracle Sourcing process, Oracle Procurement Contracts enables you to leverage many of Oracle Sourcing's capabilities for the purpose of contract terms negotiation.
Supported features include:
Multi-round: You can use the multi-round functionality for negotiating contractual terms. In the first round, you can invite multiple suppliers. Then, another round can be initiated for detailed contractual negotiations with the selected supplier.
Online Discussion: You can use the online discussion feature in Oracle Sourcing to negotiate the detailed contract terms interactively.
Amendments: Sourcing suppliers can request changes in contract terms. A sourcing buyer can review the request and create amendments to the sourcing document if needed.
Oracle Sourcing provides the Sourcing Template feature to ease the process of authoring sourcing documents. These templates include attributes, lines, supplier details, and so forth. With Oracle Procurement Contracts, you can also apply a contract template to a sourcing document. Contract templates are not part of the sourcing template. You can apply a contract template and a sourcing template separately to a sourcing document.
Some sourcing documents with contract terms may require special approvals. You can achieve this by using the various seeded workflow functions, such as "STANDARDCONTRACT", which checks for the existence of contract terms in a document. You can customize the workflow to submit the document to different approvers, based on whether the document contains non-standard clauses or other criteria that is appropriate to your business.
For details on seeded workflow functions in sourcing approval workflow, see Approval Workflows.
Contract authoring is the process of adding contract terms to a purchasing or sourcing document.
In order to add contract terms, users of Oracle Purchasing and Oracle Sourcing must first create their business documents.
If Oracle Procurement Contracts is installed, users can then add or view contract terms in the following business documents:
Document Type | Required Application |
---|---|
RFI | Oracle Sourcing |
RFQ | Oracle Sourcing |
Auction | Oracle Sourcing |
Response | Oracle Sourcing |
Quote | Oracle Sourcing |
Bid | Oracle Sourcing |
Standard Purchase Order | Oracle Purchasing |
Blanket Purchase Agreement | Oracle Purchasing |
Contract Purchase Agreement | Oracle Purchasing |
To add contract terms, you must first apply a pre-approved contract template to the business document.
Expert enabled contract templates may have rules associated with them. Based on your responses to the questionnaire and the commercial terms of the contract, expert includes relevant clauses automatically in the contract.
After you have applied the contract template, you can modify the clauses and deliverables that were added from the contract template. You can also add clauses and deliverables specifically for the contract.
With Oracle Procurement Contracts you can manage all your contract document attachments specific to a contract. These attachments can be contractual agreements, contract images or any supporting documents for the contract.
You can validate the contract, to check for inconsistencies and errors.
You can preview the contract, by generating and viewing an Adobe PDF version of the complete business document.
For more information on creating business documents, see the Oracle Purchasing or Oracle Sourcing online Help.
This section covers the implementation and other considerations for:
Before using Oracle Procurement Contracts, you must determine the roles and responsibilities of the application users. The responsibility, with the seeded Purchasing Super User menu associated with it, will have full access to Oracle Procurement Contracts features. To restrict any functionality to a certain user, you need to exclude the corresponding security function from the user responsibility.
Available function security options include:
No Contract Access: If you want to restrict the access to author or view contract terms to certain users, ensure that the Manage Contract Terms function is excluded from the responsibility provided to these users.
Standard Contracts Authoring: Identify the users who would author standard contracts, but may not have permissions to author non-standard terms or to remove contract terms on a contract. For these users, remove the following functions from their responsibilities:
Allow Non-standard Terms
Override Authoring Controls
Non-standard Contracts Authoring: These are users in your organization with special responsibilities who can negotiate and author non-standard terms. For these users, remove the Override Authoring Controls function from their responsibilities.
Super User Privileges: These are users in your organization with overriding privileges. They are able to override standard privileges, to edit clauses that are text protected, or delete mandatory clauses. Use the menu from the seeded Oracle Procurement Contracts responsibility for these users.
For the functions that are available in Oracle Procurement Contracts for user security, see the Seeded Responsibility section of Appendix D.
The following table displays the differences between a responsibility with full access to Procurement Contracts functionality to another responsibility without any access to Oracle Procurement Contracts features.
