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 Use of Value Limits (for Unplanned Services)

Use

If you wish to make provision in the PO for services that are not precisely definable during the planning phase of a procurement project, set a money limit instead of entering a service description. This limit, which represents a budget for unplanned services, must not be exceeded. The service can be specified later - perhaps at the time of actual performance.

A value limit is set for each procurement project (i.e. the limit applies to the document item). For example, you can set a limit of $5 million for the construction of an office building. In addition, you could set limits on services covered by individual contracts (e.g. $500,000 for masonry work and $200,000 for electrical work). The system checks adherence to these limits at the time the work actually carried out is recorded.

In the window for maintaining value limits, you can set a variety of limits:

  • Overall limit only

  • Overall limit and limit on services covered by contract item(s)

  • Overall limit, limit on services covered by contract item(s), and other limit

  • Overall limit and other limit

  • Overall limit on services from model specifications or standard service catalog

  • Expected value

Overall Limit Only

You set a general overall limit of $10,000 for a procurement project. The complete project may thus comprise any unplanned services with a total value not exceeding this figure. If performed services to the value of $9,000 have already been entered and you try to enter further unplanned services amounting to $1,200, the system will issue a warning or error message, depending on the setting in Customizing. The services can then only be entered after consultation with the responsible buyer (who may first have to increase the value limit).

Overall Limit and Limit on Services Covered by Contract Item(s)

You can set an overall limit and additional limits on services covered by one or more items of a contract with the service provider. This ensures that only such services can be performed - not any or all kinds of service.

Since the service specifications and prices are defined in the contract item, you ensure first that only these services previously agreed with the provider are performed and second that the price stipulated in the contract applies.

Note Note

You can the also maintain the limits in such a way that the sum total of the individual contract limits exceeds the overall limit. (Example: $100,000 overall limit, $50,000 limit on contract item 1, $10,000 limit on contract item 2 and $60,000 limit on contract item 3.)

This allows unplanned services to be entered unhindered in the early phase of the project, whereas services that come later cannot be entered up to their full limit because the overall limit has already been reached.

End of the note.

Overall limit, Limit on Services Covered by Contract Item(s), and Other Limit

If you can see that not all necessary services can be procured against existing contracts on which you have set limits, it is sensible to set an additional limit for these services. You can then record the work actually done in straightforward manner.

Overall Limit and Other Limit

You can set a value limit for other services. This approach is suitable if you can foresee that you will require services not covered by any existing contracts. You can set the limit for other services in connection with the overall limit.

However, it is also possible to use a limit for other services in addition to contract limits. In this case, you allow the performance of any other services in addition to those in the stated contracts.

Overall Limit on Services from Model Specifications or Standard Service Catalog

You have the option of setting limits on services listed in model specifications or standard service catalogs that exist in the system. As a result, the service provider may not perform any services within the overall limit, but only services from the stated specifications or catalogs.

Expected Value

The expected value is relevant to the following:

  • Compilation of the commitments figure (CO)

  • Determination of the total value of the PO item

  • Determination of the release strategy

  • Purchasing statistics and analyses

Purchase Order Commitments

If you wish to work with PO commitments (CO), you can enter an expected value (i.e. a figure you assume to be the final amount payable) in addition to the overall limit, which may not be exceeded. As a rule, the expected value will lie below the overall limit.

However, you also have the option of setting the expected value for purchase order commitments figure at a higher level than the overall limit (e.g. $100,000 expected value and $20, 000 overall limit).

This enables you to determine that the total sum payable is made available right at the start of the procurement project, but initially only services worth a value of up to $20,000 may be performed. Further work can only be carried out if the buyer increases the overall limit. This enables you to progressively allocate the budget to different phases of the project.

Determining the Overall Value of the PO Item

If you have a PO item comprising unplanned services only, the expected value is the total value of the item.

If you have a PO item comprising both in planned and unplanned services, the total value is made up of the sum for the planned services plus the expected value.

Determining the Release Strategy

If you are working with a release strategy, the expected value is used to determine the relevant release strategy for the PO item.

Monitoring Unplanned Services

The "Actual" value field for each limit allows you to continually monitor the limits that have been set and gives you an overview of the remaining budget at any point in time.

The system determines the actual value from the data on the services performed that has been recorded via the entry sheet. If services worth $1,500 and $2,000 have already been performed and entered with respect to a procurement project worth a total of $10,000, the system shows an actual value of $3,500.

In order to compare the planned values in the PO with the cumulative actual values in the relevant service entry sheet, you can display the totals in the outline view of the purchasing document. Percentage figures are also displayed.