Overview of Oracle Services Procurement

This chapter covers the following topics:

• Overview of Oracle Services Procurement
• Using Oracle Services Procurement

Overview of Oracle Services Procurement

Oracle Services Procurement is the application that enables complete control and oversight for services spending. It is a key component of Oracle Advanced Procurement suite. Oracle Services Procurement automates and streamlines the process of requisitioning, sourcing, procuring, and handling payments for services such as repair and maintenance, hiring contingent workers, managing professional services, and facilities management. End-to-end services procurement processes are automated; these processes integrate with Oracle E-Business Suite applications to provide complete and comprehensive procure to pay cycles.

With Oracle Services Procurement, you can:

• Bring Purchasing oversight to services. Oracle Services Procurement helps you source and manage services.

• Define and manage all aspects of your services business arrangement utilizing contracts. The ability to define, manage, control, and track these contract elements keeps lead times and costs in check while preventing cost overruns.

  • For complex services such as construction or professional services, you can define payment terms, progress payment schedule, financing advances, financing advances recoupment and retainage rates for services settlement.

  • For contingent labor, you can define appropriate rates, terms, job information and more.

• Use preferred suppliers right from the initial request, funneling orders to preferred suppliers so that services are sourced to the correct supplier at negotiated rates every time. Oracle Sourcing can be used to negotiate terms with potential vendors. For services that are routinely requisitioned by employees, create an approved vendor list that may contain one or multiple approved suppliers. For a unique request, you may choose to allow the employee to suggest a new supplier.

• Track all aspects of the order and invoice directly as suppliers. Online tracking and change management frees procurement professionals from the burden of routine inquiries and change requests.

• Match to the original terms of payment, purchase order, and/or services receipts.

  • For complex services, to calculate the payment due to the supplier, use an invoice that is received or Work Confirmation created for the progress payment specified on the contract. Previous financing payments, if any, are recouped, and applicable retainage are withheld before payment is made.

  • For contingent workers, use approved, supplier-entered timecards, as a services receipt or to auto-generate a supplier invoice based on approved timecards.

• Ensure services delivery and compliance with deliverable tracking. For more complex contract needs, use Oracle Services Procurement in conjunction with Oracle Procurement Contracts to track deliverables online, ensuring that contract terms and conditions are fulfilled.

• Set policies for services spending approval. Oracle Services Procurement ensures that adequate spending checks are in place. Approval rules are configurable, typically requiring approval from the employee's management and possibly other groups as appropriate. Services requests are placed against open projects and their budgets. Oracle Services Procurement provides the necessary checks. Once the request is authorized, employees track the spending amount against submitted invoices to see remaining budget.

  • For complex services, suppliers can report progress either in the form of a Work Confirmation or an Invoice. The system automatically updates the purchase order based work confirmations and invoices, providing advance warning before spending runs over budget.

  • When integrated with Oracle Time and Labor, contingent workers fill out timecards online to indicate work performed.

• Track the entire services cycle with online access to the detailed history of each order. Employees view the status of service requests and drill to supporting details such as the approval status, purchase orders, timecards and invoices. Project managers initiate changes to service requests, which generate automatic notifications to suppliers. With advance notice of changes, suppliers provide more responsive service and your buying organization incurs fewer penalties or cost premiums for expedited service.

• Measure supplier and contingent labor performance. With Oracle Services Procurement, delivery of services is tracked to completion. Suppliers monitor their on-time performance for individual service requests through the portal, ensuring proper feedback to the supplier. For contingent labor, hiring managers enter in contractor performance data at the end of each assignment. This information is shared throughout the enterprise. So other hiring managers can view prior performance information to select the best contractors for each job.

Typical Users of Oracle Services Procurement

Oracle Project Procurement empowers organizations to effectively manage the procurement of complex work and contingent workers.

The following industries can benefit the most from the product's capabilities:

• Procurement of Complex Work: Industries such as Engineering and Construction (E&C), Aerospace and Defense (A&D), Engineer to Order (ETO), and Maintenance Repair and Overhaul (MRO).

• Procurement of Contingent Workers: Industries such as professional services, facilities management, marketing, and telecom.

How Oracle Services Procurement Addresses Industry Requirements

Oracle Services Procurement addresses the following business requirements across industries:

• Administers corporate polices:

  • Negotiate master agreements successfully with terms, conditions and rates

  • Source and drive spend towards preferred / performing suppliers

  • Ensure that contract terms and rates are enforced

• Shares knowledge and gain visibility towards services spend:

  • Visibility to predefined terms, rate and suppliers

  • Capture spend in the system

  • Analyze spend using business intelligence tools

• Eliminates over-billing errors and improves supplier performance

• Checks and controls time and labor entries

• Service receipt to auto-generate invoice

• Analyze supplier performance using business intelligence tools

• Reduces procurement cycles timeframes and improves service levels through suppliers collaboration

  • Online sourcing collaboration

  • Generate agreement directly from award

  • Supplier viewing of PO, timecard, invoice

  • Change order management

For information on how Oracle Services Procurement helps enterprises to handle the following business flows, see: Using Oracle Services Procurement:

• Procurement of complex services that involves payments based on progress of work.

