A Master Contract is used to associate multiple other contracts for the same vendor, or to have a single place where terms and conditions are entered that are common to the contracts raised with the vendor. You can create another type of contract from the Master Contract and the new contract appears on the Associated Contracts tab. For example, a Master Contract is raised with a vendor who will be supplying IT services over a period of 3 years. There will be a series of service contracts associated with this master contract covering support of key applications, and new work or upgrades performed under a statement of work. Service contracts are entered in the Warranty Contracts application.
A Master Contract has a set of statuses which normally follows the path draft, waiting on approval, waiting to start, approved, expired, closed. A contract has a start and end date. If the start date is in the future, then when approving the master contract, it will move to waiting to start. An escalation will automatically move it to approved when the start date has been reached. There is also an escalation which will change the status to expired when the end date of the contract has been reached.
A master contract can be revised. The Revise Contract action is used, and a revision description entered, the status is moved to pending revision and the revision number is incremented. The new revision is a complete copy of the previous revision, which for a new master contract will start at zero. When changes have been made the new revision is approved and the previous revision is changed to a status of revised. There is an action View Revision History which shows when each revision was created and the revision comments. The new revision is used until further changes are needed or it reaches its end date and expires. A master contract can have it status changed to suspended or cancelled. A master contract at a status of cancelled, closed or revised cannot be modified. All contracts have the same set of statuses and allow revisions to be created.
Contracts exists at the organization level but are used on request for quotations, purchase orders, invoices and work orders all of which exist at the site level. There is an action Authorize Sites which will authorize the contract to be used on one or more sites. This needs to be performed when the status is at draft or waiting to be approved. When the master contract is used to create associated contracts then the authorized sites will be copied to the new contract, except for labor rate contracts where there is no need to associate sites as labor exists at the organization level.
Commodity groups and codes can be associated with the master contract but only when the status is at draft or waiting to be approved. Commodity groups and codes are used to help in the search for items, to report spend by commodities or track which commodities are provided by each vendor. When the master contract is used to create associated contracts the commodity groups and codes are also copied. Commodity groups and codes are only applicable to Purchase and Lease/Rental contracts.
The performance of the vendor can be monitored using a Service Level Agreement (SLA). The Associate SLAs action is used to associate previously created SLAs. Vendor performance is monitored against a Maximo object. Work orders, service requests and assets are common objects where SLAs are applied, but you could also use an SLA to monitor the qualification renewal status of the people (labor) who work for the vendor. When creating the SLAs in the Service Level Agreements application you should set the type to be VENDOR, add the vendor and the vendor contact who will be responsible for adherence to the SLA. While the SLA can be associated with any type of contract the applies to Maximo object is where that contract will be used. For example, a purchasing contract is used on a PO and the applies to object would then be PO. A Key Performance Indicator (KPI) can be used to monitor the delivery times of the items purchased for a commodity group against the lead times that the vendor indicated when the contract was raised. An SLA also supports the monitoring of a condition using an Escalation, this might be used for the vendor response time on a service request or work order, sending out a notification to the vendor if the target start had been missed. When the master contract is used to create associated contracts, the associated SLA are also copied.
The Master Contract application has a Terms and Conditions tab. When creating a new master contract, the terms and conditions are copied from those defined for the contract type MASTER in the A structural element of a Maximo database which is used for data sharing and is often aligned to a legal entity of an organisation. More application and action Contract Options (see below). New terms and conditions can be created on a master contract record, for example those specific to a vendor by entering a description and long description but leaving the term field blank. When the master contract is used to create associated contracts the terms and conditions are not copied, instead they are inherited for the particular contract type being created.
The Master Contract application also has a Properties tab. When creating a new master contract, the properties are copied from those defined for the contract type MASTER in the Organizations application and action Contract Options (see below).
Terms and Conditions
The Terms and Conditions is a simple application for creating a library of terms and conditions to be used by an organization. Each record has a code and description with the long description containing the text for the term or condition, the long description is supported with rich text formatting.
