Pricing Arrangements

You use this function to define risk-sharing models, from simple to complex and regardless of industry.

Integration

Price components are replicated to SAP ERP as individual line items. You can import them into service entry sheets and use them in invoices.
Pricing arrangements are displayed in the extended purchase order history.

Prerequisites

You have activated business function Pricing arrangements (PSM_GOVPROC_PA) in the SAP ERP system.
You have performed the activity Define and Activate Pricing Arrangements in Customizing for SAP Supplier Relationship Management under SRM Server Cross-Industry Functions Application Settings Pricing Arrangements .

You have activated the business function SRM, Cross-Industry Functions (SRM_CROSS_INDUSTRY_1). Note that you can only use this business function in conjunction with the business function SRM, Procurement for Public Sector (SRM_PUBLIC_SECTOR_1). In other words, you must activate both business functions.

Features

You can define pricing arrangements for shopping carts, RFxs, shopping carts, and purchase orders.
You can define a pricing arrangement at header level that applies to all new line items in the document. You can enter the ceiling manually at header level or have it calculated from the line items.
You can assign only one pricing arrangement to a line item. However, a document can contain multiple pricing arrangements.
Pricing arrangements are copied to follow-on documents. You can, however, change them in follow-on documents.
You define the account assignment at pricing component level.
You define invoicing and receipt at individual pricing component level.

Example

Firm Fixed Price (FFP) is the simplest and most commonly used pricing arrangement. It is based on the quantity * unit price formula. On the other hand, complex pricing arrangements take into account a great variety of factors that can increase or decrease the total cost, as described in the examples below.

Fixed Price with Economic Price Adjustment (FPEP)

FPEP is suitable for long-term contracts and takes into account price variations of, for example, fuel. The price is adjusted according to market evolution. FPEP allows for more flexibility and offers protection against strong fluctuations.

Cost

Cost reimbursement contracts represent more risks for the purchasing organization but offer more flexibility. For example, when you plan to build a new aircraft, new developments are involved. Your budget has been approved but many unknown factors remain. The contract is nonetheless executed. The pricing is fluctuating and there are no preset delivery and order schedules.

Cost Sharing

In research and development, the contracting parties can share research costs and share profits afterwards.

Cost Plus Award Fee (CPAF)

Cost Plus Award Fee is suitable for contracts with a great number of variables that need to be constantly adjusted, for example, when you plan to build hospitals for a great number of patients in a limited number of months.

Cost Plus Incentive Fee (CPIF)

You can use CPIF to encourage the executing party to keep costs under control and award incentive fees if the cost-saving objectives are met.

Cost Plus Fixed Fee (CPFF)

You can use CPFF to grant a fixed fee when the executing party completes its tasks in due time.

Award Fees

You can use award fees to stipulate that no profit is generated unless the supplier meets certain criteria. This is common practice in aerospace and defense. As a result, the risks of misuse are minimized and cost-controlling is optimized.

Combined Pricing Arrangements

You can combine pricing arrangements, for example, in construction contracts. You can combine cost reimbursement, fixed-priced items, and labor hours.