• Procurement of contingent workers and making payments based on time reported.

Using Oracle Services Procurement

See Overview of Oracle Services Procurement.

Enterprises spend a significant portion of their corporate budget on the acquisition or procurement of services. Acquiring services include purchase of complex goods and services such as construction subcontract for electrical work, concrete work and piping, professional services, facilities management and Maintenance Repair and Overhaul (MRO).

Several buying organizations have fragmented, paper-driven, and manual processes for managing services that result in:

• Lack of visibility and lack of control over services spend

• Inability to initiate and sustain end-user compliance

• Overbilling and inability to track supplier performance

• Increased cycle time

Oracle Services Procurement integrates the entire services procurement lifecycle and supports a broad range of service categories including contingent labor, facilities management, subcontracted labor, professional services and more. It provides visibility into service spend and the performance of suppliers. Oracle Services Procurement enables managers to have complete control and perspective in the service spend arena.

Processing the Procurement of Complex Work and Contingent Workers

Oracle Services Procurement helps you manage the following requirements of business organizations:

• Procurement of complex services that involves payments based on progress of work.

• Procurement of contingent workers and making payments based on time reported.

Processing the Procurement of Complex Work

Procurement of services accounts for 40% to 80% of a project or enterprise activity. Since 'Procurement' is a major part of company's operations, enterprises focus on improving the efficiency of their procurement processes.

Procurement plays a major role in industries such as Engineering and Construction (E&C), Aerospace and Defense (A&D), Engineer to Order (ETO) and Utilities. The procurement process for these industries is broadly classified into five different categories:

• Procurement of bulk commodities

• Procurement of engineered equipment

• Procurement of catalog items

• Procurement of subcontracting services

• Rentals

This process involves collaboration between project managers, buyers, and suppliers. Complex service procurement involves authoring of complex contractual terms and conditions with complex payment controls.

For the E&C Industry:

• Bulk commodities are construction material such as Rebar, lumber, and piping etc. The materials undergo a 'material take off' process where lengths, weights, and other metrics are derived from Computer Aided Design (CAD) drawings. These units are then aggregated into the most economic buying quantities and measures before they are recorded on a purchase order document.

• Engineered equipments are complex machines such as boilers that are represented in the system as one line item for commercial purposes and multiple line items for receiving and installation.

• Catalog items are defined set of items that are procured on a frequent basis. Some categories of items like 'First Aid Kits and Kit Refills' are examples of catalog items.

• Subcontracting services include complex outsourcing on a scope of work. For example, if you operate a power plant, you may outsource the corrosion protection service to a subcontractor.

• Lastly, Utilities and E&C firms use a lot of rental equipment. The Rental category is for renting heavy equipment such as tower cranes, bulldozers, etc.

Typical Business Flow of the Procurement of Complex Work

The following diagram shows a typical business flow for the procurement of complex work at a high level:

The procurement of complex work as shown in the business flow diagram involves the following phases:

• Request for Services: Request for services usually originates from different sources. Examples are project manager or the procurement manager involved in a construction project, field engineers and architects. These users request a service when there is a requirement.

• Request for Quotation: If the required service involves higher value, longer lead time, and a complex payment term, the buying organization creates a Request for Quotation (RFQ) to negotiate the contract terms. The RFQ is usually associated with a specific project. If the buying organization needs to evaluate the technical expertise of suppliers, then the technical evaluation takes place in the RFQ process. Negotiations with the supplier on commercial terms include negotiating on the complex payment terms, progress payments schedule, retention clauses and deliverables.

• Bid Tabulation: The buying organization analyzes and compares the bids provided by the suppliers using comparative analysis. Suppliers are evaluated and then shortlisted based on the offers made on the commercial terms and the technical expertise they provide.

• Author Contract: The buying organization and supplier organization agree to the progress payments schedules and contract terms and conditions. The parties sign the contract which is then available for execution.

• Track Progress: The supplier performs the service and the progress of the work is tracked periodically. Payments are made to the supplier based on the progress of the work. The project manager in charge of the work approves the progress of the work so that payments are made to the supplier. The project manager views projected and actual tasks, milestones, and dates. This helps to track commitments, reported work, completed jobs, work in progress, remaining assignments or operations.