Full Access to Procurement Contracts | No Access to Procurement Contracts |
---|---|
PO Entry form: The Terms window displays the Contract Terms region. Buttons are enabled, varied by the phase of the Authoring flow. | PO Entry form: The Terms window displays the Contract Terms region. Buttons are disabled and, if applicable, users can view the contract template name. |
Print capability: The generated purchase order PDF document includes the contract terms along with purchase order details. | Print capability: The generated purchase order PDF document only includes the purchase order details. |
PO Summary form: The With Contract Terms check box is visible and enabled. | PO Summary form: The With Contract Terms check box is visible and enabled. Also, users can obtain a list of the purchase orders, open the purchase order, but not view the contract terms. |
Copy Function: Users can view the Contract Terms copy choices, all radio buttons are enabled. | Copy Function: Users can view the Contract Terms copy choices, radio buttons are enabled. Also, users can copy the purchase order with contract terms to a new purchase order, but cannot view the contract terms on the new document. |
View Contract Terms: Users can view contract terms from the PO Summary form. | View Contract Terms: From the PO Summary form, users cannot view contract terms. The menu option is displayed but disabled. |
The Contract Terms Library setup navigation and Manage Deliverables page is accessible. | The Contract Terms Library setup navigation and Manage Deliverables page is not accessible. |
To create a contract, you can choose one of the following approaches:
New Contract: To author a contract, you can create a new purchasing document and then apply an appropriate contract template to the document. In the new contract, you can add or modify contract terms that were brought in from the contract template.
Oracle Sourcing: You can set up a sourcing document, with contract terms, to automatically create a purchasing document with contract terms after an award is made.
Copy Purchasing Document: You can create a contract by copying an existing contract. While copying, you have the following options:
Copy the contract terms from the original contract as-is.
Copy the contract terms from the original contract, but choose the latest versions of the clauses from the Contract Terms Library.
Do not copy the contract terms. In this case, you can start in the copied purchasing document by applying a default template or choosing another.
Purchasing Open Interface: You can use the existing Purchasing Open Interface to create purchasing documents. However, contract terms cannot be imported using the open interface. You should always import the purchasing document in the Incomplete status if you intend to apply a contract template subsequently.
Finally, when adding standard clauses to a procurement contract, if you perform a keyword search and encounter the error message "You have encountered an unexpected error. Please contact your System Administrator", it is possible that technical issues exist with the text index for clauses. If the text index has not been created, run the concurrent programs -- as detailed in the Using the Keyword Search Feature section -- to resolve the issue.
The contract template for your business document must be Contract Expert enabled in order to use this feature, except in the following case:
If you have applied a Contract Expert enabled contract template to a business document, and then disabled Contract Expert in the contract template, you can continue to use Contract Expert on the business document, as long as you have not explicitly reapplied the contract template to the business document.
Remember the following when you are answering Contract Expert questions on a business document:
Before you submit the business document for approval, you must answer all the mandatory questions.
If you want to edit responses to questions that depended on others, you must edit the lowest-level questions first, then work back up the hierarchy as far as you require. Changing the response to a parent question without first blanking the response to a dependent question will not cause the dependent question to be removed from the list of questions.
You may select a blank answer to a lower-level question to remove it from the list of questions.
If the response for a question is numeric, and you do not provide a value, the system uses 0 as the default value. It is strongly recommended that you provide a value, otherwise Contract Expert may bring in or remove clauses based on the response of 0.
Remember to run Contract Expert if you have made changes to the business document. For instance, if you have changed value of Payment Terms in your business document and the change needs to bring in a different clause, you must run contract expert again to bring in the revised set of clauses into the document.
If contract expert brings in clauses under a default section and you decide to move the clauses under different sections, remember to remove the empty sections from the document. The system will not do this automatically.
Remember, if a clause, brought in by Contract Expert, has been made non-standard or replaced by an alternate, the system will not bring back the original clause the next time Contract Expert is run. However, if you have removed the clause from the document and the clause is still recommended, it will be brought back into the document.
