Complex work orders have high dollar values, often running into several millions of dollars. They are also long lead time contracts, sometimes extending over multiple years. They may be outsourced high-value projects that require extensive collaboration between the buying and supplying organizations. These contracts are characterized by progress payments that are governed by the advanced payment terms, and which are released based on completion of work. Additionally, complex work contracts can also have provisions for Contract Financing.
Some terms that are used when creating and using complex work orders:
A Progress Payment Schedule is an industry term that represents a schedule of services and work components required to complete a complex services contract. Each of these service components are typically associated with payments. Specifically in the Construction Industry, the Progress Payment Schedule is also referred to as the Schedule of Values.
Progress Payments are payments released for work partially or fully completed on a Progress Payment Schedule.
A Pay Item refers to a specific work or service component of the Progress Payment Schedule. It describes the work or service that needs to be completed, and the payment amount associated with that work or service. So a Progress Payment Schedule basically consists of several pay items. There are different types of pay items - Rate, Lumpsum and Milestone.
Progress Payment Rate is a payment term used on cost reimbursement contracts. On these contracts progress payments released to the Contractor are based on the costs incurred by the contractor during the execution of the contract. The progress payment rate is used on these contracts to compute the reimbursement amount based on the cost incurred by a contractor. The Progress Payment Rate is usually negotiated between the Buying Organization and the Contractor.
Contract Financing is often used on Public Sector Contracts. It is a payment arrangement for funding or financing a supplier when the upfront costs for initiating a contract are large or beyond the means of the supplier. These financed payments are like loans to the Supplier and are recouped or liquidated from subsequent payments made for deliveries on the Contract.
An Advance is a type of Contract Financing Payment, and is usually released before any work or service has been performed on the contract. It is often used to offset some of the upfront costs associated with initiating work on the contract.
Recoupment is closely related to Contract Financing, and is used when Contract financing is used on the contract. When Contract Financing Payments are released they need to be liquidated, since they are basically loans. Recoupment refers to the liquidation of previously released financing payments. This liquidation is done from payments released for the delivery of services.
Recoupment is quantified in the form of a Recoupment Rate. This term represents a rate (as a percentage) that is applied to Invoices submitted by the Supplier for the delivery of services specified on the contract. This rate determines the fraction of the Invoice Amount used towards recoupment of previous financing payments. The Recoupment Rate is usually negotiated between the Buying Organization and the Contractor.
Retainage is often used in the Construction Industry by the Client to mitigate risks of ensuring the completion of the contract. Sometimes in large contracts which are at the point of substantial completion, there is often a punch list of jobs that need to be completed. On these contracts if the balance payment due to the contractor is not large enough to cover the costs of completing the punch list jobs, the contractor may not finish them. Retainage is withheld from progress payments to ensure a sufficiently high balance payment amount so that contractor finishes all jobs on the contract.
Retainage Rate specifies a percentage of the invoice amount billed by the contractor that is withheld from payment. This retainage amount represents a deferred liability due for payment in the future.
The procurement of the complex services often starts off from a service request that can originate from one of several sources - Project Managers in charge of a construction project, engineers in the field, or even architects. These service requests are often high dollar value and involve services that require longer lead times to be fulfilled. Due to this buying organizations can determine that fulfilling the request will need sourcing and negotiation activity and ultimately a contract with complex payment terms.
Sourcing professionals then create a sourcing event and invite bids from multiple suppliers. Since these contracts can be complex, the entire sourcing process may involve multiple rounds of negotiation on various aspects of the contract such as payment terms, whether there would be provisions for contract financing, advances, how high the recoupment rate and the retainage rate will be, etc. Another key aspect that is negotiated on is the Progress Payment Schedule, its structure and how the work will be performed, the payment associated with each pay item, and the provisions for Contract Financing and Advances.
And finally, the Buyer and the Contractor also negotiate on applicable Clauses, deliverables such as lien wavers, insurance certificates and their due dates.
Once the process of sourcing the complex services is complete, the best party is awarded the contract. The negotiated complex payment terms and the progress payment schedule now become a part of the contract and both parties can sign-off on the same. The contract is now ready for execution.