Terms and conditions are used in purchasing (PR, RFQ, PO, Invoice) and all types of contracts. New terms and conditions can be created on those applications but if you wish to add it to the library then you need to navigate first to the Terms and Conditions application. There is a checkbox to indicate whether the term and condition can be modified on a purchasing or contract document and another checkbox to indicate whether the term and condition should be defaulted onto all new POs.
Organizations – Contract Options
In the Organizations application there is an action called Contract Options which will be found under Purchasing Options in the action menu. In this dialog you can create new types of contract. The new contract type will be based on one of Maximo’s internal contract types, service, blanket, lease, rental, warranty, labor, master, purchase, or price. When you create a new contract type the properties are copied from the internal contract type but can then be modified. You cannot add or delete properties, but you can change the default value and also determine whether it is editable on the new contract. There is also a button for creating a set of terms and conditions for each contract type.
When a new contract is created from the master contract or directly in one of the contract applications the new contract will inherit the properties and terms and conditions of the contract type which is selected.
A purchase contract contains agreed upon prices for materials and services that your organization has made with a vendor and that are valid for a period of time. There are three types of purchase contract:
- Purchase – A purchase contract can allow the quantities and prices to be changed on the purchase order. It is the only type of purchase contract that can have a payment schedule.
- Price – A price contract has agreed upon prices that cannot be changed on the PO. The price contract normally has a quantity of one because it is expected that the user will enter the quantity required.
- Blanket – A blanket contract has a maximum amount which can either be fixed or an estimate. A blanket contract normally has release purchase orders. When creating the release, the user can choose the items to include on the purchase order, but the quantities are normally fixed. If the maximum amount is fixed, then this limit cannot be exceeded.
Each contract type has a set of properties either defined at contract level or on the contract line. All three types of purchase contract require a purchase order. A purchase contract can have a release purchase order, a blanket contract nearly always has releases. Price agreements do not allow the price to be changed and if the purchasing document references the price agreement then you cannot add additional lines that are not on the contract. The change quantity on use or change price on use are set for individual contract lines.
All three types of purchase contract must be associated with a site before they can be approved. After approval the contract is read-only but it can be revised, and each revision of the contract is stored in Maximo. Contract lines also have a status and are set to approved when the contract is approved. Contract lines can be cancelled or moved to draft or another status. Only approved contract lines can be used on a purchasing document, this gives the ability to stop contract lines from being used without revising the contract.
There is an action to adjust prices across specific contract lines or all lines by applying a percentage adjustment. This might be done at the end of a contract period prior to the contract being extended.
A payment schedule can be set up for a purchase contract line, typically a line with a high value, for example to represent payment milestones. The payment schedule can have multiple lines defined against a trigger point, either on PO approval or PO receipt. Each schedule line can be offset in days from the trigger point. The value of each scheduled payment can be defined as an amount or a percentage of the total value of the contract line, when entering one value the other is calculated. Invoice lines are created automatically at either waiting to be approved or approved state.
A contract can be used on the header of a purchase requisition or purchase order in which case the items and prices are derived only from the contract. If the user is not aware of the contracts or the vendors that supply the items, then when they create a purchase requisition line that references an item that exists on a contract they will receive a warning that the item is a contract item. A button View Contracts will show the vendor contracts that provide the item and will allow the user to select a contract line, quantity and price to be used.
The Lease/Rental Contracts application handles asset leases and rentals. The main difference between the two is that there are actions that can be performed at the end of a lease, you can purchase or return the assets. A rental contract can be terminated, and the assets are returned. Both lease and rental contracts refer to rotating items or rotating tools.
Lease and rental contracts have the same set of statuses as other contracts. The contract can be revised and there is a revision history action. There are tabs for Properties and Terms and Conditions and these are initially set according to the contract type defined in the Organizations application – Contract Options. There are many more properties than are found in other types of contract. One or more Service Level Agreements can be associated with the contract, and there is the ability to associate commodity groups and codes. There is an action to associate sites to the lease or rental contract.