If you have Contract Expert rule with a condition that uses the operator ‘Not In’ for a variable (for example, Payment Terms) and assume the business document does not have any payment terms filled in yet, the system will treat null as a valid value in this condition and execute the rule. Remember this behavior when defining rules with ‘Not In’. So, in this case, if you wanted Clause A to be brought into the document if Payment Terms was Not In ‘Net 30, Net 45 or Net 60’, even though the document has no payment terms defined, Clause A will be brought into the document
Deviations are changes to contract terms in a business document that make them different from the standards established by the following:
The contract terms in the contract template associated with the business document.
Contract Expert rules, if they apply to the business document
Note: Because deviations are based on contract terms and rules associated with a contract template, the concept of contract term deviations does not apply to business documents whose Contract Source is attached document.
Remember, not every change to the business document is reported as a deviation. For instance, if the section name has been modified or the clauses reordered within the document, these are not deviations.
Remember, the Contract Approval Abstract is a powerful mechanism to report justifications for the contract deviations. If you report contract deviations in a special layout, you have several options:
You can modify the layout template for the deviations report to incorporate your unique formatting needs.
You can download the system generated deviations report , including the approval abstract, and format it offline and attach this offline document for approval. Remember to use the Category ‘Approval Abstract’ if you want to attach this document for approval. Only documents attached in the categories ‘Contract’ and ‘Approval Abstract’ will be attached to the approval notification.
If you plan on using your document attachment as the contract deviations report, do not select the Generate for Approval check box in the document to avoid potentially attaching duplicate and incorrect reports in the approval notification.
Impact of Contract Expert on Deviation Reports
There are special considerations regarding Contract Expert and the reporting of deviations:
If Contract Expert has never been run on the business document, the deviation report will not report any Contract Expert related errors. If you validate the contract terms of the business document, the validation process will report a warning that Contract Expert has not been run.
If Contract Expert has been run on the business document, the deviation report will not report any Contract Expert related errors in the following cases:
Incomplete configuration: You have not provided responses to all the questions.
Invalid configuration: There are system issues with Contract Expert.
In both cases, remember to validate the contract terms of the business document to review the errors in the validation report. If Contract Expert has been run on the business document, and you run the deviation report, the system also runs the Contract Expert process. This evaluates the conditions and determines if the clauses on the document satisfy the conditions. If the results indicate that additional clauses should be included or that some clauses should be excluded, these will individually be reported as deviations.
If you have enabled the automatic application of contract templates for a Purchasing document, that document can be automatically sourced to the appropriate vendor and issued without any buyer intervention with your default contract. The default contract template is applied to all outgoing standard purchase orders, blanket purchase agreements, or contract purchase agreements.
Setup Steps:
Set the system profile PO: Auto Apply Default Contract Templates to Yes.
Note: This can be set at the Site, Application, Responsibility, or User level as is appropriate for your organization.
Using the Contract Administrator responsibility create the contract template that you wish to be a default and assign the document type to that contract with Default Template enabled.
At times you may receive contract documents authored by a supplier or an external party. For example, you purchase a software program and sign a software license agreement with a software vendor. The software vendor authors the contract, documenting the service level agreements that both parties have consented to. If you need to track these supplier-authored contracts, perform the following:
· Navigate to the Update Contract Source page.
· Set the Authoring Party as Supplier.
· Upload the contract document provided by the supplier.
Oracle Procurement Contracts supports two types of Contract Source, Attached Document and Structured Terms. In the case of Structured Terms, the contract terms are represented by the sections and clauses included in the contract. Otherwise the contract terms are represented by the primary contract document that is uploaded for the contract. You can utilize the Deliverables feature in either scenario.
Negotiating contract terms is one of the most important activities that contract administrators, library administrators, approvers and users carry out. Editing is needed in the internal phases of the contract lifecycle, when contracts are authored, reviewed and approved, and also in the external phases, when contracts are negotiated and signed. Oracle Procurement Contracts has an in-built word processor to effectively manage authoring and editing. However, to achieve widespread adoption, Oracle Procurement Contracts also supports standard applications and data, especially when collaborating with external parties, who may not always have the ability or the inclination to adopt new technologies proposed by the internal party.
