Understanding Creating Cost-Plus Government Contract Lines
This section discusses:
Creating cost-plus government contracts.
Cost-plus contract line accounting distribution.
Project and activity assignments for cost-plus contract lines.
Government contracts are awarded based on bids submitted to the government that contain a company's estimated costs and rates for performing the contract. Once awarded, contractors must be able to effectively manage their costs and fees so that they stay within the terms and conditions outlined in the contract. This helps ensure that the contractor is appropriately reimbursed for their costs, and any fees that they receive represent a sufficient profit for their services.
To ensure that they receive proper payment for their services, government contractors track, calculate, and report on direct costs, indirect costs, and fees. To accommodate this requirement, PeopleSoft Contracts enables you to define government contracts and associate rate-based contract lines with fee types (cost-plus). After the contract lines are added to the contract, you can define additional terms and conditions, set up accounting distributions, define limits, fee calculation data, projects, activities, and standard or contract-specific rate plans for the contract lines to enable you to bill and recognize revenue for your direct costs, indirect costs, and fees according to the terms and conditions of the contract.
To define a contract with cost-plus functionality, complete the following steps:
Determine if you are calculating billing and revenue for your cost-plus contract lines using different rates.
If so, select the Separate Billing and Revenue option on the Installation Options-Contracts page. This selection provides a default for the contracts business unit which in turn provides a default for the contract.
Define a new contract with a contract classification of Government.
A contract must be assigned a contract classification of Government to have access to the government contracts and cost-plus functionality.
Add rate-based contract lines to the contract that are assigned a fee type of Fixed, Award, Incentive or Other.
Cost-plus contract lines are represented as rate-based contract lines assigned a fee type. After you assign a fee type to the contract line, the system automatically generates the pages and fields specific to that fee type used in processing direct and indirect costs and fees.
Enter the awarded, funded, and revenue contract line amounts for billing and revenue, as well as billing and revenue fee amounts.
Enter these amounts on the Contract Amounts page for each contract lines. These amounts represent limits for billing and revenue and are also used in fee calculations by the fee worksheets for each contract line. You can also enter the period of performance dates to control limits and bill processing on this page.
Assign projects and activities to the contract lines.
PeopleSoft Contracts uses the projects and activities in PeopleSoft Project Costing to track and calculate costs associated with the contract lines and to calculate fees. You must assign at least one project and activity combination to the contract line.
Define and assign a rate plan to the contract line.
Rate plans consist of a grouping of rate sets used to price transactions that occur against the contract line. Cost-plus contract lines require that you calculate direct and indirect costs. To manage this complex pricing scenario, you must define costing, billing, and optionally revenue rate sets and then group them together onto one rate plan. Revenue rate sets are available when the contract separates billing and revenue. See Update Separate Billing and Revenue Options Page.
As only one rate set or rate plan can be assigned to a contract line at any one point in time, you must assign rate plans to cost-plus contract lines to enable you to calculate the project transaction costs and then bill and recognize revenue for those expenses. You can define a standard set of rates and assign them to your contract lines, or you can define rates that are specific to the contract that you are creating.
Define revenue and billing plans and assign them to the contact lines.
To bill and recognize revenue for your cost-plus contract lines and associated fees, you must define billing and revenue plans using the as-incurred revenue method and assign them to your contract lines. Cost-plus contact lines must be assigned to their own unique billing and revenue plans and must use the as-incurred billing and revenue method.
You can set up and assign billing and revenue plans for your cost-plus contract lines manually, or automatically using billing/revenue plan templates. No matter which method that you use, when the billing and revenue plans are assigned to the contract lines, the system automatically creates a billing and revenue worksheet that is specific to the fee type.
Note: If the contract does not separate billing and revenue, the system will not generate a revenue worksheet, and all fields related to defining separate revenue amounts and fee data is hidden. However, you still must define a revenue plan to process revenue accounting entries for the contract line.
After you have completed all of your contract specific setup, you can begin processing transactions against the contract lines and generate invoices and revenue accounting entries for your contract lines and fees.
PeopleSoft Contracts enables you to capture billing and revenue information for a contract and allocate that information to individual contract lines. You associate each contract line with billing and revenue accounting distributions, billing and revenue plans and methods, manage when the conditions for billing and recognizing revenue have been met, and generate invoices and journal entries to book the revenue to the general ledger. Before you can perform bill and revenue processing for your government contract lines, you must first set up the required accounting distributions.
For rate-based contract lines and rate-based contract lines associated with fee types, you must define accounting rules. Accounting rules are set up using the Project Costing Accounting Rules pages and are defined by PeopleSoft Contracts and PeopleSoft Project Costing business units and analysis type. Depending on whether you will be using different rates for your billing and revenue calculations for your contract lines, and whether the Separate As Incurred Billing and Revenue option is selected on the contract the amount of accounting rules setup needed.
For billing purposes, the Contracts/Billing Interface (CA_BI_INTFC) process retrieves the contract asset ChartField values from the billing accounting rules. When the As-Incurred revenue process is run in PeopleSoft Contracts, it looks to the accounting rules defined to retrieve the appropriate revenue accounting distribution ChartFields for the eligible contract lines and fees.
The system processes all undistributed billing and revenue rows stored in the PROJ_RESOURCE table in PeopleSoft Project Costing and generates the billing and revenue accounting entries that can be billed and booked to the general ledger. To ensure that the system generates accounting entries for all of your eligible contact lines and fees, you must define an accounting rule for each analysis type associated with the PSWKS, PSREV and PSRV2 analysis groups.
Note: If you have elected to use separate rates for billing and revenue calculations and have selected the Separate As Incurred Billing and Revenue option on your contracts, then you must also set up accounting rules using the REV (revenue) analysis type. This analysis type is associated with the PSRV2 analysis group and is used to generate the revenue accounting entries for your cost-plus contract lines and fees when the As-Incurred Revenue process is run.
PeopleSoft Contracts partners with PeopleSoft Project Costing to enable you to bill and recognize revenue for projects and activities associated with a contract. To enable you to properly price and track transactions associated with your projects and activities, you must associate the pricing rates, projects, and activities with your contract lines. For rate-based contract lines, you must assign at least one project and activity to your contract line. In addition, for cost-plus contract lines, you must indicate which project and activity set should be stamped on the fee rows generated for the contract line. At least one project and activity set must be selected for stamping on the fee row at any one point in time; however, you can change which project and activity set is used throughout the life of the contract line, outside of amendment processing.