Understanding Service Contracts

You must have PeopleSoft Purchasing installed to take advantage of service contracts. Service contracts are used to secure standard rates with suppliers to hire service providers at specific rates.

When service coordinators source a requisition and include contract suppliers, the system finds all the contract suppliers that match the role and unit-of-measure combination. Service contracts are only applicable to resource-based roles that have a rate associated with them or to category contracts for a category associated to a Services Procurement service type. Category adjustments are only applied when a rate sheet is available to use as the base rate from applying the adjustment. For example, if the rate sheet is for 45 USD an hour and a category-based contract exists for a reduction of 10%, the contract rate will be considered as 40.50 USD an hour and that rate will be compared to the bid or work order rate.

When suppliers bid on a requisition, the system checks for the category or the role, unit of measure, and supplier location to verify whether they match a current contract. If a match is found, the system enforces that the bid rate is less than or equal to the contract rate. You are not required to award bidders with a contract; they are treated as just another bidder. When the requisition is filled, the system uses the lower rate from the Filled Rate field to create the work order. The system takes the currency from the contract header and the merchandise amount is the rate-per-hour.

If PeopleSoft Purchasing is installed and you are integrating work orders with purchase orders, then when the work order is released, the system verifies against the contract again and overrides the work order rate with the contract rate if necessary. If a new contract becomes active between the time that the supplier bids on the requisition and the time that the purchase order was created, the purchase order uses the most current contract price and the work order is updated to match that price upon its release.

For example, you could have a contract with a supplier to provide construction services at the rate of 45 USD an hour. You source a requisition for a contracting job, and the supplier attempts to bid 48 USD an hour for the job. The system enforces the contract rate and requires the supplier to bid at or below the contract rate. The bid would be filled and the work order created for the rate of 45 USD an hour. If a new contract is subsequently negotiated for a rate of $42 USD an hour prior to creation of the purchase order and release of work order, the system adjusts the work order rate down to the 42 USD an hour rate during the work order release.