Oracle Procurement Contracts supports import of the Microsoft Word document and the synchronization of the changes with the structured contract stored in the system. Modifications to the original contract can be reviewed before changes are accepted. This two-way integration with Microsoft Word streamlines the contract collaboration process involving the buyer, contract administrator, legal and supplier. It also provides a non-intrusive, easy to use, bidirectional and reliable integration solution.
Note: For full synchronization with Oracle Procurement Contracts, the Microsoft Word document should be in Microsoft Office 2003 XML format (also known as WordprocessingML). It must have been originally exported from Oracle Procurement Contracts using the Word Export Function.
Your organization may have a master service agreement (master contract) with a group of pre-approved suppliers, and later you create separate contracts (child contract) for specific transactions. For example, your company already has negotiated a master service agreement for general insurance and liability clauses with an advertising firm. Your company now wants to negotiate a separate contract for a specific advertising campaign with the same general insurance and liability clauses. In this case, you can design a campaign-specific child contract that references the master contract for its general liability and insurance clauses.
To achieve this, you can consider one of the following options:
Capture the master agreement as a global blanket purchase agreement or a contract purchase agreement (global or regular) with the general insurance and liability clause. Subsequently create a standard purchase order to capture the child contract. This standard purchase order should reference the master agreement and should have project-specific contract terms
Model a contract purchase agreement after a master agreement and reference it in a standard purchase agreement, if there are no specific lines in the master agreement.
Referencing a master contract in a standard purchase order does not copy the contract terms from the master contract to the standard purchase order. Instead, the document number of the global blanket agreement or the contract purchase agreement is referenced in the standard purchase order.
Furthermore, contract terms cannot be associated with planned purchase orders and blanket releases. Therefore, do not use a regular blanket purchase agreement as the master contract, if a child contract will need to have additional contract terms.
Contract templates that are applied to a global agreement (for example, blanket purchase agreement or contract purchase agreement) are also effective in the operating unit that references the global agreement.
Consider the following business case for an organization with two operating units, OU1 and OU2:
You create a contract template in OU1.
You create a global agreement in OU1 and apply the contract template.
You enable the global agreement for OU2.
You can create global agreement in a central procurement organization and apply this contract template. If you enable the global agreement for other organizations, all operating units can utilize the contract terms associated with the global agreement, and you do not need to author them again in these operating units.
Since the contract terms are now referenced in multiple operating units, while creating a contract template ensure the terms are legally applicable to all the operating units in which it is referenced directly or indirectly.
With Contract Repository you can create miscellaneous contracts, such as license agreements, non-disclosure agreements, and merger agreements, which are not specifically related to the purchasing function. You can create purchase agreements for miscellaneous items that are outside the normal purchasing flow, for which full execution capabilities are not required.
Your organization may have critical, high value contracts already is place. You can add contract terms to such contracts and start reaping the benefits provided by Oracle Procurement Contracts such as embedding contract clauses on the contract and managing deliverables.
Implementation considerations for printed contract documents include:
Customize Layout Template: Oracle Procurement Contract enables you to generate your purchasing document with contract terms in PDF format. You can customize the layout of the PDF document. Important factors to consider include:
Contract Format: You can create your own format for the contract document.
For example, you may want to place the company logo on contract documents. After creating a custom XSL-FO stylesheet, you need to upload it into the XML Publisher template repository using the XML Publisher Administrator responsibility. Currently, Oracle Procurement Contracts only supports layout templates of type XSL-FO.
For more information, see the XML Publisher User Guide. For details on how to set up layout template, see Setting Up Layout Templates .
Translation: You can translate the XSL-FO stylesheet to the local language so the content in the PDF file is created in the desired language.
Association: After creating your layout template, you need to associate the layout template to the document type that you need to use it with. Use the Document Types form to associate your layout template to the document type.
The layout templates that Oracle Procurement Contracts uses are Document Type Layout and Contract Terms Layout. The Document Type Layout template defines the Cover Page and the Purchasing or Sourcing Document Details. The Contract Terms Layout template defines the Amendment, Terms, and Signature Block.
The printed procurement contract consists of the Document Layout followed by the Contract Terms Layout. Both templates should be consistent and created with that knowledge in mind. For more information on seeded layout templates, see Layout Template .