The contract header is similar to that seen in other contract-based applications except there is an additional section for the length of term and the cost. This section will need to be completed and sites authorized before being able to approve the contract. The contract lines allow you to select rotating items or rotating tools, this is really for reference as you can create a lease/rental contract without any contract lines. The usefulness of adding a contract line is visibility of the item being used on a contract from the Item Master application. After approving the contract, you add the assets that are associated with the lease or rental contract.
There is a contract line status and an action to Change Line Status which can be used without creating a revision of the contract. The most likely scenario will be to change the status of the contract line to Cancel. When a contract line has been cancelled it will remain cancelled following a revision of the contract.
Both lease and rental contracts have a payment schedule. The action Manage Payments is used but the contract will need to be approved and active to set these up. Active in this context means on or after the start date of the contract and before the end of the contract. In the Manage Payments dialog you create a new schedule and then select the assets to apply to it as schedule lines. The Generate Payments button will create a set of invoices at a status of SCHED depending on the schedule chosen and its start and end dates. The invoices can be seen from the Payment Details tab. On the schedule you can choose whether to create a single line payment but if this is not set then the invoices will have one line per asset. There are no PO and no receipts for the invoices created under a payment schedule. While the contract may reference a set of A physical place where assets exist and where work can be performed. More or assets the invoices are charged to a GL account.
The Apply Price Adjustment action allows one or more contract lines to be selected and modified by a percentage, a negative percentage will reduce the line cost. The contract will need to be revised to perform this action.
It is possible to add a new contract line for the same rotating item or rotating tool as already referenced on the contract. This might be the case when leasing or renting new assets under the same contract but for a different cost. When entering the assets, you can indicate the start date, end date and total cost. When adding new assets, a second payment schedule can be created in the Manage Payments dialog. If you have to revise an existing payment schedule then the Revise Schedule button is used, this will give you the option of cancelling all remaining scheduled invoices.
At the end of the lease you may be able to purchase some or all of the assets. In the action End Lease – Purchase Asset, you select whether you are going to create a PO or Invoice, set the status of the record to be created, and use the Autonumber button to generate the next PO or invoice number. You then select the assets to be purchased and enter the remaining cost. The lease end status of the asset will now indicate that it is purchased. If opting for the PO then the contract will be referenced on the PO and a PO line with a line type of service will be created for each asset. You would then create the invoice and match to the PO line as a two-way match, you already have the asset hence a receipt serves no purpose. Maximo will create a service receipt behind the scenes when you approve the invoice.
At the end of the lease you may elect to return the assets. In the action End Lease – Return Asset, you only have a choice of generating an invoice, you select the status and use the Autonumber button to generate the next invoice number. You then select the assets to be returned and enter the remaining cost which might be zero. The lease end status of the asset will now indicate that it is returned. The invoice generated might be a zero-cost invoice.
Labor Rate Contracts
A Labor Rate Contract defines the hourly rates to be used for various craft-skills and or individual labor supplied by a vendor. The contract has a valid period and properties are provided to determine whether the contract can be extended and the extension period in days.
Labor rate contracts have the same set of statuses as other contracts. The contract can be revised but there is no revision history action. There are tabs for Properties and Terms and Conditions and these are initially set according to the contract type defined in the Organizations application – Contract Options. One or more Service Level Agreements can be associated with the contract, but there is no ability to associate commodity groups and codes. There is no need to associate sites as labor is defined at the organization level.
There are no contract lines, instead the user enters the craft-skill levels applicable to the contract and the rates to be used. These are the same records as can be seen in the Crafts application in the table window called Outside Rates. The contract must be approved before you can enter the labor associated with one of the craft-skill rates entered on the contract. The rate used for the labor can either be inherited from the contract rate or overridden with a different value. The premium pay codes and rates are copied from the craft record when the labor record is saved to the contract, these rates can also be modified.