• Billing and Payments: When invoices are generated by the supplier for the progression in work, the complex payment terms specified in the contract document are made available in the invoices in order to calculate the actual payments to be made to the supplier. The advance paid to the supplier is recouped based on the recoupment percentage specified in the contract document. If the contract document contains retainage information, the retainage percentage is applied on the invoice value, prior to making payments to the supplier.

• Retainage Management: Retainage management is the process of releasing or paying the portion of a payment that was withheld until a substantial portion or all of the service procurement work is completed. The amounts retained during the life of the contract must be released and paid to the supplier or subcontractor when all, or a substantial portion of the work is completed. When the release criteria are met, suppliers request a release of the retained amount by submitting a document called a Retainage Release Request.

How the Oracle Services Procurement Solution Helps to Process the Procurement of Complex Work

Multiple products in Oracle e-Business Suite are integrated to form the Complex Work solution. The products: Oracle Projects, Oracle Payables and Oracle Advanced Procurement (that includes Oracle Purchasing, Oracle iProcurement, Oracle Sourcing, Oracle iSupplier Portal, Oracle Supplier Life Cycle Management and Oracle Procurement Contracts) are integrated to provide a complete solution for the procurement of complex work.

• Create service requests from the deliverables of the individual tasks in Oracle iProcurement. Negotiate, source, and award requests to a contractor through Oracle Sourcing.

• Specify complex payment terms, execute the contract, report and track progress against the progress payment schedule through Oracle Purchasing and Oracle iSupplier Portal.

• Create receipts for shipments that belong to complex purchase orders using Oracle iProcurement.

• Record invoices using the complex payment terms and process payments for the contract in Oracle Payables.

• Use Oracle Projects to manage the entire undertaking, the tasks involved, as well as to monitor commitments and actuals throughout the complex services procurement cycle along with project costs and work progress.

For information on processing the procurement of complex work, see Overview of Processing Complex Work Procurement.

Processing the Procurement of Contingent Workers

The procurement of contingent workers happens in almost all industries, specifically in sectors such as facilities, financial, marketing, and telecom.

Typical Business Flow of the Procurement of Contingent Workers

The following diagram shows a typical business flow of the procurement of contingent workers at a high level:

The procurement of contingent workers as shown in the business flow diagram involves the following phases:

• Procure contingent workers

• Assign contingent workers to projects and tasks

• Monitor the work performed by contingent workers

• Process contingent worker timecards and expense reports

• Track and report contingent worker costs

How the Oracle Services Procurement Solution Helps to Process the Procurement of Contingent Workers

Oracle Services Procurement enables enterprises to automate and streamline the process for sourcing, procuring and managing the payment of contingent workers.

Multiple products in Oracle e-Business Suite are integrated to form the Contingent Worker Procurement solution. The products: Oracle Human Resources, Oracle Projects, Oracle Time and Labor. Oracle Internet Expenses and Oracle Advanced Procurement (that includes Oracle Purchasing, Oracle iProcurement, and Oracle iSupplier Portal) are integrated to provide a complete solution for the procurement of contingent workers.

The integrated platform provides the flexibility to capture job and skill requirements, assignment information, and optionally a statement of work.

The integrated solution to process the procurement of contingent workers enables you to:

• Create purchase orders for procuring rate based services using Oracle iProcurement, Oracle Sourcing and Oracle Purchasing.

• Use Oracle Sourcing as buyers to negotiate on the rate to be paid for contractors.

• Manage contingent workers differently from other workforce types using Oracle Human Resources Management System (Oracle HRMS). Buyers enter and maintain information about the contingent workers and reference purchase orders created in Oracle Purchasing to track supplier and rate information for a worker's assignment. Oracle HRMS provides the infrastructure to monitor and track the assignment history of contingent workers including breaks in assignment.

• Record contingent worker time entries in Oracle Time and Labor. Timecard entries are validated against the purchase order to ensure the timecard does not exceed pre-authorized amounts. When timecards are approved, the purchase order is updated, depleting the budget of the approved time. Buying organizations use this information to generate payment to the supplied based on the record time.

• Use Oracle iSupplier Portal to view and download approved timecards. Invoice errors and over billing are minimized by automatically creating invoices from service receipts.

• Use Oracle Time and Labor, Oracle Purchasing, and Oracle Projects integration to track the time spent on the service purchaser order, which is charged on the corresponding project activity. Other details captured for the task are the task and expenditure for a project. Buyers retrieve timecard data to projects.

• Use Oracle Time and Labor and Oracle Purchasing integration to allow the invoices to be automatically generated from the approved timecard thereby eliminating invoice errors. Create expense reports for contingent workers in Oracle iExpenses.

For information about processing the procurement of contingent workers, see Overview of Processing Contingent Worker Procurement.