You should review your layout requirements for all these components, evaluate the default print layouts, and decide if changes are needed.
Other considerations for printed contract documents include:
Printed document content: The system generates contract documents in PDF format. A contract document includes the following components:
Cover Page: This page contains the contract effectivity text for new contracts. In case of amendments to a contract, you can have different verbiage in the cover page. It also has the summary of the changes that the submitter enters while submitting the contract for approval using the Approval form.
Purchasing or Sourcing Document Details: This section includes the details on the purchasing or sourcing document, such as supplier address, item, need by date, and ship to location in a tabular structure.
Amendment: This section lists the details of the changes to each clause, section, and deliverable, after a Sourcing or Purchasing document is amended.
Terms: All the clause text and sections as heading, along with the deliverables, are printed in this section.
Signature: This section is for obtaining signatures of the relevant parties involved in the contract.
Note: : If you upload a contract document as the representation of the contract that was not generated by Oracle Procurement Contracts, the system will not be able to merge the commercial section and the contract terms section of the Oracle Purchasing PDF document.
Implementation considerations for printed contract documents include:
Microsoft Word Integration: You can export the section and clauses included by a contract template in a Microsoft Word format. You can send this Microsoft Word Document to you legal user for review. You can perform spell check and track changes utilizing the features provided by Microsoft Word.
If the review comments are minimal, you can make those changes to the clauses and retain the structure of the contract terms. Otherwise, you can upload the Microsoft Word document as a representation of the contract.
Contract Deviation Report: Oracle Procurement Contract enables you to review the deviation in the contract terms compared to the standard contract template. You can attach the Contract Deviation Report to the approval notification.
Purchasing document with contract terms can only be canceled from the Enter PO form and not from the PO Summary form.
A contract must be approved internally by management, and optionally by legal professionals, before it is sent to the supplier for signing. Depending on the complexity of your contracts, you can route them to different or additional approvers. For example, if some contracts contain non-standard clauses that are specially negotiated, you can route those contracts to legal professionals for additional review and approval.
See the Oracle Purchasing online Help for more details.
You must identify contract signatories and establish guidelines for the contract signature process and communicate it across the organization. Oracle Procurement Contracts supports two ways to sign a contract, manually or electronically. In both cases, the supplier's acceptance of the contract is recorded.
Electronic Signature: To enable electronic signature, Oracle E-Records must be installed. During the award process in Oracle Sourcing, you choose "Document And Signature" as the acceptance criteria to require the supplier to electronically sign the purchasing document that is auto-created.
In Oracle Purchasing, to require electronic signature, you set the acceptance criteria to "Document and Signature" while authoring a contract.
After the contract is approved internally, the supplier receives a notification for signature. The supplier signs the contract online. A notification is sent to the buyer, who then signs the contract online. Oracle E-Records keeps the signed contract copies in the evidence store for future reference.
Note: When you create an amendment for a signed document, the acceptance criteria is automatically set to "Document and Signature". You must set acceptance criteria to "None" if you do not require the amendments to be signed by the supplier.
Digital Signature: You can enable Digital Certificate based signatures for your organization whether a contract is signed by supplier or the buyer. Oracle Procurement Contracts utilizes Oracle Workflow technology to enable this feature. Oracle’s digital signature is PKCS7 compliant based on X.509 certificates. You need to obtain the digital certificate from third party certificate provider and upload these certificates to the user’s browser and also the Oracle database.
See the Oracle Workflow User's Guide for details.
Manual Signature: After the contract has been approved internally, the contract document can be e-mailed, or printed and sent to the supplier for manual signature. After the contract has been signed offline, the buyer can record the acceptance of the contract in an Acceptances screen.
For more details on accepting contracts, see the Oracle Purchasing User's Guide.
This section covers the implementation and other considerations for:
The following factors are important to the approval process and your contract administrators and buyers should be familiar with them:
With Oracle Procurement Contracts you can approve both purchasing documents and legal terms through the existing purchasing approval workflow. As a result, approvers in legal and business groups can approve the document through the same approval process and thus minimize the disputes between the approvers in two groups. When you design or update the PO Approval workflow, you need to include approvers for legal terms.