The contractor now initiates work on the progress schedule of the contract. If there are provisions on the contract for contract financing such advances, they can be billed before work starts.
The contractor now performs work on the progress payment schedule & periodically reports progress and requests payment either in the form of a Work Confirmation or a Payment Request. These documents state the amount of work completed on different components of the progress payment schedule, and usually need to be approved by designated individuals like Engineers, Project Managers or Architects on the clients side before any payment can be released.
After the work progress is approved, the contractor submits an Invoice for payment. Complex Payment Terms specified on the contract are now used to calculate the payment due to the contractor. Previous contract financing payments, if any, can be recouped, and applicable retainage can be withheld before a payment is made to the contractor.
Alternatively, if the contractor's invoice is for financing payments these can be released and tracked as such on the contract so that they can be recouped subsequently from invoices for services deliveries. Oracle Purchasing owns the contract and tracks the execution of the contract, and maintains a current status of the contract through its lifecycle.
The Contractor can report progress on the Progress Payment Schedule by submitting Work Confirmations through Oracle iSupplier Portal. Alternatively the Buyer can report progress on behalf of the Contractor from within Oracle Purchasing.
Oracle Payables provides capability to process payments for the contract. Advances, and other Contract Financing, Progress Payments, Retainage witholdings and Retainage Release can all be processed using Oracle Payables in conjunction with the terms defined on the Contract.
An example of a complex work order is Renovation of Parking Lot Services.
Enter a complex work order by selecting the appropriate document style for a complex award using the Create LOV. The price for the Parking Lot Renovation Service is $1,000,000.
You can enter a priced line or an informational line on a complex work order. However, please note that the informational lines do not have any pay items associated with them.
Every complex work order line is automatically numbered, however you can change the numbering of a line. The Contract Line (CLIN) and Sub-line (SLIN) structure is used in all CLM purchasing documents, including modifications and amendments to the purchasing documents. A Contract Line captures information about the item(s) or service(s) to be procured in the contract with or without the pricing details. Thus, a Contract Line (CLIN) can be a priced line or an informational line. Similarly, Sub-Lines, which are used to capture additional information about the CLIN, can be priced sub-lines or informational sub-lines.
CLIN numbers are always 4 digit numeric values that fall in the range 0001-9999. Duplicate numbers are not supported by the system and an error message displays if a duplicate number is found. A segment with 4 digit numeric values from 0001 - 9999 is defined for each document. The numbers are sequentially generated.
SLINS are Sub-lines that use a 6-character numbering format - numeric or alphanumeric. The first 4 digits of the SLINs are populated with the parent CLIN number. The next 2 digits are automatically generated, based on whether the SLIN is a Priced sub-line or an Informational sub-line. SLIN numbers cannot be updated by you. If the SLIN is Informational, the last 2 digits are always numeric values in the range 01-99. If the SLIN is Priced, the last 2 digits are always alphabetical values ranging from AA to ZZ (except the alphabets I and O which are not used in number generation at all). For more information on the guidelines that govern the numbering of purchasing document lines, please refer to the Appendix - Common CLM Functionality.
Specify the Line Type using the Type LOV. Lines are usually Quantity Based (for items/supplies) or Amount Based (for services). Depending on the Line Type that is selected, the Item/Job field is enabled (for Quantity Based types) or disabled (for Amount Based types).
Note: Rate based temp labor line type is not available on the CLM complex work order.
Note: You can add Exhibit Lines of type CDRLs to complex work orders in the same manner as you do for awards. For more information, please refer to the ELINs and CDRLs section in the Awards chapter.
If the item or service exists in Inventory, iProcurement store or catalog, then the Description and Category field values are defaulted. Select from the available Contract Types in the Contract Type LOV. Based on the Contract Type selected, a pricing calculation will take place and the item/service will be priced on the line. Enter a Quantity in the Qty field and a Unit of Measure in the Unit field. The Amount field gets calculated based on the formula of the Contract Type field, Unit Price, the Quantity and Unit of Measure.
You can choose to create an option line on a purchasing document that you intend to exercise at a future point in time. Instead of modifying the source document at a future date, you can enter the anticipated options on the original award. Option lines (both exercised and unexercised) can have pay items.
