Variance Pricing

Variance pricing is used to capture and process price variances for a particular set of rates. Variance pricing, or retroactive rate adjustments, are required when contractors retroactively apply new rates to transactions that were previously processed. Transactions that have previously been processed are those that have been billed or sent to the general ledger.

You can apply variance pricing to all contract types and all rate set types. In addition, the Pricing summarization feature can be used, which reduces the number of transaction rows that are processed, in turn reducing the amount of time that it takes to run the Variance Pricing process. The Pricing summarization feature can also be used to reduce the number of transaction rows that result from the Variance Pricing process, which are ultimately posted to the Project Transaction table (PROJ_RESOURCE).

You can enable variance pricing on a standard or contract-specific rate set by selecting the Enable Variance check box. When using this option, you can enter, track, and process variance rates on the Rate Variance History page.

You cannon inactive variance pricing on a rate set if a variance rate exists on one or more target rows in an effective-dated rate set.

Through its integration with Project Costing, Contracts enables you to capture and process any rate changed for indirect costs that are associated with the contract. The rate changes generally impact a certain period of time within the contract. For a transaction to be eligible for variance pricing, at least one of its source or target rows must have been sent to the billing worksheet, passed to PeopleSoft Billing for invoicing, passed to PeopleSoft General Ledger for revenue recognition, sent to Asset Management for capitalization, or have been used for fee calculations.

When rate changes occur, the system verifies whether the transaction rows are eligible to be repriced. If they are, then those transaction rows are repriced by the Pricing engine and are ineligible for variance pricing.

New indirect costs are generated by the system for the difference in the old and new rates, and the new rates are used to calculate indirect costs against any current or future transactions going forward. When a rate change is made to an eligible rate set that is associated with a rate plan, after the new transaction row is created, the system prices the new row using any applicable remaining rate sets contained in the rate plan.

PeopleSoft Project Costing maintains a history of these rate changes for audit and reporting purposes.