Considerations for Selecting Rate Schedules for Project and Financial Planning

When specifying rate settings for financial or project plan types, you select to use either actual or planning rates for calculating cost or revenue for planning resources.

Actual rates are those that are used for calculating actual amounts for expenditure items. If you use planning rates, then you can select rate schedules created specifically for planning purposes.

The following is a description of the points to consider when selecting actual or planning rate schedules for calculating raw costs, burdened costs, and revenue.

Selecting Rate Schedules when Using Actual Rates

When using actual rates for project plan types and financial plan types that support cost amounts, you select cost rate schedules at the resource class level. Similarly, for financial plan types that support revenue amounts, you select bill rate schedules at the resource class level. If the application is unable to determine cost or bill rates for a planning resource, then it uses the resource class rates schedules that you defined in the Rate Settings tab. For named persons, the rates for planning costs are derived from the named person's business unit or organization when the projects business unit or organization is different from the named person's business unit or organization.

The precedence order for determining the rate schedule to compute the planning costs for the resource is as follows:

1. Cost rate overrides defined at the project or task level.

2. Rates or rate schedules associated with the labor costing overrides.

3. Rate schedules associated with the organization costing rules.

If cost rate overrides are defined at the project or task level, then the relevant cost rate override that's active for the resource assignment duration is used.

If cost rate overrides aren't defined but labor costing overrides are defined for the person in the Manage Labor Costing Overrides setup task, then the override that's active on the start date of the planning period (or the start date of the financial project plan, budget, or forecast in case of non-periodic plans) is used to determine the rate or the rate schedule to compute the planning costs for the resource.

Lastly, if neither cost rate overrides nor labor costing overrides are defined but the organization costing rules are defined for the business unit (or expenditure organization or both) in the Manage Organization Costing Rules setup task, then the rule that's active on the start date of the planning period (or the start date of the financial project plan, budget, or forecast in case of non-periodic plans) is used to determine the rate schedule to compute the planning costs for the resource.

If the Use planning rates check box (under the Rate Settings tab in the Planning Options section) isn't selected and the actual cost rates can't be determined because cost rate overrides, labor costing overrides, or organization costing rules aren't defined, then the Resource Class Raw Cost Rate that you defined in the Rate Settings tab is used to compute the planning costs for the resources in the financial project plans, budgets, and forecasts.

Selecting Rate Schedules when Using Planning Rates

Some of the reasons for using planning rates are as follows:

• Project planning extends into the future, beyond dates for which actual rates are available. Using planning rates enables you to plan for future periods by making assumptions about potential rate increases or decreases.

• Planning is at a more summary level than when using actual rates. For example, use job-based rate schedules to plan, but actually track labor costs using cost rates defined at the employee level.

When using planning rates, you select rate schedules at the resource, job, and resource class levels. The following table summarizes the precedence order for determining cost or bill rates for a planning resource when deriving raw costs or revenue for rate-based planning resources.

Rate Source	Precedence	Description
Override rate	1	Rate manually entered by users in the budget, forecast, or project plan
Labor or nonlabor rate schedules	2	Rate schedules selected for labor or nonlabor resources
Job rate schedules	3	Applicable only for labor resources
Resource class rate schedules	4	Used when rates aren't available at the resource level. Specifying a resource class rate schedule is optional.

Specifying a Burden Schedule when Using Planning Rates

Optionally specify a burden schedule when specifying planning rate schedules. Project Financial Management applications use this burden schedule to calculate the burdened cost for all planning resources (including those that aren't rate-based).

If an expenditure type isn't associated with the planning resource, then Project Financial Management applications use the expenditure type defined for the associated resource class to determine the burden multiplier, and ultimately, the burdened cost.

Specifying Rate Derivation Dates

While creating or editing a financial or project plan type, under the Plan Settings tab in the Planning Options section, you can select the rate derivation date type based on which the date calculations are performed.

If you select Effective resource rate dates as the rate derivation date type, then the existing rates are overridden. The application checks for rates on the period start date and considers the multiple rates defined for specific time-intervals throughout the period.

Some points to consider:

• The Effective resource rate dates option is available for planning cost amounts. It's not available for planning revenue amounts.

• The rates (for example, person rate and job rate) within a period must be defined in the same currency.

• After a rate schedule is determined to calculate the planning cost for a period, if no rates are found within that rate schedule for one or more days, the application doesn't search for other rate schedules to compute cost.