You should make it a business practice to review all validations, including warnings, to help identify potential issues with the contract data and reduce the number of amendments.
You should also make it a business practice to run the Contract Deviations report and review those change identified.
To upload a contract document attachment in the Contract category, you need to initiate a new revision. You cannot classify a contract document attachment as Contract, if the purchasing document is in the Approved status.
The contract template that is applied in the initial version of a contract cannot be removed or changed after this version is signed and accepted by the supplier and the buyer.
In a new version of a purchasing document, you cannot modify contract documents that were carried over from a previous version. You can only delete them from the current version and upload the modified version.
In Oracle Procurement Contracts, buyers and suppliers can sign contracts manually or electronically. Signer identity is authenticated by requiring users to reenter usernames and passwords when signing contracts electronically or using a unique digital certificate (issued by a certification authority).
The system-generated contract PDF is only attached to the document after approval. If the PDF document is not attached after a purchasing document is approved, ensure that the PO Output format in Oracle Purchasing setup is set to PDF and the Approval workflow is functioning properly.
When a contract has a non-standard clause, you may want to route the contract to additional or different reviewers for special approvals. You can achieve this by using the workflow function seeded in the Purchasing Approval workflows.
For details on seeded workflow function, refer to the Approval Workflows appendix.
You should identify at which point in the business flow you want to customize your approval workflow and you also want to identify the individuals who would be performing the approval at each point. Given the various touch points described below, consider the nature and extent of changes you would require to your various workflow approval programs.
Approving Clauses: You approve clauses in the Contract Terms Library.
Approving Contract Templates: Standard clauses from the library are used for creating contract templates. You approve templates in the Contract Terms Library.
Approval Before Publishing: A template can be applied to a sourcing document and then you can submit the sourcing document for internal approvals before publishing it to external parties.
Approval During Award: You can submit a sourcing document for internal approvals before you make an award to a supplier.
Approving Purchase Orders: You can submit a purchasing document with contract terms for approval.
With Oracle Procurement Contracts, the existing purchasing document status have additional implications.
The table below lists the event in a contract life cycle and related purchasing document status:
Event Description | Status |
---|---|
Buyer has approval authority on the spending amount, but chooses to submit the purchasing document for additional approval. | Pre-approved |
Internal approver rejects the purchasing document. | Rejected |
A purchasing document is approved by the internal approver and is waiting for supplier and buyer signatures. | Pre-approved |
Supplier or buyer rejects the purchasing document during the signature process. | Rejected |
A signed document can be executed through the regular shipment and receiving processes supported by Oracle Purchasing. In addition, buyers and suppliers can execute and track additional contractual obligations through the deliverables feature provided by Oracle Procurement Contracts. It is important to note that buyers and suppliers can only manage deliverables that are assigned to them.
This section covers the implementation and other considerations for:
The due date for a deliverable can be set to:
Fixed due date. For example, December 10th, 2005.
Relative Due Date. For example, 10 days after the agreement expires.
Deliverable due dates that cannot be resolved are not displayed on the Deliverables page until the event that it refers to actually occurs. For example, the system cannot resolve the due date for a deliverable, if it is set to "10 days after the purchase order is closed" until the purchase order is actually closed. The reason is, the system does not know when the contract will be closed. Users will not have visibility to the deliverables until the purchase order is closed.
To avoid the above situation, consider selecting events for which the due dates can be resolved. For example, the "Agreement expires" event for blanket agreement can be resolved based on the expiry date of the agreement. In the case of standard purchase order, you may consider using the event "10 days after purchase order signed" instead of "10 days after purchase order closed."
During contract authoring, users can create one or more deliverables with a supplier contact associated with it. However, in order for the suppliers to follow through and manage these deliverables, they must have registered with Oracle iSupplier Portal as users of the application.
To improve future contract negotiations, or to comply with regulatory requirements, contract administrators or legal may need to periodically review and revise their contract standards. Analyzing the contract language used in existing contracts is a critical step in effectively updating existing standards. Oracle Procurement Contracts enables users to search for all contracts where certain clauses are used, or have been modified. The search can be filtered by various criteria like contracts with a specific supplier, contracts above a certain amount, contracts for one or all Operating Units, or contracts authored using a specific template. Information on the number of times a certain clause has been used or modified is also provided as part of the results.