The Apply Price Adjustment action allows the Craft-Skill rates to be selected and modified by a percentage, a negative percentage will reduce the rate. The contract can be revised to add or remove a craft-skill record or change the default rate.
External Labor entered against a Labor Rate Contract can be assigned to work orders and the actual hours performed can be recorded. The Labor Reporting application can be used to fill-in a complete timesheet for the week. The costs associated with Labor Rate Contract appears under Labor Costs and not Service Costs in the View Costs dialog box on Work Order Tracking application. The hours recorded will need to be approved before they can be invoiced, this is performed from the Labor Reporting application using the action Approve Labor.
Work performed against a Labor Rate Contract can be invoiced without requiring a purchase order or receipts. There is an action on the Labor Reporting application called Create Invoice which will create invoices for the selected records splitting them by vendor.
There are two contract types that are covered by the Warranty Contracts application, Warranty and Service. A warranty contract as an agreement with an external provider for assets or locations under warranty. A service contract is an agreement with an external provider to provide maintenance services for assets or locations. A warranty contract for a set of assets may transition to a service contract with the same vendor at the end of the warranty period. There is a lot of similarity between warranty and service contracts within the Warranty Contracts application, there are differences in how they are processed when the asset or location is referenced on a work order.
Warranty and service contracts have the same set of statuses as other contracts. The contract can be revised and there is a revision history action. There are tabs for Properties and Terms and Conditions and these are initially set according to the contract type defined in the Organizations application – Contract Options. One or more Service Level Agreements can be associated with the contract, but there is no ability to associate commodity groups and codes. There is an action to associate sites to the warranty or service contract.
The contract has a Vendor, Start Date and optionally an End Date, the initial status is DRAFT. The contract lines can only be of type Standard Service in which case a service item will be required, or Service in which case a description will be required. The contract lines have a duration, for example 3 years and a field to indicate whether the children of the assets or locations are to be covered by the contract. The coverage of the contract is optional and is expressed in percentage terms and/or amounts for labor, materials and tools. The duration of the warranty can also be expressed using a meter, for example a car may be under warranty up to 60,000 miles.
The contract must be associated with one or more sites before it can be approved. After approval the asset and/or locations can now be associated with the contract. As the Assets and Locations are added they will be associated with each contract line. This allows you to fine tune the duration, start and end date or associate one of the meters of the location or asset that will be used to measure the validity of the contract. The addition of assets and locations will be needed for warranty assets and most service contracts where there is a coverage. However, there are other service contracts where the vendor will be used generally on site where specifying locations and assets is not necessary or where the coverage is for particular asset types.
For contracts of type warranty when the location or asset under warranty is referenced on a work order a warning message appears in the field and the Warranties Exists checkbox is set. This is also applicable if the location or asset is referenced on a task of the work order. The warranties can be seen by using the Work Order Tracking action View Warranties.
An approved service contract can be referenced on a work order, the vendor is filled when the contract is selected. There is no warning that a service contract exists as there is for an asset under warranty. The active service contracts that can be selected are the ones where the asset, location or their ancestors are referenced on the service contract. Work orders performed under the service contract can then be paid by raising an invoice that refers to the service contract on the invoice header with references to the work orders on the invoice lines. The invoice lines would be of type service.
Warranty and Service contracts can be viewed from the Location and Asset applications using the action View Contracts.
There is a property – Payment Schedule which is set for service contracts but not warranty contracts. If it is set the action Manage Payments can be used. In the dialog that opens the total line cost is entered with the start and end dates and a schedule. The total line cost is divided by the periods defined by the schedule. For example, a one-year contract may have a schedule of every 3 months. The estimate payment button will divide the total line cost by the number of periods to create a payment amount. When the contract is approved Maximo will also create a set of invoices one for each payment period with each invoice referring to the contract and contract line. There is no PO and no receipts for the invoices created under a payment schedule. While the contract may reference a set of locations or assets the invoices are charged to a GL account and these costs will not appear as life cycle costs of the asset or location when a payment schedule is being used.