For more information on Options, please refer to the Appendix - Common CLM Functionality.
You can also perform actions such as Update, Duplicate and Delete for each line. The Delete Action deletes a line from the award. The Duplicate action makes a copy of the line and places it below the original line. The Update action enables you to view the Update Line page and enter/edit additional line information.
The first region in the Update Lines page defaults the information for the line. In addition, the pricing details are displayed, such as Contract Type, Cost Constraint, Qty, Unit, Unit Price, Total Amount. The formula for calculating the Total Amount is also displayed in this region. The details page for the line displays with more information such as the complex payment terms etc. The details page enables you to capture several pieces of critical information for the Complex Services Contract.
Buyers can define a scope of work which is really the description of the service that is being procured. This can be captured either as the Line Description or can be attached as an external document. For more information on attaching documents, please refer to the Attachments section in this chapter.
Complex Payment Terms for Financing, and Retainage are captured on the line. In our example for Financing, you can enter the Advance Amount, Recoupment Rate, Maximum Retainage Amount and the Retainage Rate. Please note that the advance amount cannot be more than the funded amount for the line. These terms defined here apply uniformly to the entire progress payment schedule of this line, that is, the Retainage Rate of 10% is applied to all invoices submitted against pay items of this line. Similarly, the Recoupment Rate of 10% is applied to all Invoices submitted against pay items of this line.
Further to this, certain attributes defined at the line behave as defaults onto the progress payment schedule. Billing details like the Charge Account, Accrue at Receipt, Project Information etc all act as defaults for the payment schedule and as each new pay item is created for the line, it assumes these values.
The Progress Payment Schedule page replaces the Schedules tab because the complex work order does not have delivery schedules.
Several additional details can be specified for the pay items on the details page. The Pay Items details page can be accessed using the pencil icon.
There are three types of Pay Items - Rate, Lumpsum, and Milestone.
Rate pay items are based on a Rate of work completion. Payments for these can be claimed as units of work are completed. In our example we have a rate pay item for Landscape designer services for 25 Hrs @ $1000.00/hr.
Lump Sum pay items, as the name suggest, are based on a Lump Sum amount allocated to a portion of work. Progress payments can be released for these pay items based on the level of completion. In our example we have 2 lump sum pay items, one for Resurfacing the entire parking lot for 20,000 dollars, and another for Road work for a total amount of 50,000 dollars.
Milestone pay items are based on a milestone in the contract or event that needs to be fully complete before the associated payment can be claimed by the contractor. In our example, the milestone for claiming the last 50,000 dollars on the contract is to complete the final painting on the parking lot.
The pay item details page has more details that the Buyer can specify for each pay item. Attributes such as Work Location, Receiving Controls, and Billing information can be specified here. Additionally, documents such as drawings, or specifications for the pay item can be uploaded as an attachment.
For more information on linking pay items to requisition lines for funding, please refer to the section Linking Requisition Lines in the Awards chapter.
On the Distributions tab, you can specify specific charge accounts for the advance, or the accounts generator can be configured to generate an account for the Advance automatically. Accounts can also be generated automatically for every pay item on the progress payment schedule. Please note that the advance amount cannot be more than the funded amount for the line.
For more information on creating default distributions, please refer to the section Distributions in the Awards chapter.
iSupplier Portal offers several features to the supplier that provide capabilities to track, monitor, and manage the Complex Services Contract. Using the portal, the Supplier can track the progress on each individual pay item of the Progress Payment Schedule, acknowledge and sign the document before it become a formal contract, request for changes to the contract, and create and submit work confirmation to report the progress on the Contract. Please note that you cannot create a work confirmation for the pay item if the line amount is greater than the funded amount. Also for pay items with a funding of 0 (zero), the lines are not available for creating work confirmations.
For more information on iSupplier Portal, please refer to the Oracle Contract Lifecycle Management for Public Sector iSupplier Portal User Guide.
Global Update enables you to add common field values for multiple lines or update common field values for multiple lines, pay items and distributions on draft complex work orders.
Please refer to the Global Updates sub-sections in the Award Lines, Award Schedules and Award Distributions sections (Awards chapter) for more information on globally updating field values.