Using Oracle Procurement Contracts you can perform the following kinds of search:
Contract Administrators can search for all contracts across multiple organizations that have any clause pertaining to a specific clause type. For example, 'Termination' to identify if any clauses are being created non-standard.
Legal professionals can find all contracts that use a specific clause that needs to be modified due to new regulations.
Contract Administrators and legal professionals can search for keywords and text from Oracle Purchasing and Oracle Sourcing and repository contracts.
Note: Users can search for versions only if the contract belongs to Oracle Purchasing or the Repository Contracts.
You can amend a contract, including contract terms, at any time after the contract is signed. An amendment increments the version of the Sourcing or Purchasing document.
A contract amendment may be initiated by the buyer or the supplier. Buyers need to review and approve change requests submitted by suppliers. To incorporate changes, buyers need to manually update the contract terms after approving the change request.
For details on general amendments in purchasing and sourcing documents, see the Oracle Purchasing and Oracle Sourcing online Help.
This section covers the implementation and other considerations for setting up:
With Oracle Procurement Contracts you can create custom layout for the cover page for an amendment document. For detailed instruction on customizing your contract document lay, refer to Setting Up Contract Terms Library.
If you have supporting documents for a contract that are critical, then changes to these documents may need to be governed by formal revision process. A formal revision process may require users to submit the changes for internal approval and supplier signature before the changes become effective. For your reference, changes are displayed in the PO Revision History page. To require a formal revision process, you should categorize the supporting document as a "Contract"' in the contract document attachment.
After the contract is signed and accepted by both parties, it can be executed. The supplier can request changes to contract terms using Oracle iSupplier Portal. After the buyer has reviewed and accepted the changes requested, the system does not automatically reflect the changes to the contract terms. The buyer need to revise the purchase order and amend the relevant contract terms.
You can make changes to a contract after it is accepted and signed by the supplier and the buyer and it is ready to be executed. Any modification would appear in the Amendment section of the contract PDF file, if the PO: Generate Amendment Documents profile option is set to Yes.
Other considerations include:
Amendment Descriptions: When you amend a contract clause or deliverable, you can annotate each amendment by entering text in the Amendment Description field that is specific to that particular amendment. In order to provide the business context and reason for amendments, you should provide an amendment description for all amendments.
Print Text feature: While amending a clause in a contract, you can use the Print Text feature to print the amended clause text in the Amendments section of the printed contract, in addition to the amendment description.
Any changes made to a signed contract would require approval. Oracle Procurement Contract provides you with additional workflow functions that you can use for routing the contract for special approvals, in case contract terms are amended. For the seeded workflow functions in the sourcing and purchasing approval workflows, see the Approval Workflows appendix.
When a contract nears expiration, you may renegotiate or close out the contract. Using Oracle Purchasing and Oracle Sourcing, you can renegotiate the business elements of an existing contract.
If Oracle Procurement Contracts is enabled, you can additionally include contract terms during your renegotiation process.
During the closeout process, you may require one or more tasks to be performed, such as submitting a contract performance report, or creating a budget versus actual cost analysis. With Oracle Procurement Contracts enabled, you can model these tasks as internal deliverables and track them as part of the contract.
For more information on renegotiating and closing out contracts, see the Oracle Purchasing and Oracle Sourcing online Help.
You can specify start and end dates on a blanket or a contract purchase agreement. To track the expiration of the contract, you can create an internal deliverable with a due date such as "one month before agreement expires." The person responsible for the deliverable would be notified and can take necessary actions before the contract expires.
Note that standard purchase orders do not support start and end effective dates. To support closeout and renewal, you can use the Purchase Order Signed event or a fixed due date event when setting up the deliverables.
Contracts that are currently executed may have to be renegotiated after they expire. You can create a sourcing RFQ or a Reverse Auction from a purchasing document, like a blanket purchase agreement. The relevant attributes pertaining to the purchasing document are copied over to the newly created sourcing document. With Oracle Procurement Contracts, the contract terms associated with the purchasing document are copied over to the sourcing document as well.